<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 12, 1996
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ELDORADO RESORTS LLC
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
NEVADA 7011 88-0115550
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
ELDORADO CAPITAL CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
NEVADA 9999 88-0367075
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
345 NORTH VIRGINIA STREET
RENO, NEVADA 89501
(702) 786-5700
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)
---------------
ROBERT M. JONES
CHIEF FINANCIAL OFFICER
ELDORADO RESORTS LLC
345 NORTH VIRGINIA STREET
RENO, NEVADA 89501
(702) 786-5700
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
---------------
Copies of all communications to:
PAMELA B. KELLY, ESQ.
LATHAM & WATKINS
633 WEST FIFTH STREET, SUITE 4000
LOS ANGELES, CALIFORNIA 90071
(213) 485-1234
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE
OF THE SECURITIES TO THE PUBLIC:
As soon as practicable after the effective date
of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. [X]
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
---------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
PROPOSED PROPOSED AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER NOTE(1) OFFERING PRICE(1) FEE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
10 1/2% Senior Subordinated Notes due
2006.................................. $100,000,000 100% $100,000,000 $34,483
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457.
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SUCH SECTION 8(a), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED SEPTEMBER 12, 1996
PROSPECTUS
OFFER TO EXCHANGE
10 1/2% SENIOR SUBORDINATED NOTES DUE 2006
FOR ALL OUTSTANDING 10 1/2% SENIOR SUBORDINATED NOTES DUE 2006
OF
ELDORADO RESORTS LLC
AND
ELDORADO CAPITAL CORP.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON ,
199 UNLESS EXTENDED.
Eldorado Resorts LLC, a Nevada limited-liability company (the "Company"), and
Eldorado Capital Corp., a Nevada corporation ("Capital" and, together with the
Company, the "Issuers"), hereby offer (the "Exchange Offer"), upon the terms
and subject to the conditions set forth in this Prospectus and the accompanying
Letter of Transmittal (the "Letter of Transmittal"), to exchange $1,000
principal amount of its 10 1/2% Senior Subordinated Notes due 2006 (the
"Exchange Notes") for each $1,000 principal amount of its outstanding 10 1/2%
Senior Subordinated Notes due 2006 (the "Private Notes"), of which $100,000,000
in aggregate amount was issued on July 31, 1996 and is outstanding as of the
date hereof. The form and terms of the Exchange Notes are the same as the form
and terms of the Private Notes except that (i) the exchange will have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
pursuant to a registration statement of which this Prospectus is a part (the
"Registration Statement"), and therefore, the Exchange Notes will not bear
legends restricting the transfer thereof and (ii) holders of the Exchange Notes
will not be entitled to certain rights of holders of the Private Notes under
the Registration Rights Agreement (as defined herein), which rights will
terminate upon the consummation of the Exchange Offer. The Exchange Notes will
evidence the same indebtedness as the Private Notes (which they replace) and
will be entitled to the benefits of an indenture dated as of July 31, 1996
governing the Private Notes and the Exchange Notes (the "Indenture"). The
Private Notes and the Exchange Notes are sometimes referred to herein
collectively as the Notes. See "The Exchange Offer" and "Description of the
Notes."
The Exchange Notes will bear interest at the same rate and on the same terms
as the Private Notes. Consequently, the Exchange Notes will bear interest at
the rate of 10 1/2% per annum and the interest thereon will be payable semi-
annually in arrears on February 15 and August 15 of each year, commencing
February 15, 1997. The Exchange Notes will bear interest from the date of
original issuance of the Private Notes.
The Exchange Notes will be redeemable, in whole or in part, at the option of
the Issuers, at any time after August 15, 2001 at the respective redemption
prices set forth herein, plus accrued and unpaid interest and Liquidated
Damages (as defined herein), if any, to the redemption date. In addition, on or
prior to August 15, 1999, the Issuers may, at their option, use the net
proceeds of one or more Public Equity Offerings (as defined herein) to redeem
up to an aggregate of 33% of the Notes originally issued at the redemption
prices set forth herein plus accrued and unpaid interest and Liquidated
Damages, if any, to the redemption date. Upon a Change of Control (as defined
herein), each holder of Exchange Notes has the right to require the Issuers to
repurchase such holder's Exchange Notes at a price equal to 101% of their
principal amount plus accrued and unpaid interest and Liquidated Damages, if
any, to the date of repurchase. In addition, subject to certain conditions, the
Issuers will be obligated to make an offer to repurchase the Exchange Notes at
100% of their principal amount, plus accrued and unpaid interest and Liquidated
Damages, if any, to the date of repurchase, with the net cash proceeds of
certain sales or other dispositions of assets.
The Exchange Notes will be general unsecured obligations of the Issuers,
subordinated in right of payment to all existing and future Senior Debt (as
defined herein) of the Issuers, including all borrowings of the Company under
the Credit Facility (as defined herein). See "Risk Factors--Subordination of
Notes." At June 30, 1996, pro forma for the offering of the Notes and the
application of proceeds therefrom, the Company would have had outstanding $100
million aggregate principal amount of Notes, $17.2 million under the Existing
Credit Facility and $4.0 million of other long-term debt. The Exchange Notes
will be unconditionally guaranteed (the "Guarantees") on a senior unsecured
basis by certain future Restricted Subsidiaries (as defined herein).
The Issuers will accept for exchange any and all validly tendered Private
Notes not withdrawn prior to 5:00 p.m., New York City time, on , 199 ,
unless the Exchange Offer is extended by the Issuers in their sole discretion
(the "Expiration Date"). Tenders of Private Notes may be withdrawn at any time
prior to the Expiration Date. Private Notes may be tendered only in integral
multiples of $1,000. The Exchange Offer is subject to certain customary
conditions. See "The Exchange Offer--Conditions."
-----------
SEE RISK FACTORS BEGINNING ON PAGE 13 FOR A DISCUSSION OF CERTAIN FACTORS
THAT INVESTORS SHOULD CONSIDER IN CONNECTION WITH THE EXCHANGE OFFER AND AN
INVESTMENT IN THE EXCHANGE NOTES.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
NEITHER THE NEVADA GAMING COMMISSION NOR THE NEVADA STATE GAMING CONTROL
BOARD HAS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS OR
THE INVESTMENT MERITS OF THE EXCHANGE NOTES OFFERED HEREBY. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
-----------
The date of this Prospectus is , 199
<PAGE>
Based on an interpretation by the staff of the Securities and Exchange
Commission (the "Commission") set forth in no-action letters issued to third
parties, the Issuers believe that the Exchange Notes issued pursuant to the
Exchange Offer in exchange for Private Notes may be offered for resale, resold
and otherwise transferred by a holder thereof (other than (i) a broker-dealer
who purchases such Exchange Notes directly from the Issuers to resell pursuant
to Rule 144A or any other available exemption under the Securities Act or (ii)
a person that is an affiliate of either of the Issuers within the meaning of
Rule 405 under the Securities Act), without compliance with the registration
and prospectus delivery provisions of the Securities Act; provided that the
holder is acquiring the Exchange Notes in the ordinary course of its business
and is not participating, and had no arrangement or understanding with any
person to participate, in the distribution of the Exchange Notes. Holders of
Private Notes wishing to accept the Exchange Offer must represent to the
Issuers, as required by the Registration Rights Agreement, that such
conditions have been met. The Issuers believe that none of the registered
holders of the Private Notes is an affiliate (as such term is defined in Rule
405 under the Securities Act) of either of the Issuers.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Private Notes, where such Private Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. The Letter of Transmittal states that
by so acknowledging and by delivering a prospectus, a broker-dealer will not
be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with resales of
Exchange Notes received in exchange for Private Notes where such Private Notes
were acquired by such broker-dealer as a result of marketing-making activities
or other trading activities. The Issuers have indicated their intention to
make this Prospectus (as it may be amended or supplemented) available to any
broker-dealer for use in connection with any such resale for a period of 180
days after the date of effectiveness of the Registration Statement (as defined
herein), unless extended pursuant to the terms of the Registration Rights
Agreement (as defined herein). See "Plan of Distribution."
The Issuers will not receive any proceeds from, and have agreed to bear the
expenses of, the Exchange Offer. No underwriter is being used in connection
with this Exchange Offer.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE ISSUERS ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF PRIVATE NOTES IN ANY JURISDICTION IN
WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
2
<PAGE>
The Exchange Notes will be available initially only in book-entry form. The
Issuers expect that the Exchange Notes issued pursuant to the Exchange Offer
will be issued in the form of one or more fully registered global notes that
will be deposited with, or on behalf of, The Depository Trust Company ("DTC"
or the "Depositary") and registered in its name or in the name of Cede & Co.,
as its nominee. Beneficial interests in the global notes representing the
Exchange Notes will be shown on, and transfers thereof will be effected only
through, records maintained by the Depositary and its participants. After the
initial issuance of such global notes, Exchange Notes in certificated form
will be issued in exchange for the global notes only in accordance with the
terms and conditions set forth in the Indenture. See "Description of Notes--
Book Entry; Delivery and Form."
AVAILABLE INFORMATION
The Issuers have filed with the Commission a Registration Statement on Form
S-4 under the Securities Act with respect to the Exchange Notes offered
hereby. As permitted by the rules and regulations of the Commission, this
Prospectus omits certain information, exhibits and undertakings contained in
the Registration Statement. For further information with respect to the
Issuers and the Exchange Notes offered hereby, reference is made to the
Registration Statement, including the exhibits thereto and the financial
statements, including the notes thereto, filed as a part thereof. The
Registration Statement (and the exhibits thereto), as well as the periodic
reports and other information filed by the Issuers with the Commission, may be
inspected and copied at the Public Reference Section of the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at
the regional offices of the Commission located at Room 1400, 75 Park Place,
New York, New York 10007 and Suite 1400 Northwestern Atrium Center, 500 West
Madison Street, Chicago, Illinois 60661. Copies of such materials may be
obtained from the Public Reference Section of the Commission, Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and its
public reference facilities in New York, New York and Chicago, Illinois at the
prescribed rates. In addition, the Commission maintains a Web site at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission. Statements contained in this Prospectus as to the contents of any
contract or other document are not necessarily complete, and in each instance
reference is made to the copy of such contract or document filed as an exhibit
to the Registration Statement, each such statement being qualified in all
respects by such reference.
3
<PAGE>
SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the consolidated financial statements, including the notes
thereto, appearing elsewhere in this Prospectus. Reference is hereby made to
"Risk Factors" which contains material information that holders of Private
Notes should consider prior to participating in the Exchange Offer. As used
herein, the term "Reno Market" means the combined markets of Reno and Sparks,
Nevada.
Eldorado Resorts LLC (the "Company") was formed to be the successor to
Eldorado Hotel Associates Limited Partnership (the "Predecessor Partnership")
pursuant to an exchange of all of the currently outstanding partnership
interests in the Predecessor Partnership for membership interests in the
Company (the "Reorganization"). The Reorganization was effective on July 1,
1996. See "Material Agreements--The Reorganization." Eldorado Capital Corp., a
Nevada corporation ("Capital"), was incorporated with the sole purpose of
serving as co-issuer of the Notes in order to facilitate the offering thereof.
Unless otherwise indicated, the information contained herein assumes
consummation of the Reorganization.
THE COMPANY
The Company owns and operates the Eldorado Hotel & Casino (the "Eldorado"), a
premier hotel/casino and entertainment facility in Reno, Nevada. The Company
has established the Eldorado as a luxury destination resort by creating a
sophisticated, elegant atmosphere unique in the Reno Market and providing
unsurpassed personal service and cuisine, a dynamic gaming environment and a
wide variety of amenities attractive to multiple market segments. The Eldorado
is centrally located in downtown Reno and is easily accessible both to vehicle
traffic from Interstate 80, the principal highway linking Reno to its primary
visitor markets in northern California, and to pedestrian traffic from nearby
casinos. For the twelve months ended June 30, 1996, the Eldorado generated
$40.8 million in EBITDA (as defined herein) on net revenues of $150.7 million.
In addition to owning the Eldorado, the Company's 77%-owned subsidiary,
Eldorado Limited Liability Company, a Nevada limited-liability company
("ELLC"), owns a 50% joint venture interest, along with a wholly-owned
subsidiary of Circus Circus Enterprises, Inc. ("Circus Circus"), in the Silver
Legacy Resort Casino (the "Silver Legacy"), a major themed hotel/casino located
adjacent to the Eldorado. The remaining 23% of ELLC is owned by the principal
equityholders of the Company.
The Eldorado was established in 1973 and has undergone several significant
expansions and improvements, including substantial additions in 1979, 1985,
1989 and 1995. As a result of these expansions, the Eldorado is one of the
largest and most elegant properties in the Reno Market. As of June 30, 1996,
the Eldorado offered approximately 81,500 square feet of gaming space with
1,984 slot machines and 84 table games, three hotel towers with a total of 817
rooms, including 137 suites, seven dining venues, parking for 1,138 vehicles
and approximately 12,400 square feet of convention space. For the year ended
December 31, 1995, the Eldorado achieved a 93.8% average hotel occupancy rate.
The Company is currently further improving and expanding the Eldorado through
the development of a Parisian-style bistro, a state-of-the-art 500-seat
showroom and a full-service health spa.
The Company's business strategy draws upon management's two decades of
experience successfully operating the Eldorado. A key element of the Company's
strategy is to provide patrons with unsurpassed personal service that is
designed to foster customer loyalty and generate repeat business. This
dedication to service is supported by a variety of high quality amenities,
including well-appointed hotel rooms and suites and numerous critically
acclaimed dining venues. Additionally, the Company seeks to attract customers
from multiple market segments by providing a well-balanced gaming environment
which contains a mix of slot machines and table games attractive to both
middle-income and premium-play customers. The success of the Eldorado is
evidenced
4
<PAGE>
by its superior gaming utilization. For the twelve months ended June 30, 1996,
the Eldorado generated 12.1% of the Reno Market's gaming revenues (exclusive of
race and sports wagers and keno) while operating only 7.7% of its gaming
capacity, giving the Eldorado 157% of its "fair share" of the Reno Market's
gaming revenues.
As part of its strategy to further enhance its position as a market leader,
in 1993 the Company teamed with Circus Circus to develop the Silver Legacy, the
first newly constructed major hotel/casino in the Reno Market since 1978 and
its first themed mega-resort. The Silver Legacy opened in July 1995 and
encompasses two city blocks in downtown Reno adjacent to the Eldorado and
Circus Circus-Reno. The Silver Legacy's design is based upon Nevada's silver
mining heritage and the legend of Sam Fairchild, a fictitious silver baron who
"struck it rich" on the site of the hotel/casino. The Company's management
believes that the Silver Legacy is a "must see" attraction for visitors to the
Reno Market. As of June 30, 1996, the Silver Legacy featured 1,711 hotel rooms
and suites, approximately 88,500 square feet of casino space with 2,217 slot
machines and 87 table games and parking for approximately 1,800 vehicles.
The Eldorado, Silver Legacy and Circus Circus-Reno properties are connected
in a "seamless" manner by 200-foot wide skyway corridors. These enclosed
corridors serve as entertainment bridgeways between the three properties and
house restaurants and custom retail shops. The Eldorado, Silver Legacy and
Circus Circus-Reno comprise the heart of the Reno Market's prime gaming area
and room base, providing the most extensive and the broadest variety of gaming,
entertainment, lodging and dining amenities in the Reno area, with an aggregate
of over 4,100 rooms, approximately 5,900 slot machines and 250 table games, 16
restaurants and enough parking to accommodate approximately 4,600 vehicles. The
Company's management believes that the centralized location and critical mass
of these three properties, together with the ease of access between the
facilities, provide the Eldorado with significant advantages over other
freestanding hotel/casinos in the Reno Market.
The Company has a very broad and experienced management team that includes,
among others, Donald Carano and several members of his immediate family. Donald
Carano, the Chief Executive Officer and a member of the Board of Managers of
the Company, co-founded the Eldorado in 1973 and has been the driving force
behind its development. In addition to Donald Carano, each of the Company's
other eight senior executives has in excess of 10 years of operating experience
in the gaming industry. Management believes that its family-oriented, hands-on
approach has enabled the Company to operate the Eldorado successfully for over
two decades. In addition to their roles in management of the Company, members
of the Carano family beneficially own 63% of the Company.
Reno is the second largest city in Nevada and is located in northern Nevada
at the base of the Sierra Nevada mountain range, approximately 140 miles east
of Sacramento, California and 225 miles east of San Francisco, California. The
Reno Market is the third largest gaming market in the United States after Las
Vegas, Nevada and Atlantic City, New Jersey and generated over $900 million in
gaming revenues for the twelve months ended June 30, 1996. According to the
Nevada State Gaming Control Board (the "Nevada Gaming Board"), while gaming
revenues in the Reno Market grew at a 4% compound annual growth rate from 1985
to 1995, for the first eleven full months the Silver Legacy was in operation
(August 1, 1995 through June 30, 1996), the Reno Market's gaming revenues
increased by approximately 8.6% over the previous year's comparable eleven
month period. Reno is a destination resort market which attracts visitors for
an average of 2.5 nights. Visitors are attracted to the Reno area for its wide
variety of gaming amenities and its numerous other summer and winter
recreational activities. Principal feeder markets for the Reno Market include
northern California and the Pacific Northwest. Hotel occupancy rates for the
Reno Market increased in 1995 to 86.0% from 84.4% in 1994, despite a 13.2%
increase in hotel room capacity. A large portion of the increased room capacity
was due to the opening of the Silver Legacy, which management expects will
continue to broaden the appeal of the Reno Market to potential visitors.
Visitors were also attracted to the Reno Market in 1995 by the opening of the
National Bowling Stadium, which is located approximately one block from the
Eldorado and Silver Legacy. The National Bowling Stadium will host national
bowling tournaments two out of every three years through 2009. The first of
these
5
<PAGE>
tournaments was held in Reno in 1995 and according to the Reno Sparks
Convention and Visitors Authority (the "Visitors Authority") attracted nearly
228,000 guests who infused approximately $230 million into the local economy.
In addition, the Reno/Tahoe International Airport has experienced steady and
significant growth over the last five years, with the number of airline
passenger arrivals to the airport increasing from 1.5 million in 1990 to over
2.9 million in 1995, representing a compound annual growth rate of
approximately 14%. Management believes that the opening of the Silver Legacy
and the National Bowling Stadium and the continued expansion of airflight
service to the Reno/Tahoe International Airport will positively impact the
future growth of the Reno Market.
The Issuers' principal executive offices reside inside the Eldorado, which is
located at 345 North Virginia Street, Reno, Nevada 89501, and its telephone
number is (702) 786-5700.
THE EXCHANGE OFFER
The Exchange Offer.......... The Issuers are hereby offering to exchange
$1,000 principal amount of Exchange Notes for
each $1,000 principal amount of Private Notes
that are properly tendered and accepted. The
Issuers will issue Exchange Notes on or promptly
after the Expiration Date. As of the date hereof,
there is $100,000,000 aggregate principal amount
of Private Notes outstanding.
Based on an interpretation by the staff of the
Commission set forth in no-action letters issued
to third parties, the Issuers believe that the
Exchange Notes issued pursuant to the Exchange
Offer in exchange for Private Notes may be
offered for resale, resold and otherwise
transferred by a holder thereof (other than (i) a
broker-dealer who purchases such Exchange Notes
directly from the Issuers to resell pursuant to
Rule 144A or any other available exemption under
the Securities Act or (ii) a person that is an
affiliate of either of the Issuers within the
meaning of Rule 405 under the Securities Act),
without compliance with the registration and
prospectus delivery provisions of the Securities
Act; provided that the holder is acquiring
Exchange Notes in the ordinary course of its
business and is not participating, and had no
arrangement or understanding with any person to
participate, in the distribution of the Exchange
Notes. Each broker-dealer that receives Exchange
Notes for its own account in exchange for Private
Notes, where such Private Notes were acquired by
such broker-dealer as a result of market-making
activities or other trading activities, must
acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange
Notes. See "The Exchange Offer--Resale of the
Exchange Notes."
Registration Rights
Agreement................... The Private Notes were sold by the Issuers on
July 31, 1996 to Bear, Stearns & Co. Inc.,
Wasserstein Perella Securities, Inc. and BA
Securities, Inc., as the initial purchasers (the
"Initial Purchasers"), pursuant to a Purchase
Agreement dated July 25, 1996, between the
Issuers and the Initial Purchasers (the "Purchase
Agreement"). Pursuant to the Purchase Agreement,
the Issuers and the Initial Purchasers entered
into a Registration Rights Agreement dated as of
July 31, 1996 (the "Registration Rights
Agreement"), which grants
6
<PAGE>
the holders of the Private Notes certain exchange
and registration rights. The Exchange Offer is
intended to satisfy such rights, which will
terminate upon the consummation of the Exchange
Offer. The holders of the Exchange Notes will not
be entitled to any exchange or registration
rights with respect to the Exchange Notes. See
"The Exchange Offer--Termination of Certain
Rights."
Expiration Date............. The Exchange Offer will expire at 5:00 p.m., New
York City time, on , 199 , unless
the Exchange Offer is extended by the Issuers in
their sole discretion, in which case the term
Expiration Date shall mean the latest date and
time to which the Exchange Offer is extended. See
"The Exchange Offer--Expiration Date; Extensions;
Amendments."
Accrued Interest on the
Exchange Notes and the
Private Notes............... The Exchange Notes will bear interest from the
date of original issuance of the Private Notes.
See "The Exchange Offer--Interest on the Exchange
Notes."
Conditions to the Exchange
Offer....................... The Exchange Offer is subject to certain
customary conditions that may be waived by the
Issuers. The Exchange Offer is not conditioned
upon any minimum aggregate principal amount of
Private Notes being tendered for exchange. See
"The Exchange Offer--Conditions."
Procedures for Tendering
Private Notes............... Each holder of Private Notes wishing to accept
the Exchange Offer must complete, sign and date
the Letter of Transmittal, or a facsimile
thereof, in accordance with the instructions
contained herein and therein, and mail or
otherwise deliver such Letter of Transmittal, or
such facsimile, together with such Private Notes
and any other required documentation to Fleet
National Bank, as exchange agent (the "Exchange
Agent"), at the address set forth herein. By
executing the Letter of Transmittal, the holder
will represent to and agree with the Issuers
that, among other things, (i) the Exchange Notes
to be acquired by such holder of Private Notes in
connection with the Exchange Offer are being
acquired by such holder in the ordinary course of
its business, (ii) such holder has no arrangement
or understanding with any person to participate
in a distribution of the Exchange Notes, (iii)
that if such holder is a broker-dealer registered
under the Exchange Act or is participating in the
Exchange Offer for the purposes of distributing
the Exchange Notes, such holder will comply with
the registration and prospectus delivery
requirements of the Securities Act in connection
with a secondary resale transaction of the
Exchange Notes acquired by such person and cannot
rely on the position of the staff of the
Commission set forth in no-action letters (see
"The Exchange Offer--Resale of the Exchange
Notes"), (iv) such holder understands that a
secondary resale transaction described in clause
(iii) above and any resales of Exchange Notes
obtained by such holder in exchange for Private
Notes acquired by such holder directly from the
Issuers should be covered by an effective
registration statement
7
<PAGE>
containing the selling security holder
information required by Item 507 or Item 508, as
applicable, of Regulation S-K of the Commission
and (v) such holder is not an "affiliate," as
defined in Rule 405 under the Securities Act, of
either of the Issuers. If the holder is a broker-
dealer that will receive Exchange Notes for its
own account in exchange for Private Notes that
were acquired as a result of market-making
activities or other trading activities, such
holder will be required to acknowledge in the
Letter of Transmittal that such holder will
deliver a prospectus in connection with any
resale of such Exchange Notes; however, by so
acknowledging and by delivering a Prospectus,
such holder will not be deemed to admit that it
is an "underwriter" within the meaning of the
Securities Act. See "The Exchange Offer--
Procedures for Tendering."
Special Procedures for
Beneficial Owners........... Any beneficial owner whose Private Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee
and who wishes to tender such Private Notes in
the Exchange Offer should contact such registered
holder promptly and instruct such registered
holder to tender on such beneficial owner's
behalf. If such beneficial owner wishes to tender
on such owner's own behalf, such owner must,
prior to completing and executing the Letter of
Transmittal and delivering such owner's Private
Notes, either make appropriate arrangements to
register ownership of the Private Notes in such
owner's name or obtain a properly completed bond
power from the registered holder. The transfer of
registered ownership may take considerable time
and may not be able to be completed prior to the
Expiration Date. See "The Exchange Offer--
Procedures for Tendering."
Guaranteed Delivery
Procedures.................. Holders of Private Notes who wish to tender their
Private Notes and whose Private Notes are not
immediately available or who cannot deliver their
Private Notes, the Letter of Transmittal or any
other documentation required by the Letter of
Transmittal to the Exchange Agent prior to the
Expiration Date must tender their Private Notes
according to the guaranteed delivery procedures
set forth under "The Exchange Offer--Guaranteed
Delivery Procedures."
Acceptance of the Private
Notes and Delivery of the
Exchange Notes.............. Subject to the satisfaction or waiver of the
conditions to the Exchange Offer, the Issuers
will accept for exchange any and all Private
Notes that are properly tendered in the Exchange
Offer prior to the Expiration Date. The Exchange
Notes issued pursuant to the Exchange Offer will
be delivered on the earliest practicable date
following the Expiration Date. See "The Exchange
Offer--Terms of the Exchange Offer."
Withdrawal Rights........... Tenders of Private Notes may be withdrawn at any
time prior to the Expiration Date. See "The
Exchange Offer--Withdrawal of Tenders."
8
<PAGE>
Certain Federal Income Tax
Considerations.............. The exchange of Private Notes for Exchange Notes
will be treated as a "non-event" for federal in-
come tax purposes because the Exchange Notes will
not be considered to differ materially from
the Private Notes. As a result, no material fed-
eral income tax consequences will result to hold-
ers exchanging Private Notes for Exchange Notes.
See "Certain Federal Income Tax Considerations."
Exchange Agent.............. Fleet National Bank is serving as the Exchange
Agent in connection with the Exchange Offer.
THE EXCHANGE NOTES
The Exchange Offer applies to $100,000,000 aggregate principal amount of the
Private Notes. The form and terms of the Exchange Notes are the same as the
form and terms of the Private Notes except that (i) the exchange will have been
registered under the Securities Act and, therefore, the Exchange Notes will not
bear legends restricting the transfer thereof and (ii) holders of the Exchange
Notes will not be entitled to certain rights of holders of the Private Notes
under the Registration Rights Agreement, which rights will terminate upon
consummation of the Exchange Offer. The Exchange Notes will evidence the same
indebtedness as the Private Notes (which they replace) and will be issued
under, and be entitled to the benefits of, the Indenture. For further
information and for definitions of certain capitalized terms used below, see
"Description of the Notes."
Securities Offered.......... $100.0 million aggregate principal amount of 10
1/2% Senior Subordinated Notes due 2006.
Issuers..................... The Exchange Notes will be joint and several
obligations of Eldorado Resorts LLC and Eldorado
Capital Corp.
Maturity.................... August 15, 2006.
Interest Payment Dates...... February 15 and August 15 of each year,
commencing February 15, 1997, to holders of
record on the immediately preceeding February 1
and August 1.
Optional Redemption......... The Exchange Notes are redeemable at the option
of the Issuers, in whole or in part, at any time
after August 15, 2001, at the redemption prices
set forth herein plus accrued and unpaid interest
and Liquidated Damages, if any, to the redemption
date. In addition, on or prior to August 15,
1999, the Issuers may redeem up to 33% in
aggregate principal amount of the Exchange Notes
originally issued at a redemption price equal to
110% of the principal amount thereof plus accrued
and unpaid interest and Liquidated Damages, if
any, to the date of redemption with the net
proceeds of one or more Public Equity Offerings
(as defined herein). See "Description of Notes--
Optional Redemption."
Special Redemption.......... The Exchange Notes are subject to redemption
requirements imposed by gaming laws and
regulations of the state of Nevada. See
"Description of Notes--Gaming Redemption."
9
<PAGE>
Ranking..................... The Exchange Notes will be general unsecured
obligations of the Issuers, subordinated in right
of payment to all existing and future Senior Debt
of the Issuers, including all borrowings of the
Company under the Credit Facility. See
"Description of Notes--Subordination."
Guarantees.................. The Notes will be guaranteed by certain future
Restricted Subsidiaries (as defined herein). Such
guarantees will be subordinated to all existing
and future Senior Debt of any guarantors. See
"Description of Notes--Certain Covenants--
Subsidiary Guarantees."
Repurchase at the Option of
Holders..................... Upon a Change of Control (as defined herein),
each holder of Exchange Notes will have the right
to require the Issuers to purchase such holder's
Notes at 101% of the principal amount thereof,
plus accrued and unpaid interest and Liquidated
Damages, if any, to the repurchase date. In
addition, the Issuers will be required to offer
to purchase certain of the Exchange Notes at 100%
of the principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages, if any,
to the date of repurchase, with the proceeds of
certain asset sales. See "Description of Notes--
Repurchase at the Option of Holders."
Mandatory Redemption........ The Issuers are not required to make any
mandatory redemption or sinking fund payments
prior to maturity of the Exchange Notes. See
"Description of Notes--Mandatory Redemption."
Certain Covenants........... The Indenture pursuant to which the Exchange
Notes will be issued (the "Indenture") contains
certain covenants that, among other things, limit
the ability of the Issuers and any Restricted
Subsidiaries to incur additional indebtedness,
pay dividends or make other distributions, create
certain liens, enter into certain transactions
with affiliates, utilize proceeds from asset
sales, issue or sell equity interests of
subsidiaries or enter into certain mergers and
consolidations. See "Description of Notes--
Certain Covenants."
Eldorado Capital Corp. ..... Eldorado Capital Corp. is a wholly-owned
subsidiary of the Company whose sole purpose is
to serve as a co-issuer of the Notes.
RISK FACTORS
For a discussion of certain factors that should be considered in connection
with the Exchange Offer, see "Risk Factors."
10
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
The summary consolidated financial data set forth below has been derived from
the consolidated financial statements of the Predecessor Partnership. The
consolidated statement of income data for each year in the three-year period
ended December 31, 1995 and the consolidated balance sheet data at December 31,
1994 and 1995 are derived from the audited financial statements of the
Predecessor Partnership, which are contained elsewhere in this Prospectus. The
consolidated statement of income data for the thirteen-month period ended
December 31, 1991 and for the year ended December 31, 1992 and the consolidated
balance sheet data at December 31, 1991, 1992 and 1993 are derived from the
audited financial statements of the Predecessor Partnership, which are not
contained herein. Consolidated statement of income data is presented for the
thirteen-month period ended December 31, 1991 because of a change in fiscal
year by the Predecessor Partnership. The consolidated financial data as of and
for the six-month periods ended June 30, 1995 and 1996 are derived from
consolidated financial statements that are unaudited but which, in the opinion
of management, include all adjustments, consisting only of normal and recurring
adjustments, necessary for a fair presentation of the Company's financial
condition and results of operations. The summary consolidated financial data
are not necessarily indicative of the Company's future results of operations or
financial condition and should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations," the
Company's consolidated financial statements, including the notes thereto, and
the other financial and statistical information appearing elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
THIRTEEN-MONTH -------------------------------------- --------------------
PERIOD ENDED JUNE 30, JUNE 30,
DEC. 31, 1991 1992 1993 1994 1995 1995 1996
-------------- -------- -------- -------- -------- --------- ---------
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT
OF INCOME DATA:
Net revenues............ $133,069 $131,460 $137,057 $138,198 $148,730 $ 68,793 $70,800
Abandonment loss(1)..... -- -- -- -- 1,862 -- --
Equity in net loss of
subsidiary(2).......... -- -- -- -- 3,208 -- 61
Operating income........ 34,699 35,932 35,272 33,602 28,282 15,174 12,744
Interest expense, net... (7,776) (6,385) (4,979) (2,967) (5,093) (1,356) (4,651)
Minority interest in net
loss of subsidiary(3).. -- -- -- -- 745 -- 14
Net income(4)........... 26,923 29,547 30,293 30,635 23,934 13,818 8,107
OTHER DATA:
EBITDA(5)(6)............ $ 41,341 $ 42,730 $ 42,715 $ 41,214 $ 41,761 $ 18,836 $17,972
Net cash provided by
(used in):
Operating activities... 34,762 36,691 32,002 38,786 36,345 17,786 10,888
Investing activities... (14,409) (17,112) (10,478) (37,045) (62,791) (36,101) (6,508)
Financing activities... (20,429) (19,753) (21,876) (1,205) 27,208 13,804 (5,718)
Capital expenditures,
net.................... 14,816 17,847 10,562 12,053 57,451 30,734 6,524
Ratio of earnings to
fixed charges.......... 4.1x 5.3x 6.2x 6.1x 3.6x 4.2x 2.6x
OPERATING DATA(7):
Number of hotel
rooms(8)............... 783 783 783 783 817 783 817
Average hotel occupancy
rate................... 90.2% 92.2% 93.0% 93.7% 93.8% 95.3% 94.7%
Casino square
footage(8)............. 61,500 61,500 61,500 61,500 76,500 76,500 81,500
Number of slot
machines(8)............ 1,557 1,546 1,568 1,597 1,904 1,831 1,984
Number of table
games(8)............... 84 77 77 71 84 71 84
<CAPTION>
TWELVE MONTHS ENDED
JUNE 30, 1996
--------------------
(UNAUDITED)
<S> <C>
PRO FORMA DATA(9):
Cash interest expense....................................................... $12,233
EBITDA/Cash interest expense................................................ 3.3x
Total debt/EBITDA........................................................... 3.0x
Ratio of earnings to fixed charges.......................................... 2.1x
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31, AT JUNE 30, 1996
-------------------------------------------- ------------------------
1991 1992 1993 1994 1995 ACTUAL AS ADJUSTED(10)
-------- -------- -------- -------- -------- -------- ---------------
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE
SHEET DATA:
Cash and cash
equivalents............ $ 6,085 $ 5,176 $ 4,824 $ 5,360 $ 6,122 $ 4,784 $ 4,784
Total assets............ 109,541 119,011 129,645 160,384 215,592 218,813 222,313
Total debt.............. 65,392 65,645 61,469 79,064 123,630 119,088 122,588
Partners' equity(11).... 35,659 45,206 57,799 69,634 74,768 82,675 82,675
</TABLE>
- -------
See footnotes to Summary Consolidated Financial Data
11
<PAGE>
FOOTNOTES TO SUMMARY CONSOLIDATED FINANCIAL DATA
(1) Abandonment loss represents the net book value of property disposed of as
a result of the expansion of the Eldorado.
(2) Equity in net loss of subsidiary represents ELLC'S 50% joint venture
interest in the Circus and Eldorado Joint Venture, a Nevada general
partnership (the "Silver Legacy Joint Venture"). The equity in net loss of
subsidiary for the year ended December 31, 1995 includes the impact of
ELLC's share of the $9.9 million of pre-opening expenses that were
incurred by the Silver Legacy Joint Venture.
(3) Minority interest in net loss of subsidiary represents the 23% minority
interest partners' share of ELLC's 50% joint venture interest in the
Silver Legacy Joint Venture. The minority interest in ELLC is owned by the
Company's equityholders.
(4) The Predecessor Partnership was not subject to U.S. federal income taxes,
as the partners included their respective shares of partnership taxable
income in their income tax returns. For each period shown, the Predecessor
Partnership made distributions to its partners, a portion of which was to
reimburse the partners for such tax liability. As a limited-liability
company, the Company also will not be subject to income tax liability.
Therefore, holders of membership interests will include their respective
shares of the Company's taxable income in their income tax returns and the
Company will continue to make distributions for such tax liabilities.
(5) The Company pays management fees to Recreational Enterprises, Inc. and
Hotel Casino Management, Inc., the owners of 55% and 29% of the Company's
equity interests, respectively. The management fees paid to Recreational
Enterprises, Inc. and Hotel Casino Management, Inc. are included in
selling, general and administrative expenses and totalled $2.1 million and
$2.0 million for the six months ended June 30, 1995 and 1996,
respectively, and $4.6 million, $3.8 million and $4.3 million for the
years ended December 31, 1993, 1994 and 1995, respectively. Historically,
the salaries of senior executive officers and certain other key employees
of the Company were not directly incurred by the Company but were paid
from a portion of the management fees paid to Recreational Enterprises,
Inc. As of July 1, 1996, the aggregate annual salaries of such senior
executive officers and other key employees have become payroll obligations
of the Company. In connection with the issuance of the Private Notes, the
Company entered into a Management Agreement (as defined herein) with
Recreational Enterprises, Inc. and Hotel Casino Management, Inc. providing
that future management fees paid to Recreational Enterprises, Inc. and
Hotel Casino Management, Inc. will not exceed 1.5% of the Company's annual
net revenues. See "Material Agreements--Management Agreement." Assuming
reallocation of such salaries and the payment of management fees pursuant
to the Management Agreement (assuming aggregate annual reallocated
salaries at the 1996 levels of $2.3 million per year (which includes
assumed aggregate bonuses of $0.3 million which may or may not be paid at
the discretion of the Chief Executive Officer) and the payment of
management fees of the full 1.5% of annual net revenues, in each case, for
all periods presented), (i) the aggregate of such salaries and management
fees would have totalled $4.4 million, $4.4 million and $4.5 million for
the years ended December 31, 1993, 1994 and 1995, respectively, and (ii)
the Company's pro forma net income would have been higher by $0.2 million
for the year ended December 31, 1993 and would have been $0.6 million and
$0.2 million lower for the years ended December 31, 1994 and 1995,
respectively.
(6) EBITDA is defined as earnings before interest, taxes, depreciation and
amortization. For the year ended December 31, 1995, EBITDA was adjusted to
exclude abandonment loss of $1.9 million and ELLC's equity in net loss of
its subsidiary of $3.2 million. For the six months ended June 30, 1996,
EBITDA was adjusted to exclude ELLC's equity in net loss of its subsidiary
of $61,000. EBITDA should not be construed as an alternative to operating
income or net income (as determined in accordance with generally accepted
accounting principles) as an indicator of the Company's operating
performance, or as an alternative to cash flows generated by operating,
investing and financing activities (as determined in accordance with
generally accepted accounting principles) as an indicator of cash flows or
a measure of liquidity. EBITDA is presented solely as supplemental
disclosure because management believes that it is a widely used measure of
operating performance in the gaming industry.
(7) Excludes the operating data of the Silver Legacy.
(8) As of the end of each period presented.
(9) Gives pro forma effect to the issuance of the Private Notes and the
application of the net proceeds therefrom, as if such transactions had
occurred as of June 30, 1995.
(10) Adjusted to reflect the consummation of the issuance of the Private Notes
and the application of the net proceeds therefrom, as if such transactions
had occurred as of June 30, 1996.
(11) Effective upon consummation of the Reorganization, partners' equity will
be reclassified as members' equity.
12
<PAGE>
RISK FACTORS
Prospective investors should carefully consider the following risk factors,
in addition to the other information contained in this Prospectus, before
participating in the Exchange Offer.
COMPETITION
The Company competes for customers primarily on the basis of location, range
and pricing of amenities and overall atmosphere. Of the 48 casinos currently
operating in the Reno Market, the Company competes principally with the eight
hotel/casinos that, like the Company, each generate over $36 million in annual
gaming revenues, including Circus Circus-Reno and the Silver Legacy. To a
lesser extent, the Company also competes with hotel/casinos located in Las
Vegas and Laughlin, Nevada, in the Lake Tahoe area and in other parts of the
United States and with state sponsored lotteries, on-and-off track wagering,
card clubs, riverboat and Native American gaming ventures and other forms of
legalized gaming.
Since the 1980's, legalized gaming opportunities have proliferated
throughout the United States. Riverboat, dockside or land-based gaming is
currently legal in ten states and gaming on Native American-owned land is
legal in at least 23 states, including California, Washington and Oregon. In
addition, California (from where the Reno Market drew approximately 47% of its
visitors in 1995) allows other non-casino style gaming, including pari-mutuel
wagering, a state-sponsored lottery, card clubs, bingo and off-track betting.
The Company believes that the expansion of casino gaming on Native American
lands in California, and to a lesser extent in Washington and Oregon, could
have a material adverse affect on the Company's operations. Furthermore, while
the Company believes that the continued spread of legalized gaming may in the
future present the Company with opportunities for expansion (subject to
available financing), increased legalized gaming in other states, particularly
in areas close to Nevada, such as California, Washington and Oregon, could
adversely affect the Company's operations. See "Business--Competition."
A substantial number of customers travel to both the Reno Market and the
Lake Tahoe market during their visits. Consequently, the Company believes that
its success is influenced to some degree by the success of the Lake Tahoe
market. While the Company does not anticipate a decline in the popularity of
either the Reno Market or the Lake Tahoe market as tourist destination areas
in the foreseeable future, any such decline could adversely affect the
Company's operations.
According to statistics published by the Visitors Authority, there were
approximately 14,241 hotel rooms and approximately 5,221 motel rooms in the
Reno Market at the end of 1995. In addition, according to the Visitors
Authority, several hotel/casino projects are currently proposed or under
construction in the Reno Market which are expected to add approximately 2,690
rooms by the end of the decade. While management believes that growth in the
Reno Market's room base and gaming capacity will benefit the Company, there
can be no assurance that such growth will not exceed market demand and thereby
adversely affect the Company's financial condition or results of operations.
LEVERAGE AND DEBT SERVICE
The Company has substantial fixed debt service in addition to operating
expenses. The Company used the net proceeds from the issuance of the Private
Notes to repay a portion of the Existing Credit Facility (as defined herein)
and, concurrently with the closing of the issuance of the Private Notes,
amended the Existing Credit Facility to provide for a senior secured revolving
credit facility of $50 million (the Existing Credit Facility as amended is
hereinafter referred to as the "Credit Facility"). See "Material Agreements--
Description of the Credit Facility." As of June 30, 1996, after giving pro
forma effect to the issuance of the Private Notes and the application of the
net proceeds therefrom, the Company's total consolidated long-term debt
(excluding current portion) would have been $121.2 million, consisting of the
Private Notes, $17.2 million outstanding under the Existing Credit Facility
and $4.0 million of other long-term debt. The degree to which the Company is
leveraged could have important consequences to the holders of the Notes,
including the following: (i) the Company's ability
13
<PAGE>
to obtain additional financing in the future for working capital, capital
expenditures, acquisitions or other purposes may be impaired, (ii) the
Company's flexibility in planning for or reacting to changes in market
conditions may be limited and (iii) the Company may be vulnerable in the event
of a downturn in its business. The refinancing effected by the application of
the proceeds of the issuance of Private Notes reduced the Company's principal
repayment obligations for the near future; however, under the terms of the
Indenture and the Credit Facility, the Company may continue to incur
additional indebtedness.
The Credit Facility and the Indenture contain certain restrictive covenants
including, among other things, limitations on the ability of the Company and
certain of its subsidiaries to incur additional indebtedness, to create liens
and other encumbrances, to make certain payments and investments, to enter
into transactions with affiliates to sell or otherwise dispose of assets and
to merge or consolidate with another entity. Although the covenants are
subject to various exceptions which are designed to allow the Company to
operate without undue restraint, there can be no assurance that such covenants
will not adversely affect the Company's ability to finance future operations
or capital needs or engage in other activities which may be in the interest of
the Company. In addition, the Company is required under the Credit Facility to
maintain certain financial ratios. The Company's ability to comply with such
provisions will be dependent upon its future performance, which will be
affected by prevailing economic conditions and financial, business and other
factors, certain of which are beyond the Company's control. Accordingly, no
assurance can be given that the Company will maintain a level of operating
cash flow that will permit it to service its obligations and to satisfy the
financial covenants in the Credit Facility. A breach of any of these covenants
or the inability of the Company to comply with the required financial ratios
could result in a default under the Credit Facility, which would entitle the
lenders thereunder to accelerate the maturity of the Credit Facility, and
could result in cross-defaults permitting the acceleration of other
indebtedness of the Company, including the Notes. Such an event would
adversely affect the Company's ability to make payments on the Notes. See
"Material Agreements--Description of the Credit Facility" and "Description of
Notes."
SUBORDINATION OF EXCHANGE NOTES
The Exchange Notes will be unsecured and subordinated to the prior right of
payment of all existing and future Senior Debt of the Issuers, including
obligations under the Credit Facility. Subject to certain limitations, the
Indenture will permit the Issuers to incur additional indebtedness, including
Senior Debt. See "Description of Notes--Certain Covenants--Incurrence of
Indebtedness." In addition, the indebtedness under the Credit Facility will
become due prior to the maturity of the Exchange Notes. As a result of the
subordination provisions contained in the Indenture, in the event of a
liquidation or insolvency, the assets of the Issuers will be available to pay
obligations on the Exchange Notes only after all Senior Debt has been paid in
full, and there may not be sufficient assets remaining to pay amounts due on
any or all of the Exchange Notes then outstanding. See "Material Agreements--
Description of the Credit Facility" and "Description of Notes."
DEPENDENCE ON KEY MARKETS AND PEDESTRIAN TRAFFIC IN DOWNTOWN RENO
The Visitors Authority reports that visitors from California, Washington,
Oregon and Canada accounted for approximately 47%, 12%, 7% and 7%,
respectively, of the visitors to the Reno Market in 1995. Accordingly, the
Company is dependent for its revenues primarily upon the gaming activities of
customers visiting the Reno Market from these areas. A decline in the Reno
Market's gaming revenues generally or in the economy of the Reno Market, a
decline in the economies in California, Washington, Oregon, Canada or
elsewhere or a decline in the number of gaming customers traveling to the Reno
Market for any reason, including increased competition from other gaming areas
(including Native American gaming in California, Washington and Oregon), could
have a material adverse effect on the Company's results of operations. See "--
Seasonality; Quarterly Fluctuations in Operating Results" and "Business--
Competition."
Additionally, management is aware of proposals for the potential rerouting
of train tracks throughout the Reno metropolitan area. Such rerouting could
increase the frequency of trains travelling through downtown Reno and could
cause interruptions in normal pedestrian traffic patterns and flow. Any
interruption in pedestrian traffic
14
<PAGE>
patterns and flow could result in a decline in the number of visitors to the
Eldorado. The Company is unable to estimate the impact that future
construction or the increase in the frequency of trains traveling through
downtown Reno would have on its results of operations.
CONTROL BY AND DEPENDENCE ON KEY PERSONNEL
Donald Carano controls the Company through his direct and indirect equity
ownership of the Company and is a member of the Board of Managers and the
Chief Executive Officer of the Company. As a result, Mr. Carano has the power
to elect a majority of the Board of Managers, appoint new management and
control all aspects of the daily operations of the Company and the Eldorado.
The Company is dependent on the retention of, and continued performance by,
Mr. Carano. The Company believes that the sudden loss of the services of Mr.
Carano could have a material adverse effect on the Company. The Company does
not have an employment contract with Mr. Carano and the Company does not
maintain key-man insurance policies on Mr. Carano or on any other officer of
the Company.
POTENTIAL CONFLICTS OF INTEREST
Donald Carano and Robert Jones, the Chief Financial Officer of the Company,
are members of the Silver Legacy Joint Venture's Executive Committee, which
oversees the management of the operations of the Silver Legacy. Therefore, Mr.
Carano's and Mr. Jones's decisions relating to the daily operations of the
Company, in addition to Mr. Carano's equity ownership in the Company, could
conflict with their respective positions on the Silver Legacy's Executive
Committee to the extent that their actions in such capacities are not
beneficial to both the Eldorado and the Silver Legacy. See "Management" and
"Security Ownership of Certain Beneficial Owners and Management."
Additionally, Gary Carano, the General Manager of the Silver Legacy and a
member of the Board of Managers of the Company, and Glenn Carano, the Director
of Marketing of the Silver Legacy, each indirectly own a 10.1% interest in
Recreational Enterprises, Inc., which owns a 55% equity interest in the
Company. See "Security Ownership of Certain Beneficial Owners and Management."
Accordingly, Gary Carano's and Glenn Carano's decisions relating to the
management of the Silver Legacy could conflict with Gary Carano's position as
a member of the Company's Board of Managers and both of their respective
positions as equityholders in the Company to the extent that their actions in
such capacities are not beneficial to both the Eldorado and the Silver Legacy.
The potential for the conflicts of interest described above may be
exacerbated by the fact that the Eldorado and the Silver Legacy are connected
by a skyway corridor. No specific procedures for resolving these conflicts of
interest have been developed and there can be no assurance that effective
procedures for addressing such matters can be developed.
Donald Carano is the Chief Executive Officer of and beneficially owns stock,
along with Gene, Gregg and Cindy Carano (the Director of Hotel and Retail
Operations of the Eldorado), in Recreational Enterprises, Inc., which, in
addition to its ownership interest in the Company, engages in other business
activities. These members of the Carano family, as well as Rhonda Carano (the
Director of Advertising and Public Relations of the Eldorado), provide
services and devote a portion of their time and attention to business
activities of Recreational Enterprises, Inc. which are unrelated to the
business of the Company. Furthermore, Donald Carano is currently a general
partner of the Ferrari Carano Vineyards and Winery, a California general
partnership (the "Ferrari Carano Winery"), which is owned by Recreational
Enterprises, Inc. and the Carano family. Additionally, Donald Carano and
Recreational Enterprises, Inc. collectively own a 50% equity interest in the
Pioneer Inn Hotel Casino, a small hotel/casino located in downtown Reno. Mr.
Carano spends approximately one-third of his time on matters relating to the
Ferrari Carano Winery and, from time to time, devotes a portion of his
attention to other business ventures, including, to a minimal extent, the
Pioneer Inn Hotel Casino. In addition, Mr. Carano is "of counsel" to the law
firm of McDonald Carano Wilson McCune Bergin Frankovich & Hicks LLP, but is
not involved in the active practice of law. See "Certain Transactions."
15
<PAGE>
SEASONALITY; QUARTERLY FLUCTUATIONS IN OPERATING RESULTS
Historically, hotel/casino operations in the Reno Market have been subject
to seasonal variations. Traditionally, the strongest operating results occur
in the third quarter and the weakest results have occurred during the period
from November through February when weather conditions have adversely affected
operating results. For example, during the winter months of 1994-1995 and
1995-1996, the Reno Market and surrounding areas experienced greater than
normal snowfall, making travel to the Reno Market more difficult. This
resulted in significant declines in traffic on major highways, particularly on
routes to and from northern California, and caused a downturn in customer
volume. Consequently, during those periods the revenues and cash flows at
hotel/casinos in the Reno Market, including the Eldorado, were adversely
affected. Furthermore, according to the Visitors Authority, 57% of visitors to
the Reno Market in 1995 arrived by some form of ground transportation.
Therefore, normal winter weather is expected to cause the Company's operating
results to be seasonally affected and severe winter weather may have a
material adverse effect on the Company's operating results. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Seasonality."
In addition, the Company's financial results for the first half of 1995 were
positively impacted by the presence of bowlers competing in tournaments
sponsored by the American Bowling Congress (the "ABC") which were held at the
National Bowling Stadium. The Visitors Authority has entered into contracts
with each of the ABC and the Women's International Bowling Congress (the
"WIBC") which obligate each of the ABC and the WIBC to hold a National
Championship Bowling Tournament at the National Bowling Stadium once every
three years. The contracts were structured so that there will be a National
Championship Bowling Tournament in Reno two out of every three years between
1995 and 2009. However, while the Company expects that the National Bowling
Stadium will host tournaments sponsored by other bowling organizations,
neither the ABC nor the WIBC is scheduled to sponsor a tournament in Reno in
1996. Consequently, the Company expects some negative impact in its operating
results and cash flow in 1996 and in other years in which neither of these
associations stages a tournament in Reno. See "Business--Reno Market."
CHANGE OF CONTROL
In the event of a Change of Control, each holder of Notes will have the
right, at the holder's option, to require the Issuers to purchase all or a
portion of such holder's Notes in accordance with the terms of the Indenture.
The occurrence of a Change of Control could result in a default under the
Credit Facility or other Senior Debt. In addition, the Issuers' ability to pay
cash to the holders of the Notes upon any such event may be limited by the
Issuers' financial condition at the time of such event or by financial
covenants that may be contained in the Senior Debt. If the Issuers are
required to seek the consent of their lenders to repurchase the Notes and are
unable to obtain such consents or are unable to refinance the borrowings that
contain such prohibition, the inability of the Issuers to repurchase Notes
would constitute an Event of Default under the Indenture, which, in turn,
would constitute a default under the Credit Facility or other Senior Debt. In
such circumstances, the subordination provisions in the Indenture would likely
restrict payments to the holders of Notes. See "--Subordination of Notes" and
"Description of Notes--Repurchase at the Option of Holders."
CAPITAL CALLS UNDER THE SILVER LEGACY JOINT VENTURE AGREEMENT
The Silver Legacy was developed pursuant to the Agreement of Joint Venture
of Circus and Eldorado Joint Venture (the "Joint Venture Agreement") dated as
of March 1, 1994, between ELLC and Galleon, Inc., a wholly-owned subsidiary of
Circus Circus ("Circus Sub"). Under the Joint Venture Agreement, ELLC may be
required to make certain additional capital contributions to defray certain
net losses incurred by the Silver Legacy Joint Venture. No assurance can be
given that ELLC will maintain a level of operating cash flow that will permit
it to satisfy any such additional capital contribution requirements. If ELLC
fails to make a required additional capital contribution, Circus Sub may loan
directly to the Silver Legacy Joint Venture the amount of the additional
capital contribution that ELLC has failed to pay or may contribute the amount
of such additional capital contribution on behalf of ELLC, which contributed
amount would be considered a loan to ELLC and would be
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required to be repaid by ELLC from the cash distributions it receives pursuant
to the Joint Venture Agreement. If ELLC's loan were not repaid to Circus Sub
within two years, ELLC's interest in the Silver Legacy Joint Venture could be
purchased by Circus Sub. In addition, if ELLC were in default at any time on
any two required additional capital contributions, ELLC's interest in the
Silver Legacy Joint Venture could be purchased by Circus Sub. The Company is
not liable for the payment of any additional capital contribution owed by
ELLC. See "Material Agreements--Silver Legacy Joint Venture Agreement."
IMPACT OF SILVER LEGACY/RECENT OPERATING RESULTS
The opening of the Silver Legacy has had a mixed effect on the Eldorado's
results of operations. During peak periods, the Eldorado has benefited from
the critical mass of, and the seamless connection between, the Eldorado, the
Silver Legacy and Circus Circus-Reno properties. Management believes that, in
slower periods, the Eldorado has been negatively impacted by the Silver
Legacy, as that facility attracts a greater share of the gaming patrons due to
its larger room base. From August 1, 1995 through June 30, 1996, the
Eldorado's gaming revenues increased by $4.5 million, or 4.9%, as compared to
the prior year period. However, while the Eldorado was able to increase its
gaming revenues during this period despite competition from the Silver Legacy,
the Company's EBITDA declined due to additional operating and marketing costs.
In addition to the impact of the Silver Legacy, harsh winter conditions in
the Reno area, the absence of a major bowling tournament, a lower than normal
table hold percentage, as well as the increased costs associated with
operating the larger Eldorado facility each had a negative impact on the
Company's operating performance in 1996. For the six months ended June 30,
1996, the Company's EBITDA decreased to $17.9 million as compared to $18.8
million in EBITDA generated in the comparable prior year period. Based upon
the factors discussed above, the Company expects EBITDA for the third quarter
ended September 30, 1996 and for the nine months ended September 30, 1996 to
be lower than the EBITDA generated in the comparable prior year periods. In
addition, the Company's EBITDA for the year ended December 31, 1995 increased
to $41.8 million from $41.2 million for the year ended December 31, 1994 and
decreased from $42.7 million in each of the years ended December 31, 1993 and
1992. No assurance can be given that the Company's EBITDA will increase or
will regain levels achieved in prior years. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
ENVIRONMENTAL MATTERS
As is the case with any owner or operator of real property, the Company is
subject to a variety of federal, state and local governmental regulations
relating to the use, storage, discharge, emission and disposal of hazardous
materials. Federal, state and local environmental laws and regulations also
impose liability on potentially responsible parties, including the owners or
operators of real property, to clean up, or contribute to the cost of cleaning
up, sites at which hazardous wastes or materials were disposed of or released.
The Company does not have environmental liability insurance to cover such
events.
Certain of the Company's properties and former properties, including the
Silver Legacy property, had or have varying degrees of petroleum contamination
in the soil and/or groundwater. In each instance where such petroleum
contamination has been identified, investigation or remediation activities
have been undertaken or are ongoing. The possibility exists that additional
contamination, as yet unknown, may exist at these or other of the Company's
properties. In addition, under the terms of an Environmental Indemnity, dated
May 30, 1995 (the "Environmental Indemnity"), the Company has agreed jointly
and severally with Circus Circus to indemnify, defend and hold harmless the
agents and lenders under the Silver Legacy Joint Venture's bank credit
facility from and against any and all Environmental Losses (as defined in the
Environmental Indemnity) suffered or incurred on the premises of the Silver
Legacy or arising through the ownership, use, occupancy or operation thereof.
Generally, liability under the Environmental Indemnity covers the period prior
to the date the lenders foreclose on and take possession of the real property
securing their loans to the Silver Legacy Joint Venture. The agents and
lenders are not required to seek payments from the Silver Legacy Joint Venture
before pursuing payments from the Company and Circus Circus for Environmental
Losses. In all cases, the Company believes that the
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contamination arose from activities of prior owners or occupants, or from
offsite sources and not as a result of any actions or operations conducted by
the Company.
As to the petroleum contamination identified on the Silver Legacy property,
the Company is currently seeking reimbursement and indemnification from
Chevron Company USA. The possibility exists that other responsible parties may
be identified for this or other sites, and the Company will determine whether
to seek contribution or reimbursement from such parties. In addition,
reimbursement for some of the expenditures has been, and further reimbursement
may be, obtained from the State of Nevada Petroleum Fund which has been
established to reimburse parties for costs incurred in clean-up of underground
storage tank related contamination.
The Company's properties and former properties also lie within the proposed
Central Truckee Meadows Remediation District, encompassing much of the City of
Reno, which will address groundwater contaminated with solvents as identified
by the Nevada Division of Environmental Protection. The Company does not
believe that it has contributed to this solvent contamination. The Company has
not been required to conduct any remediation or investigation of this matter
nor to contribute toward any costs associated therewith. However, the
possibility remains that funding of the investigation or remediation of this
regional groundwater issue could result in a special assessment on the
Company's properties or former properties among others within the Remediation
District. The possibility exists that the entire area of contamination, or a
portion thereof, could be listed under the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980.
Asbestos has been determined to be present in areas of the Eldorado, which
management believes does not require removal at this time.
GAMING REGULATION
The Company's gaming operations, and the ownership of securities in the
Company, are subject to extensive regulation by the Nevada Gaming Commission
(the "Nevada Commission"), the Nevada State Gaming Control Board (the "Nevada
Board") and various local governmental authorities (the "Local Authorities"
and, together with the Nevada Commission and the Nevada Board, the "Nevada
Gaming Authorities"). If it were determined that the Nevada Gaming Control Act
or any regulations promulgated thereunder (collectively, the "Nevada Act")
were violated by the Company, the Eldorado or the Silver Legacy, the gaming
licenses held by the violating entity could be limited, conditioned, suspended
or revoked, subject to compliance with certain statutory and regulatory
procedures. The Nevada Gaming Authorities have broad authority with respect to
licensing and registration of entities and individuals involved in gaming
operations, including holders of the Company's outstanding securities. The
Nevada Gaming Authorities may, among other things, revoke the license of any
entity licensed as a gaming corporation or the registration of any entity
registered as a holding company of a gaming corporation, and may also revoke
the license of any individual licensed as an officer, director, control person
or shareholder of a licensed or registered entity. Revocation of the gaming
licenses held by the Company would result in a material adverse effect on the
business of the Company.
The Company will be required to disclose to the Nevada Gaming Authorities
the identities of the holders of the Notes. In addition, the Nevada Commission
has authority under the Nevada Act, in its discretion, to (i) require holders
of debt securities of licensed companies to file applications, (ii)
investigate such holders and (iii) require such holders to be found suitable
to own such debt securities. If the Nevada Commission determines that a person
is unsuitable to own such securities, then pursuant to the regulations of the
Nevada Commission, the Company may be subject to sanctions, including the loss
of its approvals, if, without the prior approval of the Nevada Commission, it
(i) pays to the unsuitable person any dividend, interest or any distribution
whatsoever, (ii) recognizes any voting right by such unsuitable person in
connection with such securities, (iii) pays the unsuitable person remuneration
in any form or (iv) makes any payments to the unsuitable person by way of
principal, redemption, conversion, exchange, liquidation or similar
transaction. The Indenture provides that if a holder or beneficial owner of a
Note is required to be found suitable and is not found suitable, the Company
will have the right (i) to require the holder or owner to dispose of its Notes
within 30 days or such earlier period as may be ordered by the Nevada
Commission or (ii) to redeem the holder's or owner's Notes within 30 days or
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such earlier period as may be prescribed by the Nevada Commission at the
lesser of the principal amount thereof or the price at which the holder or
owner acquired the Notes, together with, in either case, accrued interest to
the date of finding of unsuitability by the Nevada Commission. See
"Description of Notes--Gaming Redemption."
In addition, any future public offering of debt or equity securities by the
Company, including the Exchange Offer and any offering the proceeds of which
are intended to be used to pay for construction of, or to acquire an interest
in, any gaming facilities in Nevada, to finance the gaming operations of an
affiliated company or to retire or extend obligations incurred for any such
purposes, requires the prior approval of the Nevada Commission.
If the Nevada Gaming Authorities were to find an officer, director or key
employee unsuitable for licensing or unsuitable to continue having a
relationship with the Company, the Company would have to sever all
relationships with such person. Furthermore, the Nevada Commission may require
the Company to terminate the employment of any person who refuses to file
appropriate applications. Either result could materially adversely affect the
gaming operations of the Company.
POSSIBLE LEGISLATION
The California State Assembly and the California Senate each have recently
passed separate bills which would legalize electronic gaming devices and
nonhouse banked card games at casinos located on Native American lands in
California and would create a new agency within the California Attorney
General's office that would regulate legal gaming in California. None of these
bills has been passed by both houses of the legislature. The Company believes
that the expansion of casino gaming on Native American lands, or otherwise, in
California could have a material adverse effect on the Company's operations.
In July 1996, the United States House of Representatives gave final
congressional approval to a bill that, if signed by the President, would
create the National Gambling Impact and Policy Commission to conduct a
comprehensive study of all matters relating to the economic and social impact
of gaming in the United States. The legislation provides that, not later than
two years after the enactment of such legislation, the commission would be
required to issue a report containing its findings and conclusions, together
with recommendations for legislation and administrative actions. Any such
recommendations, if enacted into law, could adversely impact the gaming
industry and have a material adverse effect on the Company's business or
results of operations.
Additionally, from time to time, certain federal legislators have proposed
the imposition of a federal tax on gaming revenues. Any such tax could have a
material adverse effect on the Company's financial condition or results of
operations.
NON-RECOURSE NATURE OF NOTES
No direct or indirect member, manager, employee, officer, stockholder or
director, past, present or future, of either of the Issuers or any Guarantor
(as defined herein) will have any personal liability in respect of the
obligations of the Issuers under the Indenture, the Notes or any guarantees
thereof by reason of the status as such member, manager, employee, officer,
stockholder or director unless such person is an Issuer or Guarantor of the
Notes.
ABSENCE OF PUBLIC MARKET
The Private Notes have not been registered under the Securities Act and are
subject to significant restrictions on resale. The Exchange Notes constitute a
new issue of securities for which there is currently no active trading market.
The Company does not intend to list the Notes on any securities exchange or to
seek approval for quotation of the Notes through any automated quotation
system. If the Exchange Notes are traded after their initial issuance, they
may trade at a discount from their initial offering price, depending upon
prevailing interest rates, the market for similar securities and other
factors, including general economic conditions and the financial
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condition of, performance of and prospects for the Company. The Initial
Purchasers have advised the Company that they currently intend to make a
market in the Notes as permitted by applicable law and regulation. However,
the Initial Purchasers are not obligated to do so and any such market-making
activities may be discontinued at any time without notice. In addition, such
market-making activities may be limited during the Exchange Offer. There can
be no assurance that an active trading market for the Notes will develop or be
sustained. See "Notice to Investors."
FAILURE TO EXCHANGE PRIVATE NOTES
Exchange Notes will be issued in exchange for Private Notes only after
timely receipt by the Exchange Agent of such Private Notes, a properly
completed and duly executed Letter of Transmittal and all other required
documentation. Therefore, holders of Private Notes desiring to tender such
Private Notes in exchange for Exchange Notes should allow sufficient time to
ensure timely delivery. Neither the Exchange Agent nor the Issuers are under
any duty to give notification of defects or irregularities with respect to
tenders of Private Notes for exchange. Private Notes that are not tendered or
are tendered but not accepted will, following consummation of the Exchange
Offer, continue to be subject to the existing restrictions upon transfer
thereof. In addition, any holder of Private Notes who tenders in the Exchange
Offer for the purpose of participating in a distribution of the Exchange Notes
will be required to comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Private Notes, where such Private Notes were acquired by such
broker-dealer as a result of market-making activities or any other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. To the extent that Private Notes are
tendered and accepted in the Exchange Offer, the trading market for untendered
and tendered but unaccepted Private Notes could be adversely affected due to
the limited amount, or "float," of the Private Notes that are expected to
remain outstanding following the Exchange Offer. Generally, a lower "float" of
a security could result in less demand to purchase such security and could,
therefore, result in lower prices for such security. For the same reason, to
the extent that a large amount of Private Notes are not tendered or are
tendered and not accepted in the Exchange Offer, the trading market for the
Exchange Notes could be adversely affected. See "Plan of Distribution" and
"The Exchange Offer."
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The Private Notes were sold by the Issuers on July 31, 1996 (the "Closing
Date") to the Initial Purchasers pursuant to the Purchase Agreement. The
Initial Purchasers subsequently sold the Private Notes to (i) "qualified
institutional buyers" ("QIBs"), as defined in Rule 144A under the Securities
Act ("Rule 144A"), in reliance on Rule 144A and (ii) a limited number of
institutional "accredited investors" ("Accredited Institutions"), as defined
in Rule 501(a)(1), (2), (3), or (7) under the Securities Act. As a condition
to the sale of the Private Notes, the Issuers and the Initial Purchasers
entered into the Registration Rights Agreement on July 31, 1996. Pursuant to
the Registration Rights Agreement, the Issuers agreed that, unless the
Exchange Offer is not permitted by applicable law or Commission policy, they
would (i) file with the Commission a Registration Statement under the
Securities Act with respect to the Exchange Notes within 45 days after the
Closing Date, (ii) use their best efforts to cause such Registration Statement
to become effective under the Securities Act within 180 days after the Closing
Date and (iii) use their best efforts to consummate the Exchange Offer prior
to the 30th business day following the date on which the Registration
Statement is declared effective. A copy of the Registration Rights Agreement
has been filed as an exhibit to the Registration Statement. The Registration
Statement is intended to satisfy certain of the Issuers' obligations under the
Registration Rights Agreement and the Purchase Agreement.
RESALE OF THE EXCHANGE NOTES
With respect to the Exchange Notes, based upon an interpretation by the
staff of the Commission set forth in certain no-action letters issued to third
parties, the Issuers believe that a holder (other than (i) a broker-dealer
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who purchases such Exchange Notes directly from the Issuers to resell pursuant
to Rule 144A or any other available exemption under the Securities Act or (ii)
any such holder that is an "affiliate" of either of the Issuers within the
meaning of Rule 405 under the Securities Act) who exchanges Private Notes for
Exchange Notes in the ordinary course of business and who is not
participating, does not intend to participate, and has no arrangement with any
person to participate, in a distribution of the Exchange Notes, will be
allowed to resell Exchange Notes to the public without further registration
under the Securities Act and without delivering to the purchasers of the
Exchange Notes a prospectus that satisfies the requirements of Section 10 of
the Securities
Act. However, if any holder acquires Exchange Notes in the Exchange Offer for
the purpose of distributing or participating in the distribution of the
Exchange Notes or is a broker-dealer, such holder cannot rely on the position
of the staff of the Commission enumerated in certain no-action letters issued
to third parties and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction,
unless an exemption from registration is otherwise available. Each broker-
dealer that receives Exchange Notes for its own account in exchange for
Private Notes, where such Private Notes were acquired by such broker-dealer as
a result of market-making activities or other trading activities, must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. The Letter of Transmittal states that by so acknowledging
and by delivering a prospectus, a broker-dealer will not be deemed to admit
that it is an "underwriter" within the meaning of the Securities Act. This
Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of Exchange Notes received
in exchange for Private Notes where such Private Notes were acquired by such
broker-dealer as a result of market-making or other trading activities.
Pursuant to the Registration Rights Agreement, the Issuers have agreed to make
this Prospectus, as it may be amended or supplemented from time to time,
available to broker-dealers and other persons, if any, with similar prospectus
delivery requirements for use in connection with any resale for a period not
to exceed 180 days after the date of effectiveness of the Registration
Statement, unless extended pursuant to the terms of the Registration Rights
Agreement. See "Plan of Distribution."
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Issuers will accept any and all Private
Notes validly tendered and not withdrawn prior to the Expiration Date. The
Issuers will issue $1,000 principal amount of Exchange Notes in exchange for
each $1,000 principal amount of outstanding Private Notes surrendered pursuant
to the Exchange Offer. Private Notes may be tendered only in integral
multiples of $1,000.
The form and terms of the Exchange Notes are the same as the form and terms
of the Private Notes except that (i) the exchange will be registered under the
Securities Act and, therefore, the Exchange Notes will not bear legends
restricting the transfer thereof and (ii) holders of the Exchange Notes will
not be entitled to any of the rights of holders of Private Notes under the
Registration Rights Agreement, which rights will terminate upon the
consummation of the Exchange Offer. The Exchange Notes will evidence the same
indebtedness as the Private Notes (which they replace) and will be issued
under, and be entitled to the benefits of Indenture, which also authorized the
original issuance of the Private Notes, such that both series of Notes will be
treated as a single class of debt securities under the Indenture.
As of the date of this Prospectus, $100,000,000 in aggregate principal
amount of the Private Notes are outstanding and registered in the name of Cede
& Co., as a nominee for DTC. Only a registered holder of the Private Notes (or
such holder's legal representative or attorney-in-fact) as reflected on the
records of the Trustee under the Indenture may participate in the Exchange
Offer. There will be no fixed record date for determining registered holders
of the Private Notes entitled to participate in the Exchange Offer.
Holders of the Private Notes do not have any appraisal or dissenters' rights
under the Indenture in connection with the Exchange Offer. The Issuers intend
to conduct the Exchange Offer in accordance with the provisions of the
Registration Rights Agreement and the applicable requirements of the
Securities Act, the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations of the Commission thereunder.
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The Issuers shall be deemed to have accepted validly tendered Private Notes
when, as and if the Issuers have given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
of Private Notes for the purposes of receiving the Exchange Notes from the
Issuers.
Holders who tender Private Notes in the Exchange Offer will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Private
Notes pursuant to the Exchange Offer. The Issuers will pay all charges and
expenses, other than certain applicable taxes described below, in connection
with the Exchange Offer. See "--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time on
, 199 , unless the Issuers, in their sole discretion, extend the
Exchange Offer, in which case the term Expiration Date shall mean the latest
date and time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Issuers will (i) notify the
Exchange Agent of any extension by oral or written notice, (ii) mail to the
registered holders of Private Notes an announcement thereof and (iii) issue a
press release or other public announcement which shall include disclosure of
the approximate number of Private Notes deposited to date, each prior to 9:00
a.m., New York City time, on the next business day after the previously
scheduled Expiration Date. Without limiting the manner in which the Issuers
may choose to make a public announcement of any delay, extension, amendment or
termination of the Exchange Offer, the Issuers shall have no obligation to
publish, advertise, or otherwise communicate any such public announcement,
other than by making a timely release to an appropriate news agency.
The Issuers reserve the right, in their sole discretion, (i) to delay
accepting any Private Notes, (ii) to extend the Exchange Offer or (iii) if any
conditions set forth below under "--Conditions" shall not have been satisfied,
to terminate the Exchange Offer by giving oral or written notice of such
delay, extension or termination to the Exchange Agent. Any such delay in
acceptance, extension, termination or amendment will be followed as promptly
as practicable by oral or written notice thereof to the registered holders. If
the Exchange Offer is amended in a manner determined by the Issuers to
constitute a material change, the Issuers will promptly disclose such
amendment by means of a prospectus supplement that will be distributed to the
registered holders, and the Issuers will extend the Exchange Offer for a
period of five to ten business days, depending upon the significance of the
amendment and the manner of disclosure to the registered holders, if the
Exchange Offer would otherwise expire during such five to ten business day
period.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will bear interest at a rate equal to 10 1/2% per annum.
Interest on the Exchange Notes will be payable semi-annually on each August 15
and February 15, commencing February 15, 1997. Holders of Exchange Notes will
receive interest on February 15, 1997 from the date of original issuance of
the Private Notes. Holders of Private Notes that are accepted for exchange
will be deemed to have waived the right to receive any interest accrued on the
Private Notes.
PROCEDURES FOR TENDERING
Only a registered holder of Private Notes may tender such Private Notes in
the Exchange Offer. To tender in the Exchange Offer, a holder of Private Notes
must complete, sign and date the Letter of Transmittal, or facsimile thereof,
have the signatures thereon guaranteed if required by the Letter of
Transmittal, and mail or otherwise deliver such Letter of Transmittal or such
facsimile to the Exchange Agent at the address set forth below under "--
Exchange Agent" for receipt prior to the Expiration Date. In addition, either
(i) certificates for such Private Notes must be received by the Exchange Agent
along with the Letter of Transmittal, (ii) a timely confirmation of a book-
entry transfer (a "Book-Entry Confirmation") of such Private Notes, if such
procedure is available, into the Exchange Agent's account at the Depositary
pursuant to the procedure for book-entry
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transfer described below, must be received by the Exchange Agent prior to the
Expiration Date, or (iii) the holder must comply with the guaranteed delivery
procedures described below.
The tender by a holder that is not withdrawn prior to the Expiration Date
will constitute an agreement between such holder and the Issuers in accordance
with the terms and subject to the conditions set forth herein and in the
Letter of Transmittal.
THE METHOD OF DELIVERY TO THE EXCHANGE AGENT OF PRIVATE NOTES, THE LETTER OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF
THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN
OVERNIGHT OR HAND DELIVERY SERVICE, PROPERLY INSURED. IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE
DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF
TRANSMITTAL OR PRIVATE NOTES SHOULD BE SENT TO THE ISSUERS. HOLDERS MAY
REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES
OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner of Private Notes whose Private Notes are registered in
the name of a broker, dealer, commercial bank, trust company or other nominee
and who wishes to tender should contact the registered holder promptly and
instruct such registered holder to tender on such beneficial owner's behalf.
If such beneficial owner wishes to tender on its own behalf, such beneficial
owner must, prior to completing and executing the Letter of Transmittal and
delivering its Private Notes, either make appropriate arrangements to register
ownership of the Private Notes in its name or obtain a properly completed bond
power from the registered holder. The transfer of registered ownership may
take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal described
below (see "--Withdrawal of Tenders"), as the case may be, must be guaranteed
by an Eligible Institution (as defined below) unless the Private Notes
tendered pursuant thereto are tendered (i) by a registered holder who has not
completed the box titled "Special Delivery Instructions" on the Letter of
Transmittal or (ii) for the account of an Eligible Institution. In the event
that signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, are required to be guaranteed, such guarantee must be made by a
member firm of a registered national securities exchange or of the National
Association of Securities Dealers, Inc., a commercial bank or trust company
having an office or correspondent in the United States or an "eligible
guarantor institution" within the meaning of Rule 17Ad-15 under the Exchange
Act which is a member of one of the recognized signature guarantee programs
identified in the Letter of Transmittal (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the registered
holder of any Private Notes listed therein, such Private Notes must be
endorsed or accompanied by a properly completed bond power, signed by such
registered holder as such registered holder's name appears on such Private
Notes.
If the Letter of Transmittal or any Private Notes or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity,
such persons should so indicate when signing, and unless waived by the
Issuers, evidence satisfactory to the Issuers of their authority to so act
must be submitted with the Letter of Transmittal.
The Exchange Agent and the Depositary have confirmed that any financial
institution that is a participant in the Depositary's system may utilize the
Depositary's Automated Tender Offer Program to tender Private Notes.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Private Notes will be
determined by the Issuers in their sole discretion, which determination will
be final and binding. The Issuers reserve the absolute right to reject any and
all Private Notes not properly tendered or any Private Notes the Issuers'
acceptance of which would, in the opinion of counsel for the Issuers, be
unlawful. The Issuers also reserve the right to waive any defects,
irregularities or conditions of tender as to
23
<PAGE>
particular Private Notes. The Issuers' interpretation of the terms and
conditions of the Exchange Offer (including the instructions in the Letter of
Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Private Notes must be
cured within such time as the Issuers shall determine. Although the Issuers
intend to notify holders of defects or irregularities with respect to tenders
of Private Notes, neither the Issuers, the Exchange Agent nor any other person
shall incur any liability for failure to give such notification. Tenders of
Private Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived.
While the Issuers have no present plan to acquire any Private Notes that are
not tendered in the Exchange Offer or to file a registration statement to
permit resales of any Private Notes that are not tendered pursuant to the
Exchange Offer, the Issuers reserve the right in their sole discretion to
purchase or make offers for any Private Notes that remain outstanding
subsequent to the Expiration Date or, as set forth below under "--Conditions,"
to terminate the Exchange Offer and, to the extent permitted by applicable
law, purchase Private Notes in the open market, in privately negotiated
transactions or otherwise. The terms of any such purchases or offers could
differ from the terms of the Exchange Offer.
By tendering, each holder of Private Notes will represent to the Issuers
that, among other things, (i) Exchange Notes to be acquired by such holder of
Private Notes in connection with the Exchange Offer are being acquired by such
holder in the ordinary course of business of such holder, (ii) such holder has
no arrangement or understanding with any person to participate in the
distribution of the Exchange Notes, (iii) such holder acknowledges and agrees
that any person who is a broker-dealer registered under the Exchange Act or is
participating in the Exchange Offer for the purposes of distributing the
Exchange Notes must comply with a registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction of the Exchange Notes acquired by such person and cannot rely on
the position of the staff of the Commission set forth in certain no-action
letters, (iv) such holder understands that a secondary resale transaction
described in clause (iii) above and any resales of Exchange Notes obtained by
such holder in exchange for Private Notes acquired by such holder directly
from the Issuers should be covered by an effective registration statement
containing the selling securityholder information required by Item 507 or Item
508, as applicable, of Regulation S-K of the Commission and (v) such holder is
not an "affiliate," as defined in Rule 405 under the Securities Act, of either
of the Issuers. If the holder is a broker-dealer that will receive Exchange
Notes for such holder's own account in exchange for Private Notes that were
acquired as a result of market-making activities or other trading activities,
such holder will be required to acknowledge in the Letter of Transmittal that
such holder will deliver a prospectus in connection with any resale of such
Exchange Notes; however, by so acknowledging and by delivering a prospectus,
such holder will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
RETURN OF PRIVATE NOTES
If any tendered Private Notes are not accepted for any reason set forth in
the terms and conditions of the Exchange Offer or if Private Notes are
withdrawn or are submitted for a greater principal amount than the holders
desire to exchange, such unaccepted, withdrawn or non-exchanged Private Notes
will be returned without expense to the tendering holder thereof (or, in the
case of Private Notes tendered by book-entry transfer into the Exchange
Agent's account at the Depositary pursuant to the book-entry transfer
procedures described below, such Private Notes will be credited to an account
maintained with the Depositary) as promptly as practicable.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Private Notes at the Depositary for purposes of the Exchange Offer
within two business days after the date of this Prospectus, and any financial
institution that is a participant in the Depositary's systems may make book-
entry delivery of Private Notes by causing the Depositary to transfer such
Private Notes into the Exchange Agent's account at the Depositary in
accordance with the Depositary's procedures for transfer. However, although
delivery of Private Notes may be effected through book-entry transfer at the
Depositary, the Letter of Transmittal or facsimile
24
<PAGE>
thereof, with any required signature guarantees and any other required
documents, must, in any case, be transmitted to and received by the Exchange
Agent at the address set forth below under "--Exchange Agent" on or prior to
the Expiration Date or pursuant to the guaranteed delivery procedures
described below.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Private Notes and (i) whose Private Notes
are not immediately available or (ii) who cannot deliver their Private Notes,
the Letter of Transmittal or any other required documents to the Exchange
Agent prior to the Expiration Date, may effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery substantially in the form provided by the Issuers (by
facsimile transmission, mail or hand delivery) setting forth the name and
address of the holder, the certificate number(s) of such Private Notes and
the principal amount of Private Notes tendered, stating that the tender is
being made thereby and guaranteeing that, within five New York Stock
Exchange trading days after the Expiration Date, the Letter of Transmittal
(or a facsimile thereof), together with the certificate(s) representing the
Private Notes in proper form for transfer or a Book-Entry Confirmation, as
the case may be, and any other documents required by the Letter of
Transmittal, will be deposited by the Eligible Institution with the
Exchange Agent; and
(c) Such properly executed Letter of Transmittal (or facsimile thereof),
as well as the certificate(s) representing all tendered Private Notes in
proper form for transfer and all other documents required by the Letter of
Transmittal are received by the Exchange Agent within five New York Stock
Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Private Notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Private Notes may be
withdrawn at any time prior to the Expiration Date.
To withdraw a tender of Private Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to the Expiration Date. Any such
notice of withdrawal must (i) specify the name of the person having deposited
the Private Notes to be withdrawn (the "Depositor"), (ii) identify the Private
Notes to be withdrawn (including the certificate number or numbers and
principal amount of such Private Notes) and (iii) be signed by the holder in
the same manner as the original signature on the Letter of Transmittal by
which such Private Notes were tendered (including any required signature
guarantees). All questions as to the validity, form and eligibility (including
time of receipt) of such notices will be determined by the Issuers in their
sole discretion, whose determination shall be final and binding on all
parties. Any Private Notes so withdrawn will be deemed not to have been
validly tendered for purposes of the Exchange Offer and no Exchange Notes will
be issued with respect thereto unless the Private Notes so withdrawn are
validly retendered. Properly withdrawn Private Notes may be retendered by
following one of the procedures described above under "The Exchange Offer--
Procedures for Tendering" at any time prior to the Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Issuers shall not
be required to accept for exchange, or exchange the Exchange Notes for, any
Private Notes, and may terminate the Exchange Offer as provided herein before
the acceptance of such Private Notes, if the Exchange Offer violates
applicable law, rules or regulations or an applicable interpretation of the
staff of the Commission.
25
<PAGE>
If the Issuers determine in their sole discretion that any of these
conditions are not satisfied, the Issuers may (i) refuse to accept any Private
Notes and return all tendered Private Notes to the tendering holders, (ii)
extend the Exchange Offer and retain all Private Notes tendered prior to the
expiration of the Exchange Offer, subject, however, to the rights of holders
to withdraw such Private Notes (see "--Withdrawal of Tenders") or (iii) waive
such unsatisfied conditions with respect to the Exchange Offer and accept all
properly tendered Private Notes that have not been withdrawn. If such waiver
constitutes a material change to the Exchange Offer, the Issuers will promptly
disclose such waiver by means of a prospectus supplement that will be
distributed to the registered holders of the Private Notes, and the Issuers
will extend the Exchange Offer for a period of five to ten business days,
depending upon the significance of the waiver and the manner of disclosure to
the registered holders, if the Exchange Offer would otherwise expire during
such five to ten business day period.
TERMINATION OF CERTAIN RIGHTS
All rights under the Registration Rights Agreement (including registration
rights) of holders of the Private Notes eligible to participate in the
Exchange Offer will terminate upon consummation of the Exchange Offer except
with respect to the Issuers' continuing obligations (i) to indemnify such
holders (including any broker-dealers) and certain parties related to such
holders against certain liabilities (including liabilities under the
Securities Act), (ii) to provide, upon the request of any holder of a
transfer-restricted Private Note, the information required by Rule 144A(d)(4)
under the Securities Act in order to permit resales of such Private Notes
pursuant to Rule 144A, (iii) to use their best efforts to keep the
Registration Statement effective to the extent necessary to ensure that it is
available for resales of transfer-restricted Private Notes by broker-dealers
for a period not to exceed 180 days from the Expiration Date, unless extended
pursuant to the terms of the Registration Rights Agreement and (iv) to provide
copies of the latest version of the Prospectus to broker-dealers upon their
request for a period not to exceed 180 days after the date of effectiveness of
the Registration Statement, unless extended pursuant to the terms of the
Registration Rights Agreement.
SHELF REGISTRATION
In the event that (i) the Issuers are not required to consummate the
Exchange Offer because the Exchange Offer is not permitted by applicable law
or Commission policy, or (ii) any holder of Private Notes notifies the Issuers
in writing on or prior to the 20th business day following consummation of the
Exchange Offer (A) that based upon the advice of counsel such holder is
prohibited by applicable law or Commission policy from participating in the
Exchange Offer, or (B) that based upon the advice of counsel such holder may
not resell the Exchange Notes acquired by it in the Exchange Offer to the
public without delivering a Prospectus and that the Prospectus contained in
the Registration Statement is not appropriate or available for such resales,
or (C) that such holder is a broker-dealer and holds applicable Notes acquired
directly from the Issuers or one of their affiliates, the Issuers jointly and
severally, will at their cost, (a) promptly file a shelf registration
statement covering resales of the Notes (a "Shelf Registration Statement"),
(b) use their best efforts to cause such Shelf Registration Statement to be
declared effective under the Securities Act, and (c) use their best efforts to
keep effective such Shelf Registration Statement until the earlier of three
years after the (i) the date of its effectiveness or (ii) such shorter period
ending when (A) all applicable Notes covered by the Shelf Registration
Statement have been sold thereunder, (B) a subsequent shelf registration
statement covering all applicable Notes has been declared effective under the
Securities Act or (C) all applicable Notes may be sold pursuant to Rule 144(k)
under the Securities Act. The Issuers will, in the event of the filing of a
Shelf Registration Statement, provide to each holder of the Notes copies of
the prospectus which is a part of such Shelf Registration Statement, notify
each such holder when such Shelf Registration Statement has become effective
and take certain other actions as are required to permit unrestricted resales
of the Notes. A holder that sells its Notes pursuant to a Shelf Registration
Statement generally will be required to be named as a selling securityholder
in the related prospectus and to deliver a prospectus to purchasers, will be
subject to certain of the civil liability provisions under the Securities Act
in connection with such sales and will be bound by the provisions of the
Registration Rights Agreement which are applicable to such a holder (including
certain indemnification obligations).
26
<PAGE>
LIQUIDATED DAMAGES
If (a) the Issuers fail to file any of the Registration Statements required
by the Registration Rights Agreement on or before the date specified for such
filing, (b) any of such Registration Statements is not declared effective by
the Commission on or prior to the date specified for such effectiveness (the
"Effectiveness Target Date"), (c) the Issuers fail to consummate the Exchange
Offer within 30 business days of the Effectiveness Target Date with respect to
the Exchange Offer Registration Statement or (d) the Shelf Registration
Statement or the Exchange Offer Registration Statement is declared effective
but thereafter ceases to be effective or usable in connection with resales of
Transfer Restricted Securities during the periods specified in the
Registration Rights Agreement (each such event referred to in clauses (a)
through (d) above is hereinafter referred to as a "Registration Default"),
then the Issuers will pay damages to each holder of Notes, with respect to the
first 90-day period immediately following the occurrence of such Registration
Default, an amount equal to $.05 per week per $1,000 principal amount of Notes
held by such holder. Such damages, together with damages accrued by the
Issuers pursuant to the next succeeding sentence, are collectively referred to
herein as "Liquidated Damages." The amount of the Liquidated Damages will
increase by an additional $.05 per week per $1,000 principal amount of Notes
with respect to each subsequent 90-day period until all Registrations Defaults
have been cured, up to a maximum amount of Liquidated Damages of $.40 per week
per $1,000 principal amount of Notes. All accrued Liquidated Damages will be
paid by the Issuers on each Interest Payment Date to the Global Note Holder
(as defined herein) by wire transfer of immediately available funds and to
holders of Certificated Securities (as defined herein) by wire transfer to the
accounts specified by them or by the mailing of checks to their registered
addresses if no such accounts have been specified. Following the cure of all
Registration Defaults, the accrual of Liquidated Damages will cease.
EXCHANGE AGENT
Fleet National Bank has been appointed as Exchange Agent of the Exchange
Offer. Questions and requests for assistance, requests for additional copies
of this Prospectus or of the Letter of Transmittal and requests for Notice of
Guaranteed Delivery should be directed to the Exchange Agent addressed as
follows:
By Mail: By Hand:
Fleet National Bank Fleet National Bank
Corporate Trust Operations Corporate Trust Operations
777 Main Street, Lower Level 777 Main Street, Lower Level
CTMO 0224 Hartford, Connecticut 06115
Hartford, Connecticut 06115 Attention: Patricia Williams
Attention: Patricia Williams
By Facsimile:
(860) 986-7908
Confirm by Telephone:
(860) 986-2910
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION VIA A
FACSIMILE NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID
DELIVERY.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Issuers. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telephone or in person by officers and regular
employees of the Issuers and their affiliates.
27
<PAGE>
The Issuers have not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Issuers, however, will pay
the Exchange Agent reasonable and customary fees for its services and will
reimburse it for its reasonable out-of-pocket expenses in connection
therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Issuers and are estimated in the aggregate to be approximately
$300,000. Such expenses include registration fees, fees and expenses of the
Exchange Agent and the Trustee, accounting and legal fees and printing costs,
among others.
The Issuers will pay all transfer taxes, if any, applicable to the exchange
of Private Notes pursuant to the Exchange Offer. If, however, a transfer tax
is imposed for any reason other than the exchange of the Private Notes
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or any other persons) will be
payable by the tendering holder. If satisfactory evidence of payment of such
taxes or exemption therefrom is not submitted with the Letter of Transmittal,
the amount of such transfer taxes will be billed directly to such tendering
holder.
CONSEQUENCES OF FAILURES TO EXCHANGE
Participation in the Exchange Offer is voluntary. Holders of the Private
Notes are urged to consult their financial and tax advisors in making their
own decisions on what action to take.
The Private Notes that are not exchanged for the Exchange Notes pursuant to
the Exchange Offer will remain restricted securities. Accordingly, such
Private Notes may be resold only (i) to a person whom the seller reasonably
believes is a QIB in a transaction meeting the requirements of Rule 144A, (ii)
in a transaction meeting the requirements of Rule 144 under the Securities
Act, (iii) outside the United States to a foreign person in a transaction
meeting the requirements of Rule 904 under the Securities Act, (iv) in
accordance with another exemption from the registration requirements of the
Securities Act (and based upon an opinion of counsel if the Issuers so
request), (v) to the Issuers or (vi) pursuant to an effective registration
statement and, in each case, in accordance with any applicable securities laws
of any state of the United States or any other applicable jurisdiction.
ACCOUNTING TREATMENT
For accounting purposes, the Issuers will recognize no gain or loss as a
result of the Exchange Offer. The expenses of the Exchange Offer will be
amortized over the term of the Exchange Notes.
28
<PAGE>
USE OF PROCEEDS
The Issuers will not receive any proceeds from the issuance of the Exchange
Notes offered hereby. In consideration for issuing the Exchange Notes as
contemplated in this Prospectus, the Issuers will receive in exchange Private
Notes in like principal amount, the terms of which are identical to the
Exchange Notes. The Private Notes surrendered in exchange for Exchange Notes
will not result in any increase in indebtedness of the Issuers.
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company at June 30, 1996, on an actual and an as adjusted basis to reflect the
issuance of the Private Notes and the application of the net proceeds
therefrom. This table should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the consolidated financial statements, including the notes thereto, included
elsewhere in this Offering Memorandum.
<TABLE>
<CAPTION>
AT JUNE 30, 1996
-----------------------
ACTUAL AS ADJUSTED(1)
-------- --------------
(UNAUDITED--DOLLARS IN
THOUSANDS)
<S> <C> <C>
Current portion of long-term debt.................... $ 18,773 $ 1,433
======== ========
Long-term debt, less current portion:
Credit Facility(2)................................. $ 96,350 $ 17,190
Senior Subordinated Notes due 2006................. -- 100,000
Other long-term debt............................... 3,965 3,965
-------- --------
Total............................................ 100,315 121,155
Total partners' equity(3)............................ 82,675 82,675
-------- --------
Total capitalization................................. $182,990 $203,830
======== ========
</TABLE>
- --------
(1) As adjusted to reflect the issuance of the Private Notes and the
application of the net proceeds therefrom. In connection with the issuance
of the Private Notes, the Company amended its Existing Credit Facility to
provide for a senior secured revolving credit facility of $50 million. See
"Material Agreements--Description of the Credit Facility."
(2) At June 30, 1996, the Company had $4.8 million available under its
Existing Credit Facility. For discussion of the Company's Existing Credit
Facility see "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources" and "Material
Agreements--Description of the Credit Facility."
(3) Effective upon consummation of the Reorganization, partners' equity was
reclassified as members' equity.
29
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth on the following page has
been derived from the consolidated financial statements of the Predecessor
Partnership. The consolidated statement of income data for each year in the
three-year period ended December 31, 1995 and the consolidated balance sheet
data at December 31, 1994 and 1995 are derived from the financial statements
of the Predecessor Partnership which were audited by Arthur Andersen LLP,
independent public accountants, and are contained elsewhere in this
Prospectus. The consolidated statement of income data for the year ended
December 31, 1992 and the consolidated balance sheet data at December 31, 1992
and 1993 are derived from the financial statements of the Predecessor
Partnership which were audited by Arthur Andersen LLP and are not contained
herein. The consolidated statement of income data for the thirteen-month
period ended December 31, 1991 and the consolidated balance sheet data dated
December 31, 1991 are derived from the financial statements of the Predecessor
Partnership which were audited by other auditors and are not contained herein.
Consolidated statement of income data is presented for the thirteen-month
period ended December 31, 1991 because of a change in fiscal year by the
Predecessor Partnership. The selected consolidated financial data as of and
for the six-month periods ended June 30, 1995 and 1996 are derived from
consolidated financial statements that are unaudited but which, in the opinion
of management, include all adjustments, consisting only of normal and
recurring adjustments, necessary for a fair presentation of the Company's
financial condition and results of operations. The selected consolidated
financial data are not necessarily indicative of the Company's future results
of operations or financial condition and should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," the Company's consolidated financial statements, including the
notes thereto, and the other financial and statistical information appearing
elsewhere in this Prospectus.
30
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
THIRTEEN-MONTH -------------------------------------- ---------------------
PERIOD ENDED JUNE 30, JUNE 30,
DEC. 31, 1991 1992 1993 1994 1995 1995 1996
-------------- -------- -------- -------- -------- ---------- ---------
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT
OF INCOME DATA:
Operating revenues:
Casino................. $ 93,792 $ 93,189 $ 95,261 $ 97,809 $106,737 $ 50,124 $ 49,319
Food and beverage...... 28,554 29,601 31,436 31,718 33,780 15,171 16,919
Hotel.................. 15,874 15,712 16,518 16,837 17,200 8,278 8,036
Other.................. 3,614 3,729 5,328 4,316 4,908 1,987 3,351
Less promotional
allowances............ (8,765) (10,771) (11,486) (12,482) (13,895) (6,767) (6,825)
-------- -------- -------- -------- -------- ---------- ---------
Net revenues......... 133,069 131,460 137,057 138,198 148,730 68,793 70,800
Operating expenses:
Casino(1).............. 26,869 26,843 34,573 37,554 42,692 20,441 21,084
Food and beverage(1)... 28,118 27,942 23,772 23,006 26,363 11,551 12,778
Hotel(1)............... 6,538 6,603 5,882 6,554 7,536 3,891 3,571
Other.................. 1,788 1,907 2,799 2,361 2,043 814 1,515
Selling, general and
administrative(2)..... 28,415 25,435 27,316 27,509 28,335 13,260 13,980
Depreciation and
amortization.......... 6,642 6,798 7,443 7,612 8,409 3,662 5,067
Abandonment loss(3).... -- -- -- -- 1,862 -- --
Equity in net loss of
subsidiary(4)......... -- -- -- -- 3,208 -- 61
-------- -------- -------- -------- -------- ---------- ---------
Total operating
expenses............ 98,370 95,528 101,785 104,596 120,448 53,619 58,056
-------- -------- -------- -------- -------- ---------- ---------
Operating income........ 34,699 35,932 35,272 33,602 28,282 15,174 12,744
Interest expense, net... (7,776) (6,385) (4,979) (2,967) (5,093) (1,356) (4,651)
-------- -------- -------- -------- -------- ---------- ---------
Net income before
minority interest...... 26,923 29,547 30,293 30,635 23,189 13,818 8,093
Minority interest in net
loss of subsidiary(5).. -- -- -- -- 745 -- 14
-------- -------- -------- -------- -------- ---------- ---------
Net income(6)........... $ 26,923 $ 29,547 $ 30,293 $ 30,635 $ 23,934 $ 13,818 $ 8,107
======== ======== ======== ======== ======== ========== =========
OTHER DATA:
EBITDA(2)(7)............ $ 41,341 $ 42,730 $ 42,715 $ 41,214 $ 41,761 $ 18,836 $ 17,872
Net cash provided by
(used in):
Operating activities... 34,762 36,691 32,002 38,786 36,345 17,786 10,888
Investing activities... (14,409) (17,112) (10,478) (37,045) (62,791) (36,101) (6,508)
Financing activities... (20,429) (19,753) (21,876) (1,205) 27,208 13,804 (5,718)
Capital expenditures,
net ................... 14,816 17,847 10,562 12,053 57,451 30,734 6,524
OPERATING DATA(8):
Number of hotel
rooms(9)............... 783 783 783 783 817 783 817
Average hotel occupancy
rate................... 90.2% 92.2% 93.0% 93.7% 93.8% 95.3% 94.7%
Casino square
footage(9)............. 61,500 61,500 61,500 61,500 76,500 76,500 81,500
Number of slot
machines(9)............ 1,557 1,546 1,568 1,597 1,904 1,831 1,984
Number of table
games(9)............... 84 77 77 71 84 71 84
<CAPTION>
TWELVE MONTHS ENDED
JUNE 30, 1996
-------------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
PRO FORMA DATA(10):
Cash interest expense...................................................... $12,233
EBITDA/Cash interest expense............................................... 3.3x
Total debt/EBITDA.......................................................... 3.0x
Ratio of earnings to fixed charges......................................... 2.1x
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31, AT JUNE 30, 1996
-------------------------------------------- ------------------------
1991 1992 1993 1994 1995 ACTUAL AS ADJUSTED(11)
-------- -------- -------- -------- -------- -------- ---------------
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE
SHEET DATA:
Cash and cash
equivalents............ $ 6,085 $ 5,176 $ 4,824 $ 5,360 $ 6,122 $ 4,784 $ 4,784
Total assets............ 109,541 119,011 129,645 160,384 215,592 218,813 222,313
Total debt.............. 65,392 65,645 61,469 79,064 123,630 119,088 122,588
Partners' equity(12).... 35,659 45,206 57,799 69,634 74,768 82,675 82,675
</TABLE>
- --------
See footnotes to Selected Consolidated Financial Data
31
<PAGE>
FOOTNOTES TO SELECTED CONSOLIDATED FINANCIAL DATA
(1) The casino, food and beverage and hotel expenses for the thirteen month
period ended December 31, 1991 and for the year ended December 31, 1992
do not reflect the expense re-allocation, in accordance with SEC
guidelines, to allocate complimentaries provided, at cost, in the food
and beverage and hotel outlets to the casino department. This re-
allocation has been reflected in all subsequent periods presented.
(2) The Company pays management fees to Recreational Enterprises, Inc. and
Hotel Casino Management, Inc., the owners of 55% and 29% of the Company's
equity interests, respectively. The management fees paid to Recreational
Enterprises, Inc. and Hotel Casino Management, Inc. are included in
selling, general and administrative expenses and totalled $2.1 million
and $2.0 million for the six months ended June 30, 1995 and 1996,
respectively, and $4.6 million, $3.8 million and $4.3 million for the
years ended December 31, 1993, 1994 and 1995, respectively. Historically,
the salaries of senior executive officers and certain other key employees
of the Company were not directly incurred by the Company but were paid
from a portion of the management fees paid to Recreational Enterprises,
Inc. As of July 1, 1996, the aggregate annual salaries of such senior
executive officers and other key employees have become payroll
obligations of the Company. In connection with the issuance of the
Private Notes, the Company entered into a Management Agreement with
Recreational Enterprises, Inc. and Hotel Casino Management, Inc.
providing that future management fees paid to Recreational Enterprises,
Inc. and Hotel Casino Management, Inc. will not exceed 1.5% of the
Company's annual net revenues. See "Material Agreements--Management
Agreement." Assuming reallocation of such salaries and the payment of
management fees pursuant to the Management Agreement (assuming aggregate
annual reallocated salaries at the 1996 levels of $2.3 million per year
(which includes assumed aggregate bonuses of $0.3 million which may or
may not be paid at the discretion of the Chief Executive Officer) and the
payment of management fees of the full 1.5% of annual net revenues, in
each case, for all periods presented), (i) the aggregate of such salaries
and management fees would have totalled $4.4 million, $4.4 million and
$4.5 million for the years ended December 31, 1993, 1994 and 1995,
respectively, and (ii) the Company's pro forma net income would have been
higher by $0.2 million for the year ended December 31, 1993 and would
have been $0.6 million and $0.2 million lower for the years ended
December 31, 1994 and 1995, respectively.
(3) Abandonment loss represents the net book value of property disposed of as
a result of the expansion of the Eldorado.
(4) Equity in net loss of subsidiary represents ELLC's 50% joint venture
interest in the Silver Legacy Joint Venture. The equity in net loss of
subsidiary for the year ended December 31, 1995 includes the impact of
ELLC's share of the $9.9 million of pre-opening expenses that were
incurred by the Silver Legacy Joint Venture.
(5) Minority interest in net loss of subsidiary represents the 23% minority
interest partners' share of ELLC's 50% joint venture interest in the
Silver Legacy Joint Venture. The minority interest in ELLC is owned by
the Company's equityholders.
(6) The Predecessor Partnership was not subject to U.S. federal income taxes,
as the partners included their respective shares of partnership taxable
income in their income tax returns. For each period shown, the
Predecessor Partnership made distributions to its partners, a portion of
which was to reimburse the partners for such tax liability. As a limited-
liability company, the Company also will not be subject to income tax
liability. Therefore, holders of membership interests will include their
respective shares of the Company's taxable income in their income tax
returns and the Company will continue to make distributions for such tax
liabilities.
(7) EBITDA is defined as earnings before interest, taxes, depreciation and
amortization. For the year ended December 31, 1995, EBITDA was adjusted
to exclude abandonment loss of $1.9 million and ELLC's equity in net loss
of its subsidiary of $3.2 million. For the six months ended June 30,
1996, EDITDA was adjusted to exclude ELLC's equity in net loss of its
subsidiary of $61,000. EBITDA should not be construed as an alternative
to operating income or net income (as determined in accordance with
generally accepted accounting principles) as an indicator of the
Company's operating performance, or as an alternative to cash flows
generated by operating, investing and financing activities (as determined
in accordance with generally accepted accounting principles) as an
indicator of cash flows or a measure of liquidity. EBITDA is presented
solely as supplemental disclosure because management believes that it is
a widely used measure of operating performance in the gaming industry.
(8) Excludes the operating data of the Silver Legacy.
(9) As of the end of each period presented.
(10) Gives pro forma effect to the issuance of the Private Notes and the
application of the net proceeds therefrom, as if such transactions had
occurred as of June 30, 1995.
(11) Adjusted to reflect the consummation of the Offering and the application
of the net proceeds therefrom, as if such transactions had occurred as of
June 30, 1996.
(12) Effective upon consummation of the Reorganization, partners' equity will
be reclassified as members' equity.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with, and is
qualified in its entirety by, the Company's consolidated financial statements,
including the notes thereto, and the other financial information appearing
elsewhere in this Prospectus, as well as the discussion under "Risk Factors."
The discussion herein reflects the historical operations of the Predecessor
Partnership.
OVERVIEW
The Company's net revenues and net income are derived largely from the
Eldorado's gaming activities. To enhance its gaming revenues, the Company
attempts to maximize the use of its gaming facilities by providing a well-
balanced casino environment which contains a mix of games attractive to
multiple market segments. In addition, the Company attempts to maximize
customer visits to the casino by offering a wide variety of value oriented
dining options and through various promotions and special events. For the
twelve-month period ended June 30, 1996, casino revenues accounted for
approximately 70% of the Company's net revenues.
As of June 30, 1996, the Eldorado offered approximately 81,500 square feet
of gaming space with approximately 1,984 slot machines and 84 table games,
three hotel towers with a total of 817 rooms, including 137 suites, and seven
dining venues. Expansion activity during 1995 included the addition of 36
suites, the expansion of the casino space to 76,500 square feet (allowing for
the addition of 300 slots and 12 games) and the addition of The Brew Brothers
microbrewery, the Chefs' Pavilion buffet, three specialty shops, a 12,400
square foot convention center and the Grand Plaza, which is located at the
base of the skyway corridor which links the Eldorado to the Silver Legacy. On
March 28, 1996, the Company opened the 5,000 square foot mezzanine casino with
102 slots and 10 table games.
The retail value of hotel accommodations and food and beverage items
provided to customers without charge is included in gross revenues and
deducted as a promotional allowance to calculate net revenues.
The Company's 77%-owned subsidiary, ELLC, holds a 50% interest, along with
Circus Sub, in the Silver Legacy Joint Venture, which owns and operates the
Silver Legacy. In connection with entering into the Silver Legacy Joint
Venture, the Company loaned $23.0 million to ELLC (the "ELLC Note"), and ELLC
contributed the $23.0 million to the Silver Legacy Joint Venture as a portion
of its equity investment. The Company intends to enter into an agreement with
ELLC and the other members of ELLC pursuant to which the Company will
contribute to the capital of ELLC all or a substantial portion of the ELLC
Note and will assume certain other obligations of the other ELLC members in
exchange for an increased equity interest in ELLC. Following these
transactions, the Company anticipates that its ownership interest in ELLC will
increase from 77% to in excess of 90%. See "Certain Transactions." The Company
accounts for its investment in the Silver Legacy Joint Venture utilizing the
equity method of accounting. Therefore, the Company's net income for the year
ended December 31, 1995 and the six months ended June 30, 1996 reflects its
pro rata share of the net loss before taxes of the Silver Legacy Joint Venture
from the opening of the Silver Legacy in July 1995. The Silver Legacy Joint
Venture does not pay any management fee in connection with its operations.
IMPACT OF SILVER LEGACY/RECENT OPERATING RESULTS
The opening of the Silver Legacy in July 1995 increased the number of gaming
positions and hotel rooms in the Reno Market by approximately 10% and 13%,
respectively. The Reno Market has been positively impacted by the Silver
Legacy, with gaming revenues increasing by approximately 8.6%, or $66 million,
from August 1, 1995 to June 30, 1996, as compared to the prior year period.
The opening of the Silver Legacy has had a mixed effect on the Eldorado's
results of operations. During peak periods, the Eldorado has benefitted from
the critical mass of, and the seamless connection between, the Eldorado,
Silver Legacy and Circus Circus-Reno properties. In slower periods, the
Eldorado has been negatively impacted by the Silver Legacy as that facility
attracts a greater share of the gaming patrons due to its larger room base.
From August 1, 1995 through
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June 30, 1996, the Eldorado's gaming revenues increased by $4.5 million, or
4.9%, as compared to the prior year period. However, while the Eldorado was
able to increase its gaming revenues during this period despite competition
from the Silver Legacy, the Company's EBITDA declined due to additional
operating and marketing costs.
In addition to the impact of the Silver Legacy, harsh winter conditions in
the Reno area, the absence of a major bowling tournament in 1996, a lower than
normal table hold percentage, as well as the increased costs associated with
operating a larger Eldorado facility each had a negative impact on the
Company's operating performance in 1996. For the six months ended June 30,
1996, the Company's EBITDA decreased to $17.9 million as compared to $18.8
million in EBITDA generated in the comparable prior year period. Based upon
the factors discussed above, the Company expects EBITDA for the third quarter
ended September 30, 1996 and for the nine months ended September 30, 1996 to
be lower than the EBITDA generated in the comparable prior year periods.
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995
Net Revenues. Net revenues for the six-month period ended June 30, 1996 were
$70.8 million compared to $68.8 million for the same period in 1995, an
increase of 2.9%. The Company generated strong net revenues during the first
six months of 1995 due primarily to the influx of visitors attending the ABC's
National Championship Bowling Tournament held from February through June 1995.
Despite the absence of a major bowling tournament during the first half of
1996, the Company's net revenues exceeded the results of the prior period as a
result of the expansion and addition of food and beverage facilities and the
addition of the video arcade and three specialty shops.
Casino revenues declined to $49.3 for the six months ended June 30, 1996
compared to $50.1 million in the same period in 1995, despite the opening of
the mezzanine casino on March 28, 1996, because of a lower than expected hold
percentage in table games and decreased revenue in slots, primarily in the
month of April. In addition, certain factors were in existence in 1996 that
were not present in 1995, such as poor weather in the first quarter, which
negatively impacted weekend traffic, the lack of a major bowling tournament
and dilution due to the opening of the Silver Legacy and other properties.
Food and beverage revenues were $16.9 million during the first half of 1996,
an increase of 11.5% compared to $15.2 million during the same period in 1995.
The increase in food and beverage revenues was due primarily to the opening of
The Brew Brothers in July 1995 and the opening of the Chefs' Pavilion buffet
in October 1995. These increases were somewhat offset by the closing of The
Vintage restaurant in January 1996 to make room for the new mezzanine casino
and the temporary closing of the Choices Express Cafe restaurant during the
first quarter of 1996 to remodel and redesign the restaurant for the addition
of an Asian noodle kitchen.
Hotel revenues declined slightly to $8.0 million in the first six months of
1996 from $8.3 million for the same period of 1995. The decrease is a result
of a reduction in the Company's average daily rate ("ADR") to approximately
$53 in 1996 from approximately $58 in 1995. This decrease in ADR was caused
primarily by increased room capacity in the Reno Market due to the opening of
the Silver Legacy and other properties.
Other revenues for the six months ended June 30, 1996 were $3.4 million
compared to $2.0 million for the same period in 1995, an increase of 68.7%.
This increase is attributable primarily to added retail capacity with the
opening of three new specialty shops, an increase in revenue from the video
arcade and a completely remodeled and relocated gift shop. Other revenues
include $0.5 million on the sale of land during the second quarter of 1996.
Promotional allowances expressed as a percentage of casino revenues were
13.8% for the first six months of 1996 compared to 13.5% for first six months
of 1995. This increase was a result of greater use of
34
<PAGE>
complimentaries to all levels of casino patrons during the first quarter of
1996 and a lower than expected hold percentage in table games and decreased
revenues in slots during the second quarter of 1996.
Operating Expenses. The Company's operating expenses increased to $58.1
million for the six months ended June 30, 1996 from $53.6 million during the
same period in 1995, an increase of 8.3%. The increase in operating expenses
was attributed to casino and food and beverage departments, depreciation and
selling, general and administration expenses, as well as the equity in net
loss of ELLC. The increase in expenses was somewhat offset by improved
operating margins in the hotel department. Casino expenses increased 3.2% to
$21.1 million during the first six months of 1996 from $20.4 million during
the same period in 1995 due primarily to the cost of providing complimentaries
in the first quarter and servicing the larger casino floor.
Food and beverage expenses increased 10.6% to $12.8 million in the first
half of 1996 from $11.6 million during the same period in 1995. The increase
in food and beverage expenses was due primarily to expansion of facilities to
accommodate restaurant additions and expansions. Despite an increase in
support personnel and the costs associated with the expanded facilities, the
Company was able to partially offset these increases by more cost effective
purchasing and adjustments to the restaurant menu mix.
Hotel expenses declined 8.2% in the first six months of 1996 to $3.6 million
from $3.9 million during the same period of 1995. The decline is primarily due
to promotional expense decreases in the hotel sales department in the first
half of 1996 compared to the same period in 1995 because of the absence of a
major bowling tournament in 1996.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 5.4% during the first half of 1996 to $14.0
million from $13.3 million during the same period in 1995. The increase was
due in part to increased advertising expenditures to promote the recent
expansion and upgraded amenities to the property and to increased property
maintenance expenditures because of these expansions.
Depreciation. During the first six months of 1996, depreciation was
$5.1 million compared to $3.7 million in the same period of 1995, an increase
of 38.4%. The increase was attributable to the depreciation of assets which
were not in service in the prior period. These assets include the addition of
36 suites, the Chefs' Pavilion buffet, the Grand Plaza and the skyway
corridor, which includes The Brew Brothers and added retail space.
Interest Expense, Net. Interest expense, net in the first six months of 1996
was $4.7 million, an increase of 243.0% from $1.4 million during the same
period in 1995. Interest expense increased as a result of an increase in
outstanding borrowings under the Existing Credit Facility from $95.3 million
as of June 30, 1995 to $113.7 million as of June 30, 1996 relating to the
Company's expansion in 1995. In addition, the Company capitalized interest of
$0.2 million in the first half of 1996 related to construction costs, as
compared to $2.1 million in the same period of 1995 which includes capitalized
interest related to the Company's investment in the Silver Legacy Joint
Venture.
Net Income. As a result of the factors described above, net income was $8.1
million during the first half of 1996 compared to $13.8 million during the
same period in 1995, a decrease of 41.3%.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Net Revenues. Net revenues were $148.7 million for the year ended 1995
compared to $138.2 million for the year ended 1994, an increase of 7.6%, due
primarily to increased casino revenues. During 1995, casino revenues increased
9.1% to $106.7 million from $97.8 million in 1994 as a result of increases in
the Company's casino capacity and an influx of visitors attracted by the
opening of the Silver Legacy and the ABC's National Championship Bowling
Tournament held at the National Bowling Stadium. In addition, slot machine and
table game revenue increased 6.3% and 19.4%, respectively, due primarily to
the expansion of the Company's casino in 1995.
35
<PAGE>
Food and beverage revenues were $33.8 million for the year ended 1995, an
increase of 6.5% compared to $31.7 million for the year ended 1994. The
increase was due primarily to the opening of The Brew Brothers in July 1995,
which generated $1.5 million in gross revenues. The Company was able to
increase food and beverage revenues despite disruptions in the operations of
the Seafood Buffet, Choices Express Cafe and the Chefs' Pavilion buffet due to
construction activities throughout the hotel.
Hotel revenues for the year ended 1995 increased 2.2% to $17.2 million from
$16.8 million for the year ended 1994. The Company's ADR and hotel occupancy
percentage during 1995 and 1994 remained constant at approximately $60 and
94%, respectively. The increased hotel revenues resulted from the increased
use of hotel amenities.
Promotional allowances expressed as a percentage of casino revenues were
13.0% in 1995 compared to 12.8% in 1994 as a result of greater use of
complimentaries in connection with casino marketing targeted to both high-end
players and participants in the bowling tournaments held at the National
Bowling Stadium in 1995.
Operating Expenses. The Company's operating expenses increased to $120.4
million for the year ended 1995 from $104.6 million for the year ended 1994, a
15.2% increase. This increase was attributable to increased expenses in the
casino and food and beverage departments, increased depreciation expense and
an increase in selling, general and administrative expenses, as well as equity
in net loss of the Company's subsidiary of $3.2 million and an abandonment
loss of $1.9 million related to the Company's expansion activities. Casino
expenses were $42.7 million for the year ended 1995 compared to $37.6 million
for the year ended 1994, an increase of 13.7%. This increase was due in large
part to increased casino marketing costs and increased costs associated with
operating a larger casino in 1995 as compared to 1994.
Food and beverage expenses were $26.4 million for the year ended 1995
compared to $23.0 million for the year ended 1994, an increase of 14.6% due
primarily to the opening of The Brew Brothers, the expansion of the new Chefs'
Pavilion buffet and related support facilities.
Hotel expenses increased 15.0% for the year ended 1995 to $7.5 million from
$6.6 million for the year ended 1994 due to increased operating expenses
associated with the addition of 36 new suites and expansions completed in
1995. Additionally, the hotel sales department incurred additional costs to
promote the hotel to those attending the National Championship Bowling
Tournament at the National Bowling Stadium in 1995.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 3.0% for the year ended 1995 to $28.3
million from $27.5 million for the year ended 1994 primarily as a result of an
increase in the property maintenance expenses due to the Company's expansion
activities in 1995.
Depreciation. Depreciation expense increased 10.5% to $8.4 million for the
year ended 1995 compared to $7.6 million for the year ended 1994. This
increase resulted from the completion of certain expansion projects, which the
Company began to depreciate in the third and fourth quarters of 1995.
Interest Expense, Net. Interest expense, net was $5.1 million in 1995, a
71.7% increase from $3.0 million in 1994. Capitalized interest was $2.7
million in 1995, compared to $2.1 million in 1994. These amounts include
capitalized interest related to the Company's investment in the Silver Legacy
Joint Venture.
Net Income. As a result of the factors described above, net income was $23.9
million in 1995 compared to $30.6 million in 1994, a decrease of 21.9%.
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993
Net Revenues. Net Revenues increased 0.8% to $138.2 million in 1994 compared
to $137.1 million in 1993. In the summer of 1994, the Company commenced
construction of 36 new suites and the Grand Plaza, expanded the casino and
added three specialty shops, The Brew Brothers and a 12,400 square foot
convention center, all of
36
<PAGE>
which were completed in 1995. In addition, throughout 1994, the Silver Legacy
was under construction, causing periodic street closings during that period.
Despite the disruption due to the construction projects in and around the
property, casino revenues increased 2.7% in 1994 to $97.8 million from $95.3
million in 1993.
Food and beverage revenues increased slightly to $31.7 million in 1994 as
compared to $31.4 million in 1993. The Company was able to maintain its level
of food and beverage revenues despite a decline in customer count by
increasing its overall price structure.
Hotel revenues increased 1.9% to $16.8 million in 1994 from $16.5 million in
1993. The Company's ADR increased to approximately $60 in 1994 from
approximately $59 in 1993, and hotel occupancy increased to 93.7% in 1994 from
93.0% in 1993.
Other revenue decreased 19.0% in 1994 to $4.3 million from $5.3 million in
1993 due to a loss of income which had been generated by rental properties and
vending and parking facilities that had been located on the property on which
the Silver Legacy is now located. This property was contributed to the Silver
Legacy Joint Venture as part of ELLC's capital contribution in 1994.
Promotional allowances expressed as a percentage of casino revenues were
12.8% in 1994 compared to 12.1% in 1993 as a result of increased marketing
efforts to attract premium players.
Operating Expenses. The Company's operating expenses increased to $104.6
million in 1994 from $101.8 million in 1993, a 2.8% increase. The increase in
operating expenses was attributable primarily to an increase in promotional
expenses. The Company expanded its gaming customer base by adding additional
marketing representatives to pursue premium players in new markets. As a
result, casino expenses increased to $37.6 million in 1994 as compared to
$34.6 million in 1993, an increase of 8.6%.
Food and beverage expenses were $23.0 million in 1994 compared to $23.8
million in 1993, a decrease of 3.2%. The decrease in food and beverage
expenses was a result of management's concerted effort to contain and
economize the expenses in this department and a greater use of complimentaries
during 1994.
Hotel expenses increased 11.4% in 1994 to $6.6 million from $5.9 million in
1993 as a result of substantial increases in wages to employees in the hotel,
housekeeping and reservations departments.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 0.7% for the year ended 1994 to $27.5
million from $27.3 million for the year ended 1993. A general increase in
selling, general and administrative expenses was partially offset by
development expenses incurred in 1993.
Depreciation. Depreciation increased to $7.6 million in 1994 compared to
$7.4 million in 1993 as a result of depreciating the Company's 652-space
parking structure over a full year as compared to a partial allocation in the
prior year.
Interest Expense, Net. Interest expense dropped to $3.0 million from $5.0
million due to the capitalization of interest related to the various expansion
projects and the investment in the Silver Legacy. Capitalized interest was
$2.1 million in 1994, which includes capitalized interest related to the
Company's investment in the Silver Legacy Joint Venture, as compared to $0.3
million in 1993.
Net Income. As a result of the factors described above, net income was $30.6
million in 1994 compared to $30.3 million in 1993.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity and capital resources have been
through cash flow from operations and borrowings under various credit
agreements. The Company has completed several expansion and
37
<PAGE>
remodeling projects in the past, accounting for a significant use of cash flow
from operations and borrowings under the Existing Credit Facility.
Additionally, the Company received $2.5 million for the sale, to a related
party, of half of the Company's interest in land on the block adjacent to the
Silver Legacy.
The Company's EBITDA for the six months ended June 30, 1996 was $17.9
million as compared to $18.8 million for the six months ended June 30, 1995,
and was $41.8 million and $41.2 million for the years ended December 31, 1995
and 1994, respectively. EBITDA excludes the Company's equity in the net loss
of ELLC and a $1.9 million abandonment loss recognized in the last quarter of
1995. Cash flow from operations for the six months ended June 30, 1996 and
1995 was $10.9 million and $17.8 million, respectively, and was $36.3 million
and $38.8 million for the years ended December 31, 1995 and 1994,
respectively.
During the first quarter of 1996, the Company funded a portion of the $3.9
million cost of expansion of the mezzanine casino, which opened on March 28,
1996. Additionally, during the second quarter, the Company expended
approximately $1 million for the construction of a 500-seat showroom and a
Parisian-style bistro. The funding of this expansion project was accomplished
through cash flow from operations as well as borrowings under the Existing
Credit Facility.
At June 30, 1996, the Company had $4.8 million of cash and cash equivalents
and $4.8 million available pursuant to its Loan Agreement dated as of March
25, 1994 (the "Existing Credit Facility"), among the Company, the banks named
therein and Bank of America NT&SA , as administrative agent. As of June 30,
1996, the Existing Credit Facility totalled $118.4 million, which consisted of
a $103.4 million reducing revolver (the "Revolver") and a $15.0 million
revolving working capital facility (the "Working Capital Facility"). At
June 30, 1996, the Revolver was fully drawn and approximately $10.2 million
was outstanding under the Working Capital Facility. The net proceeds of the
issuance of the Private Notes on July 31, 1996 were used to repay a portion of
the Existing Credit Facility. The Existing Credit Facility was amended
concurrently with the closing of the issuance of the Private Notes to consist
of a $50 million revolving working capital facility (as amended, the "Credit
Facility"). See "Material Agreements--Description of the Credit Facility."
Therefore, as of June 30, 1996, giving pro forma effect to the consummation of
the issuance of the Private Notes and the application of the net proceeds
therefrom and assuming adoption of the proposed amendments to the Credit
Facility, the Company would have had $100.0 million in aggregate principal
amount of Notes outstanding, $17.2 million outstanding under the Credit
Facility, $4.0 million of other long-term debt (net of current portion) and
approximately $32.8 million available under the Credit Facility. See "Use of
Proceeds" and "Material Agreements--Description of the Credit Facility."
For the first six months of 1996, the Company made distributions to holders
of equity interests in the Company of $0.2 million compared with $9.7 million
in the first half of 1995. Distributions of $18.8 million were made in each of
1995 and 1994.
During 1995, the Company's principal uses of funds were capital expenditures
relating to several expansion projects, including the construction of 36 new
suites and completion of the skyway corridor connecting the Eldorado to the
Silver Legacy, which includes three speciality shops and The Brew Brothers,
the Chefs' Pavilion buffet, the Grand Plaza and a 12,400 square foot
convention center. Total expenditures related to these expansions were $56.7
million. During the six months ended June 30, 1996, the Company's principal
uses of funds were for the reduction of the Existing Credit Facility and
capital expenditures of $3.9 million related to the expansion of the casino on
the mezzanine level. Total expenditures to reduce the Existing Credit Facility
and capital expenditures were approximately $14 million.
The Company's future sources of liquidity are anticipated to be from its
operating cash flow, funds available from the $50 million Credit Facility and
capital lease financing for certain of its fixed assets purchases. The
Company's anticipated uses of cash in the near term include approximately $14
million for completion of a 500-seat showroom, a Parisian-style bistro and a
full-service health spa. These expansion projects are anticipated to be
completed during 1997. Approximately $4 million of these expenditures are
expected to be incurred during the remainder of 1996 with the remaining $10
million anticipated to be incurred in 1997. In addition, the
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Company paid $1.6 million in August 1996 to fund the cash-portion of the
purchase price for a parcel of land adjacent to and west of the Eldorado. See
"Business--Properties."
CORPORATE EXPENSES/MANAGEMENT FEES
The Company pays management fees to Recreational Enterprises, Inc. and Hotel
Casino Management, Inc., the owners of 55% and 29% of the Company's equity
interests, respectively. The management fees paid to Recreational Enterprises,
Inc. and Hotel Casino Management, Inc. are included in selling, general and
administrative expenses and totalled $2.1 million and $2.0 million for the six
months ended June 30, 1995 and 1996, respectively, and $4.6 million, $3.8
million and $4.3 million for the years ended December 31, 1993, 1994 and 1995,
respectively. Historically, the salaries of senior executive officers and
certain other key employees of the Company were not directly incurred by the
Company but were paid from a portion of the management fees paid to
Recreational Enterprises, Inc. As of July 1, 1996, the aggregate annual
salaries of such senior executive officers and other key employees have become
payroll obligations of the Company. In connection with the issuance of the
Private Notes, the Company entered into a Management Agreement with
Recreational Enterprises, Inc. and Hotel Casino Management, Inc. providing
that future management fees paid to Recreational Enterprises, Inc. and Hotel
Casino Management, Inc. will not exceed 1.5% of the Company's annual net
revenues. See "Material Agreements--Management Agreement." Assuming
reallocation of such salaries and the payment of management fees pursuant to
the Management Agreement (assuming aggregate annual reallocated salaries at
the 1996 levels of $2.3 million per year (which includes assumed aggregate
bonuses of $0.3 million which may or may not be paid at the discretion of the
Chief Executive Officer) and the payment of management fees of the full 1.5%
of annual net revenues, in each case, for all periods presented), (i) the
aggregate of such salaries and management fees would have totalled $4.4
million, $4.4 million and $4.5 million for the years ended December 31, 1993,
1994 and 1995, respectively, and (ii) the Company's pro forma net income would
have been higher by $0.2 million for the year ended December 31, 1993 and
would have been $0.6 million and $0.2 million lower for the years ended
December 31, 1994 and 1995, respectively.
SEASONALITY
Hotel/casino operations in the Reno Market are subject to seasonal
variation, with the strongest operating results occurring in the third quarter
of each year and the weakest results occurring during the period from November
through February. Such variations occur when weather conditions have made
travel to Reno by visitors from northern California and the Pacific Northwest
difficult. The following table shows the Company's percentage of gross
revenues by quarter for each of 1993, 1994 and 1995.
<TABLE>
<CAPTION>
1993 1994 1995
----- ----- -----
<S> <C> <C> <C>
First quarter........................................ 20.6% 22.6% 21.6%
Second quarter....................................... 25.8% 26.1% 24.9%
Third quarter........................................ 28.9% 27.7% 28.8%
Fourth quarter....................................... 24.7% 23.6% 24.7%
----- ----- -----
Total.............................................. 100.0% 100.0% 100.0%
</TABLE>
IMPACT OF INFLATION
Absent changes in competitive and economic conditions or in specific prices
affecting the industry, the Company believes that the hotel/casino industry
may be able to maintain its operating profit margins in periods of general
inflation by increasing minimum wagering limits for its games and increasing
the prices of its hotel rooms, food and beverage and other items, and by
taking actions designed to increase the number of patrons. The industry may be
able to maintain growth in gaming revenues as a result of the tendency of
customers to increase their gaming budgets with an increase in inflation.
Changes in specific prices (such as fuel and transportation prices) relative
to the general rate of inflation may have a materially adverse effect on the
hotel/casino industry.
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BUSINESS
OVERVIEW
The Company owns and operates the Eldorado Hotel & Casino (the "Eldorado"),
a premier hotel/casino and entertainment facility in Reno, Nevada. The Company
has established the Eldorado as a luxury destination resort by creating a
sophisticated, elegant atmosphere unique in the Reno Market and providing
unsurpassed personal service and cuisine, a dynamic gaming environment and a
wide variety of amenities attractive to multiple market segments. The Eldorado
is centrally located in downtown Reno and is easily accessible both to vehicle
traffic from Interstate 80, the principal highway linking Reno to its primary
visitor markets in northern California, and to pedestrian traffic from nearby
casinos. For the twelve months ended June 30, 1996, the Eldorado generated
$40.8 million in EBITDA on net revenues of $150.7 million. In addition to
owning the Eldorado, the Company's 77%-owned subsidiary, ELLC, owns a 50%
joint venture interest, along with a subsidiary of Circus Circus, in the
Silver Legacy, a major themed hotel/casino located adjacent to the Eldorado.
The remaining 23% of ELLC is owned by the principal equityholders of the
Company.
The Eldorado was established in 1973 and has undergone several significant
expansions and improvements, including substantial additions in 1979, 1985,
1989 and 1995. As a result of these expansions, the Eldorado is one of the
largest and most elegant properties in the Reno Market. As of June 30, 1996,
the Eldorado offered approximately 81,500 square feet of gaming space with
1,984 slot machines and 84 table games, three hotel towers with a total of 817
rooms, including 137 suites, seven dining venues, parking for 1,138 vehicles
and approximately 12,400 square feet of convention space. For the year ended
December 31, 1995, the Eldorado achieved a 93.8% average hotel occupancy rate.
The Company is currently further improving and expanding the Eldorado through
the development of a Parisian-style bistro, a state-of-the-art 500-seat
showroom and a full-service health spa.
As part of its strategy to further enhance its position as a market leader,
in 1993 the Company teamed with Circus Circus to develop the Silver Legacy,
the first newly constructed major hotel/casino in the Reno Market since 1978
and its first themed mega-resort. The Silver Legacy opened in July 1995 and
encompasses two city blocks in downtown Reno adjacent to the Eldorado and
Circus Circus-Reno. The Silver Legacy's design is based upon Nevada's silver
mining heritage and the legend of Sam Fairchild, a fictitious silver baron who
"struck it rich" on the site of the hotel/casino. The Company's management
believes that the Silver Legacy is a "must see" attraction for visitors to the
Reno Market. As of June 30, 1996, the Silver Legacy featured 1,711 hotel rooms
and suites, approximately 88,500 square feet of casino space with 2,217 slot
machines and 87 table games and parking for approximately 1,800 vehicles.
The Eldorado, Silver Legacy and Circus Circus-Reno properties are connected
in a "seamless" manner by 200-foot wide skyway corridors. These enclosed
corridors serve as entertainment bridgeways between the three properties and
house several restaurants and custom retail shops. The Eldorado, Silver Legacy
and Circus Circus-Reno comprise the heart of the Reno Market's prime gaming
area and room base, providing the most extensive and the broadest variety of
gaming, entertainment, lodging and dining amenities in the Reno area, with an
aggregate of over 4,100 rooms, approximately 5,900 slot machines and 250 table
games, 16 restaurants and enough parking to accommodate approximately 4,600
vehicles. The Company's management believes that centralized location and
critical mass of these three properties, together with the ease of access
between the facilities, provide the Eldorado with significant advantages over
other freestanding hotel/casinos in the Reno Market.
The Company has a very broad and experienced management team that includes,
among others, Donald Carano and several members of his immediate family.
Donald Carano, the Chief Executive Officer and a member of the Board of
Managers of the Company, co-founded the Eldorado in 1973 and has been the
driving force behind its development. In addition to Donald Carano, each of
the Company's other eight senior executives has in excess of 10 years of
operating experience in the gaming industry. Management believes that its
family-oriented, hands-on approach has enabled the Company to operate the
Eldorado successfully for over two decades.
40
<PAGE>
In addition to their roles in management of the Company, members of the Carano
family beneficially own 63% of the Company.
Reno is the second largest city in Nevada and is located in northern Nevada
at the base of the Sierra Nevada mountain range, approximately 140 miles east
of Sacramento, California and 225 miles east of San Francisco, California. The
Reno Market is the third largest gaming market in the United States after Las
Vegas, Nevada and Atlantic City, New Jersey and generated over $900 million in
gaming revenues for the twelve months ended June 30, 1996. According to the
Nevada Gaming Board, while gaming revenues in the Reno Market grew at a 4%
compound annual growth rate from 1985 to 1995, for the first eleven full
months the Silver Legacy was in operation (August 1, 1995 through June 30,
1996), the Reno Market's gaming revenues increased by approximately 8.6% over
the previous year's comparable eleven month period. Reno is a destination
resort market which attracts visitors for an average of 2.5 nights. Visitors
are attracted to the Reno area for its wide variety of gaming amenities and
its numerous other summer and winter recreational activities. Principal feeder
markets for the Reno Market include northern California and the Pacific
Northwest. The Company's management believes that the opening of the Silver
Legacy and the National Bowling Stadium and the expansion of airflight service
to the Reno/Tahoe International Airport will positively impact the future
growth of the Reno Market.
BUSINESS STRATEGY
The Company's business strategy draws upon its extensive gaming management
experience gained from operating the Eldorado successfully for nearly two
decades. Key elements of the Company's strategy include the following:
Unsurpassed Personal Service and High Quality Amenities. One of the
cornerstones of the Company's business strategy is to provide its customers
with an extraordinary level of personal service. The Company's senior
management is actively involved in the daily operations of the Eldorado,
frequently interacting with hotel, restaurant and gaming patrons to ensure
that they are receiving the highest level of personal attention. Management
believes that extraordinary personal service is an integral part of fostering
customer loyalty and generating repeat business. Management regularly conducts
feedback sessions and focus groups with customers to elicit comments and
suggestions on ways it can improve each customer's experience at the Eldorado.
Additionally, management personally responds to suggestions made on comment
cards placed in each of the Eldorado's hotel rooms. Furthermore, management
continually strives to instill in each employee a dedication to superior
service designed to exceed guests' expectations.
In addition to personalized service, the Eldorado has earned a reputation
for high quality amenities and an excellent price-to-value relationship.
Locals and visitors alike are attracted to the Eldorado's selection of dining
venues and exceptional food quality, for which the Eldorado is nationally
recognized. Management believes that the Eldorado's excellent cuisine adds to
the overall atmosphere and prestige of the hotel and therefore emphasizes
outstanding food and ambiance and a wide variety of dining choices.
Superior Utilization of Gaming Capacity. The Eldorado has historically
achieved excellent utilization of its gaming facilities, as evidenced by the
fact that for the twelve months ended June 30, 1996, it generated 12.1% of the
Reno Market's gaming revenues (exclusive of race and sports wagers and keno)
while operating only 7.7% of its gaming capacity, giving the Eldorado 157% of
its "fair share" of the Reno Market's gaming revenues. Management attributes
this success in its gaming utilization to its strategy of providing a well-
balanced gaming environment which contains a mix of slot machines and table
games attractive to both middle-income and premium-play customers. Due to the
significant gaming play of the Company's gaming customers, the Eldorado's win
per unit across all denominations of both slot machines and table games
substantially exceeds the Reno Market's average win per unit for such games.
The Company attempts to attract a high volume of gaming customers to the
Eldorado by offering a variety of value-oriented dining options and through
various promotions and special events, including the Eldorado's celebrated
annual Great Italian Festival.
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<PAGE>
The Eldorado continually monitors and enhances its casino operations to
react to changing market conditions and customer demands. For example, the
Company has shifted its slots mix towards $1 and higher denominated machines
in response to the increased popularity of higher-end slot machines, which the
Company believes appeal to its growing base of higher-income gaming clientele.
The Company targets premium-play customers as well as the value-conscious
gaming patron with its state-of-the-art casino featuring the latest in game
technology, unique electronic displays and customer-convenient features.
Effective Marketing to Target Gaming Patrons. The Company primarily targets
its marketing programs to four segments of the gaming market: the free and
independent traveler, preferred casino customers, local patrons and the
wholesale/specialty groups.
The free and independent traveler segment consists of those travelers not
affiliated with groups who make their reservations directly with the Eldorado
or through independent travel agents. To attract the independent traveler, the
Company uses print media, radio, television and direct mail to advertise in
northern California, the Pacific Northwest, western Canada and other regional
travel markets.
Preferred casino customers are those patrons who maintain the necessary
gaming criteria to become established casino guests. The Company uses a broad
special events agenda and an extensive guest development program, including
providing casino credit, to attract and retain preferred casino customers. In
addition, the Company utilizes its quality hotel rooms, excellent restaurant
venues and other amenities to offer complimentaries to a broad spectrum of
established casino guests, from the frequent players who place relatively
modest wagers to the true premium players who consistently wager high amounts.
The Company believes that the ability to reward the more modest gaming patrons
fosters intense loyalty and repeat business from such customers, who often
increase their level of play over time.
The Company has established an aggressive marketing program directed toward
the local gaming market segment, consisting of frequent radio, television and
newspaper advertising, a variety of promotions and other programs specifically
tailored for the local customer, such as check cashing promotions. The
Eldorado's reputation for exceptional quality restaurants and an excellent
price-to-value relationship is particularly appealing to the local gaming
patron, as dining is a primary motivation for casino visits by many local
residents.
Wholesale/specialty groups consist of those customers participating in
travel packages offered by air tour operators, groups of up to 100 people with
strong gaming profiles and visitors attending tournaments at the National
Bowling Stadium. The Eldorado sales force targets this segment by attending
trade shows in order to establish relationships with airlines, travel agents,
meeting planners and wholesalers. The Eldorado has developed special marketing
programs and tools to cultivate relationships with these air tour operators
and specialty groups, including offering familiarization tours of the
Eldorado. The Eldorado attempts to utilize this market segment as a means of
creating a consistent room base during the calendar year.
The Eldorado has implemented a state-of-the-art, real-time customer tracking
system which comprehensively tracks its gaming customers throughout the
casino. The system was developed by the Eldorado as a means of obtaining up-
to-the-minute information on a customer's gaming habits, maximum and minimum
wagers and the total amount wagered. The Eldorado can thereby ensure that
customers receive immediate recognition and complimentaries based on their
levels of gaming. This innovation is enhanced by a friendly, knowledgeable
staff and a conveniently located promotion center. In addition, "Club
Eldorado," the casino's full-service slot club, offers an array of special
events and exciting tournaments and convenient ways of earning
complimentaries.
Strategic Expansion and Improvements. Since opening the Eldorado in 1973,
the Company has employed a strategy of continual expansion and improvement in
order to maintain and enhance its position as a leader in the Reno Market.
Expansions in 1979, 1985 and 1989 increased the Eldorado's room base by
approximately 500 rooms, and added a total of approximately 54,500 square feet
of gaming space. Further expansion in 1992 and 1993 included a remodeling of
the Eldorado's mezzanine level, the creation of the Eldorado Coffee Company
42
<PAGE>
and the addition of a 652-space parking garage. During the summer of 1995, the
Company added 36 suites and unveiled the new Grand Plaza, a European-style
plaza located at the base of the skyway corridor connecting the Eldorado with
the Silver Legacy which showcases the "Fountain of Fortune," a dramatic 20-
piece fountain crafted from marble and bronze. As part of the 1995 expansion,
the casino was expanded to 76,500 square feet, and three exclusive specialty
shops, The Brew Brothers, the Chefs' Pavilion buffet and a new 12,400 square-
foot convention center were added. Most recently, in the early spring of 1996,
the Company opened a new, elegant 5,000 square-foot casino with 102 slots and
10 table games adjacent to the skyway corridor on the mezzanine level to take
advantage of the foot traffic coming to the Eldorado from the Silver Legacy.
Continuing its successful expansion strategy, the Company is currently
adding a new 175-seat Parisian-style bistro, which is scheduled to open in
December 1996. In addition, the Eldorado is currently building a state-of-the-
art 500-seat showroom which is scheduled to open in 1997. The showroom will
add an entertainment experience that management believes will attract a larger
and broader audience of entertainment seekers. The showroom will feature the
only nightly production show of its kind in downtown Reno. In addition, the
Eldorado plans to open a full-service health spa, scheduled to be completed in
1997. Management believes that the addition of these unique amenities will
further enhance the Eldorado's position as a leading luxury hotel in the Reno
Market. Furthermore, the Company owns a 31,000 square foot piece of property
across the street from and west of the Eldorado, which could be used for
further expansion of the Eldorado.
The map on the following page shows the relative locations of the Eldorado,
Silver Legacy and Circus Circus-Reno, as well as certain other major
attractions in the Reno Market.
43
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[MAP DEPICTING DOWNTOWN RENO AND THE POSITION OF THE ELDORADO HOTEL & CASINO
RELATIVE TO OTHER HOTEL/CASINOS AND OTHER LANDMARKS IN DOWNTOWN RENO]
[MAP DEPICTING THE CONNECTIONS BETWEEN THE ELDORADO HOTEL & CASINO, THE SILVER
LEGACY RESORT CASINO AND CIRCUS CIRCUS-RENO AND THE DISTANCE FROM THE
PROPERTIES TO THE NATIONAL BOWLING STADIUM]
44
<PAGE>
ELDORADO HOTEL & CASINO
When the Eldorado opened in 1973 with 282 rooms and approximately 7,000
square feet of gaming space, it was the only hotel/casino located in the
northern section of downtown Reno. As Reno has steadily grown northward, the
Eldorado is now centrally positioned in the heart of Reno's prime gaming area
and room base. Easily accessible to both foot and vehicle traffic, the
Eldorado is strategically located directly off Interstate 80, the principal
highway linking the Reno Market with San Francisco, Sacramento and other
cities in its primary visitor market of northern California. With three golden
towers, including a 26-story tower that lights up with over 2,000 feet of neon
at night, the Eldorado is visible from Interstate 80, attracting visitors to
the downtown area and generating interest in the property. Management believes
the Eldorado serves as a downtown landmark, situated to attract a large volume
of foot traffic from other casinos as well as from the local populace. In
addition, the Eldorado is easily accessible to visitors competing in and
attending the various bowling tournaments that are held in the National
Bowling Stadium, which is located just one block away. Furthermore, management
believes that the new exterior facade at the primary Virginia Street entrance,
featuring a 24-foot by 48-foot golden portal and majestic flickering
torchieres, is in itself an entertainment attraction that draws customers from
competing hotel/casinos.
As of June 30, 1996, the Eldorado offered approximately 81,500 square feet
of gaming space, with approximately 1,984 slot machines, 84 table games
consisting of blackjack, craps, roulette, Pai Gow Poker, Let It Ride(R),
Caribbean stud poker, mini-baccarat and baccarat, two keno games and a race
and sports book. The Eldorado's casino includes a balanced mix of slot
machines and table games which management believes makes it attractive to both
middle-income and premium-play customers. The relatively high proportion of
slot machines, which are offered in denominations from 5c to $100, generates
approximately 68% of the total gaming revenues for the casino and provides
consistency in revenues and cash flow. The diverse selection of table games
and the variety of table limits allow for the maximum amount of play from a
wide variety of gaming customers, which management believes makes the Eldorado
one of the premier table games casinos in the Reno Market.
The interior of the hotel is designed to create a unique European ambiance
and offers 817 finely-appointed rooms and suites, including 18 specialty
suites, 93 "Eldorado Player's Spa Suites" with bedside spas and 26 one-bedroom
and two-bedroom penthouse suites. Hotel guests enjoy panoramic views of Reno's
skyline and the majestic Sierra Nevada mountain range. Management believes
that attention to detail, decor and architecture have created an identifiable
and innovative presence in the Reno Market for the Eldorado. In 1995, the
Eldorado achieved a 93.8% average hotel occupancy rate and an ADR of
approximately $60. Management believes that the Eldorado's average hotel
occupancy rate and ADR are among the highest in the Reno Market.
The Eldorado is nationally recognized for its exceptional cuisine.
Management believes that the Eldorado's superior cuisine and wide-ranging
selection of dining opportunities are crucial factors in attracting and
retaining customers. All of the Eldorado's dining venues, which range from
buffet to gourmet, offer high quality food at reasonable prices. The following
chart details the Eldorado's dining venues, their respective seating
capacities and their outstanding attributes, including a detail of the awards
and distinctions each has received.
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<PAGE>
<TABLE>
<CAPTION>
Seating
Dining Venue Capacity Description
------------ -------- -----------
<C> <C> <S>
LA STRADA 170 . Features northern Italian cuisine in an
Italian countryside villa setting
. Recognized as one of the country's top 10
Italian restaurants in the 1994 Best of the
Best Academy Awards of the Restaurant
Industry
. Recipient of the Wine Spectator Award of
Excellence in each of the past five years
. Hailed in the March 1993 issue of Bon Appetit
magazine as a "sure thing in Reno" for food
lovers
THE BREW BROTHERS 225 . The first microbrewery located in a
hotel/casino. Features a variety of
handcrafted beers and live nightly
entertainment.
. Named as the area's best microbrewery in the
Reno Gazette-Journal in 1996
. Offers seven microbrewed beers, including
Eldorado Extra Pale Honey Ale, Redhead Amber
Ale, Wild Card Wheat Ale, Big Dog Ale, Gold
Dollar Pale Ale, Double Down Stout and a
rotating seasonal brew
THE GRILL 185 . A spirited, lively steak and seafood house
. Specializes in rotisserie and grilled entrees
at affordable prices
. Offers top quality USDA cuts of beef and
fresh seafood, a "never-ending" salad and
fruit bar with homemade soups
CHEFS' PAVILION 525 . A 220-foot buffet offering a wide variety of
cuisines, including a Mongolian barbecue,
omelette station and a salad, fruit, ice
cream and dessert bar
. Features an open exhibition kitchen where
customers can observe meals being prepared
TIVOLI GARDENS 210 . A 24-hour restaurant with a menu featuring
Asian, Italian, Mexican and South American
cuisines
. Features the Eldorado Coffee Company, where
fresh coffee beans are roasted each day for
use throughout the hotel and for retail
purchase
. Hailed in the March 1993 issue of Bon Appetit
magazine as a "sure thing in Reno" for food
lovers
CHOICES EXPRESS CAFE 220 . A food court offering a diverse selection of
cuisines, including an Asian noodle kitchen,
a delicatessen, a gelato shop where 24
flavors are made fresh each day, a salad bar,
a bakery and an espresso bar
SEAFOOD BUFFET 425 . Offered each Friday and Saturday night
. Named one of the top 25 seafood restaurants
in the country in the 1994 Best of the Best
Academy Awards of the Restaurant Industry
. Voted one of Reno's best all-around food
values in a 1994 Reno Gazette-Journal
readership poll
PARISIAN-STYLE BISTRO 175 . A Parisian-style bistro, bar and restaurant
(scheduled to open offering French country fare
in December 1996) . Designed by famed restaurant designer Pat
Kuleto to feature seven distinct
architectural styles
</TABLE>
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<PAGE>
The Eldorado's selection of high-quality food and beverages reflects the
Carano family's emphasis on the dining experience. Eldorado chefs utilize
homemade pasta, carefully chosen imported ingredients, fresh seafood and top
quality USDA choice cuts of beef. Throughout the property, beverage offerings
include The Brew Brothers microbrewed beers and wines from the Ferrari Carano
Winery.
The Eldorado features a 652-space parking garage, a 360-space valet parking
facility and 126 surface parking spaces. Other amenities offered by the
Eldorado include several specialty shops, a versatile 12,400 square foot
convention center and an outdoor plaza located adjacent to the Eldorado which
hosts a variety of special events. The Eldorado's casino cabaret has been
named Reno's best cabaret for the past seven years by "Fun and Gaming," a
widely circulated Reno tourist publication.
SILVER LEGACY RESORT CASINO
The Silver Legacy opened in July 1995 as the first major newly-constructed
hotel/casino in the Reno Market since 1978 and its first themed mega-resort.
Plans for the Silver Legacy were originally formulated in 1993 by the Company
and Circus Circus, who jointly recognized the potential synergies of
constructing a new hotel/casino in between the Eldorado and Circus Circus-Reno
properties.
The Silver Legacy's design is based upon Nevada's silver mining heritage and
the legend of Sam Fairchild, a fictitious silver baron who "struck it rich" on
the site of the hotel/casino. Accordingly, the opulent interior of the Silver
Legacy showcases a variety of antique silver pieces from the Mackey silver
collection and a casino built around Sam Fairchild's legendary 120-foot tall
mining rig. The mining rig appears to transform ore into silver coins that
cascade into slot machines located at the mining rig's base. The mining rig is
enclosed within a 75,000 square foot dome, the interior of which is painted to
resemble the sky and features three dynamic sound and light shows which are
continuously updated so that visitors are provided with a unique experience
each time they enter the hotel. The exterior of the dome serves as a
distinctive landmark on the Reno skyline. The Company's management believes
that the Silver Legacy is a "must see" attraction for visitors to the Reno
Market.
The Silver Legacy is situated on two city blocks, encompassing 240,000
square feet in downtown Reno. The hotel currently offers 1,711 guest rooms and
suites, many of which feature views of Reno's skyline and the Sierra Nevada
mountain range. The Silver Legacy's 10-story parking facility can accommodate
approximately 1,800 vehicles. The Silver Legacy's casino features
approximately 88,500 square feet of gaming space and contains 2,217 slot
machines and 87 table games including blackjack, craps, roulette, Pai Gow
Poker, Let It Ride(R), Caribbean stud poker, mini-baccarat and Pai Gow and two
keno games. "Club Legacy," the Silver Legacy's slot club, offers customers
exciting special events and tournaments and convenient ways of earning
complimentaries. From its opening in July 1995 through the second quarter of
1996, the Silver Legacy has generated $39.1 million in EBITDA before
preopening expenses on net revenues of $137.0 million. The Company's
management expects the Silver Legacy's gaming revenues to increase as the
casino builds its premium customer base.
The Silver Legacy's restaurant offerings include a 240-seat buffet, a
delicatessen, a steak and seafood restaurant, an oyster bar and a 24-hour
coffee shop. In addition, the hotel sponsors entertainment events which are
held in the hotel's convention area. The Silver Legacy's other amenities
include three custom retail shops, exercise facilities and an outdoor swimming
pool and sundeck. The Silver Legacy's plans for the future include the
addition of periodic evening entertainment, a race and sports book to the
casino and a video arcade.
RENO MARKET
The Reno Market is the third largest gaming market in the United States
after Las Vegas, Nevada and Atlantic City, New Jersey and generated over $900
million of gaming revenues for the twelve months ended June 30, 1996. In
addition, according to Nevada Gaming Board, while gaming revenues in the Reno
Market grew at a 4% compound annual growth rate from 1985 to 1995, for the
first eleven full months the Silver Legacy was in operation (August 1, 1995
through June 30, 1996), the Reno Market's gaming revenues increased by
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<PAGE>
approximately 8.6% over the previous year's comparable eleven month period.
Also, as of December 31, 1995, the Reno Market featured 14,241 hotel rooms
which had an 86.0% average hotel occupancy rate in 1995. According to the
Visitors Authority, numerous other approved or announced hotel projects are
expected to add approximately 2,690 rooms to the Reno Market by the end of the
decade.
Reno is the second largest city in Nevada, with a population of
approximately 150,620 as of July 1, 1995, and is located at the base of the
Sierra Nevada mountains along Interstate 80, approximately 140 miles east of
Sacramento, California and 225 miles east of San Francisco, California. Reno
is a destination resort market which attracts visitors by offering gaming as
well as numerous other summer and winter recreational activities. In addition
to gaming, the Reno area features numerous national forests, mountains and
lakes (including Lake Tahoe) and offers outstanding year-round opportunities
for outdoor activities of all types. According to the Visitors Authority,
visitors to the Reno Market stayed an average of 2.5 nights in 1995. The Reno
area enjoys relatively mild weather, with abundant sunshine throughout the
year, low humidity and modest annual snowfall. Special annual events in the
Reno area include Hot August Nights, the National Championship Air Races, the
Reno Balloon Races and the Reno Rodeo. According to the Visitors Authority,
the greater Reno area attracted 4.9 million visitors in 1995, an increase of
8.5% from 1994.
The following table sets forth certain statistical information for the Reno
Market for the years 1991 through 1995, as reported by the Visitors Authority
or the Nevada Gaming Board.
THE RENO MARKET
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Gaming Revenues
(000's)................ $762,043 $804,927 $811,227 $826,174 $889,480
Gaming Positions(1)(2).. 27,963 28,500 29,228 29,943 31,926
Hotel Rooms(1).......... 12,368 12,566 12,566 12,582 14,241
Average Hotel Occupancy
Rate................... 83.8% 84.3% 85.2% 84.4% 86.0%
Airline Passenger
Arrivals(3)............ 1,713,313 1,884,703 2,374,244 2,670,969 2,911,834
Convention Attendance... 135,323 169,271 177,925 203,389 314,137
</TABLE>
--------
(1) As of December 31 for each period shown.
(2) Calculated from information provided by the Nevada State Gaming Control
Board.
(3) Arrivals to Reno/Tahoe International Airport.
The Company believes that four recent developments will further expand the
size of the Reno Market. These developments include (i) the opening of the
National Bowling Stadium in February 1995, (ii) the opening of the Silver
Legacy in July 1995, (iii) the announcement of several new hotel developments
and expansions and (iv) the increase in air service to Reno, especially by
Reno Air and Southwest Airlines.
The National Bowling Stadium, located approximately one block from the
Eldorado and Silver Legacy, opened in February 1995 at a reported cost of
approximately $48 million. The state-of-the-art facility features 80 bowling
lanes and will host tournaments for the ABC and the WIBC over the next 13
years as well as many other tournaments for other bowling organizations. The
National Bowling Stadium has scheduled the WIBC's National Championship
Bowling Tournament in 1997, 2000, 2003, 2006 and 2009 and has scheduled the
ABC's National Championship Bowling Tournament for 1998, 2001, 2004 and 2007,
providing a major bowling tournament in Reno two out of every three years
through the year 2009. The Visitors Authority estimates that the ABC's 1995
National Championship Bowling Tournament, which was held between February and
July 1995, was attended by approximately 228,000 people (93,000 bowlers and
135,000 family members and friends) who stayed for an average of approximately
four days and infused approximately $230 million into the local economy.
According to the Visitors Authority, bowling tournaments held at the National
Bowling Stadium attract visitors from markets that do not normally contribute
substantially to Reno's visitor profile. The National Bowling Stadium also
features a large-screen movie theater, a 1950s-themed diner and retail space
and can be configured to host special events and conventions.
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<PAGE>
The Silver Legacy is Reno's first newly constructed major hotel/casino since
1978 and its first themed mega-resort. The Silver Legacy's 1,711 hotel rooms
and approximately 2,800 gaming positions represented an approximately 13%
increase in the number of hotel rooms and an approximately 10% increase in the
number of gaming positions in the Reno Market. In addition, according to the
Visitors Authority, several new hotel/casino projects have been commenced or
are planned. The Company's management believes that these new development and
expansion activities will help retain existing customers and assist in
attracting additional customers to the Reno Market.
Passenger traffic at the Reno/Tahoe International Airport has increased
steadily for five consecutive years, from 1.5 million airline passenger
arrivals in 1990 to over 2.9 million in 1995, representing a 14% compound
annual growth rate. In 1995, twelve scheduled airlines and numerous other
charter airlines provided service to more than 250 North American cities,
carrying more than 15,800 people daily. The most frequent users of the airport
are Reno Air and Southwest Airlines, with approximately 90 and 80 daily
flights, respectively, to and from Reno as of July 1, 1996. To meet the
significant increase in tourism and travel anticipated because of major
development efforts in the Reno area, including the development of the
National Bowling Stadium and the Silver Legacy, Reno has renovated and
expanded its airport facilities to accommodate an expected growth in passenger
activity. The Eldorado and Silver Legacy are within a 10-minute drive of the
airport, making them easily accessible to visitors travelling to Reno by air.
COMPETITION
The Company competes for customers primarily on the basis of location, range
and pricing of amenities and overall atmosphere. Of the 48 casinos currently
operating in the Reno Market, the Company competes principally with the eight
other hotel/casinos that each generate over $36 million in annual gaming
revenues, including Circus Circus-Reno and the Silver Legacy. To a lesser
extent, the Company also competes with hotel/casino operations located in Las
Vegas and Laughlin, Nevada and in the Lake Tahoe area. A substantial number of
customers travel to both Reno and the Lake Tahoe market during their visits.
Consequently, the Company believes that its success is influenced to some
degree by the success of the Lake Tahoe market. Environmental restrictions
place limitations on the expansion of hotels and casinos in the Lake Tahoe
market. Additionally, the Company competes with casino gaming on Native
American-owned lands throughout California, Washington and Oregon, from where
the Reno Market drew approximately 47%, 12% and 7%, respectively, of its
visitors in 1995. Furthermore, since the 1980's, legalized gaming
opportunities have proliferated throughout the United States, and the Company
now competes with pari-mutuel wagering, state-sponsored lotteries, card clubs,
bingo, off-track betting, riverboat and other forms of legalized gaming. The
Visitors Authority estimates that approximately 2,690 rooms will be added to
the Reno Market by the end of the decade. The Company expects that these
additional rooms will increase competition for visitor revenue in the future.
EMPLOYEES
As of August 31, 1996, the Company had 2,542 employees, the substantial
majority of whom are nonmanagement personnel. The number of people employed at
any time is subject to seasonal fluctuation. None of the Company's employees
is covered by a collective bargaining agreement. The Company believes that
employee relations are excellent.
PROPERTIES
The Company's executive offices reside inside the Eldorado, which is located
on an approximately 159,000 square foot parcel at 345 North Virginia Street,
Reno, Nevada. The Company owns the entire parcel, except for approximately
30,000 square feet which is leased by the Company from C, S and Y Associates,
a general partnership of which Donald Carano is a general partner. See
"Certain Transactions." The lease expires on June 30, 2027. Annual rent is
equal to the greater of (i) $400,000 and (ii) an amount based on a decreasing
percentage of the Eldorado's gross gaming revenues ranging from 3.0% of the
first $6.5 million of gross gaming revenues to 0.1% of gross gaming revenues
in excess of $75.0 million. Rent in 1995 totalled $649,000.
49
<PAGE>
In addition, the Company owns a 35,000 square foot parcel of land located at
444 North Center Street, Reno, Nevada, on which the Company's human resources
offices are located, and owns approximately 90 acres of land located in Verdi,
Nevada. In addition, the Company owns a 31,000 square foot parcel of property
across the street from and west of the Eldorado, which could be used for
expansion of the Eldorado. Furthermore, the Company and Circus Circus each own
a one-half interest in a 63,000 square foot parcel of land across the street
from the Silver Legacy.
LEGAL MATTERS
The Company from time to time is involved in litigation arising in the
ordinary course of its business. The Company does not believe that such
litigation will, individually or in the aggregate, have a material adverse
effect on its financial position or results of operations.
50
<PAGE>
MANAGEMENT
The following tables set forth certain information with respect to persons
who are members of the Company's Board of Managers (each a "Board Member"),
executive officers of the Company or the Eldorado and other significant
employees. The Indenture requires that the Company's Board of Managers include
at least one independent Board Member to be appointed within 180 days after
issuance of the Private Notes, subject to approval of such Board Member by the
Nevada Gaming Authorities.
BOARD MEMBERS AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
---- --- -----------
<C> <C> <S>
Donald L. Carano 64 Board Member and Chief Executive Officer of
the Company
Robert M. Jones 53 Chief Financial Officer of the Company
Gene R. Carano 40 Vice President and Secretary of the Company
and Co-General Manager of the Eldorado
Gregg R. Carano 37 Vice President of the Company and Co-General
Manager of the Eldorado
Gary L. Carano 44 Board Member--Appointed by Recreational
Enterprises, Inc. as its corporate
representative
Raymond J. Poncia, 63 Board Member--Appointed by Hotel Casino
Jr. Management, Inc. as its corporate
representative
SIGNIFICANT EMPLOYEES
<CAPTION>
NAME AGE POSITION(S)
---- --- -----------
<C> <C> <S>
Robert B. MacKay 48 Director of Administration of the Eldorado
Robert B. Mouchou 40 Director of Gaming of the Eldorado
Rick W. Murdock 41 Director of Sales and Casino Marketing of the
Eldorado
Cindy L. Carano 35 Director of Hotel and Retail Operations of
the Eldorado
Rhonda B. Carano 42 Director of Advertising and Public Relations
of the Eldorado
</TABLE>
DONALD L. CARANO. Mr. Carano has served as Chief Executive Officer of, and
has owned a controlling interest in, the Company since 1973. Previously, he
was an attorney with the firm of McDonald Carano Wilson McCune Bergin
Frankovich & Hicks LLP, with which he maintains an "of counsel" relationship.
Mr. Carano has been involved in the gaming industry and has been a licensed
casino operator since 1969. Mr. Carano's commitment to the development and
promotion of tourism in Reno has earned him several awards, including the
Nevada Food and Beverage Directors Association Man-of-the-Year Award, the
American Lung Association 1993 Distinguished Community Service Award and the
1992 Hotelier of the Year Award. Also, since 1984, Mr. Carano has been the
Chief Executive Officer of the Ferrari Carano Winery. He is the father of
Gary, Gene, Glenn, Gregg and Cindy Carano and is married to Rhonda Carano.
ROBERT M. JONES. Mr. Jones has served as Chief Financial Officer of the
Company since 1989. Prior to joining the Company in 1984, Mr. Jones spent
fourteen years in public accounting, ten of which were as an audit principal
with the international accounting firm of Arthur Young & Company. Mr. Jones is
a Certified Public Accountant, was an honors graduate of the University of
Arizona with a major in accounting and has a Master of Business Administration
degree in taxation from Golden Gate University in San Francisco.
51
<PAGE>
GENE R. CARANO. Mr. Carano has served as Vice President of the Company and
Co-General Manager of the Eldorado since 1993 and has been Secretary of the
Company since June 1996. From 1986 to 1993, Mr. Carano served as the
Eldorado's Director of Gaming. Prior to joining the Eldorado, Mr. Carano held
various positions at another major casino in northern Nevada, including slot
floor supervisor and pit boss. Mr. Carano studied business management and
hotel administration at Utah State University and the University of Nevada,
Las Vegas.
GREGG R. CARANO. Mr. Carano returned to the Eldorado in 1994 as Vice
President of the Company and the Co-General Manager after serving as General
Manager of Circus Circus-Reno from 1993 to 1994. From 1985 to 1993, Mr. Carano
served as Director of Food and Beverage at the Eldorado. Mr. Carano holds a
Bachelor of Science Degree in Hotel/Restaurant Management from Florida
International University and an Associates Degree in Occupational Studies in
Culinary Arts from the Culinary Institute of America.
GARY L. CARANO. Mr. Carano is the General Manager of the Silver Legacy.
Previously, he served as Assistant General Manager, General Manager and Chief
Operating Officer of the Eldorado from 1980 to 1994. Mr. Carano holds a
Bachelors Degree in Business Administration from the University of Nevada,
Reno.
RAYMOND J. PONCIA, JR. Mr. Poncia has had an ownership interest in the
Eldorado since 1973 and has been involved in the gaming industry since 1968.
He has been involved with the Eldorado in the areas of development,
architectural and interior design, construction financing and business
planning. Mr. Poncia received his architectural degree from Case-Reserve
University and has been a licensed architect in private practice since 1960.
ROBERT B. MACKAY. Mr. MacKay has been the Director of Administration of the
Eldorado since 1989. From 1985 to 1989, Mr. MacKay served as the Eldorado's
Treasurer. He also has held the positions of Director of Finance and
Controller of the Eldorado. Mr. MacKay is a Certified Public Accountant and is
a graduate of the University of Nevada, Reno with a degree in Accounting.
ROBERT B. MOUCHOU. Mr. Mouchou has been the Director of Gaming of the
Eldorado since 1993. Mr. Mouchou joined the Eldorado in 1979 and has held a
variety of positions, including Games Manager, Assistant Slot Manager, Casino
Analyst, Assistant Controller and Audit Supervisor.
RICK W. MURDOCK. Mr. Murdock has been the Director of Sales since 1985 and
the Director of Sales and Casino Marketing of the Eldorado since 1995. He
began his career at the Eldorado in 1981 and has since held various positions,
including Director of Sales, National Sales Manager and Assistant Hotel
Manager.
CINDY L. CARANO. Ms. Carano has been the Director of Hotel and Retail
Operations of the Eldorado since 1994. Ms. Carano joined the Eldorado's
management team in 1985 as a reservation supervisor and served as Hotel
Manager before becoming the Director of Hotel and Retail Operations. Ms.
Carano holds a Bachelor of Science degree from the University of Nevada, Las
Vegas School of Hotel Administration.
RHONDA B. CARANO. Mrs. Carano has been the Director of Advertising and
Public Relations of the Eldorado since 1978. Mrs. Carano previously worked as
a management trainee at the Eldorado from 1976 to 1978 where she learned the
hotel/casino business. Mrs. Carano is the Vice President of the Ferrari Carano
Winery. She received a Bachelor of Science degree from the University of
Nevada, Reno.
52
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Tables
The following table sets forth all compensation paid by the Predecessor
Partnership during 1995 to the Company's officers named below (the "Named
Officers").
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
------------ ------------
NUMBER OF
APPRECIATION
RIGHTS ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS GRANTED COMPENSATION(1)
--------------------------- ------ ----- ------------ ---------------
<S> <C> <C> <C> <C>
Donald Carano........................ -- -- -- $501,501(2)
Board Member and Chief Executive
Officer of the Company
Robert Jones......................... -- -- 75,000 287,807(3)
Chief Financial Officer of the
Company
Gene Carano.......................... -- -- 100,000 375,080(4)
Vice President of the Company and
Co-General Manager of the Eldorado
Gregg Carano......................... -- -- 100,000 375,276(5)
Vice President of the Company and
Co-General Manager of the Eldorado
</TABLE>
- --------
(1) Historically, the salaries of the Named Officers were not directly
incurred by the Company but were paid from a portion of the management
fees paid to Recreational Enterprises, Inc. Certain of such Named Officers
also perform services for Recreational Enterprises, Inc. unrelated to the
business of the Company for which they receive salaries from Recreational
Enterprises, Inc. Amounts shown include salaries paid by Recreational
Enterprises, Inc. from a portion of the management fees. As of July 1,
1996, the aggregate annual salaries of such Named Officers and certain
other key employees have become payroll obligations of the Company. The
Company has been informed by Recreational Enterprises, Inc. that salaries
and bonuses (including deferred compensation) attributable to services
provided by the Named Officers to the Company consisted of $500,000,
$285,000, $372,000 and $372,000 paid to Messrs. Carano, Jones, Carano and
Carano, respectively.
(2) Includes contributions to the Company's 401(k) Plan (as defined herein) of
$1,181, payment of term life insurance premiums of $138 and payment of
health insurance premiums of $182.
(3) Includes contributions to the Company's 401(k) Plan of $1,707, payment of
term life insurance premiums of $138 and payment of health insurance
premiums of $962.
(4) Includes contributions to the Company's 401(k) Plan of $1,980, payment of
term life insurance premiums of $138 and payment of health insurance
premiums of $962.
(5) Includes contributions to the Company's 401(k) Plan of $2,176, payment of
term life insurance premiums of $138 and payment of health insurance
premiums of $962.
53
<PAGE>
Following the consummation of the Reorganization, the Company intends to pay
the following annual compensation to the Named Officers.
<TABLE>
<CAPTION>
ANNUAL
NAME AND PRINCIPAL POSITION COMPENSATION(1)
--------------------------- ---------------
<S> <C>
Donald Carano............................................. $550,000
Board Member and Chief Executive Officer
of the Company
Robert Jones.............................................. 270,000
Chief Financial Officer of the Company
Gene Carano............................................... 300,000
Vice President of the Company and Co-General Manager
of the Eldorado
Gregg Carano.............................................. 300,000
Vice President of the Company and Co-General Manager
of the Eldorado
</TABLE>
- --------
(1) Such amounts do not include bonuses in an amount not to exceed 20% of such
Named Officers salaries for which such executive officers are eligible.
Bonuses are granted at the discretion of the Chief Executive Officer.
Performance and Appreciation Rights
The following table provides certain information with respect to the grants
of appreciation rights made during 1995 to the Named Officers.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------------------
NUMBER OF % OF TOTAL
APPRECIATION APPRECIATION
RIGHTS RIGHTS GRANTED TO EXPIRATION
NAME GRANTED(1) EMPLOYEES IN 1995 BASE PRICE DATE(2)
---- ------------ ----------------- ---------- -----------------
<S> <C> <C> <C> <C>
Donald Carano...... -- -- -- --
Robert Jones....... 75,000 8.72% $26.66 December 31, 2004
Gene Carano........ 100,000 11.63 26.66 December 31, 2004
Gregg Carano....... 100,000 11.63 26.66 December 31, 2004
</TABLE>
- --------
(1) Such rights vest at a rate of 1/96th per month, subject to continued
employment, beginning on January 1, 1995 and become fully vested on
January 1, 2000.
(2) Appreciation rights may expire earlier upon termination of employment,
death or disability.
Aggregated Performance and Appreciation Rights
The following table provides certain information with respect to
appreciation rights exercised by the Named Officers in 1995 and the value held
by such officers as of the end of 1995.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
NUMBER OF APPRECIATION RIGHTS AS OF APPRECIATION RIGHTS
APPRECIATION DECEMBER 31, 1995 AS OF DECEMBER 31, 1995
RIGHTS VALUE ------------------------- -------------------------
NAME EXERCISED REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Donald Carano........... -- -- -- -- -- --
Robert Jones............ -- -- 9,375 65,625 -- --
Gene Carano............. -- -- 12,500 87,500 -- --
Gregg Carano............ -- -- 12,500 87,500 -- --
</TABLE>
54
<PAGE>
DEFERRED COMPENSATION PLAN
Effective January 1, 1990, the Company established the Eldorado Hotel Casino
Deferred Compensation Plan (the "Deferred Compensation Plan") for the benefit
of a select group of management and highly compensated employees. Under the
Deferred Compensation Plan, each year the Company makes a contribution to a
trust on behalf of each participating employee in an amount determined by the
Chief Executive Officer of the Company, Donald Carano, in his sole discretion.
Participating employees vest 20% per year in the amount contributed to their
respective deferred compensation accounts each year so that they become 100%
vested in the amount credited to their respective accounts in any given year
five years from the date such amount was contributed. In addition, a
participating employee becomes 100% vested in all amounts credited to such
employee's account upon retirement, death, permanent disability or termination
of employment with the Company for any reason other than fraud, upon a sale of
substantially all of the Company's assets or if the Carano family ceases to
have majority ownership or control of the Company. Participating employees
receive annual distributions commencing upon the earliest of the second month
after death, permanent disability, retirement or, if employment is terminated
for reasons other than death or disability prior to attainment of age 60,
attainment of age 60. The Chief Executive Officer, however, may in his sole
discretion elect to make a distribution to an employee who terminates
employment prior to the attainment of age 60. In addition, the Chief Executive
Officer may in his sole discretion elect to distribute an employee's benefits
in the form of a lump sum distribution and may elect to distribute benefits to
an employee over a shorter period of time than that provided for in the
Deferred Compensation Plan. The Company has established a trust fund, with
Donald Carano as trustee, to hold and invest amounts contributed pursuant to
the Deferred Compensation Plan. Under the Deferred Compensation Plan,
participating employees have a duty to devote their full time, energy, skill
and best efforts to the affairs of the Company.
1995 PERFORMANCE AND APPRECIATION RIGHTS PLAN
The Company adopted the Eldorado Hotel Associates Limited Partnership 1995
Performance and Appreciation Rights Plan (the "Rights Plan") effective January
1, 1995 to provide certain executives and other key employees of the Company
who have substantial responsibility for its management and growth with
incentives and rewards. The Rights Plan is administered by a Committee
comprised of Donald Carano and two other individuals selected by the members
of the Company (the "Rights Committee"). The Rights Committee has sole and
complete authority to select eligible employees, to grant performance and
appreciation rights up to a maximum of 1,000,000 each in the aggregate, to
determine the date on which each performance right or appreciation right will
vest and to impose restrictions and conditions on performance and appreciation
rights. An employee is eligible to be granted performance and appreciation
rights if, on the proposed grant date, such employee is an executive or other
key employee of the Company or an affiliate of the Company, as determined by
the Rights Committee. An employee's performance rights terminate upon such
employee's exercise of any appreciation rights or the termination of such
employee's employment with the Company. Upon the termination of an employee's
employment with the Company, the employee will be entitled to exercise
appreciation rights only to the extent that such rights have vested to such
date. No performance or appreciation rights may be granted after June 1, 2000.
A performance right allows an employee to receive upon exercise compensation
equal to a percentage of the total distributions to the members of the Company
for the prior fiscal quarter between the date that the right was granted and
the date of exercise. An appreciation right allows an employee upon exercise
to receive compensation based on the difference between the value of the
membership interests of the Company at the date the right was granted and the
date of exercise. The combination of one performance right and one
appreciation right is intended to represent the economic equivalent of
ownership of .00001% of one membership interest in the Company. Performance
and appreciation rights do not, however, entitle holders thereof to any rights
in or to own or control any membership interests in the Company.
55
<PAGE>
Performance rights and appreciation rights may not be transferred other than
by will or the laws of descent and distribution or to a family trust created
solely for the benefit of an employee or such employee's spouse and
descendants. Performance rights and appreciation rights may be exercised only
by the employee holding such rights (or a legal guardian, legal
representative, trustee of a family trust or executor of the estate of a
deceased employee). The Rights Committee, however, may in its discretion allow
certain other transfers of performance and appreciation rights, such as
transfers during the lifetime of an employee to the spouse and children of the
employee.
401(K) RETIREMENT SAVINGS PLAN
The Company maintains a savings plan (the "401(k) Plan") qualified under
Sections 401(a) and 401(k) of the Internal Revenue Code of 1986, as amended.
Generally, all employees of the Company in the United States who are 21 years
of age or older, who have completed six months and 1,000 hours of service and
who are not covered by collective bargaining agreements are eligible to
participate in the 401(k) Plan. Employees who elect to participate in the
401(k) Plan may defer up to 15% but not less than 1% of their annual
compensation, subject to statutory and certain other limits. The Company makes
matching contributions of 25% of the employees' contributions, up to a maximum
of 1.5% of the employees' annual compensation and subject to certain other
limitations.
COMPENSATION COMMITTEE AND INSIDER PARTICIPATION IN COMPENSATION DECISIONS
The Company does not have a compensation committee or other committee of the
Board of Managers performing equivalent functions. The compensation paid in
1995 and to be paid in the future to each of the Company's Board Members and
executive officers will be determined by the Chief Executive Officer.
56
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following chart illustrates the ownership of the Company and the Silver
Legacy Joint Venture. Recreational Enterprises, Inc. is beneficially owned by
members of the Carano family and Hotel Casino Management, Inc. is beneficially
owned by members of the Poncia family.
[Chart appears here]
57
<PAGE>
The following table sets forth certain information regarding the beneficial
ownership of the Company's outstanding membership interests by (i) each person
known by the Company to be a beneficial owner of 5% or more of the outstanding
membership interests, (ii) each Board Member, (iii) each executive officer
named under the caption "Management--Executive Compensation" and (iv) all
Board Members and executive officers of the Company as a group.
<TABLE>
<CAPTION>
PERCENTAGE
MEMBERSHIP
NAME AND ADDRESS OF BENEFICIAL OWNER INTEREST
------------------------------------ ----------
<S> <C>
Donald L. Carano(1)(2)......................................... 63.0%
Recreational Enterprises, Inc.(3).............................. 55.0%
Raymond J. Poncia, Jr.(4)(5)................................... 32.0%
Hotel Casino Management, Inc.(5)(6)............................ 29.0%
Hotel Casino Realty Investments, Inc.(7)....................... 6.0%
Gene R. Carano(2)(8)........................................... 5.9%
Gregg R. Carano(2)(8).......................................... 5.9%
Gary L. Carano(2)(8)........................................... 5.9%
Cindy L. Carano(2)(8).......................................... 5.9%
Glenn T. Carano(2)(8).......................................... 5.9%
Ludwig J. Corrao(9)............................................ 5.0%
Robert M. Jones(2)............................................. --
All Board Members and executive officers as a group............ 95.0%
</TABLE>
- --------
(1) Includes 5.0% owned by Mr. Carano individually, 55.0% owned by
Recreational Enterprises, Inc., which is owned by members of the Carano
family, and 3.0% beneficially owned by Mr. Carano through Recreational
Enterprises, Inc.'s 50.0% ownership of Hotel Casino Realty Investments,
Inc.
(2) The address of Donald L. Carano, Gene R. Carano, Gregg R. Carano, Cindy L.
Carano and Robert M. Jones is c/o Eldorado Resorts LLC, P.O. Box 3399,
Reno, Nevada 89505. The address of Gary L. Carano and Glenn T. Carano is
c/o Silver Legacy Resort Casino, 407 N. Virginia Street, Reno,
Nevada 89501.
(3) Recreational Enterprises, Inc. is beneficially owned by the following
members of the Carano family in the following percentages: Donald L.
Carano--49.5%; Gene R. Carano--10.1%; Gregg R. Carano--10.1%; Gary L.
Carano--10.1%; Cindy L. Carano--10.1% and Glenn T. Carano--10.1%. Gary
holds 7.185% of his interest in Recreational Enterprises, Inc. through
various trusts. Gene, Gregg, Cindy and Glenn each hold all of their
respective interests in Recreational Enterprises, Inc. through various
trusts. The address of Recreational Enterprises, Inc. is P.O. Box 2540,
Reno, Nevada 89505.
(4) Includes 29.0% owned by Hotel Casino Management, Inc., which is owned by
members of the Poncia family, and 3.0% beneficially owned by Mr. Poncia
through Hotel Casino Management, Inc.'s 50.0% ownership of Hotel Casino
Realty Investments, Inc.
(5) The address of Raymond J. Poncia, Jr. and Hotel Casino Management, Inc. is
P.O. Box 429, Verdi, Nevada 89439.
(6) Hotel Casino Management, Inc. is beneficially owned by the following
members of the Poncia family in the following percentages: Raymond J.
Poncia, Jr.--49.712%; Cathy L. Poncia-Vigen--12.572%; Linda R. Poncia--
12.572%; Michele L. Poncia--12.572% and Tammy R. Poncia--12.572%. Cathy,
Linda, Michele and Tammy each hold all of their respective interests in
Hotel Casino Management, Inc. through various trusts.
(7) Recreational Enterprises, Inc. and Hotel Casino Management, Inc. each own
50% of the outstanding shares of capital stock of Hotel Casino Realty
Investments, Inc. The address of Hotel Casino Realty Investments, Inc. is
P.O. Box 429, Verdi, Nevada 89439.
(8) All of such membership interest is beneficially owned through such
individual's 10.1% ownership of Recreational Enterprises, Inc.
(9) The address of Ludwig J. Corrao is P.O. Box 12907, Reno, Nevada 89510.
58
<PAGE>
CERTAIN TRANSACTIONS
The Company's 77%-owned subsidiary, ELLC, holds a 50% interest, along with
Circus Sub, in the Silver Legacy Joint Venture, which owns and operates the
Silver Legacy. In connection with entering into the Silver Legacy Joint
Venture, the Company loaned $23.0 million to ELLC, and ELLC contributed the
$23.0 million to the Silver Legacy Joint Venture as a portion of its equity
investment. The Company intends to enter into an agreement with ELLC and the
other members of ELLC pursuant to which the Company will contribute to the
capital of ELLC all or a substantial portion of the ELLC Note and will assume
certain other obligations of the other ELLC members in exchange for an
increased equity interest in ELLC. Following these transactions, the Company
anticipates that its ownership interest in ELLC will increase from 77% to in
excess of 90%.
The Company has historically paid a management fee to each of Recreational
Enterprises, Inc. and Hotel Casino Management, Inc. A portion of these fees
represented compensation for services provided to the Company by certain
members of the Carano family. Management fees totalled $4.6 million, $3.8
million and $4.3 million in 1993, 1994 and 1995, respectively.
In the future, management fees will be paid pursuant to a Management
Agreement (the "Management Agreement") entered into by the Company,
Recreational Enterprises, Inc. and Hotel Casino Management, Inc. concurrently
with the issuance of the Private Notes. The Management Agreement provides that
Recreational Enterprises, Inc. and Hotel Casino Management, Inc.
(collectively, the "Managers") will, among other things, (a) develop strategic
plans for the Company's business, including preparing annual budgets and
capital expenditure plans, (b) provide advice and oversight with respect to
financial matters of the Company, (c) establish and oversee the operation of
financial accounting systems and controls and regularly review the Company's
financial reports, (d) provide planning, design and architectural services to
the Company and (e) furnish advice and recommendations with respect to certain
other aspects of the Company's operations. In consideration for such services,
the Company will pay to the Managers a management fee not to exceed 1.5% of
the Company's annual net revenues. The Management Agreement will be in effect
for three years from the date thereof and will be automatically renewed for
additional three year terms until terminated by one of the parties. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Corporate Expenses/Management Fees."
The Company owns the entire parcel on which the Eldorado is located, except
for approximately 30,000 square feet which is leased by the Company from C, S
and Y Associates, a general partnership of which Donald Carano is a general
partner. The lease expires on June 30, 2027. Annual rent is equal to the
greater of (i) $400,000 or (ii) an amount based on a decreasing percentage of
the Eldorado's gross gaming revenues ranging from 3% of the first $6.5 million
of gross gaming revenues to 0.1% of gross gaming revenues in excess of
$75 million. Rent in 1993, 1994 and 1995 totalled $636,000, $642,000 and
$649,000, respectively.
In addition, the Company leases certain real property from G & G Associates,
a general partnership of which Gary Carano is a general partner. Lease
payments in 1993, 1994 and 1995 totalled approximately $11,000, $17,000 and
$17,000, respectively.
Donald Carano has been an attorney with the firm of McDonald Carano Wilson
McCune Bergin Frankovich & Hicks LLP ("McDonald Carano") since 1961. Mr.
Carano maintains an "of counsel" relationship with McDonald Carano, but is not
involved in the active practice of law or in the representation of the Company
or any of its affiliates as an attorney. The Company currently retains
McDonald Carano in connection with a variety of legal matters. In addition,
McDonald Carano will pass upon certain legal matters with respect to the
validity of the Notes.
Donald Carano and Recreational Enterprises, Inc., which is owned by members
of the Carano family, collectively own a 50% equity interest in the Pioneer
Inn Hotel Casino, a small hotel/casino located in downtown Reno.
59
<PAGE>
The Company pays insurance premiums for and from time to time leases an
aircraft owned by Recreational Enterprises, Inc. and a yacht owned by Hotel
Casino Realty Investments, Inc. for use in operating the Company's business.
In 1993, 1994 and 1995, (i) insurance premiums and lease payments for the
aircraft totalled approximately $331,000, $222,000 and $168,000, respectively,
and (ii) insurance premiums and lease payments for the yacht totalled
approximately $186,000, $185,000 and $187,000, respectively.
MATERIAL AGREEMENTS
THE REORGANIZATION
The Company was recently formed under the laws of the State of Nevada to be
the successor to the Predecessor Partnership. Pursuant to an Agreement and
Plan of Merger dated as of June 28, 1996, between the Predecessor Partnership
and the Company, (i) the Predecessor Partnership merged with and into the
Company, with the Company remaining as the surviving entity, and (ii) each
partner's ownership interest in the Predecessor Partnership was converted into
the same ownership percentage of membership interests in the Company. The
Reorganization was effective on July 1, 1996. Concurrently with the
Reorganization, the Predecessor Partnership dissolved and terminated.
DESCRIPTION OF THE CREDIT FACILITY
The following is a summary of the Existing Credit Facility and the
amendments thereto which are contained in the Amended and Restated Loan
Agreement dated as of July 31, 1996 (the "Credit Facility"), between the
Company and Bank of America. This summary is qualified in its entirety by
reference to the Existing Credit Facility and the Credit Facility, a copy of
each of which is available upon request. See "Available Information."
Existing Credit Facility
The Existing Credit Facility provided for a revolving credit facility of
$118.4 million as of June 30, 1996. Borrowings under the Existing Credit
Facility bore interest, at the Company's option, at either (i) a fluctuating
rate equal to the greater of (a) the Reference Rate publicly announced by Bank
of America and (b) the Federal Funds Rate plus .50%, plus an applicable
percentage or (ii) a rate based upon the rate offered by Bank of America to
prime banks in the London Eurodollar Market or another Eurodollar Market
acceptable to Bank of America, plus an applicable percentage. As of June 30,
1996, the Company had $113.7 million principal amount outstanding under the
Existing Credit Facility, which bore interest at an average effective rate of
7.38%.
Amendments to the Existing Credit Facility
Concurrently with the issuance of the Private Notes, the Company entered
into the Credit Facility. The Credit Facility provides for a senior secured
revolving credit facility of $50 million ($3 million of which may be utilized
for the issuance of letters of credit). Borrowings bear interest, at the
Company's option, at either (i) the greater of (a) the Reference Rate publicly
announced by Bank of America and (b) the Federal Funds Rate plus .50%, plus an
applicable percentage or (ii) the Eurodollar rate plus an applicable
percentage. The Credit Facility will mature on July 31, 2001.
Security; Guaranty. The Credit Facility is secured by a first deed of trust
and security interest in all real property interests and fixtures underlying
the Eldorado, certain parking facilities, a second deed of trust on the 31,000
square foot property located across the street from the Eldorado, all related
personal property, substantially all other assets of the Company and a pledge
of the Company's interests in ELLC. In addition, Capital has guaranteed the
Company's obligations under the Credit Facility.
Fees. In connection with the Credit Facility, the Company has agreed to pay
certain fees to the lenders, including a per annum commitment fee based on the
unused portion of the Credit Facility, a facility fee and an agency fee.
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Covenants. The Credit Facility contains a number of restrictive and other
covenants, including (i) restrictions on the disposition of property, (ii)
restrictions on investments and acquisitions, (iii) restrictions on
distributions to members of the Company, (iv) restrictions on the incurrence
of negative pledges, (v) restrictions on the incurrence of indebtedness and
the issuance of guarantees, (vi) restrictions on transactions with affiliates
and (vii) restrictions on annual capital expenditures including capital
leases. The Credit Facility also contains financial covenants including a
maximum total debt to EBITDA ratio, a maximum senior debt to EBITDA ratio, a
minimum fixed charge coverage ratio and a minimum equity requirement.
Events of Default. The Credit Facility contains customary events of default,
including (i) failure to pay principal or interest when due, (ii) cross
defaults to other indebtedness and material agreements of the Company,
including any guarantees issued by the Company, (iii) change of control
restrictions, (iv) failure to comply with covenants, representations or
warranties in the Credit Facility, (v) the occurrence of judgments or
impermissible liens, (vi) the invalidity or termination of any loan document
executed in connection with the Credit Facility or the failure of any such
loan document to create a valid first priority lien on the assets of the
Company and (vii) bankruptcy, insolvency or similar events with respect to the
Company, any of its subsidiaries or any of its members.
LIMITED-LIABILITY COMPANY OPERATING AGREEMENT
The rights and obligations of the equityholders of the Company (the
"Members") are governed by the Operating Agreement of Eldorado Resorts LLC
(the "Operating Agreement") dated as of June 28, 1996, as amended, entered
into in connection with the Reorganization.
Membership Interests. Each Member's interest in the Company ("Membership
Interest") is equal to the percentage of capital contributed by that Member.
See "Security Ownership of Certain Beneficial Owners and Management."
Management. The Company is managed by the Board of Managers, which currently
consists of three Board Members. The initial Board Members are designated in
the Operating Agreement as Donald Carano, Recreational Enterprises, Inc. and
Hotel Casino Management, Inc. Each corporation that serves as a Board Member
must select a corporate officer as its representative. Recreational
Enterprises, Inc. has selected Gary Carano as its representative and Hotel
Casino Management, Inc. has selected Raymond Poncia as its representative. A
corporation which is a Board Member may change its representative at any time
by providing notice to the Company. The Operating Agreement provides that the
Board of Managers will consist of at least three, but not more than seven,
Board Members, as determined by a majority of the Board of Managers.
Board Members are elected at annual meetings of the Members for one-year
terms. Any Board Member may be removed from office with a vote of 60% of the
Membership Interests, but no Board Member may be removed where there would be
enough votes to elect that Board Member at an election. In an election, each
Member is entitled to as many votes as equals the number of percentage points
of such Member's Interest multiplied by the number of Board Members to be
elected. Members can cast all of their votes for a single Board Member or
distribute them among the candidates for Board Member as they see fit. The
Board of Managers generally has control over the management and affairs of the
Company. Board Members are required to devote enough time to the Company to
reasonably perform their duties. The Chief Executive Officer, President and
Presiding Board Member will supervise the day-to-day operations of the
Company. Members and interest holders have no right to participate directly in
management or control of the Company, except for votes required for certain
extraordinary transactions described in the Operating Agreement.
Certain transactions may not be consummated without the approval of 75% of
the Membership Interests. These transactions include, among others, amending
the size of the Board of Managers to consist of less than three or more than
seven Board Members, engaging in any business combination or reorganization,
entering into any joint venture, partnership or limited-liability company
relating to the operation or ownership of the Company's properties, issuing or
selling Membership Interests, causing the Company to guarantee indebtedness,
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requiring certain additional capital contributions, registering with the
appropriate regulatory authorities and publicly offering equity securities of
the Company.
Board Member and Officer Indemnification. The Operating Agreement provides
that no Board Member or Officer will be liable to the Company, its Members or
holders of its Membership Interests for acts or omissions of such Board Member
or Officer in connection with the business or affairs of the Company,
including for breach of fiduciary duty or mistake of judgment, except for acts
involving intentional misconduct, fraud or knowing violations of the law. The
Operating Agreement also provides that the Company will indemnify, defend and
hold harmless every Board Member and Officer for any losses arising out of the
Company or its business or affairs, unless such losses are based on acts or
omissions involving intentional misconduct, fraud or a knowing violation of
the law.
Rights and Restrictions of Members. Members have a preemptive right, for a
period of 30 days, to acquire any Membership Interest or any other equity or
voting interest, or any right or option for the purchase thereof, in the
Company that the Company or the Board of Managers at any time proposes to
issue. These rights cannot be altered without a unanimous vote of the
Membership Interests.
Restrictions on Transfer of Membership Interests. No Member may transfer its
interest without first offering it to the Company and the other Members. Any
transferee of a Membership Interest must obtain a license to hold an ownership
interest in a gaming licensee in Nevada. Additionally, any transferee must be
approved by at least a majority in interest of the non-transferring Members
before that person can enjoy the rights of membership.
Permitted Assignments and Transfers of Membership Interests. Any Member may
assign all or some of that Member's Membership Interest to the Company, any
other Member or to entities controlled by or under common control with any
other Member. Such assignees will not become Members, however, without the
approval of at least a majority in interest of the non-transferring Members.
Additionally, under certain circumstances, the Membership Interests which were
originally issued to, and respectively held as of the date of the Operating
Agreement by, Donald Carano and Ludwig Corrao may be transferred to any
affiliate of a Member, to any children or other lineal descendants of the
current holder of such transferable interest or to a revocable living trust
for the benefit of the current holder of such transferrable interest. Such
transferees immediately become Members. All transfers must meet with prior
approval of the Nevada Commission.
Dissolution and Liquidation. The Company will be dissolved upon the earliest
to occur of: (a) December 31, 2030, (b) the sale or disposition of all or
substantially all of the assets of the Company, (c) the written consent of
Members holding more than a 75% voting interest in the Company or (d) any
event that, pursuant to the Operating Agreement, terminates a Member's
interest, unless there are at least two remaining Members and at least a
"majority in interest" (as defined in Nevada Revised Statutes Section 86.065)
of the remaining Members agree to continue the Company.
The Company shall be liquidated upon the occurrence of any event requiring
dissolution of the Company. Proceeds from liquidation shall be dispersed first
to creditors, including Members and interest holders who are creditors for
debts other than their respective capital contributions, and second to Members
and interest holders in accordance with their capital account balances.
Mandatory Distributions. The Board of Managers will distribute each year to
each Member an amount equal to such Member's allocable share of taxable income
multiplied by the highest marginal combined federal, state and local income
tax rate applicable to individuals for that year; provided that such
distributions will not be made after any event that causes the Company to
thereafter be taxed under the Internal Revenue Code of 1986, as amended, as a
corporation.
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SILVER LEGACY JOINT VENTURE AGREEMENT
The Silver Legacy was developed by the Silver Legacy Joint Venture formed
pursuant to the Agreement of Joint Venture of Circus and Eldorado Joint
Venture (the "Joint Venture Agreement") dated as of March 1, 1994, between
ELLC and Circus Sub. Under the Joint Venture Agreement, each of ELLC and
Circus Sub (together, the "Partners") owns a 50% interest in the Silver Legacy
Joint Venture (each Partner's "Percentage Interest"). Each Partner was
obligated to contribute cash or property to the Silver Legacy Joint Venture
with a value equal to 15% of the total budgeted cost for developing and
constructing the Silver Legacy. To satisfy their respective contribution
obligations, ELLC contributed real property worth $25.0 million on which to
build the Silver Legacy and $26.9 million in cash and Circus Sub contributed
$51.9 million in cash. In addition, pursuant to the Joint Venture Agreement,
Circus Circus provided certain loans to the Silver Legacy Joint Venture for
the costs of developing and constructing the Silver Legacy and also provided
credit support for a $230.0 million credit agreement entered into by the
Silver Legacy Joint Venture on May 30, 1995 (the "Silver Legacy Credit
Agreement") for the balance of the development and construction costs (such
loans and financing are collectively referred to herein as the "Construction
Financing"). In return, Circus Circus receives an annual fee which has been
1.5% of the average outstanding principal balance of such financing. The
Silver Legacy Credit Agreement is secured by a deed of trust on the Silver
Legacy and by security interests in other assets of the Silver Legacy Joint
Venture. Under the Silver Legacy Credit Agreement, indebtedness is subject to
scheduled quarterly reductions ranging from $5.0 million to $7.0 million, and
a scheduled reduction of the remaining outstanding balance on September 30,
2000. In addition to the scheduled quarterly payments, mandatory prepayments
are required after the end of each of the first eight full fiscal quarters
following the opening of the Silver Legacy in the amount of 50% of the Silver
Legacy Joint Venture's Consolidated Available Cash Flow (as defined in the
Silver Legacy Credit Agreement). Proposed amendments to the Silver Legacy
Credit Agreement would require quarterly reductions ranging from $2.5 million
to $5.0 million, and a scheduled reduction of the remaining outstanding
balance in June 2003. Each of ELLC's and Circus Sub's ability to participate
in cash flows generated by the Silver Legacy is limited by the terms of the
Joint Venture Agreement and the Silver Legacy Credit Agreement. As of June 30,
1996, the Silver Legacy Joint Venture was indebted to Circus Circus in the
aggregate amount of $37.8 million, the repayment of which is subject to
certain limitations under the terms of the Silver Legacy Credit Agreement. The
advances to the Silver Legacy Joint Venture are secured by a second deed of
trust on the Silver Legacy. As of June 30, 1996, the assets of the Silver
Legacy Joint Venture, including the Silver Legacy, were subject to
encumbrances securing the repayment of indebtedness in the principal amount of
$250.3 million.
Additional capital contributions in proportion to each Partner's Percentage
Interest may be required by the Managing Partner (as defined in the Joint
Venture Agreement) to defray any net loss (not including depreciation and
amortization expenses) incurred by the Silver Legacy Joint Venture. If either
Partner fails to make such additional capital contributions, the non-
defaulting Partner may (i) contribute the amount of the additional capital
contribution that the defaulting Partner has failed to pay to the Silver
Legacy Joint Venture on behalf of the defaulting Partner, which amount will be
considered a loan to the defaulting Partner from the non-defaulting Partner
(an "Additional Capital Contribution Loan") and must be repaid by the
defaulting Partner from the cash distributions it receives pursuant to the
Joint Venture Agreement or (ii) loan the amount of the additional capital
contribution that the defaulting Partner has failed to pay to the Silver
Legacy Joint Venture, which loan must be repaid from Net Cash from Operations
(as defined herein).
Profit Allocation. Under the terms of the Joint Venture Agreement, Profits
of the Silver Legacy Joint Venture (defined as the Silver Legacy Joint
Venture's taxable income with certain adjustments) in each fiscal year are
allocated to the Partners pursuant to the following formula: (i) the net
operating income of the Silver Legacy Joint Venture for financial reporting
purposes (determined in accordance with generally accepted accounting
principles) for such fiscal year, exclusive of interest expense, is credited
to Circus Sub up to the amount of its Priority Allocation (as defined below)
for such fiscal year, any balance is credited to ELLC up to the amount of
Circus Sub's Priority Allocation for such fiscal year and any remaining
balance is credited to the Partners in proportion to their Percentage
Interests, (ii) interest expense of the Silver Legacy Joint Venture for such
fiscal year is charged to the Partners in proportion to their Percentage
Interests and (iii) the difference
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between net operating income less interest expense and Profits for such fiscal
year is credited (or charged) to the Partners in proportion to their
Percentage Interests. If this formula causes a Partner to be charged with a
loss in any fiscal year, such Partner will be allocated zero Profits for such
year and the other Partner will be allocated all of the Profits for such year.
In addition, losses of the Silver Legacy Joint Venture (defined as the Silver
Legacy Joint Venture's taxable loss with certain adjustments) in any fiscal
year are allocated to the Partners in proportion to their Percentage
Interests.
Circus Sub is entitled to a priority allocation ("Priority Allocation") of
pretax operating income equal to 7.5% of the "Initial Investment," defined as
the total cost of construction of the Silver Legacy up to a maximum of $290
million. The Initial Investment is decreased each year by the amount of
depreciation expense recorded on the Silver Legacy in such year and by any
principal payments made to repay the Construction Financing in such year.
Circus Sub is entitled to such Priority Allocation beginning May 1, 1997 and
for so long as ELLC selects the General Manager (as defined in the Joint
Venture Agreement) of the Silver Legacy (as provided for in the Joint Venture
Agreement).
Distributions of Cash From Operations. The Joint Venture Agreement provides
that Net Cash from Operations (defined as the gross cash proceeds from all
Silver Legacy Joint Venture operations less cash operating expenses and
certain other expenses and obligations, including interest and principal
payments on indebtedness including the Construction Financing, other than
indebtedness owed Partners or affiliates as provided for in the Joint Venture
Agreement) is to be distributed quarterly to the Partners in proportion to
their Percentage Interests after satisfaction of certain other obligations as
follows: (i) at the end of the first year of operation only, the distribution
to each Partner of an amount equal to its tax liability attributable to the
Silver Legacy Joint Venture, (ii) the payment of interest and principal on all
loans to the Silver Legacy Joint Venture from Partners and affiliates
(excluding payment of principal on the Construction Financing), (iii) the
payment of principal and interest on any Additional Capital Contribution Loan,
plus the distribution to the non-defaulting Partner who provided such
Additional Capital Contribution Loan of an amount equal to the amount of such
Additional Capital Contribution Loan, (iv) the payment of certain construction
cost overruns, (v) at the end of the first year of operation only, the payment
of the balance of the principal of the Constructrion Financing not including
cost overruns, (vi) to the extent earned and available, the distribution to
Circus Sub of an amount up to its Priority Allocation and to ELLC of an amount
up to the amount distributed to Circus Sub pursuant to Circus Sub's Priority
Allocation, (vii) after the first year of operation, the distribution to each
Partner of an amount equal to its tax liability attributable to the Silver
Legacy Joint Venture and (viii) the payment of the balance of the portion of
the Construction Financing provided by Circus Circus until such loans are paid
in full or refinanced. In addition, any withdrawal from the Silver Legacy
Joint Venture by either party results in a reduction of distributions to such
withdrawing Partner to 75% of amounts otherwise payable to such Partner.
Management. The Silver Legacy Joint Venture is managed by an Executive
Committee, a Managing Partner and a General Manager. The Executive Committee
consults with, reviews, monitors and oversees the performance of the Managing
Partner and the General Manager, thus functioning in a capacity similar to a
corporation's board of directors. The Executive Committee may act only upon
the approval of a majority of its members. The Executive Committee has five
members, three of whom are appointed by the Managing Partner and the other two
of whom are appointed by the other Partner. The Joint Venture Agreement names
Circus Sub as the Managing Partner. As of September 1, 1996, the members of
the Executive Committee appointed by the Managing Partner are Kurt Sullivan,
Yvette Landau and Scott Beeman; the members appointed by ELLC are Donald
Carano and Robert Jones.
The Managing Partner is generally responsible for overseeing the management
and the business affairs of the Silver Legacy Joint Venture and may be
replaced only: (i) upon the unanimous agreement of the Partners or (ii) by the
other Partner if the Silver Legacy Joint Venture's net operating results for
any four consecutive quarters are less than 80% of the amount projected in the
Silver Legacy Joint Venture's annual business plan, upon which such other
Partner will become the Managing Partner; provided, however, that as long as
ELLC appoints the General Manager, ELLC may not require Circus Sub to resign
as Managing Partner.
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The General Manager is responsible for the oversight and management of the
day-to-day operations of the Silver Legacy and other business of the Silver
Legacy Joint Venture. The General Manager, currently Gary Carano, is appointed
by ELLC subject to the approval of Circus Sub. The General Manager will
continue to be selected by ELLC so long as Circus Sub is allocated its
Priority Allocation or so long as the Silver Legacy Joint Venture's net
operating results are not less than 80% of the amount projected in the Silver
Legacy Joint Venture's annual business plan. If the General Manager fails to
meet such performance requirements, Circus Sub may replace the General
Manager; provided, however, that if Circus Sub replaces the General Manager
without ELLC's consent, Circus Sub will not receive its Priority Allocation.
Transfers of Partnership Interests. After the Silver Legacy has been in
operation for at least 10 years and the initial Construction Financing has
been paid in full, either Partner may, so long as such Partner is not in
default of any of the provisions of the Joint Venture Agreement, offer to
purchase the entire interest of the other Partner. If either Partner makes
such an offer, the other Partner is required to either sell its interest or
purchase the interest of the offering Partner at the price proposed by the
offering Partner, subject to a pro rata adjustment if the interests are not
equal at the time of the offer. In addition, in the event that (i) a Partner
is in default at any time on any two required additional capital
contributions, (ii) an Additional Capital Contribution Loan is not repaid
within two years, (iii) any deed of trust for the benefit of Circus Circus for
the Construction Financing is in default for over one year or (iv) unless
otherwise agreed by Circus Circus, Donald Carano, an immediate family member
acceptable to Circus Sub or one of their respective affiliates does not
control ELLC, or unless otherwise agreed by ELLC, Circus Circus does not
control Circus Sub, then the non-defaulting Partner may purchase the
defaulting Partner's interest. The purchase price will be equal to the net
equity of the defaulting Partner's interest, decreased by any amount that the
non-defaulting Partner contributed as a capital contribution on behalf of the
defaulting Partner (which amount is considered a loan to the defaulting
Partner pursuant to the Joint Venture Agreement). Any such purchase and sale
is subject to the approval of the Nevada Gaming Authorities.
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DESCRIPTION OF NOTES
GENERAL
The Private Notes were issued pursuant to an indenture (the "Indenture")
dated as of July 31, 1996, between the Issuers and Fleet National Bank, as
trustee (the "Trustee"), in a private transaction that is not subject to the
registration requirements of the Securities Act. See "Notice to Investors."
The terms of the Private Notes include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939
(the "Trust Indenture Act"). The Notes are subject to all such terms, and
holders of Notes are referred to the Indenture and the Trust Indenture Act for
a statement thereof. The form and terms of the Exchange Notes will be the same
as the form and terms of the Private Notes except that (i) the exchange will
have been registered under the Securities Act, and therefore the Exchange
Notes will not bear legends restricting the transfer thereof and (ii) holders
of the Exchange Notes will not be entitled to certain rights of holders of the
Private Notes under the Registration Rights Agreement, which rights will
terminate upon consummation of the Exchange Offer. The following summary of
certain provisions of the Indenture does not purport to be complete and is
qualified in its entirety by reference to the Indenture, including the
definitions therein of certain terms used below. A copy of the proposed form
of Indenture may be obtained from the Company. The definitions of certain
terms used in the following summary are set forth below under "--Certain
Definitions."
The Exchange Notes will be issued in fully registered form only, without
coupons, in denominations of $1,000 and integral multiples thereof. Initially,
the Trustee will act as Paying Agent and Registrar for the Notes. The Notes
may be presented for registration or transfer and exchange at the offices of
their respective Registrar, which for the Notes initially will be the
Trustee's corporate trust office. The Issuers may change any Paying Agent and
Registrar without notice to holders of the Notes.
As of the date of the Indenture, the only Subsidiary of the Issuers (other
than Capital) was ELLC, an Unrestricted Subsidiary. Unrestricted Subsidiaries
will not be subject to many of the restrictive covenants set forth in the
Indenture.
Capital is a wholly-owned subsidiary of the Company that was incorporated in
Nevada for the purpose of serving as a co-issuer of the Notes in order to
facilitate the issuance of the Notes. Capital will not have any substantial
operations or assets and will not have any revenues. As a result, prospective
participants in the Exchange Offer should not expect Capital to participate in
servicing the interest and principal obligations on the Notes. See "--Certain
Covenants."
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate principal amount to $100.0 million and
will mature on August 15, 2006. Interest on the Notes will accrue at the rate
of 10 1/2% per annum and will be payable semi-annually in arrears on February
15 and August 15 of each year (each, an "Interest Payment Date"), commencing
on February 15, 1997, to holders of record on the immediately preceding
February 1 and August 1. Interest on the Notes will accrue from the most
recent date to which interest has been paid or, if no interest has been paid,
from the date of original issuance. Interest will be computed on the basis of
a 360-day year comprised of twelve 30-day months. Principal of and premium,
interest and Liquidated Damages, if any, on the Notes will be payable at the
office or agency of the Issuers maintained for such purpose or, at the option
of the Issuers, payment of interest and Liquidated Damages, if any, may be
made by check mailed to the holders of the Notes at their respective addresses
set forth in the register of holders of Notes; provided that all payments with
respect to Notes the holders of which have given wire transfer instructions to
the Company will be required to be made by wire transfer of immediately
available funds to the accounts specified by the holders thereof. Until
otherwise designated by the Issuers, the Issuers' office or agency will be the
office of the Trustee maintained for such purpose. The Notes will be issued in
denominations of $1,000 and integral multiples thereof.
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SUBORDINATION
The payment of principal of, and premium, interest and Liquidated Damages
(if any) on, the Notes, and any other amounts payable by the Issuers with
respect to the Notes, will be subordinated in right of payment, as set forth
in the Indenture, to the prior payment in full of all Senior Debt of the
Issuers, whether outstanding on the date of the Indenture or thereafter
incurred.
Upon any distribution to creditors of either Issuer in a liquidation or
dissolution of such Issuer or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to such Issuer or its property, an
assignment for the benefit of creditors or any marshalling of either Issuer's
assets and liabilities, the holders of Senior Debt of such Issuer will be
entitled to receive payment in full of all Obligations due in respect of such
Senior Debt (including interest after the commencement of any such proceeding
at the rate specified in the applicable Senior Debt) before the holders of
Notes will be entitled to receive any payment with respect to the Notes, and
until all Obligations with respect to Senior Debt of such Issuer are paid in
full in cash, any distribution to which the holders of Notes would be entitled
shall be made to the holders of such Senior Debt (except that holders of Notes
may receive securities that are subordinated at least to the same extent as
the Notes to Senior Debt and any securities issued in exchange for Senior Debt
and payments made from the trust described under "--Legal Defeasance and
Covenant Defeasance").
The Issuers also may not make any payment upon or in respect of the Notes
and may not offer to repurchase Notes (except in such subordinated securities
or from the trust described under "--Legal Defeasance and Covenant
Defeasance") if (i) a default in the payment of the principal of or interest
on Designated Senior Debt occurs and has not been cured or waived in writing
or (ii) any other default occurs and is continuing with respect to Designated
Senior Debt that permits holders of the Designated Senior Debt as to which
such default relates to accelerate its maturity and the Trustee receives a
notice of such default (a "Payment Blockage Notice") from the Issuers or the
holders of any Designated Senior Debt. Payments on the Notes may and shall be
resumed (a) in the case of a payment default, upon the date on which such
default is cured or waived and (b) in case of a nonpayment default, the
earlier of the date on which such nonpayment default is cured or waived or 179
days after the date on which the applicable Payment Blockage Notice is
received, unless the maturity of any Designated Senior Debt has been
accelerated. No new period of payment blockage may be commenced unless and
until 360 days have elapsed since the effectiveness of the immediately prior
Payment Blockage Notice. No nonpayment default that existed or was continuing
on the date of delivery of any Payment Blockage Notice to the Trustee by any
holders of Designated Senior Debt, and which is known to the holders of such
Designated Senior Debt, shall be, or be made, the basis for a subsequent
Payment Blockage Notice (unless such nonpayment default shall have been cured
or waived for a period of not less than 181 days).
The Indenture further requires that the Issuers promptly notify holders of
Senior Debt of the receipt of an acceleration notice following an Event of
Default.
As a result of the subordination provisions described above, in the event of
a liquidation or insolvency, Holders of Notes may recover less ratably than
creditors of the Issuers who are holders of Senior Debt. As of June 30, 1996,
after giving pro forma effect to the offering of the Private Notes and the
application of the net proceeds therefrom, the Company would have had
outstanding approximately $22.6 million in principal amount of Senior Debt.
The Indenture limits the amount of additional Indebtedness, including Senior
Debt, that the Issuers and their Restricted Subsidiaries can incur. See "--
Certain Covenants--Incurrence of Indebtedness."
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OPTIONAL REDEMPTION
Except for the Company's rights in connection with one or more Public Equity
Offerings or as required by applicable gaming law, the Notes are not
redeemable at the Issuers' option prior to August 15, 2001. Thereafter, the
Notes are subject to redemption at the option of the Issuers, in whole or in
part, upon not less than 30 nor more than 60 days' notice, at the redemption
prices (expressed as percentages of principal amount) set forth below plus
accrued and unpaid interest and Liquidated Damages, if any, thereon to the
applicable redemption date, if redeemed during the twelve-month period
beginning on August 15 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2001.............................................................. 105.25%
2002.............................................................. 103.50%
2003.............................................................. 101.75%
2004 and thereafter............................................... 100.00%
</TABLE>
Notwithstanding the foregoing, but subject to the terms of any Designated
Senior Debt, on or prior to August 15, 1999, the Issuers may redeem up to 33%
in aggregate principal amount of the Notes originally issued under the
Indenture at a redemption price of 110% of the principal amount thereof plus
accrued and unpaid interest and Liquidated Damages, if any, thereon to the
redemption date with the net proceeds of one or more Public Equity Offerings;
provided that at least $67.0 million in aggregate principal amount of Notes
remain outstanding immediately after the occurrence of each such redemption;
and provided, further, that notice of each such redemption shall have been
given within 30 days after the date of the closing of each such Public Equity
Offering.
GAMING REDEMPTION
Notwithstanding any other provision hereof, if any Gaming Authority requires
that a holder or beneficial owner of Notes must be licensed, qualified or
found suitable under any applicable gaming law and such holder or beneficial
owner fails to apply for a license, qualification or a finding of suitability
within 30 days after being requested to do so by the Gaming Authority (or such
lesser period that may be required by such Gaming Authority), or if such
holder or such beneficial owner is not so licensed, qualified or found
suitable, the Company will have the right, at its option, (i) to require such
holder or beneficial owner to dispose of such holders or beneficial owner's
Notes within 30 days of receipt of such notice of such finding by the
applicable Gaming Authority or such earlier date as may be ordered by such
Gaming Authority or (ii) to redeem the Notes of such holder or beneficial
owner at the lesser of the principal amount thereof or the price at which such
holder or beneficial owner acquired such Notes, together with, in either case,
accrued and unpaid interest and Liquidated Damages, if any, thereon to the
earlier of the date of redemption or such earlier date as may be required by
such Gaming Authority or the date of the finding of unsuitability by such
Gaming Authority, which may be less than 30 days following the notice of
redemption, if so ordered by such Gaming Authority. The holder or beneficial
owner of Notes applying for a license, qualification or a finding of
suitability must pay all costs of the licensure or investigation for such
qualification or finding of suitability. The Company is not required to pay or
reimburse any holder or beneficial owner of Notes who is required to apply for
such license, qualification or finding of suitability for the costs of the
licensure or investigation for such qualification or finding of suitability.
Such expense will, therefore, be the obligation of such holder or beneficial
owner. See "Risk Factors--Gaming Regulation" and "Business--Regulatory
Matters".
SELECTION AND NOTICE
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which
the Notes are listed, or, if the Notes are not so listed, on a pro rata basis,
by lot or by such method as the Trustee shall deem fair and appropriate;
provided that no Notes of $1,000 or less shall be redeemed in part. Notices of
redemption shall be mailed by first class mail at least 30 but not more than
60 days before the redemption date
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(except in the case of a redemption required by any Gaming Authority, which
may be less than 30 business days) to each holder of Notes to be redeemed at
its registered address. If any Note is to be redeemed in part only, the notice
of redemption that relates to such Note shall state the portion of the
principal amount thereof to be redeemed. A new Note in principal amount equal
to the unredeemed portion thereof will be issued in the name of the Holder
thereof upon cancellation of the original Note. On and after the redemption
date, interest ceases to accrue on Notes or portions of them called for
redemption.
MANDATORY REDEMPTION
Except as set forth below under "--Repurchase at the Option of Holders," the
Issuers are not required to make mandatory redemption or sinking fund payments
with respect to the Notes.
REPURCHASE AT THE OPTION OF HOLDERS
Change of Control. Upon the occurrence of a Change of Control (as defined
herein), the Issuers are required to make an offer (a "Change of Control
Offer") to repurchase all or any part (equal to $1,000 or an integral multiple
thereof) of each holder's Notes at an offer price in cash equal to 101% of the
aggregate principal amount thereof plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the date of repurchase (the "Change of
Control Offer Price," and such date of payment being the "Change of Control
Payment Date") which date is required to be no earlier than 30 days nor later
than 60 days from the date such notice is mailed (unless a longer period is
required by law). Within 30 days following any Change of Control, the Issuers
will mail a notice to each holder describing the transaction that constitutes
the Change of Control and offering to repurchase Notes pursuant to the
procedures required by the Indenture and described in such notice. The Issuers
will comply with the requirements of Rule 14e-1 under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and any other securities laws
and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the Notes as a result of a
Change of Control.
On the Change of Control Payment Date, the Issuers will, to the extent
lawful, (i) accept for payment all of the Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (ii) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all of
the Notes or portions thereof so tendered and (iii) deliver or cause to be
delivered to the Trustee the Notes so accepted together with an Officer's
Certificate stating the aggregate principal amount of the Notes or portions
thereof being purchased by the Issuers. The Paying Agent will promptly mail to
each holder of the Notes so tendered the Change of Control Payment for such
Notes, and the Trustee will promptly authenticate and mail (or cause to be
transferred by book entry) to each holder a new Note equal in principal amount
to any unpurchased portion of the Notes surrendered, if any; provided that
each such new Note will be in a principal amount of $1,000 or an integral
multiple thereof. Prior to complying with the provisions of this covenant, but
in any event within 90 days following a Change of Control, the Issuers will
either repay all outstanding Senior Debt or obtain the requisite consents, if
any, under all agreements governing outstanding Senior Debt to permit the
repurchase of Notes required by this covenant. The Issuers will publicly
announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
Notwithstanding the foregoing, the Company shall not be required to make a
Change of Control Offer as provided above if, in connection with any Change of
Control, it has made an offer to purchase (an "Alternative Offer") any and all
Notes validly tendered at a cash price equal to or higher than the Change of
Control Offer Price and has purchased all Notes properly tendered in
accordance with the terms of such Alternative Offer.
Except as described above with respect to a Change of Control, the Indenture
does not contain provisions that permit the holders of the Notes to require
that the Issuers repurchase or redeem the Notes in the event of a takeover,
recapitalization or similar transaction.
The occurrence of a Change of Control could result in a default under the
Senior Credit Agreement or other Senior Debt. In addition, the Senior Credit
Agreement or other Senior Debt could restrict the Issuers' ability to
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repurchase Notes upon a Change of Control. In the event a Change of Control
occurs at a time when the Issuers are prohibited from repurchasing Notes, the
Issuers could seek the consent of its lenders to the repurchase of Notes or
could attempt to refinance the borrowings that contain such prohibition. If
the Issuers do not obtain such a consent or repay such borrowings, the Issuers
will remain prohibited from repurchasing Notes. In such case, the Issuers'
failure to make a Change of Control Offer or to repurchase Notes tendered in a
Change of Control Offer would constitute an Event of Default under the
Indenture, which could, in turn, constitute a default under the Senior Credit
Agreement or other Senior Debt. In such circumstances, the subordination
provisions in the Indenture would likely restrict payments to the holders of
Notes. See "--Subordination." Finally, the Issuers' ability to repurchase
Notes upon a Change of Control may be limited by the Issuers' then existing
financial resources.
Asset Sales. The Indenture provides that the Issuers will not, and will not
permit any of their Restricted Subsidiaries or ELLC to, engage in an Asset
Sale unless (i) no Default or Event of Default exists or is continuing
immediately prior to and after giving effect to such Asset Sale, (ii) the
Issuers, the Restricted Subsidiary or ELLC, as the case may be, receives (a)
consideration at the time of such Asset Sale at least equal to the fair market
value of the assets or Equity Interests issued or sold or otherwise disposed
of or (b) in the case of a lease of assets which constitutes an Asset Sale, a
lease providing for rent and other consideration which are no less favorable
to the Company, the Restricted Subsidiary or ELLC, as the case may be, than
the then prevailing market conditions (in the case of either (a) or (b),
evidenced by a resolution of the Management Committee set forth in an
Officer's Certificate delivered to the Trustee) and (iii) at least 80% of the
consideration therefor received by the Issuers, such Restricted Subsidiary or
ELLC, as the case may be, is in the form of cash or Cash Equivalents; provided
that (a) the amount of any liabilities (as shown on the most recent balance
sheet of the Issuers, such Restricted Subsidiary or ELLC, as the case may be)
of the Issuers, any Restricted Subsidiary or ELLC (other than liabilities that
are by their terms subordinated to the Notes) that are assumed by the
transferee of any such assets pursuant to a customary novation agreement that
releases the Issuers, such Restricted Subsidiary or ELLC, as the case may be,
from further liability, shall be deemed to be Cash Equivalents for purposes of
this covenant, (b) the amount of any notes or other obligations received by
the Issuers, such Restricted Subsidiary or ELLC from such transferee that are
promptly (but in any event, within 30 days) converted by the Issuers, such
Restricted Subsidiary or ELLC into cash (to the extent of the cash received)
shall be deemed to be cash for purposes of this provision, (c) with respect to
an Asset Sale of Development Property or other real property except a
hotel/casino (1) real property received in exchange therefor and to be used or
useful in any business in which the Company is permitted to engage pursuant to
the covenants described under "--Certain Covenants--Business Activities" will
be deemed to be Cash Equivalents for purposes of this covenant and shall be
deemed to have been applied in accordance with the first sentence of the next
succeeding paragraph and (2) notes or other evidences of indebtedness received
in exchange therefor shall be deemed Cash Equivalents for purposes of this
covenant, provided that cash payments received in respect thereof shall be
applied by the Company in accordance with this covenant, (d) with respect to
an Asset Sale by ELLC, consideration received by ELLC in the form of a note
pursuant to Section 12.2 of the Joint Venture Agreement shall be deemed to be
Cash Equivalents for purposes of this provision and payments received by ELLC
in respect of such note shall be applied by ELLC as specified in the next
succeeding paragraph and (e) with respect to an Asset Sale by the Company of
its interest in ELLC or an Asset Sale by ELLC, voting equity securities issued
by an Included Person that are registered and freely-tradeable by the Company
under applicable state and federal securities laws and listed for trading on a
national securities exchange will be deemed to be Cash Equivalents for
purposes of this provision, provided that the sale, transfer or other
distribution by the Company of such equity securities shall be subject to this
covenant; and provided, further, that contingent liabilities that are assumed
by the transferee of any such assets shall not be deemed to be the receipt of
consideration if such contingent liabilities are not shown as liabilities on
the most recent balance sheet of the Issuers, such Restricted Subsidiary or
ELLC, as the case may be.
Within 270 days after the receipt of any Net Proceeds from an Asset Sale,
the Issuers may either (a) apply such Net Proceeds to permanently reduce
Senior Debt of the Issuers or long-term Indebtedness of a Restricted
Subsidiary of the Company (and, in either case, to correspondingly reduce
commitments with respect
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thereto) or (b) reinvest or to commit itself by contract to reinvest the Net
Proceeds in a Permitted Investment (other than Cash Equivalents); provided,
however, that, so long as ELLC is an Unrestricted Subsidiary, in the case of
an Asset Sale by ELLC, (i) the Net Proceeds shall first be applied to pay the
principal and interest on the ELLC Note, (ii) the Net Proceeds shall then be
distributed to the members of ELLC, in accordance with their membership
interests, and (iii) of the Net Proceeds received by the Company pursuant to
clause (ii), 50% shall be subject to this covenant, and provided, further,
however, that in the case of an Asset Sale by the Company of its interest in
ELLC, only 50% of the Net Proceeds received by the Company (net of payments on
the ELLC Note) shall be subject to this covenant, so long as ELLC is an
Unrestricted Subsidiary prior to any such Asset Sale. Any Net Proceeds from
Asset Sales that are not applied or invested as provided in the first sentence
of this paragraph will be deemed to constitute "Excess Proceeds." When the
aggregate amount of Excess Proceeds exceeds $5 million, the Issuers are
required to make an offer to all holders of Notes (an "Asset Sale Offer") to
purchase the maximum principal amount of Notes that may be purchased out of
the Excess Proceeds, at an offer price in cash in an amount equal to 100% of
the principal amount thereof plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the date of purchase, in accordance with the
procedures set forth in the Indenture. To the extent that the aggregate amount
of Notes tendered pursuant to an Asset Sale Offer is less than the Excess
Proceeds, the Company may use any remaining Excess Proceeds for general
corporate purposes (subject to the restrictions of the Indenture). If the
aggregate principal amount of Notes surrendered by Holders thereof exceeds the
amount of Excess Proceeds, the Trustee shall select the Notes to be purchased
on a pro rata basis. Upon completion of such offer to purchase, the amount of
Excess Proceeds shall be reset at zero. Pending the final application of any
such Net Proceeds, the Issuers may temporarily reduce Senior Debt, without a
permanent reduction of availability thereunder, or otherwise invest such Net
Proceeds in any manner that is not prohibited by the Indenture.
CERTAIN COVENANTS
Restricted Payments. The Indenture provides that the Issuers will not, and
will not permit any of their Restricted Subsidiaries to, directly or
indirectly, (i) declare or pay any dividend or make any other distribution on
account of the Company's Equity Interests (including, without limitation, any
payment in connection with any merger or consolidation involving the Company),
other than the Member Notes and dividends or distributions payable in Equity
Interests (other than Disqualified Stock) of the Company or dividends or
distributions payable to the Company or any Consolidated Subsidiary of the
Company; (ii) purchase, redeem or otherwise acquire or retire for value any
Equity Interests of the Company or any direct or indirect parent of the
Company, other than any such Equity Interests owned by the Company or any
Consolidated Subsidiary of the Company; (iii) make any principal payment on,
or purchase, redeem, defease or otherwise acquire or retire for value any
Indebtedness that is subordinated to the Notes (other than Notes and the
Member Notes), except at final maturity or scheduled sinking fund payments set
forth in the original documentation governing such Indebtedness; or (iv) make
any Restricted Investment (all such payments and other actions set forth in
clauses (i) through (iv) above being collectively referred to as "Restricted
Payments"), unless, at the time of and after giving effect to such Restricted
Payment:
(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof;
(b) the Issuers would, after giving pro forma effect to such Restricted
Payment as if such Restricted Payment had been made at the beginning of the
Company's most recently completed four full fiscal quarters for which
internal financial statements are available preceding the date of such
Restricted Payment, have been permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test
contained in the provisions described under the caption "--Incurrence of
Indebtedness" below; and
(c) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Issuers and their Restricted Subsidiaries
after January 1, 1996 (excluding the Restricted Payments permitted by the
next succeeding paragraph), is less than the sum of $25 million plus (i)
50% of the Consolidated Net Income of the Company for the period (taken as
one accounting period) from January 1, 1996 to the end of
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the Company's most recently ended fiscal quarter for which internal
financial statements are available at the time of such Restricted Payment
(or, if such Consolidated Net Income for such period is a deficit, less
100% of such deficit), plus (ii) 100% of the aggregate net cash proceeds,
or the fair market value of assets (as determined in good faith by the
Management Committee), received by the Company from capital contributions
(other than the conversion of the Member Notes into equity interests of the
Company in accordance with the terms thereof) or the issue or sale after
the date of the Indenture of Equity Interests of the Company or of debt
securities of the Company that have been converted into such Equity
Interests (other than Equity Interests (or convertible debt securities)
sold to a Subsidiary of the Company and other than Disqualified Stock or
debt securities that have been converted into Disqualified Stock), less any
amounts paid to holders of the Member Notes, plus (iii) 50% of the net cash
proceeds received by the Company (net of payments on the ELLC Note) from
the sale or other liquidation of the Company's interest in ELLC or the sale
by ELLC of all or substantially all its assets, plus (iv) 100% of the net
cash proceeds received by the Company from a distribution by, or from the
sale or other liquidation of, any Restricted Investment or Unrestricted
Subsidiary other than cash proceeds received from ELLC and other than cash
proceeds received from Investments and applied pursuant to clause (vi) of
the next succeeding paragraph.
The foregoing provisions will not prohibit (i) the payment of any dividend
or other distribution within 60 days after the date of declaration thereof, if
at said date of declaration such payment would have complied with the
provisions of the Indenture; (ii) the making of any Restricted Investment or
the redemption, repurchase, retirement or other acquisition of any Equity
Interests of the Company (A) in exchange for, or out of the proceeds of, a
substantially concurrent capital contribution (other than the conversion of
the Member Notes into equity interests of the Company in accordance with the
terms thereof) or sale (other than to a Subsidiary of the Company) of other
Equity Interests of the Company or its Parent (other than any Disqualified
Stock), provided that the amount of any such net cash proceeds that are
utilized for any such redemption, repurchase, retirement or other acquisition
shall be excluded from clause (c) of the preceding paragraph, or (B) to the
extent required by the final order of a Gaming Authority; (iii) the
defeasance, redemption or repurchase of subordinated Indebtedness with the net
cash proceeds from an incurrence of Permitted Refinancing Indebtedness or a
substantially concurrent capital contribution or sale (other than to a
Subsidiary of the Company) of Equity Interests of the Company (other than
Disqualified Stock); provided that the amount of any such net cash proceeds
that are utilized for any such redemption, repurchase, retirement or other
acquisition shall be excluded from clause (c) of the preceding paragraph; (iv)
so long as the Company is treated as a partnership or other pass through
entity for United States federal income tax purposes, distributions to equity
owners of the Company in an amount not to exceed the Tax Amount for such
period; (v) payment of a fee not to exceed 1.5% of Net Revenues to the
Managers pursuant to the Management Agreement as in effect on the date of the
Indenture; (vi) Investments in an amount not to exceed $15.0 million in any
Person or Persons primarily engaged in the Gaming Business, plus, to the
extent not included in the Consolidated Net Income of the Issuers, 100% of net
cash proceeds received by the Issuers from a distribution by, or from the sale
or other liquidation of, any Investment made pursuant to this clause (vi),
provided in no event shall amounts permitted to be invested pursuant to this
clause (vi) exceed $15.0 million; and (vii) any redemption required pursuant
to the provisions of the Indenture described under the caption "Gaming
Redemption" above.
The Management Committee may designate any Restricted Subsidiary, other than
Capital, to be an Unrestricted Subsidiary if such designation would not cause
a Default. For purposes of making such determination, all outstanding
Investments by the Issuers and their Restricted Subsidiaries (except to the
extent repaid in cash) in the Subsidiary so designated will be deemed to be
Restricted Payments at the time of such designation and will reduce the amount
available for Restricted Payments under the first paragraph of this covenant.
All such outstanding Investments will be deemed to constitute Investments in
an amount equal to the greatest of (i) the net book value of such Investments
at the time of such designation, (ii) the fair market value of such
Investments at the time of such designation and (iii) the original fair market
value of such Investments at the time they were made. Such designation will
only be permitted if such Restricted Payment would be permitted at such time
and if such Restricted Subsidiary otherwise meets the definition of an
Unrestricted Subsidiary.
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The amount of all Restricted Payments (other than cash) shall be the fair
market value (evidenced by a resolution of the Management Committee set forth
in an Officers' Certificate delivered to the Trustee) on the date of the
Restricted Payment of the asset(s) proposed to be transferred by the Company
or such Subsidiary, as the case may be, pursuant to the Restricted Payment.
Not later than ten business days following the end of each fiscal quarter, the
Company shall deliver to the Trustee an Officers' Certificate identifying each
Restricted Payment made by the Company during such fiscal quarter and stating
that each such Restricted Payment is permitted and setting forth the basis
upon which the calculations required by the covenant "Restricted Payments"
were computed, which calculations may be based upon the Company's latest
available financial statements.
Incurrence of Indebtedness. The Indenture provides that the Issuers will
not, and will not permit any of their Restricted Subsidiaries to, directly or
indirectly, create, incur, issue, assume, guaranty or otherwise become
directly or indirectly liable, contingently or otherwise, with respect to
(collectively, "incur") any Indebtedness (including Acquired Debt), provided,
however, that, so long as no Default or Event of Default has occurred and is
continuing, the Issuers and any of their Restricted Subsidiaries may incur
Indebtedness (including Acquired Debt) if the Fixed Charge Coverage Ratio for
the Company's most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on which
such additional Indebtedness is incurred would have been at least 2.5 to 1, in
each case determined on a pro forma basis (including a pro forma application
of the net proceeds therefrom, including without limitation the application of
any such net proceeds to repay Indebtedness), as if the additional
Indebtedness had been incurred or had been issued at the beginning of such
four-quarter period.
The foregoing provisions will not apply to:
(i) the incurrence by the Issuers and their Restricted Subsidiaries of
Indebtedness pursuant to the bank lines of credit (including revolving and
term loans) in an amount not to exceed $75.0 million at any time
outstanding, less the aggregate amount of all permanent reductions thereto
pursuant to the covenant described under "--Repurchase at the Option of
Holders--Asset Sales;"
(ii) the incurrence by the Issuers of Existing Indebtedness;
(iii) the incurrence by the Issuers of Indebtedness represented by the
Notes and the Indenture;
(iv) the incurrence by the Issuers or any of their Restricted
Subsidiaries of Indebtedness in one or more FF&E Financings and Capitalized
Lease Obligations to acquire or refinance furniture, fixtures or equipment
incident to and useful in the Gaming Business, in an aggregate principal
amount not to exceed $15.0 million outstanding at any one time;
(v) the incurrence of intercompany Indebtedness between or among the
Issuers and any of their Consolidated Subsidiaries; provided that any
subsequent issuance or transfer of Equity Interests that results in any
such Indebtedness being held by a Person other than an Issuer or a
Consolidated Subsidiary of an Issuer, or any sale or other transfer of any
such Indebtedness to a Person that is not either an Issuer or a
Consolidated Subsidiary of an Issuer, shall be deemed to constitute an
incurrence of such Indebtedness by the Issuers or such Restricted
Subsidiary, as the case may be;
(vi) the incurrence by the Issuers or any of their Restricted
Subsidiaries of Hedging Obligations that are incurred for the purpose of
fixing or hedging interest rate risk with respect to any floating rate
Indebtedness that is permitted by the terms of this Indenture to be
outstanding or for the purpose of fixing or hedging any currency exchange
rate risk;
(vii) the incurrence by the Issuers or any of their Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the
net proceeds of which are used to extend, refinance, renew, replace,
defease or refund Indebtedness that was permitted by the Indenture to be
incurred;
(viii) the incurrence of other Indebtedness by the Company or its
Restricted Subsidiaries in an amount not to exceed $20.0 million to fund
expansions, renovations, land acquisitions and construction of real
property improvements with respect to the Eldorado;
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(ix) the incurrence of Indebtedness pursuant to the Member Notes, the
Daniels Notes or the ELLC Member Notes; and
(x) to the extent that such incurrence does not result in the incurrence
by the Company or any Restricted Subsidiary of any obligation for the
payment of borrowed money of others, Indebtedness incurred solely as a
result of the execution by the Company or its Restricted Subsidiaries of
letters of credit relating to workers compensation or self insurance,
performance bonds or similar instruments; provided, however, that the
foregoing exception shall not be applicable to Indebtedness incurred in
connection with the performance by the Company or its Restricted
Subsidiaries of such bonds or instruments or payment of such letters of
credit.
Liens. The Indenture provides that the Issuers will not, and will not permit
any of their Restricted Subsidiaries to, directly or indirectly, create,
incur, assume or suffer to exist any Lien on any asset now owned or hereafter
acquired, or any income or profits therefrom or assign or convey any right to
receive income therefrom, except Permitted Liens.
Dividend and Other Payment Restrictions Affecting Subsidiaries. The
Indenture provides that the Issuers will not, and will not permit any of their
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause
or suffer to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary to (i)(a) pay dividends or make any other
distributions to the Issuers or any of their Restricted Subsidiaries on their
Capital Stock or with respect to any other interest or participation in, or
measured by, its profits, or (b) pay any indebtedness owed to the Issuers or
any of their Restricted Subsidiaries, (ii) make loans or advances to the
Issuers or any of their Restricted Subsidiaries or (iii) transfer any of its
properties or assets to the Issuers or any of their Restricted Subsidiaries,
except for such encumbrances or restrictions existing under or by reason of
(a) the Senior Credit Agreement as in effect on the date of the Indenture, and
any amendments, modifications, restatements, renewals, supplements,
refundings, replacements or refinancings thereof that contain restrictions
that are no more restrictive than those contained in the Senior Credit
Agreement as in effect on the date of the Indenture, (b) agreements existing
and as in effect on the date of the Indenture, (c) any instrument governing
Indebtedness permitted to be incurred pursuant to the terms of the Indenture,
(d) applicable law, (e) any instrument governing Indebtedness or Capital Stock
of a Person acquired by the Issuers or any of their Restricted Subsidiaries as
in effect at the time of such acquisition (except to the extent such
Indebtedness was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any
Person, or the properties or assets of any Person, other than the Person, or
the property or assets of the Person, so acquired, (f) customary non-
assignment provisions in leases or other agreements entered into in the
ordinary course of business, (g) purchase money obligations for property
acquired in the ordinary course of business that impose restrictions of the
nature described in clause (iii) above on the property so acquired, (h) any
restriction or encumbrance contained in contracts for the sale of assets
permitted by the Indenture, provided that such restrictions relate only to the
assets being sold pursuant to such contracts and (i) Permitted Refinancing
Indebtedness, provided that the restrictions contained in the agreements
governing such Permitted Refinancing Indebtedness are no more restrictive than
those contained in the agreements governing the Indebtedness being refinanced.
Merger, Consolidation or Sale of Assets; Creation of Parent. The Indenture
provides that neither Issuer may consolidate or merge with or into (whether or
not such Issuer is the surviving entity), or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its properties or
assets in one or more related transactions, to another limited-liability
company, corporation, Person or entity, unless (i) such Issuer is the
surviving entity or the entity or the Person formed by or surviving any such
consolidation or merger (if other than such Issuer) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a limited-liability company, partnership or a corporation organized or
existing under the laws of the United States, any state thereof or the
District of Columbia; (ii) the entity or Person formed by or surviving any
such consolidation or merger (if other than such Issuer) or the entity or
Person to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made assumes all the obligations of such Issuer
under the Notes and the Indenture pursuant to a supplemental indenture in a
form reasonably
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satisfactory to the Trustee; (iii) immediately after such transaction, no
Default or Event of Default exists; (iv) such Issuer or any entity or Person
formed by or surviving any such consolidation or merger, or to which such
sale, assignment, transfer, lease, conveyance or other disposition shall have
been made (A) will have Consolidated Net Worth immediately after the
transaction equal to or greater than the Consolidated Net Worth of such Issuer
immediately preceding the transaction and (B) will, at the time of such
transaction and after giving pro forma effect thereto as if such transaction
had occurred at the beginning of the applicable four-quarter period, be
permitted to incur at least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in the first paragraph of the
covenant described above under the caption "--Incurrence of Indebtedness;" (v)
any such transaction would not require any Holder of Notes to obtain a Gaming
License or be qualified under the laws of any applicable gaming jurisdiction
in the absence of such transactions, provided that a transaction involving a
jurisdiction that does not require the licensing or qualification of all of
the holders of the Notes, but reserves the discretionary right to require the
licensing or qualification of any holder of Notes, shall not be prohibited
pursuant to the terms of this clause (v); (vi) any such transaction would not
result in the loss of any qualification or any material license of the Company
or its Subsidiaries necessary for any Gaming Business then operated by the
Company or its Subsidiary; and (vii) the Issuers have delivered to the Trustee
an opinion of counsel reasonably satisfactory to the Trustee confirming that
the holders of the outstanding Notes will not recognize income, gain or loss
for federal income tax purposes as a result of such transaction and will be
subject to federal income tax in the same manner and at the same times as
would have been the case if such transaction had not occurred.
The Indenture provides that upon creation of Parent or upon the other
transfer of sufficient membership interests to cause a dissolution for
purposes of Section 708 of the Internal Revenue Code of 1986, as amended, or
any successor provision thereto the Company will deliver to the Trustee an
opinion of counsel reasonably satisfactory to the Trustee confirming that the
holders of the outstanding Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such transaction and will be
subject to federal income tax in the same manner and at the same times as
would have been the case if such transaction had not occurred.
Transactions with Affiliates. The Indenture provides that neither Issuer
will, and will not permit any of its Restricted Subsidiaries to, make any
payment to, or sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property (except Development
Property) or assets from, or enter into or make or amend (for the purpose of
increasing the obligations of either Issuer or their Restricted Subsidiaries
thereunder or decreasing the obligations of any Affiliate thereunder without a
commensurate decrease of the obligations of such Issuer or such Restricted
Subsidiary thereunder) any contract, agreement, understanding, loan, advance
or guarantee with, or for the benefit of, any Affiliate (each of the
foregoing, an "Affiliate Transaction"), unless (i) such Affiliate Transaction
is on terms that are no less favorable to such Issuer or the relevant
Restricted Subsidiary than those that would have been obtained in a comparable
transaction with an unrelated Person and (ii) such Issuer delivers to the
Trustee (a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of $1.0
million, a resolution of the Management Committee set forth in an Officers'
Certificate certifying that such Affiliate Transaction complies with
clause (i) above and that such Affiliate Transaction has been approved
unanimously by the Management Committee and (b) with respect to any Affiliate
Transaction or series of related Affiliate Transactions involving aggregate
consideration in excess of $5.0 million, an opinion as to the fairness to the
Company of such Affiliate Transaction from a financial point of view issued by
an accounting, appraisal or investment banking firm of national standing;
provided that (1) any compensation paid to, indemnity provided on behalf of,
or employment agreement entered into with, any officer or director of the
Issuers or any of their Restricted Subsidiaries in the ordinary course of
business, (2) transactions between or among the Issuers and their Restricted
Subsidiaries and (3) Restricted Payments, Permitted Investments and other
payments and distributions that are permitted by the provisions of the
Indenture described above under the caption "--Restricted Payments," in each
case, shall not be deemed Affiliate Transactions. The Indenture provides that
the Company will not, and will not permit ELLC to, modify, amend or otherwise
alter the terms of the ELLC Note to extend the maturity thereof, reduce the
amount payable by ELLC thereunder or the rate of interest applicable thereto
or otherwise diminish the obligations of ELLC thereunder; provided, however,
that the Company may, from time to time, contribute all or a portion of the
ELLC Note to ELLC in exchange for an increased equity interest in ELLC.
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Business Activities. The Indenture provides that the Company will not, and
will not permit any Restricted Subsidiary to, engage, directly or indirectly,
in any business other than (i) a Gaming Business and (ii) such other
businesses as the Company or any Restricted Subsidiary is engaged in on the
date of the Indenture. Neither the Company nor any of its Subsidiaries is
permitted by the Indenture to conduct a Gaming Business in any gaming
jurisdiction in which the Company or such Subsidiary is not licensed on the
date of the Indenture if the holders of the Notes would be required to be
licensed as a result thereof; provided that the provisions described in this
sentence will not prohibit the Company or any of its Subsidiaries from
conducting a Gaming Business in any jurisdiction that does not require the
licensing or qualification of all of the holders of the Notes, but reserves
the discretionary right to require the licensing or qualification of any
holder of Notes.
The Indenture provides that until such time as ELLC is designated as a
Restricted Subsidiary or merged with the Company, in each case in accordance
with the terms of the Indenture, the Issuers shall not permit ELLC to (i)
engage, directly or indirectly in any business or activity other than holding
an interest in the Silver Legacy Joint Venture, subject to the right of ELLC
to dispose of such interest in the Silver Legacy Joint Venture in accordance
with the provisions of the covenant entitled "--Asset Sales" above, (ii)
become the owner of any capital stock or other ownership interest in any other
entity, (iii) incur, assume, guaranty or otherwise become liable for any
Indebtedness to any other entity other than the ELLC Note, Indebtedness
payable to the Issuers or any Restricted Subsidiary and Indebtedness incurred
pursuant to Section 2.7 of the Joint Venture Agreement or (iv) issue
membership interests representing more than 10% of the outstanding equity
interests of ELLC prior to such issuance without first obtaining an opinion of
fairness to ELLC of the consideration to be received by ELLC in respect of
such issuance of membership interests from an investment banking firm of
national standing.
Subsidiary Guarantees. The Indenture provides that (i) each Restricted
Subsidiary and (ii) if the Issuers or any of their Restricted Subsidiaries
shall acquire or create another Subsidiary after the date of the Indenture,
then such Restricted Subsidiary or such newly acquired or created Subsidiary
shall execute a Guarantee and deliver an opinion of counsel relating to the
enforceability and authorization of such Guarantee in accordance with the
terms of the Indenture, pursuant to which such Subsidiary shall become a
Guarantor, on a senior subordinated basis (pursuant to subordination
provisions substantially similar to those described above under the caption
"--Subordination"), of the Issuers' payment obligations under the Notes and
the Indenture; provided, that this covenant shall not apply to any Subsidiary
during such period as such Subsidiary (i) is incorporated in any jurisdiction
outside the United States, (ii) has been properly designated as an
Unrestricted Subsidiary in accordance with the Indenture for so long as it
continues to constitute an Unrestricted Subsidiary, (iii) has Adjusted Net
Assets of less than $3.0 million or (iv) has less than $5.0 million of
outstanding Indebtedness owed to any Person other than the Issuers or any
Restricted Subsidiary.
The Indenture provides that, in the event of a sale or other disposition of
all of the assets of any Guarantor, by way of merger, consolidation or
otherwise, or a sale or other disposition of all of the capital stock of any
Guarantor, then such Guarantor (in the event of a sale or other disposition,
by way of such a merger, consolidation or otherwise, of all of the capital
stock of such Guarantor) or the corporation acquiring the property (in the
event of a sale or other disposition of all of the assets of such Guarantor)
will be released and relieved of any obligations under its Subsidiary
Guarantee; provided that the Net Proceeds of such sale or other disposition
are applied in accordance with the applicable provisions of the Indenture. In
addition, the Indenture provides that, in the event the Management Committee
designates a Guarantor to be an Unrestricted Subsidiary, then such Guarantor
will be released and relieved of any obligations under its Guarantee; provided
that such designation is conducted in accordance with the applicable
provisions of the Indenture.
Designation of an Unrestricted Subsidiary as a Restricted Subsidiary. Any
Unrestricted Subsidiary may be designated by the Management Committee as a
Restricted Subsidiary; provided that (i) at the time of such designation after
giving pro forma effect thereto as if such designation had occurred, and any
Non-Recourse Debt previously incurred by such Unrestricted Subsidiary had been
incurred, at the beginning of the Company's most recently completed four
fiscal quarters for which internal financial statements are available
preceding the date of such designation, the Issuers would be permitted to
incur $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage
Ratio test contained in the provisions described in the first paragraph under
the caption
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"--Incurrence of Indebtedness"; (ii) if such newly designated Restricted
Subsidiary has Adjusted Net Assets of $3.0 million or more or $5.0 million or
more of outstanding Indebtedness owed to any Person other than the Issuers or
any Restricted Subsidiary, such newly designated Restricted Subsidiary
executes and delivers a Guarantee and an opinion of counsel relating to the
enforceability and authorization of such Guarantee as required by the
Indenture; and (iii) no Default has occurred and is continuing immediately
preceding such designation and after giving pro forma effect thereto.
Designation of a Subsidiary as an Unrestricted Subsidiary. Any newly-
organized Subsidiary may be designated by the Management Committee as an
Unrestricted Subsidiary at the time of its formation, provided that such
Subsidiary has total assets of $1,000 or less at the time of such designation.
Any Restricted Subsidiary may be designated by the Management Committee as an
Unrestricted Subsidiary (at which time such Restricted Subsidiary's Guarantee
will terminate); provided that (i) at the time of such designation after
giving pro forma effect thereto as if such designation had occurred at the
beginning of the Issuers' most recently completed four fiscal quarters for
which internal financial statements are available preceding the date of such
designation, (A) the Issuers would be permitted to incur $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test contained in the
provisions described in the first paragraph under the caption "--Incurrence of
Indebtedness" and (B) the Fixed Charge Coverage Ratio is not less than 80% of
the Fixed Charge Coverage Ratio for such period without giving pro forma
effect to such designation; and (ii) no Default has occurred and is continuing
immediately preceding such designation and after giving pro forma effect
thereto, including the requirement described in the third paragraph under the
caption "--Restricted Payments" that any Investment in such Restricted
Subsidiary be deemed to be a Restricted Payment made on the date of such
designation.
Limitation on Other Senior Subordinated Debt. The Indenture provides that
the Issuers will not incur, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, issue, assume, guarantee or
otherwise become directly or indirectly liable with respect to or become
responsible for any Indebtedness that is subordinate or junior in right of
payment to any Senior Debt (or in the case of a Guarantor, debt that is
subordinate or junior in right of Payment to such Guarantor's Senior Debt) and
senior in any respect in right of payment to the Notes or in the case of a
Guarantor, senior to the Guarantee executed by such Guarantor.
Independent Member of the Management Committee. The Indenture provides that,
within 180 days from the date thereof, the Company will cause an independent
person to be elected to serve on the Management Committee. As used herein,
"independent" means that neither such person nor any member of such person's
family (i) has any material, direct or indirect financial interest in the
Issuers or any other obligor on the Notes or in any Affiliate of the Issuers
or of any other obligor on the Notes or (ii) serves as an officer or employee
of the Issuers or any other obligor on the Notes or any such Affiliate,
provided that service on the Management Committee or the board of managers of
the Company or the board of directors of Capital or any other obligor on the
Notes or any such Affiliate will not be deemed to constitute service as an
officer or employee thereof.
RESTRICTIONS ON ACTIVITIES OF CAPITAL
The Indenture provides that Capital may not hold any material assets, become
liable for any material obligations or engage in any significant business
activities; provided that Capital may be a co-obligor or guarantor with
respect to Indebtedness if the Company is a primary obligor of such
Indebtedness and the net proceeds of such Indebtedness are retained by the
Company or loaned to one or more of the Company's Restricted Subsidiaries
other than Capital.
PAYMENTS FOR CONSENT
The Indenture provides that the Issuers will not, and will not permit any of
their Restricted Subsidiaries to, directly or indirectly, pay or cause to be
paid any consideration, whether by way of interest, fee or otherwise, to any
Holder of any Notes for or as an inducement to any consent, waiver or
amendment of any of the terms or provisions of the Indenture or the Notes
unless such consideration is offered to be paid or is paid to all Holders of
the Notes that consent, waive or agree to amend in the time frame set forth in
the solicitation documents relating to such consent, waiver or agreement.
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REPORTS
The Indenture provides that, whether or not required by the rules and
regulations of the Commission, so long as any Notes are outstanding, the
Issuers will furnish to the Holders of Notes (i) all quarterly and annual
financial information that would be required to be contained in a filing with
the Commission on Forms 10-Q and 10-K if the Issuers were required to file
such Forms, including a "Management's Discussion and Analysis of Financial
Condition and Results of Operations" that describes the financial position and
results of operations of the Company and its Restricted Subsidiaries and, with
respect to the annual information only, a report thereon by the Issuers'
certified independent accountants and (ii) all current reports that would be
required to be filed with the Commission on Form 8-K if the Issuers were
required to file such reports. In addition, whether or not required by the
rules and regulations of the Commission, the Issuers will file a copy of all
such information and reports with the Commission for public availability
(unless the Commission will not accept such a filing) and make such
information available to securities analysts and prospective investors upon
request. In addition, the Issuers have agreed that, for so long as any Notes
remain outstanding, they will furnish to the Holders and to securities
analysts and prospective investors, upon their request, the information
required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest or
Liquidated Damages, if any, on the Notes (whether or not prohibited by the
subordination provisions of the Indenture); (ii) default in payment when due
of the principal of or premium, if any, on the Notes (whether or not
prohibited by the subordination provisions of the Indenture); (iii) failure by
the Issuers to comply with the repurchase provisions described under the
captions "--Repurchase at the Option of Holders--Change of Control," "--
Repurchase at the Option of Holders--Asset Sales" or the covenants contained
in "--Certain Covenants--Restricted Payments;" (iv) failure by the Issuers for
30 days after notice to comply with any of its other agreements in the
Indenture or the Notes; (v) default under any mortgage, indenture or
instrument under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by the Issuers or any of their
Restricted Subsidiaries (or the payment of which is guaranteed by the Issuers
or any of their Restricted Subsidiaries) whether such Indebtedness or
guarantee now exists, or is created after the date of the Indenture having an
outstanding principal amount of more than $5.0 million, individually or in the
aggregate, if such Indebtedness has been accelerated (or has matured);
(vi) failure by the Issuers or any of their Restricted Subsidiaries to pay
final non-appealable judgments aggregating in excess of $5.0 million, which
judgments are not paid, discharged or stayed for a period of 60 days; (vii)
any Guarantee of a Significant Guarantor shall be held in a judicial
proceeding to be unenforceable or invalid or shall cease for any reason to be
in full force and effect, or any Significant Guarantor, or any Person acting
on behalf of any Significant Guarantor, shall deny or disaffirm its
obligations under its Guarantee; (viii) any Gaming License relating to a
Material Gaming Facility is revoked, terminated or suspended or otherwise
ceases to be effective, resulting in the cessation or suspension of operation
for a period of more than 30 days of any material portion or aspect of the
Gaming Business of any Gaming Facility; (ix) certain events of bankruptcy or
insolvency with respect to the Issuers, any of their Significant Subsidiaries,
or any group of Subsidiaries that, considered together, would constitute a
Significant Subsidiary; and (x) the Member Notes represent Indebtedness for
more than 90 days.
If any Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the then outstanding Notes may declare
all the Notes to be due and payable upon delivery of a notice of acceleration
to the Company and to the agent for the lenders under the Senior Credit
Agreement, provided, that the Notes shall become due and payable immediately
if any Senior Debt has been or is accelerated following delivery of a notice
of acceleration. Notwithstanding the foregoing, in the case of an Event of
Default arising from certain events of bankruptcy or insolvency with respect
to either Issuer, any Significant Subsidiary of the Issuers or any group of
Restricted Subsidiaries of the Issuers that, taken together, would constitute
a Significant Subsidiary of the Issuers, all outstanding Notes will become due
and payable without further action or notice. Holders of the Notes may not
enforce the Indenture or the Notes except as provided in the Indenture.
Subject to
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certain limitations, Holders of a majority in principal amount of the then
outstanding Notes may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Holders of the Notes notice of any
continuing Default or Event of Default (except a Default or Event of Default
relating to the payment of principal or interest) if it determines that
withholding notice is in their interest.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Issuers with
the intention of avoiding payment of the premium that the Issuers would have
had to pay if the Issuers then had elected to redeem the Notes pursuant to the
optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Notes. If an Event of Default occurs prior
to August 15, 2001 by reason of any willful action (or inaction) taken (or not
taken) by or on behalf of the Company with the intention of avoiding the
prohibition on redemption of the Notes prior to such date, then the premium
specified in the Indenture shall also become immediately due and payable to
the extent permitted by law upon the acceleration of the Notes.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of
the Notes waive any existing Default or Event of Default and its consequences
under the Indenture except a continuing Default or Event of Default in the
payment of the principal of, or premium, interest or Liquidated Damages (if
any) on, the Notes.
The Issuers are required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Issuers are required, upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES, PARTNERS, MEMBERS AND
STOCKHOLDERS
No director, officer, employee, incorporator, partner, member or stockholder
of the Issuers, as such, shall have any liability for any obligations of the
Issuers under the Notes or the Indenture or for any claim based on, in respect
of, or by reason of, such obligations or their creation. Each Holder of Notes
by accepting a Note waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Notes. Such waiver
may not be effective to waive liabilities under the federal securities laws
and it is the view of the Commission that such a waiver is against public
policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Issuers may, at their option and at any time, elect to have all of their
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance") except for (i) the rights of Holders of outstanding Notes to
receive payments in respect of the principal of, and premium, interest and
Liquidated Damages (if any) on, the Notes when such payments are due from the
trust referred to below, (ii) the Issuers' obligations with respect to the
Notes concerning issuing temporary Notes, registration of Notes, mutilated,
destroyed, lost or stolen Notes and the maintenance of an office or agency for
payment and money for security payments held in trust, (iii) the rights,
powers, trusts, duties and immunities of the Trustee, and the Issuers'
obligations in connection therewith and (iv) the Legal Defeasance provisions
of the Indenture. In addition, the Issuers may, at their option and at any
time, elect to have the obligations of the Issuers released with respect to
certain covenants that are described in the Indenture ("Covenant Defeasance")
and thereafter any omission to comply with such obligations shall not
constitute a Default or Event of Default with respect to the Notes. In the
event Covenant Defeasance occurs, certain events (not including non-payment,
bankruptcy, receivership, rehabilitation and insolvency events) described
under "Events of Default" will no longer constitute an Event of Default with
respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Issuers must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders of the Notes, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be sufficient,
without reinvestment, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, and
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premium, interest and Liquidated Damages (if any) on, the outstanding Notes on
the stated maturity or on the applicable redemption date, as the case may be,
and the Issuers must specify whether the Notes are being defeased to maturity
or to a particular redemption date, (ii) in the case of Legal Defeasance, the
Issuers shall have delivered to the Trustee an opinion of counsel in the
United States reasonably acceptable to the Trustee confirming that (a) the
Issuers have received from, or there has been published by, the Internal
Revenue Service a ruling or (b) since the date of the Indenture, there has
been a change in the applicable federal income tax law, in either case to the
effect that, and based thereon such opinion of counsel shall confirm that, the
Holders of the outstanding Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Legal Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if such Legal Defeasance had not
occurred; (iii) in the case of Covenant Defeasance, the Issuers shall have
delivered to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that the Holders of the outstanding Notes
will not recognize income, gain or loss for federal income tax purposes as a
result of such Covenant Defeasance and will be subject to federal income tax
on the same amounts, in the same manner and at the same times as would have
been the case if such Covenant Defeasance had not occurred; (iv) no Default or
Event of Default shall have occurred and be continuing on the date of such
deposit (other than a Default or Event of Default resulting from the borrowing
of funds to be applied to such deposit) or insofar as Events of Default from
bankruptcy or insolvency events are concerned, at any time in the period
ending on the 91st day after the date of deposit; (v) such Legal Defeasance or
Covenant Defeasance will not result in a breach or violation of, or constitute
a default under any material agreement or instrument (other than the
Indenture) to which the Issuers or any of their Subsidiaries is a party or by
which the Issuers or any of their Subsidiaries is bound; (vi) the Issuers
shall have delivered to the Trustee an opinion of counsel to the effect that
after the 91st day following the deposit, the trust funds will not be subject
to the effect of any applicable bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally; (vii) the Company shall
have delivered to the Trustee an Officers' Certificate stating that the
deposit was not made by the Issuers with the intent of preferring the Holders
of Notes over the other creditors of the Issuers with the intent of defeating,
hindering, delaying or defrauding creditors of the Issuers or others; and
(viii) the Issuers shall have delivered to the Trustee an Officers'
Certificate and an opinion of counsel, each stating that all conditions
precedent provided for relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the Issuers may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Issuers are not required to transfer or exchange any Note
selected for redemption. Also, the Issuers are not required to transfer or
exchange any Note for a period of 15 days before a selection of Notes to be
redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture or
the Notes may be amended or supplemented with the consent of the Holders of at
least a majority in principal amount of the Notes then outstanding (including,
without limitation, consents obtained in connection with a purchase of, or
tender offer or exchange offer for, Notes), and any existing default or
compliance with any provision of the Indenture or the Notes may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding Notes (including consents obtained in connection with a tender
offer or exchange offer for Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder): (i) reduce the
principal amount of Notes whose Holders must consent to an amendment,
supplement or waiver, (ii) reduce the principal of or change the fixed
maturity of any Note or alter the provisions with respect to the redemption of
the Notes (other than provisions relating to the covenants
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described above under the caption "--Certain Covenants--Repurchase at the
Option of Holders"), (iii) reduce the rate of or change the time for payment
of interest on any Note, (iv) waive a Default or Event of Default in the
payment of principal of, or premium, interest or Liquidated Damages (if any)
on, the Notes (except a rescission of acceleration of the Notes by the Holders
of at least a majority in aggregate principal amount of the Notes and a waiver
of the payment default that resulted from such acceleration), (v) make any
Note payable in money other than that stated in the Notes, (vi) make any
change in the provisions of the Indenture relating to waivers of past Defaults
or the rights of Holders of Notes to receive payments of principal of, or
premium, interest or Liquidated Damages (if any) on, the Notes, (vii) waive a
redemption payment with respect to any Note (other than a payment required by
one of the covenants described above under the caption "--Certain Covenants--
Repurchase at the Option of Holders") or (viii) make any change in the
foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder of Notes,
the Issuers and the Trustee may amend or supplement the Indenture or the Notes
to cure any ambiguity, defect or inconsistency, to provide for uncertificated
Notes in addition to or in place of certificated Notes, to provide for the
assumption of the Issuers' obligations to Holders of Notes in the case of a
merger or consolidation, to make any change that would provide any additional
rights or benefits to the Holders of Notes or that does not adversely affect
the legal rights under the Indenture of any such Holder, or to comply with
requirements of the Commission in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Issuers, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. The Trustee will be permitted to engage
in other transactions; however, if it acquires any conflicting interest it
must eliminate such conflict within 90 days, apply to the Commission for
permission to continue or resign.
The Holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the
Indenture at the request of any Holder of Notes, unless such Holder shall have
offered to the Trustee security and indemnity satisfactory to it against any
loss, liability or expense.
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth in the next paragraph, the Notes will initially be
issued in the form of one Global Note (the "Global Note"). The Global Note
will be deposited on the date of the closing of the sale of the Notes offered
hereby (the "Closing Date") with, or on behalf of, the Depositary and
registered in the name of Cede & Co., as nominee of the Depositary (such
nominee being referred to herein as the "Global Note Holder").
Notes that are issued as described below under "--Certificated Securities"
will be issued in the form of registered definitive certificates (the
"Certificated Securities"). Upon the transfer of Certificated Securities, such
Certificated Securities may, unless the Global Note has previously been
exchanged for Certificated Securities, be exchanged for an interest in the
Global Note representing the principal amount of Notes being transferred.
The Depositary is a limited-purpose trust company that was created to hold
securities for its participating organizations (collectively, the
"Participants" or the "Depositary's Participants") and to facilitate the
clearance and settlement of transactions in such securities between
Participants through electronic book-entry changes in accounts of its
Participants. The Depositary's Participants include securities brokers and
dealers (including the Initial Purchasers), banks and trust companies,
clearing corporations and certain other organizations. Access to
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the Depositary's system is also available to other entities such as banks,
brokers, dealers and trust companies (collectively, the "Indirect
Participants" or the "Depositary's Indirect Participants") that clear through
or maintain a custodial relationship with a Participant, either directly or
indirectly. Persons who are not Participants may beneficially own securities
held by or on behalf of the Depositary only through the Depositary's
Participants or the Depositary's Indirect Participants.
The Issuers expect that pursuant to procedures established by the Depositary
(i) upon deposit of the Global Note, the Depositary will credit the accounts
of Participants designated by the Initial Purchaser with portions of the
principal amount of the Global Note and (ii) ownership of the Notes evidenced
by the Global Note will be shown on, and the transfer of ownership thereof
will be effected only through, records maintained by the Depositary (with
respect to the interests of the Depositary's Participants), the Depositary's
Participants and the Depositary's Indirect Participants. Prospective
purchasers are advised that the laws of some states require that certain
persons take physical delivery in definitive form of securities that they own.
Consequently, the ability to transfer Notes evidenced by the Global Note will
be limited to such extent. For certain other restrictions on the
transferability of the Notes, see "Notice to Investors."
So long as the Global Note Holder is the registered owner of any Notes, the
Global Note Holder will be considered the sole Holder under the Indenture of
any Notes evidenced by the Global Note. Beneficial owners of Notes evidenced
by the Global Note will not be considered the owners or Holders thereof under
the Indenture for any purpose, including with respect to the giving of any
directions, instructions or approvals to the Trustee thereunder. Neither the
Company nor the Trustee will have any responsibility or liability for any
aspect of the records of the Depositary or for maintaining, supervising or
reviewing any records of the Depositary relating to the Notes.
Payments in respect of the principal of, and premium, interest and
Liquidated Damages (if any) on, any Notes registered in the name of the Global
Note Holder on the applicable record date will be payable by the Trustee to or
at the direction of the Global Note Holder in its capacity as the registered
Holder under the Indenture. Under the terms of the Indenture, the Issuers and
the Trustee may treat the persons in whose names Notes, including the Global
Note, are registered as the owners thereof for the purpose of receiving such
payments. Consequently, neither the Issuers nor the Trustee has or will have
any responsibility or liability for the payment of such amounts to beneficial
owners of Notes. The Issuers believe, however, that it is currently the policy
of the Depositary to immediately credit the accounts of the relevant
Participants with such payments, in amounts proportionate to their respective
holdings of beneficial interests in the relevant security as shown on the
records of the Depositary. Payments by the Depositary's Participants and the
Depositary's Indirect Participants to the beneficial owners of Notes will be
governed by standing instructions and customary practice and will be the
responsibility of the Depositary's Participants or the Depositary's Indirect
Participants.
CERTIFICATED SECURITIES
Subject to certain conditions, any person having a beneficial interest in
the Global Note may, upon request to the Trustee, exchange such beneficial
interest for Notes in the form of Certificated Securities. Upon any such
issuance, the Trustee is required to register such Certificated Securities in
the name of, and cause the same to be delivered to, such person or persons (or
the nominee of any thereof). All such certificated Notes would be subject to
the legend requirements described herein under "Notice to Investors." In
addition, if (i) the Issuers notify the Trustee in writing that the Depositary
is no longer willing or able to act as a depositary and the Issuers are unable
to locate a qualified successor within 90 days or (ii) the Issuers, at their
option, notify the Trustee in writing that they elect to cause the issuance of
Notes in the form of Certificated Securities under the Indenture, then, upon
surrender by the Global Note Holder of its Global Note, Notes in such form
will be issued to each person that the Global Note Holder and the Depositary
identify as being the beneficial owner of the related Notes.
Neither the Issuers nor the Trustee will be liable for any delay by the
Global Note Holder or the Depositary in identifying the beneficial owners of
Notes and the Issuers and the Trustee may conclusively rely on, and will be
protected in relying on, instructions from the Global Note Holder or the
Depositary for all purposes.
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SAME-DAY SETTLEMENT AND PAYMENT
The Indenture requires that payments in respect of the Notes represented by
the Global Note (including principal, premium, interest and Liquidated
Damages, if any) be made by wire transfer of immediately available funds to
the accounts specified by the Global Note Holder. With respect to Certificated
Securities, the Issuers will make all payments of principal, premium, interest
and Liquidated Damages, if any, by wire transfer of immediately available
funds to the accounts specified by the Holders thereof or, if no such account
is specified, by mailing a check to each such Holder's registered address.
Secondary trading in long-term notes and debentures of corporate issuers is
generally settled in clearing-house or next-day funds. In contrast, the Notes
represented by the Global Note are expected to be eligible to trade in the
PORTAL market and to trade in the Depositary's Same-Day Funds Settlement
System, and any permitted secondary market trading activity in such Notes
will, therefore, be required by the Depositary to be settled in immediately
available funds. The Issuers expect that secondary trading in the Certificated
Securities will also be settled in immediately available funds.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as
any other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Restricted Subsidiary of such specified
Person, including, without limitation, Indebtedness incurred in connection
with, or in contemplation of, such other Person merging with or into or
becoming a Restricted Subsidiary of such specified Person, and (ii)
Indebtedness secured by a Lien encumbering any asset acquired by such
specified Person.
"Adjusted Net Assets" of a Guarantor at any date means the amount by which
the book value of the property and assets of such Guarantor exceeds the total
amount of liabilities, including without limitation contingent liabilities
(after giving effect to all other fixed and contingent liabilities incurred or
assumed on such date), but excluding liabilities under the Guarantee, of such
Guarantor at such date.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled
by" and "under common control with"), as used with respect to any Person,
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of such Person, whether
through the ownership of voting securities, by agreement or otherwise;
provided that Beneficial Ownership of 10% or more of the voting securities of
a Person shall be deemed to be control.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition of
any assets (including, without limitation, by way of a sale and leaseback)
(provided that the sale, lease, conveyance or other disposition of all or
substantially all of the assets of the Issuers and their Restricted
Subsidiaries taken as a whole will be governed by the provisions of the
Indenture described above under the caption "--Change of Control" and/or the
provisions described above under the caption "--Merger, Consolidation or Sale
of Assets" and not by the provisions of the Asset Sale covenant), and (ii) the
issue or sale by the Issuers or any of their Restricted Subsidiaries of Equity
Interests of any of the Issuers' Restricted Subsidiaries, in the case of
either clause (i) or (ii), whether in a single transaction or a series of
related transactions for net proceeds in excess of $1.0 million.
Notwithstanding the foregoing, the following will be deemed not to be Asset
Sales: (A) the disposition of Cash Equivalents or the sale of inventory or
obsolete furniture, fixtures, equipment or other property (real or personal)
in the ordinary course of business, (B) dispositions of gaming equipment in
the ordinary course of business pursuant to an established program for the
maintenance and upgrading of such equipment, (C) the surrender or waiver of
contract rights or the settlement, release or surrender of contract, tort or
other claims of any kind, (D) the grant in the ordinary course of business of,
or lapse of, any license of patents, trademarks and other
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similar intellectual property, including transfer of intellectual property
relating exclusively to the conduct of the business of The Brew Brothers,
provided that, in such event, the Company shall be granted a license to use
such transferred intellectual property for a nominal fee, (E) pursuant to the
foreclosure of any Lien on assets securing any FF&E Financing or Capital Lease
Obligation permitted pursuant to the provisions of the Indenture described
above under the caption "--Incurrence of Indebtedness," provided that such
FF&E Financing or Capital Lease Obligation is secured by a Lien that relates
only to assets purchased with such FF&E Financing or Capital Lease Obligation,
and provided, further, that such foreclosure or other remedy is conducted in a
commercially reasonable manner or in accordance with applicable law;
(F) involving only the lease or sublease for a term not to exceed ten years
(other than a sale and a leaseback transaction or similar transaction in which
the owner, prior to the transaction, does not retain the residual interest of
the property at the conclusion of the term of the lease) of real or personal
property in the ordinary course of business and provided that, with respect to
a lease or sublease for which (i) the aggregate rental payments exceed $1.0
million per annum the Company delivers to the Trustee a resolution of the
Management Committee set forth in an Officers' Certificate certifying that the
lease has been approved unanimously by the Management Committee and (ii) the
aggregate rental payments exceed $5.0 million per annum the Company delivers
to the Trustee an opinion as to the fairness to the Company of such lease from
a financial point of view by an accounting, appraisal or investment banking
firm of national standing; (G) resulting from (a) the designation of any
Restricted Subsidiary as an Unrestricted Subsidiary, or contribution to the
capital of any Unrestricted Subsidiary, in accordance with the applicable
provisions of the Indenture, or (b) the sale of Capital Stock of any
Unrestricted Subsidiary or the sale of all or substantially all of the assets
of any Unrestricted Subsidiary; (H) a transfer of assets by the Issuers to a
Consolidated Subsidiary or by a Consolidated Subsidiary to the Issuers or to
another Consolidated Subsidiary, (I) an issuance of Equity Interests by a
Consolidated Subsidiary to the Issuers or to another Consolidated Subsidiary,
(J) a Permitted Investment, Restricted Payment or other payment or
distribution that is permitted by the covenant described above under the
caption "--Restricted Payments" and (K) the contribution, in exchange for an
equity interest or debt obligation, of Development Property to a joint venture
in which the Company, directly or indirectly, holds an equity interest.
"Beneficial Owner" (including, with correlative meanings, "Beneficially
Owned" and "Beneficial Ownership") means, with respect to any Capital Stock, a
"person," as such term is used in Section 13(d)(3) of the Exchange Act, that
is a "beneficial owner," as such term is defined in Rule 13d-3 and Rule 13d-5
under the Exchange Act, of such Capital Stock.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership, partnership interests
(whether general or limited), (iv) in the case of a limited-liability company,
membership interests and (v) any other interest or participation that confers
similar intellectual property, including transfer of intellectual property
relating exclusively to the conduct of the business of The Brew Brothers,
provided that, in such event, the Company shall be granted a license to use
such transferred intellectual property for a nominal fee, (E) pursuant to the
foreclosure of any Lien on assets securing any FF&E Financing or Capital Lease
Obligation permitted pursuant to the provisions of the Indenture described
above under the caption "--Incurrence of Indebtedness," provided that such
FF&E Financing or Capital Lease Obligation is secured by a Lien that relates
only to assets purchased with such FF&E Financing or Capital Lease Obligation,
and provided, further, that such foreclosure or other remedy is conducted in a
commercially reasonable manner or in accordance with applicable law;
(F) involving only the lease or sublease for a term not to exceed ten years
(other than a sale and a leaseback transaction or similar transaction in which
the owner, prior to the transaction, does not retain the residual interest of
the property at the conclusion of the term of the lease) of real or personal
property in the ordinary course of business and provided that, with respect to
a lease or sublease for which (i) the aggregate rental payments exceed $1.0
million per annum the Company delivers to the
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Trustee a resolution of the Management Committee set forth in an Officers'
Certificate certifying that the lease has been approved unanimously by the
Management Committee and (ii) the aggregate rental payments exceed $5.0
million per annum the Company delivers to the Trustee an opinion as to the
fairness to the Company of such lease from a financial point of view by an
accounting, appraisal or investment banking firm of national standing; (G)
resulting from (a) the designation of any Restricted Subsidiary as an
Unrestricted Subsidiary, or contribution to the capital of any Unrestricted
Subsidiary, in accordance with the applicable provisions of the Indenture, or
(b) the sale of Capital Stock of any Unrestricted Subsidiary or the sale of
all or substantially all of the assets of any Unrestricted Subsidiary; (H) a
transfer of assets by the Issuers to a Consolidated Subsidiary or by a
Consolidated Subsidiary to the Issuers or to another Consolidated Subsidiary,
(I) an issuance of Equity Interests by a Consolidated Subsidiary to the
Issuers or to another Consolidated Subsidiary, (J) a Permitted Investment,
Restricted Payment or other payment or distribution that is permitted by the
covenant described above under the caption "--Restricted Payments" and (K) the
contribution, in exchange for an equity interest or debt obligation, of
Development Property to a joint venture in which the Company, directly or
indirectly, holds an equity interest.
"Beneficial Owner" (including, with correlative meanings, "Beneficially
Owned" and "Beneficial Ownership") means, with respect to any Capital Stock, a
"person," as such term is used in Section 13(d)(3) of the Exchange Act, that
is a "beneficial owner," as such term is defined in Rule 13d-3 and Rule 13d-5
under the Exchange Act, of such Capital Stock.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership, partnership interests
(whether general or limited), (iv) in the case of a limited-liability company,
membership interests and (v) any other interest or participation that confers
on a Person the right to receive a share of the profits and losses of, or
distributions of assets of, the issuing Person.
"Carano Interests" means Donald L. Carano, his spouse, lineal descendants
(including adopted children and their lineal descendants) and any trust or
entity owned, controlled by or established for the exclusive benefit of, or
the estate of, any of the foregoing.
"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof having maturities of not more than six
months from the date of acquisition, (iii) certificates of deposit and
eurodollar time deposits with maturities of six months or less from the date
of acquisition, bankers' acceptances with maturities not exceeding six months
and overnight bank deposits, in each case with any domestic commercial bank
having capital and surplus in excess of $500 million and a Keefe Bank Watch
Rating of "B" or better, (iv) repurchase obligations with a term of not more
than seven days for underlying securities of the types described in clauses
(ii) and (iii) above entered into with any financial institution meeting the
qualifications specified in clause (iii) above, (v) commercial paper having
the highest rating obtainable from Moody's Investors Service, Inc. or Standard
& Poor's Ratings Group and in each case maturing within six months after the
date of acquisition and (vi) shares of any fund investing exclusively in
investments of the type described in clauses (i), (ii), (iii) or (iv) above if
such fund has net assets of not less than $500.0 million.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all
or substantially all of the assets of the Company and its Restricted
Subsidiaries, taken as a whole, to any "person" (as such term is used in
Section 13(d)(3) of the Exchange Act) other than the Carano Interests or an
Included Person, (ii) the adoption of a plan relating to the liquidation or
dissolution of the Company, (iii) prior
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to the consummation of an Initial Public Offering, the consummation of any
transaction (including, without limitation, any merger or consolidation) the
result of which is that the Carano Interests cease to control a majority of
the voting power of the Company (other than in connection with an Initial
Public Offering and sales or other dispositions of Capital Stock that do not
result in the Carano Interests as a group no longer Beneficially Owning such
Capital Stock), (iv) after an Initial Public Offering, the Company's becoming
aware of (by way of a report or any other filing pursuant to Section 13(d) of
the Exchange Act, proxy vote, written notice or otherwise) the acquisition by
any Person or related group (within the meaning of Section 13(d)(3) or Section
14(d)(2) of the Exchange Act, or any successor provision to either of the
foregoing, including any "group" acting for the purpose of acquiring, holding
or disposing of securities within the meaning of Rule 13d-5(b)(1) under the
Exchange Act), other than the Carano Interests, in a single transaction or in
a related series of transactions, by way of merger, consolidation or other
business combination or purchase of beneficial ownership (within the meaning
of Rule 13d-3 under the Exchange Act, or any successor provision) of 35% or
more of the total voting power entitled to vote in the election of the
Management Committee or Board of Directors, as the case may be, or such other
Person surviving the transaction and, at such time, the Carano Interests shall
fail to beneficially own, directly or indirectly, securities representing
greater than the combined voting power of the Company's or such other Person's
Capital Stock as is beneficially owned by such Person or group; (v) the first
day on which the Company fails to own 100% of the issued and outstanding
Equity Interests of Capital, other than by reason of a merger of Capital with
and into a corporate successor to the Company, and (vi) during any period of
two consecutive years, individuals who at the beginning of such period
constituted the Management Committee (together with any new managers whose
election or appointment by such committee or whose nomination for election by
the members of the Company was approved by a vote of a majority of the
managers then still in office who were either managers at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Management
Committee then in office; provided, however, that the sale or transfer by the
Carano Interests to an Included Person shall not be a Change of Control so
long as such Included Person maintains an ownership interest that, if held by
the Carano Interests, would not constitute a Change of Control, and provided
further that for purposes of this definition (except clause (v)) the term
"Company" shall mean "Parent" should Parent exist and for purposes of clause
(vi), Management Committee and managers shall mean Board of Directors and
directors should Parent exist.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus, to the extent
deducted in computing Consolidated Net Income, (i) an amount equal to any
extraordinary loss plus any net loss realized in connection with an Asset
Sale, (ii) provision for taxes based on income or profits or, so long as such
Person is treated as a partnership or other pass through entity for United
States federal income tax purposes, the Tax Amount of such Person and its
Restricted Subsidiaries for such period, (iii) consolidated interest expense
of such Person and its Restricted Subsidiaries for such period, whether paid
or accrued and whether or not capitalized (including, without limitation,
amortization of original issue discount, non-cash interest payments, the
interest component of any deferred payment obligations, the interest component
of all payments associated with Capital Lease Obligations, commissions,
discounts and other fees and charges incurred in respect of letter of credit
or bankers' acceptance financings, and net payments (if any) pursuant to
Hedging Obligations), (iv) depreciation and amortization (including
amortization of goodwill and other intangibles but excluding amortization of
prepaid cash expenses that were paid in a prior period) and other non-cash
charges (excluding any such non-cash charge to the extent that it represents
an accrual of or reserve for cash charges in any future period or amortization
of a prepaid cash expense that was paid in a prior period) of such Person and
its Restricted Subsidiaries for such period, (v) pre-opening expenses to the
extent that such pre-opening expenses were deducted in computing Consolidated
Net Income, in each case, on a consolidated basis and determined in accordance
with GAAP and (vi) any abandonment loss incurred in connection with the
expansion of the Eldorado which was reflected on the Company's Consolidated
Statement of Income for the period ended December 31, 1995. Notwithstanding
the foregoing, the provision for taxes on the income or profits of, and the
depreciation, amortization and other non-cash charges of, a Restricted
Subsidiary of the referent Person shall be added to Consolidated Net Income to
compute Consolidated Cash Flow only to the extent (and in same proportion)
that the Net Income of such Restricted Subsidiary was included in calculating
the Consolidated Net Income of such Person and only if a corresponding amount
would be permitted
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at the date of determination to be dividended to the Issuers by such
Restricted Subsidiary without prior governmental approval (that has not been
obtained), and without direct or indirect restriction pursuant to the terms of
its charter and all agreements, instruments, judgments, decrees, orders,
statutes, rules and governmental regulations applicable to such Restricted
Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided that (i) the Net Income (but not loss) of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting (including without limitation ELLC) shall be included only to the
extent of the amount of dividends or distributions paid in cash to the
referent Person or a Consolidated Subsidiary thereof, (ii) the Net Income of
any Restricted Subsidiary shall be excluded to the extent that the declaration
or payment of dividends or similar distributions by such Restricted Subsidiary
of such Net Income is not at the date of determination of Consolidated Net
Income for such period permitted without any prior governmental approval (that
has not been obtained) or, directly or indirectly, by operation of the terms
of its charter or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulation applicable to such Restricted Subsidiary or
its stockholders, (iii) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition
shall be excluded, (iv) the cumulative effect of a change in accounting
principles and any losses resulting from the application of Statement of
Financial Accounting Standards No. 121 shall be excluded and (v) the Net
Income of any Unrestricted Subsidiary, other than ELLC, shall be excluded,
whether or not distributed to the Issuers or their Restricted Subsidiaries.
"Consolidated Net Worth" means, with respect to any Person, the amount by
which the total assets of such Person and its Restricted Subsidiaries exceed
the sum of (i) the total liabilities of such Person and its Restricted
Subsidiaries plus (ii) any Disqualified Stock of such Person and its
Restricted Subsidiaries (other than any such Disqualified Stock issued to such
Person or any of its Restricted Subsidiaries), in each case determined in
accordance with GAAP.
"Consolidated Subsidiary" of any Person means a Restricted Subsidiary of
such Person which could be included with such Person in a consolidated group
of such Person for federal income tax reporting.
"Continuing Member" means, as of any date of determination, any member of
the Management Committee who (i) was a member of the Management Committee on
the date of the Indenture or (ii) was nominated for election to the Management
Committee with the approval of at least a majority of the Continuing Members
who were members of the Management Committee at the time of such nomination or
election.
"Daniels Notes" means Indebtedness in an amount not to exceed $3.5 million
incurred to finance the acquisition of the Daniels Property.
"Daniels Property" means that certain parcel of real property together with
the improvements thereon located in the city of Reno, county of Washoe, state
of Nevada, located on Washoe Assessor Parcels 007-292-18, 007-292-20 and 007-
292-25, and more commonly known as Daniel's Motor Lodge, 275 North Sierra
Street, Reno, Nevada 89501.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Designated Senior Debt" means (i) Indebtedness under the Senior Credit
Agreement and (ii) any other Senior Debt permitted to be incurred by the
Issuers under the terms of the Indenture the principal amount of which is
$25.0 million or more and that has been designated by the Management Committee
as "Designated Senior Debt."
"Development Property" means a parcel of real property that is not part of a
Gaming Facility and that (i) was owned as of the date of the Indenture by the
Company, (ii) was owned as of the date of the Indenture by
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Affiliates of the Company and transferred to the Company or a joint venture in
which the Company participates and valued at the acquisition cost of such
parcels by such Affiliate plus an amount equal to interest at the rate of 10%
per annum on such acquisition cost from the date of acquisition by such
Affiliate, (iii) the Daniels Property or (iv) is acquired by the Company after
the date of the Indenture and has a fair market value of less than
$1.0 million on the date of determination.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable
at the option of the Holder thereof, in whole or in part, on or prior to the
date that is 91 days after the date on which the Notes mature.
"Eldorado" means the casino/hotel owned and operated by the Company and
located at Fourth and Virginia Streets in Reno, Nevada.
"ELLC" means Eldorado Limited Liability Company, a Nevada limited-liability
company.
"ELLC Member Notes" means Indebtedness in an amount not to exceed $3.9
million incurred in connection with the acquisition by the Company of certain
membership interests of ELLC from Affiliates of the Company.
"ELLC Note" means the inter-company payable in the amount of $23.0 million
made by ELLC in favor of the Company.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Event of Default" has the meaning specified under the caption "--Events of
Default and Remedies."
"Existing Indebtedness" means Indebtedness of the Issuers and their
Restricted Subsidiaries in existence on the date of the Indenture, until such
amounts are repaid.
"FF&E" means furniture, fixtures and equipment, including gaming equipment,
used in connection with any Gaming Business.
"FF&E Financing" means the incurrence of Indebtedness, the proceeds of which
will be used to finance the acquisition by the Company or a Restricted
Subsidiary of FF&E used in connection with any Gaming Facility whether or not
secured by a Lien on such FF&E; provided that such Indebtedness does not
exceed the fair market value of such FF&E at the time of its acquisition.
"Fixed Charges" means, with respect to any Person for any period, the sum of
(without duplication) (i) the consolidated interest expense of such Person and
its Restricted Subsidiaries for such period, whether paid or accrued
(including, without limitation, amortization of original issue discount, non-
cash interest payments, the interest component of any deferred payment
obligations, the interest component of all payments associated with Capital
Lease Obligations, commissions, discounts and other fees and charges incurred
in respect of letter of credit or bankers' acceptance financings, and net
payments (if any) pursuant to Hedging Obligations, but excluding all other
amortization of debt issuance costs) and (ii) the consolidated interest
expense of such Person and its Restricted Subsidiaries that was capitalized
during such period and (iii) any interest expense on Indebtedness of another
Person that is Guaranteed by such Person or one of its Restricted Subsidiaries
or secured by a Lien on assets of such Person or one of its Restricted
Subsidiaries (whether or not such Guarantee or Lien is called upon) and (iv)
the product of (a) all cash dividend payments or other distributions (and non-
cash dividend payments in the case of a Person that is a Restricted
Subsidiary) on any series of Disqualified Stock of such Person (other than
payments to such Person and its Consolidated Subsidiaries), times (b) a
fraction, the numerator of which is one and the denominator of which is one
minus the then current combined federal, state and local statutory tax rate of
such Person (or, in the case of a Person that is a partnership, the combined
federal, state and local tax rate to which such Person would be subject if it
were a Nevada corporation filing separate tax
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returns with respect to its Taxable Income), expressed as a decimal, in each
case, on a consolidated basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period; provided, however, that
(i) in the event that such Person or any of its Restricted Subsidiaries
incurs, assumes, Guarantees or redeems any Indebtedness (other than revolving
credit borrowings) or issues or redeems any preferred stock subsequent to the
commencement of the period for which the Fixed Charge Coverage Ratio is being
calculated but prior to the date on which the event for which the calculation
of the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the
Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to
such incurrence, assumption, Guarantee or redemption of Indebtedness, or such
issuance or redemption of preferred stock, as if the same had occurred at the
beginning of the applicable four-quarter reference period; (ii) in the event
that such Person or any of its Restricted Subsidiaries designates an
Unrestricted Subsidiary as a Restricted Subsidiary in accordance with the
provisions of the Indenture, or makes any acquisitions or dispositions
(including Asset Sales), including through mergers or consolidations and
including any related financing transactions, during the four-quarter
reference period or subsequent to such reference period and on or prior to the
Calculation Date, then the Fixed Charge Coverage Ratio shall be calculated
giving pro forma effect to such acquisitions or dispositions, as if the same
had occurred at the beginning of the applicable four-quarter reference period,
and, in the case of a redesignation of an Unrestricted Subsidiary as a
Restricted Subsidiary, Consolidated Cash Flow for such reference period shall
be calculated without giving effect to clause (v) of the proviso set forth in
the definition of Consolidated Net Income and in the case of acquisitions,
Consolidated Cash Flow for such reference period shall be calculated without
giving effect to clause (iii) of the proviso set forth in the definition of
Consolidated Net Income; (iii) the Consolidated Cash Flow attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded;
and (iv) the Fixed Charges attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses disposed of
prior to the Calculation Date, shall be excluded, but only to the extent that
the obligations giving rise to such Fixed Charges will not be obligations of
the referent Person or any of its Restricted Subsidiaries following the
Calculation Date.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of the Indenture.
"Gaming Authority" means any agency, authority, board, bureau, commission,
department, office or instrumentality of any nature whatsoever of the United
States federal or foreign government, any state, province or any city or other
political subdivision or otherwise, and whether now or hereafter in existence,
or any officer or official thereof, including the Nevada State Gaming
Commission, the Nevada State Gaming Control Board and any other applicable
gaming regulatory authority with authority to regulate any gaming operation
(or proposed gaming operation) owned, managed or operated by the Company or
any of its Subsidiaries.
"Gaming Business" means the gaming business and includes all businesses
necessary for, incident to, connected with or arising out of the operation of
a gaming establishment or facility (including developing and operating
lodging, retail and restaurant facilities, sports or entertainment facilities,
transportation services or other related activities or enterprises and any
additions or improvements thereto) and any businesses incident and useful to
the Gaming Business, including without limitation food and beverage
distribution operations to the extent that they are operated in connection
with a gaming business.
"Gaming Facility" means any tangible vessel, building, or other structure
used or expected to be used to enclose space in which a Gaming Business is
conducted and (i) wholly or partially owned, directly or indirectly, by the
Company or any Restricted Subsidiary or (ii) any portion or aspect of which is
managed or used, or expected to be managed or used, by the Company or a
Restricted Subsidiary; provided that the term Gaming
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Facility does not include any real property whether or not such vessel,
building or other structure is located thereon or adjacent thereto or any
furniture, fixtures and equipment, including gaming equipment, used in
connection with any Gaming Business.
"Gaming License" means any license, permit, franchise or other authorization
from any Gaming Authority required on the date of the Indenture or at any time
thereafter to own, lease, operate or otherwise conduct the Gaming Business of
the Company and its Subsidiaries, including all licenses granted under the
gaming laws of a jurisdiction or jurisdictions to which the Company or any of
its Subsidiaries is, or may at any time after the date of the Indenture, be
subject.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Guarantor" means each Subsidiary that executes a Guarantee of the Issuers'
payment obligations under the Notes and the Indenture in accordance with the
provisions of the Indenture, and their respective successors and assigns.
"HCM" means Hotel Casino Management, Inc., a Nevada corporation.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) interest and currency rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person against
fluctuations in interest or currency exchange rates.
"Included Persons" means any Person that (i) has a class of equity
securities that is traded on the New York Stock Exchange, the American Stock
Exchange or the Nasdaq Stock Market, (ii) has equity market value as of the
date of determination of $2 billion or more, (iii) has senior unsecured debt
securities rated in a ratings category higher than the Notes, as rated by both
of Moody's Investors Service and Standard & Poor's Ratings Group and (iv)
engages primarily in the Gaming Business.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced
by bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of
the purchase price of any property or representing any Hedging Obligations or
the amount of any Person's obligation to the redemption, repayment or other
repurchase of its Disqualified Stock, except any such balance that constitutes
an accrued expense or trade payable, if and to the extent any of the foregoing
indebtedness (other than letters of credit and Hedging Obligations) would
appear as a liability upon a balance sheet of such Person prepared in
accordance with GAAP, as well as all indebtedness of others secured by a Lien
on any asset of such Person (whether or not such indebtedness is assumed by
such Person) and, to the extent not otherwise included, the Guarantee by such
Person of any indebtedness of any other Person; provided that with respect to
the Company and its Restricted Subsidiaries, the Guarantee of Indebtedness
shall not be deemed an incurrence of Indebtedness to the extent that the
Indebtedness so guaranteed is permitted to be incurred by the Company or a
Restricted Subsidiary pursuant to the terms of the Indenture.
"Initial Public Offering" means the first underwritten public offering of
common Capital Stock of the Company or Parent registered under the Securities
Act (other than a public offering registered on Form S-8 under the Securities
Act) that results in net proceeds of at least $20.0 million to the Company or
the Parent, as the case may be.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons in the forms of direct or indirect loans (including
guarantees of Indebtedness or other obligations), advances (other than
advances to vendors and customers in the ordinary course of business that are
recorded as accounts receivable in accordance with GAAP and excluding
commission, travel, relocation and similar advances to officers and
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employees made in the ordinary course of business), capital contributions,
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP;
provided that an acquisition of assets, Equity Interests or other securities
by the Issuers or any of their Restricted Subsidiaries for consideration
consisting of Equity Interests (other than Disqualified Stock) of the Company
shall not be deemed to be an Investment. If the Issuers or any of their
Restricted Subsidiaries sells or otherwise disposes of any Equity Interests of
any Restricted Subsidiary of the Issuers such that, after giving effect to any
such sale or disposition, such Person is no longer a Restricted Subsidiary of
either Issuer, the Issuers shall be deemed to have made an Investment on the
date of any such sale or disposition equal to the fair market value of the
Equity Interests of such Restricted Subsidiary not sold or disposed of.
"Joint Venture Agreement" means that certain Agreement of Joint Venture of
Circus and Eldorado Joint Venture dated as of March 1, 1994 by and among ELLC,
the Company and Galleon, Inc. and relating to the Silver Legacy.
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the
nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement
under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"Management Agreement" means the Management Agreement, dated the date of the
Indenture, between the Company, REC and HCM.
"Management Committee" means (i) for so long as the Company is a limited-
liability company, the Board of Managers appointed pursuant to Article V of
the Operating Agreement, (ii) if the Company is a partnership, the general
partners or a committee or board generally managing the business of such
partnership and (iii) otherwise the Board of Directors of the Company.
"Managers" means REC and HCM, or any successors thereto.
"Material Gaming Facility" means on any date any Gaming Facility that is
owned by the Company or a Restricted Subsidiary (i) which has contributed more
than 10% of the Net Revenues of the Company during the Company's most recently
completed four full fiscal quarters for which internal financial statements
are available preceding such date (such contribution to be annualized if such
Gaming Facility has not been in full operation for all of such four fiscal
quarters) or (ii) the book value of which on such date constitutes more than
10% of the total assets of the Company and its Restricted Subsidiaries as of
the end of the most recently completed fiscal quarter for which internal
financial statements are available.
"Member Notes" shall mean a series of notes of the Company that: (i) are
issued pro rata, to the members of the Company in contemplation of the Initial
Public Offering; (ii) have terms specifying that principal amounts thereof may
be paid only by proceeds from the Initial Public Offering; (iii) shall
automatically be converted into membership interests, pro rata, (a) if not
paid with proceeds of the Initial Public Offering within 90 days of issuance
or (b) upon the occurrence of an Event of Default under the Notes; (iv) have a
stated final maturity after the Notes; (v) are expressly subordinated in right
of payment to the prior payment in full of the Notes; (vi) have stated
interest payment dates no more often than semi-annually; (vii) have a stated
interest rate of less than 10%; (viii) are unsecured; (ix) are not redeemable
prior to stated maturity except from the proceeds of the Initial Public
Offering; and (x) do not contain any terms or covenants which would cause the
Member Notes to be in default prior to the Notes.
"Net Income" means, with respect to any Person for any period, (i) the net
income (loss) of such Person for such period, determined in accordance with
GAAP and before any reduction in respect of preferred stock dividends,
excluding, however, (a) any gain (but not loss), together with any related
provision for taxes on such
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gain (but not loss), realized in connection with (1) any Asset Sale
(including, without limitation, dispositions pursuant to sale and leaseback
transactions) or (2) the disposition of any securities by such Person or any
of its Restricted Subsidiaries or the extinguishment of any Indebtedness of
such Person or any of its Restricted Subsidiaries and (b) any extraordinary or
nonrecurring gain (but not loss), together with any related provision for
taxes on such extraordinary or nonrecurring gain (but not loss), less (ii) in
the case of any Person that is treated as a partnership or other pass through
entity for United States federal or state income tax purposes, the Tax Amount
of such Person for such period.
"Net Proceeds" means the aggregate cash proceeds received by the Issuers,
any of their Restricted Subsidiaries or ELLC in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of
the direct costs relating to such Asset Sale (including, without limitation,
legal, accounting and investment banking fees, and sales commissions), any
relocation expenses incurred as a result thereof, any taxes or Tax
Distributions paid or payable by the Issuers, any of their Restricted
Subsidiaries or ELLC as a result thereof (after taking into account any
available tax credits or deductions and any tax sharing arrangements), any
purchase money obligations relating to the assets comprising such Asset Sale
(to the extent repaid with the proceeds thereof) and any reserve for
adjustment in respect of the sale price of such asset or assets established in
accordance with GAAP.
"Net Revenues" means the net revenues as determined under GAAP of the
Company and its Restricted Subsidiaries as shown on the Company's financial
statements.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the Issuers
nor any of their Restricted Subsidiaries (a) provides credit support of any
kind (including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender, (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Issuers or any of their Restricted Subsidiaries to declare a default on such
other Indebtedness or cause the payment thereof to be accelerated or payable
prior to its stated maturity and (iii) as to which the lenders have been
notified in writing that they will not have any recourse to the stock or
assets of the Issuers or any of their Restricted Subsidiaries.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Operating Agreement" means the Operating Agreement of Eldorado Resorts LLC,
dated June 28, 1996, as amended to the date of the Indenture.
"Parent" means a corporation to be formed which shall own all or
substantially all of the common equity interests of the Company.
"Permitted Investments" means (i) any Investment in the Issuers or in a
Consolidated Subsidiary of the Issuers, including without limitation any
Investment in the Gaming Business of the Issuers or any such Consolidated
Subsidiaries of the Issuers; (ii) any Investment in Cash Equivalents; (iii)
any Investment by the Issuers or any of their Restricted Subsidiaries in a
Person if, as a result of such Investment, (a) such Person becomes a
Consolidated Subsidiary of the Company engaged in the Gaming Business or (b)
such Person is merged, consolidated or amalgamated with or into, or transfers
or conveys substantially all of its assets to, or is liquidated into, the
Company or a Consolidated Subsidiary of the Company engaged in the Gaming
Business; (iv) any Restricted Investment made as a result of the receipt of
non-cash consideration from an Asset Sale that was made pursuant to and in
compliance with the covenant described above under the caption "--Repurchase
at the Option of Holders--Asset Sales"; (v) advances and loans to employees of
the Company and its Restricted Subsidiaries in the ordinary course of
business; (vi) Investments acquired by the Company or any of its Restricted
Subsidiaries (a) in exchange for any other Investment or accounts receivable
held by the Company or such Restricted Subsidiary in connection with or as a
result of a bankruptcy workout, reorganization or recapitalization
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of the issuer of such Investment or accounts receivable or (b) as a result of
a foreclosure by the Company or such Restricted Subsidiary or other transfer
of title with respect to any secured Investment in default; (vii) the
contribution, in exchange for an equity interest or debt obligation, of
Development Property to a joint venture in which the Company, directly or
indirectly, holds an equity interest; (viii) any Hedging Obligation; and
(ix) capital expenditures, including the acquisition of other tangible assets
or the payment of costs of construction of real property improvements, in each
case to be used or useful in the Gaming Business of the Company or its
Restricted Subsidiaries.
"Permitted Liens" means (i) Liens securing Senior Debt and Indebtedness of
Restricted Subsidiaries that is permitted to be incurred pursuant to the
Indenture; (ii) Liens securing Indebtedness that is pari passu in right of
payment with the Notes, provided that the Notes are equally and ratably
secured, (iii) Liens in favor of the Issuers or any of their Restricted
Subsidiaries; (iv) Liens on property of a Person existing at the time such
Person is merged into or consolidated with the Issuers or any of their
Restricted Subsidiaries, provided that such Liens were in existence prior to
the contemplation of such merger or consolidation and do not extend to any
assets other than those of the Person merged into or consolidated with the
Issuers or any such Restricted Subsidiary; (v) Liens on property existing at
the time of acquisition thereof by the Issuers or any of their Restricted
Subsidiaries, provided that such Liens were in existence prior to the
contemplation of such acquisition; (vi) Liens to secure the performance of
statutory obligations, surety or appeal bonds, performance bonds or other
obligations of a like nature incurred in the ordinary course of business;
(vii) Liens to secure Indebtedness (including Capital Lease Obligations)
permitted by clause (iv) of the second paragraph of the covenant entitled
"Incurrence of Indebtedness" covering only the assets acquired with such
Indebtedness; (viii) Liens existing on the date of the Indenture; (ix) Liens
for taxes, assessments or governmental charges or claims that are not yet
delinquent or that are being contested in good faith by appropriate
proceedings promptly instituted and diligently concluded, provided that any
reserve or other appropriate provision as shall be required in conformity with
GAAP shall have been made therefor; (x) Liens of landlords or of mortgagees of
landlords arising by operation of law, provided that the rental payments
secured thereby are not yet due and payable; (xi) Liens incurred or deposits
made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security, (xii)
easements, rights-of-way, restrictions, minor defects or irregularities in
title and other similar charges or encumbrances not interfering in any
material respect with the business of the Company or any of its Restricted
Subsidiaries; (xiii) judgement or attachment Liens not giving rise to an Event
of Default; (xiv) Liens arising out of the purchase, consignment, shipment or
storage of inventory or other goods in the ordinary course of business; (xv)
any interest or title of a lessor in property subject to any Capital Lease
Obligation or other lease; (xvi) Liens arising from filing Uniform Commercial
Code financing statements regarding leases; (xvii) leases or subleases
permitted pursuant to the terms of the Indenture and that are granted to
others and do not in any material respect interfere with the business of the
Company or any Restricted Subsidiary; (xviii) any interest or title of a
lessor in the property subject to any lease, whether characterized as
capitalized or operating other than any such interest or title resulting from
or arising out of a default by the Company or any Restricted Subsidiary of its
obligations under such lease; and (xix) Liens incurred in the ordinary course
of business of the Issuers or any of their Restricted Subsidiaries that (a)
are not incurred in connection with the borrowing of money or the obtaining of
advances or credit (other than trade credit in the ordinary course of
business) and (b) do not in the aggregate materially detract from the value of
the property or materially impair the use thereof in the operation of business
by the Issuers or any such Restricted Subsidiary.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Issuers
or any of their Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Issuers or any such Restricted Subsidiary;
provided that: (i) the principal amount (or accreted value, if applicable) of
such Permitted Refinancing Indebtedness does not exceed the principal amount
(or accreted value, if applicable) of the Indebtedness so extended,
refinanced, renewed, replaced, defeased or refunded (plus the amount of
reasonable expenses incurred in connection therewith); (ii) such Permitted
Refinancing Indebtedness has a final maturity date no earlier than the final
maturity date of, and has a Weighted Average Life to Maturity equal to or
greater than the Weighted Average Life to Maturity of, the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the
Indebtedness
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being extended, refinanced, renewed, replaced, defeased or refunded is
subordinated in right of payment to the Notes, such Permitted Refinancing
Indebtedness is subordinated in right of payment to the Notes on terms at
least as favorable to the Holders of Notes as those contained in the
documentation governing the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; and (iv) such Indebtedness is incurred only by
the Issuer or the Restricted Subsidiary that is the obligor on the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded.
"Person" means an individual, partnership, limited-liability company,
corporation, trust or unincorporated organization and a government or agency
or a political subdivision thereof.
"Public Equity Offering" means an underwritten public offering of common
Capital Stock of the Company or Parent registered under the Securities Act
(other than a public offering registered on Form S-8 under the Securities Act)
that results in net proceeds of at least $20.0 million to the Company.
"REC" means Recreational Enterprises, Inc., a Nevada corporation.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of such Person that
is not an Unrestricted Subsidiary.
"Senior Credit Agreement" means that certain Loan Agreement, dated as of
March 25, 1994, between the Issuer, the banks named therein, Bank of America
National Trust and Savings Association, as administrative agent, First
Interstate Bank of Nevada, N.A., as amended by that certain First Amendment to
Loan Agreement, dated as of September 29, 1995, that certain Second Amendment
to Loan Agreement, dated as of the date of the Indenture, and any further
amendments, modifications, restatements, renewals, supplements, refundings,
replacements or refinancings thereof.
"Senior Debt" means (i) Indebtedness under the Senior Credit Agreement and
(ii) any other Indebtedness permitted to be incurred by the Issuers under the
terms of the Indenture, unless the instrument under which such Indebtedness is
incurred expressly provides that it is subordinated in right of payment to any
Senior Debt of the Issuers. Notwithstanding anything to the contrary in the
foregoing, Senior Debt will not include (a) any liability for federal, state,
local or other taxes owed or owing by the Issuers, (b) any Indebtedness of the
Issuers to any of their Subsidiaries or other Affiliates, (c) any trade
payables or (d) any Indebtedness that is incurred in violation of the
Indenture.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Act, as such Regulation is in effect on the date
hereof.
"Significant Guarantor" means any Guarantor with Adjusted Net Assets in
excess of $5.0 million.
"Silver Legacy Joint Venture" means Silver Legacy Joint Venture, a Nevada
general partnership.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total
voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers
or trustees thereof is at the time owned or controlled, directly or
indirectly, by such Person or one or more of the other Subsidiaries of such
Person (or a combination thereof) and (ii) any partnership (a) the sole
general partner or the managing general partner of which is such Person or a
Subsidiary of such Person or (b) the only general partners of which are such
Person or of one or more Subsidiaries of such Person (or any combination
thereof).
"Tax Amount" means, with respect to any period, without duplication, the
amount of taxable income of any Person for such period multiplied by the
highest marginal combined federal, state and local tax rates
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applicable to individuals during such period, but only at such blended state
and local tax rates at which such Person would have been subject to taxation
if such Person had been taxed as a corporation during such period.
"Tax Distribution" means a distribution in respect of taxes to the partners
of the Company pursuant to clause (iv) of the second paragraph of the covenant
entitled "Restricted Payments."
"Unrestricted Subsidiary" means any Subsidiary, other than Capital, that is
designated by the Management Committee as an Unrestricted Subsidiary pursuant
to a Board Resolution, but only to the extent that such Subsidiary (i) has no
Indebtedness other than Non-Recourse Debt, (ii) is not party to any agreement,
contract, arrangement or understanding with the Issuers or any of their
Restricted Subsidiaries unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Issuers or such
Restricted Subsidiary than those that might be obtained at the time from
Persons who are not Affiliates of the Issuers, (iii) is a Person with respect
to which neither the Issuers nor any of their Restricted Subsidiaries has any
direct or indirect obligation (a) to subscribe for additional Equity Interests
or (b) to maintain or preserve such Person's financial condition or to cause
such Person to achieve any specified levels of operating results and (iv) is
not a guarantor of, and is not otherwise directly or indirectly providing
credit support for, any Indebtedness of the Issuers or any of their Restricted
Subsidiaries. Any such designation by the Management Committee shall be
evidenced to the Trustee by filing with the Trustee a certified copy of the
Board Resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
conditions and was permitted by the covenant described above under the caption
"--Certain Covenants--Incurrence of Indebtedness." If, at any time, any
Unrestricted Subsidiary would fail to meet the foregoing requirements as an
Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted
Subsidiary for purposes of the Indenture and any Indebtedness of such
Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the
Issuers as of such date (and, if such Indebtedness is not permitted to be
incurred as of such date under the covenant described under the caption
"Incurrence of Indebtedness," the Issuers shall be in default of such
covenant).
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (ii) the then outstanding
principal amount of such Indebtedness.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of Latham & Watkins, counsel to the Issuers, the following
discussion describes the material federal income tax consequences expected to
result to holders whose Private Notes are exchanged for Exchange Notes in the
Exchange Offer. Such opinion is based upon current provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), applicable Treasury
regulations, judicial authority and administrative rulings and practice. There
can be no assurance that the Internal Revenue Service (the "Service") will not
take a contrary view, and no ruling from the Service has been or will be
sought with respect to the Exchange Offer. Legislative, judicial or
administrative changes or interpretations may be forthcoming that could alter
or modify the statements and conclusions set forth herein. Any such changes or
interpretations may or may not be retroactive and could affect the tax
consequences to holders. Certain holders (including insurance companies, tax-
exempt organizations, financial institutions, broker-dealers, foreign
corporations and persons who are not citizens or residents of the United
States) may be subject to special rules not discussed below. EACH HOLDER OF
PRIVATE NOTES SHOULD CONSULT ITS OWN TAX ADVISOR AS TO THE PARTICULAR TAX
CONSEQUENCES OF EXCHANGING PRIVATE NOTES FOR EXCHANGE NOTES, INCLUDING THE
APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN LAWS.
The exchange of Private Notes for Exchange Notes will be treated as a "non-
event" for federal income tax purposes because the Exchange Notes will not be
considered to differ materially in kind or extent from the Private Notes. As a
result, no material federal income tax consequences will result to holders
exchanging Private Notes for Exchange Notes.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. This Prospectus, as it may
be amended or supplemented from time to time, may be used by a broker-dealer
in connection with the resales of Exchange Notes received in exchange for
Private Notes where such Private Notes were acquired as a result of market-
making activities or other trading activities. The Issuers have agreed that
for a period not to exceed 180 days after the date of effectiveness of the
Registration Statement, unless extended pursuant to the terms of the
Registration Rights Agreement, they will make this Prospectus, as amended or
supplemented, available to any broker-dealer for use in connection with any
such resale.
The Issuers will not receive any proceeds from any sale of Exchange Notes by
broker-dealers or any other persons. Exchange Notes received by broker-dealers
for their own account pursuant to the Exchange Offer may be sold from time to
time in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the Exchange Notes or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer and/or the purchasers of any such
Exchange Notes. Any broker-dealer that resells Exchange Notes that were
received by it for its own account pursuant to the Exchange Offer and any
broker or dealer that participates in a distribution of such Exchange Notes
may be deemed to be an "underwriter" within the meaning of the Securities Act
and any profit on any such resale of Exchange Notes and any commissions or
concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states that
by acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act.
The Issuers have agreed to pay all expenses incident to the Issuers'
performance of, or compliance with, the Registration Rights Agreement and will
indemnify the holders of Private Notes (including any broker-dealers), and
certain parties related to such holders, against certain liabilities,
including liabilities under the Securities Act.
96
<PAGE>
NEVADA REGULATION AND LICENSING
The ownership and operation of casino gaming facilities in Nevada are
subject to the Nevada Act and various local regulations. The Company's gaming
operations are subject to the licensing and regulatory control of the Nevada
Gaming Authorities. The laws, regulations and supervisory procedures of the
Nevada Gaming Authorities are based upon declarations of public policy which
seek to, among other things, (i) prevent unsavory or unsuitable persons from
having any direct or indirect involvement with gaming at any time or in any
capacity, (ii) establish and maintain responsible accounting practices and
procedures, (iii) maintain effective control over the financial practices of
licensees, including establishing minimum procedures for internal fiscal
affairs and the safeguarding of assets and revenues, providing reliable
recordkeeping and requiring the filing of periodic reports with the Nevada
Gaming Authorities, (iv) prevent cheating and fraudulent practices and (v)
provide a source of state and local revenues through taxation and licensing
fees. Changes in such laws, regulations and procedures could have an adverse
effect on the Company's gaming operations.
The Company, which operates the Eldorado, is licensed by the Nevada Gaming
Authorities and is a corporate licensee (a "Corporate Licensee") under the
terms of the Nevada Act. The gaming license requires the periodic payment of
fees and taxes and is not transferable. The Company is required to register
with the Nevada Commission as a publicly traded corporation (a "Registered
Corporation") at the time it makes the Exchange Offer. Registered Corporations
are required periodically to submit detailed financial and operating reports
to the Nevada Commission and furnish any other information that the Nevada
Commission may request. No person may become a member of, or receive any
percentage of the profits from, the Company without first obtaining licenses
and approvals from the Nevada Gaming Authorities. All of the members of the
Company have obtained the licenses and approvals necessary to own their
respective interests in the Company. The Company has obtained from the Nevada
Gaming Authorities the various registrations, approvals, permits and licenses
required in order to engage in gaming activities at the Eldorado.
The Nevada Gaming Authorities may investigate any individual who has a
material relationship to, or material involvement with, the Company in order
to determine whether such individual is suitable or should be licensed as a
business associate of the Company. Officers, directors and certain key
employees of the Company must file applications with the Nevada Gaming
Authorities and may be required to be licensed or found suitable by the Nevada
Gaming Authorities. The Nevada Gaming Authorities may deny an application for
licensing for any cause which they deem reasonable. A finding of suitability
is comparable to licensing, and both require submission of detailed personal
and financial information followed by a thorough investigation. The applicant
for licensing or a finding of suitability must pay all the costs of the
investigation. Changes in licensed positions must be reported to the Nevada
Gaming Authorities and, in addition to their authority to deny an application
for a finding of suitability or licensure, the Nevada Gaming Authorities have
jurisdiction to disapprove a change in a corporate position.
If the Nevada Gaming Authorities were to find an officer, director or key
employee of the Company unsuitable for licensing or unsuitable to continue
having a relationship with the Company, the Company would have to sever all
relationships with such person. In addition, the Nevada Commission may require
the Company to terminate the employment of any person who refuses to file
appropriate applications. Determinations of suitability or of questions
pertaining to licensing are not subject to judicial review in Nevada.
The Company is required to submit detailed financial and operating reports
to the Nevada Commission. Substantially all material loans, leases, sales of
securities and similar financing transactions by the Company must be reported
to, or approved by, the Nevada Commission.
If it were determined that the Nevada Act was violated by the Company, the
gaming licenses it holds could be limited, conditioned, suspended or revoked,
subject to compliance with certain statutory and regulatory procedures. In
addition, the Company and the persons involved could be subject to substantial
fines for each separate violation of the Nevada Act at the discretion of the
Nevada Commission. Further, a supervisor could be appointed by the Nevada
Commission to operate the Company's gaming properties and, under certain
97
<PAGE>
circumstances, earnings generated during the supervisor's appointment (except
for the reasonable rental value of the Company's gaming properties) could be
forfeited to the State of Nevada. Limitation, conditioning or suspension of
any gaming license or the appointment of a supervisor could (and revocation of
any gaming license would) materially adversely affect the Company's gaming
operations.
The Nevada Commission may, in its discretion, require the holder of any debt
security of the Company, including the Notes, to file applications, be
investigated and be found suitable to own such debt security. If the Nevada
Commission determines that a person is unsuitable to own such security, then
pursuant to the Nevada Act, the Company can be sanctioned, including the loss
of its licenses, if without the prior approval of the Nevada Commission, it:
(i) pays to the unsuitable person any dividend, interest or any distribution
whatsoever, (ii) recognizes any voting right by such unsuitable person in
connection with such securities, (iii) pays the unsuitable person remuneration
in any form or (iv) makes any payment to the unsuitable person by way of
principal, redemption, conversion, exchange, liquidation or similar
transaction.
The Company is presently licensed by the Nevada Gaming Authorities under the
provisions of the Nevada Act applicable to privately owned corporations. In
order to consummate the Exchange Offer, the Company will be required to apply
for registration with the Nevada Commission as a Registered Corporation and
for approval of the public offering of the New Notes. The Company presently
has applications pending with the Nevada Gaming Authorities for such
approvals. Assuming that such orders and approvals are obtained, the following
discussion pertaining to Registered Corporations will apply.
Any beneficial holder of a Registered Corporation's voting securities,
regardless of the number of shares owned, may be required to file an
application, be investigated and have his suitability as a beneficial holder
of a Registered Corporation's voting securities determined if the Nevada
Commission has reason to believe that such ownership would otherwise be
inconsistent with the declared policies of the state of Nevada. The applicant
must pay all costs of investigation incurred by the Nevada Gaming Authorities
in conducting any such investigation.
The Nevada Act requires any person who acquires beneficial ownership of more
than 5% of a Registered Corporation's voting securities to report the
acquisition to the Nevada Commission. The Nevada Act requires that beneficial
owners of more than 10% of a Registered Corporation's voting securities apply
to the Nevada Commission for a finding of suitability within 30 days after the
Chairman of the Nevada Gaming Board mails the written notice requiring such
filing. Under certain circumstances, an "institutional investor," as defined
in the Nevada Act, which acquires more than 10%, but not more than 15%, of a
Registered Corporation's voting securities may apply to the Nevada Commission
for a waiver of such finding of suitability if such institutional investor
holds the voting securities for investment purposes only. An institutional
investor will not be deemed to hold voting securities for investment purposes
unless the voting securities were acquired and are held in the ordinary course
of business as an institutional investor and not for the purpose of causing,
directly or indirectly, the election of a majority of the members of the board
of directors of a Registered Corporation, any change in a Registered
Corporation's corporate charter, bylaws, management, policies or operations or
any of its gaming affiliates or any other action which the Nevada Commission
finds to be inconsistent with holding the Registered Corporation's voting
securities for investment purposes only. Activities which are not deemed to be
inconsistent with holding voting securities for investment purposes only
include: (i) voting on all matters voted on by shareholders, (ii) making
financial and other inquiries of management of the type normally made by
securities analysts for informational purposes and not to cause a change in
management, policies or operations and (iii) such other activities as the
Nevada Commission may determine to be consistent with such investment intent.
If the beneficial holder of voting securities who must be found suitable is a
corporation, partnership or trust, it must submit detailed business and
financial information including a list of beneficial owners. The applicant is
required to pay all costs of investigation.
Any person who fails or refuses to apply for a finding of suitability or a
license within 30 days after being ordered to do so by the Nevada Commission
or the Chairman of the Nevada Gaming Board may be found unsuitable. The same
restrictions apply to a record owner of the Company's securities if the record
owner, after request, fails to identify the beneficial owner of such
securities. Any shareholder found unsuitable and who holds, directly or
indirectly, any beneficial ownership of the voting securities of a Registered
Corporation beyond such
98
<PAGE>
period of time as may be prescribed by the Nevada Commission may be guilty of
a criminal offense. A Registered Corporation is subject to disciplinary action
if, after it receives notice that a person is unsuitable to be a member or to
have any other relationship with such corporation, the Registered Corporation
(i) pays that person any dividend or interest upon voting securities of such
corporation, (ii) allows that person to exercise, directly or indirectly, any
voting right conferred through securities held by that person, (iii) pays
remuneration in any form to that person for services rendered or otherwise or
(iv) fails to pursue all lawful efforts to require such unsuitable person to
relinquish his voting securities, including, if necessary, the immediate
purchase of such voting securities for cash at fair market value.
A Registered Corporation is required to maintain a current stock ledger in
Nevada which may be examined by the Nevada Gaming Authority at any time. If
any securities are held in trust by an agent or by a nominee, the record
holder may be required to disclose the identity of the beneficial owner to the
Nevada Gaming Authorities. A failure to make such disclosure may be grounds
for finding the record holder unsuitable. A Registered Corporation is also
required to render maximum assistance in determining the identity of the
beneficial owner. The Nevada Commission has the power to require the stock
certificates of a Registered Corporation to bear a legend indicating that the
securities are subject to the Nevada Act.
Neither the Company nor a Registered Corporation may make a public offering
of its securities without the prior approval of the Nevada Commission if the
securities or proceeds therefrom are intended to be used to construct, acquire
or finance gaming facilities in Nevada or to retire or extend obligations
incurred for such purposes. The Exchange Offer will qualify as a public
offering (as such term is defined in the Nevada Act) and will require the
prior approval of the Nevada Commission upon the recommendation of the Nevada
Gaming Board. In addition, because the Company will qualify as a Registered
Corporation upon the effectiveness of the Exchange Offer, it must receive an
exemption from provisions in the Nevada Act that render a Registered
Corporation ineligible to hold a gaming license and prohibit a Corporate
Licensee from making a public offering of its securities. The Company
presently has applications pending with the Nevada Gaming Authorities for such
approval and exemption. Approval of a public offering, if given, will not
constitute a finding, recommendation or approval by the Nevada Commission or
the Nevada Gaming Board as to the accuracy or adequacy of the prospectus or
the investment merits of the New Notes offered in the Exchange Offer. Any
representation to the contrary is unlawful.
Changes in control of a Registered Corporation through merger,
consolidation, stock or asset acquisitions, management or consulting
agreements or any act or conduct by a person whereby he obtains control may
not occur without the prior approval of the Nevada Commission. Entities
seeking to acquire control of a Registered Corporation must satisfy the Nevada
Gaming Board and Nevada Commission with respect to a variety of stringent
standards prior to assuming control of such Registered Corporation. The Nevada
Commission may also require controlling shareholders, officers, directors and
other persons having a material relationship or involvement with the entity
proposing to acquire control to be investigated and licensed as a part of the
approval process relating to the transaction.
The Nevada legislature has declared that some corporate acquisitions opposed
by management, repurchases of voting securities and corporate defense tactics
affecting Registered Corporations may be injurious to stable and productive
corporate gaming. The Nevada Commission has established a regulatory scheme to
ameliorate the potentially adverse effects of these business practices upon
Nevada's gaming industry and to further Nevada's policy to: (i) assure the
financial stability of corporate gaming operators and their affiliates, (ii)
preserve the beneficial aspects of conducting business in the corporate form
and (iii) promote a neutral environment for the orderly governance of
corporate affairs. Approvals are required in certain circumstances from the
Nevada Commission before a Registered Corporation may make exceptional
repurchases of voting securities above the current market price thereof and
before a corporate acquisition opposed by management may be consummated. The
Nevada Act also requires prior approval of a plan of recapitalization proposed
by a Registered Corporation's Board of Directors in response to a tender offer
made directly to the Registered Corporation's shareholders for the purposes of
acquiring control of the Registered Corporation.
99
<PAGE>
License fees and taxes, computed in various ways depending on the type of
gaming or activity involved, are payable to the State of Nevada and to the
counties and cities in which the Nevada licensee's respective operations are
conducted. Depending upon the particular fee or tax involved, these fees and
taxes are payable either monthly, quarterly or annually and are based upon
either: (i) a percentage of the gross revenues received, (ii) the number of
gaming devices operated or (iii) the number of table games operated. A casino
entertainment tax is also paid by casino operations where entertainment is
furnished in connection with the selling of food or refreshments.
Any person who is licensed, required to be licensed, registered, required to
be registered or is under common control with such person (collectively,
"Licensees"), and who proposes to become involved in a gaming venture outside
of Nevada, is required to deposit with the Nevada Gaming Board, and thereafter
maintain, a revolving fund in the amount of $10,000 to pay the expenses of
investigation of the Nevada Gaming Board of their participation in such
foreign gaming. The revolving fund is subject to increase or decrease at the
discretion of the Nevada Commission. Thereafter, Licensees are required to
comply with certain reporting requirements imposed by the Nevada Act.
Licensees are also subject to disciplinary action by the Nevada Commission if
they knowingly violate any laws of the foreign jurisdiction pertaining to the
foreign gaming operation, fail to conduct the foreign gaming operation in
accordance with the standards of honesty and integrity required of Nevada
gaming operations, engage in activities that are harmful to the State of
Nevada or its ability to collect gaming taxes and fees or employ a person in
the foreign operation who has been denied a license or finding of suitability
in Nevada for the reason of personal unsuitability.
LEGAL MATTERS
Certain legal matters with respect to the Exchange Notes will be passed upon
for the Issuers by Latham & Watkins, Los Angeles, California and McDonald
Carano Wilson McCune Bergin Frankovich & Hicks LLP ("McDonald Carano"), Reno
and Las Vegas, Nevada. Donald L. Carano, a member of the Board of Managers and
the Chief Executive Officer of the Company, maintains an "of counsel"
relationship with McDonald Carano, but is not involved in the active practice
of law or in the representation of the Company or any of its affiliates as an
attorney.
EXPERTS
The consolidated financial statements of the Predecessor Partnership and its
subsidiary as of December 31, 1994 and 1995 and for each year of the three-
year period ended December 31, 1995 included in this Prospectus and included
elsewhere in the Registration Statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the authority of such firm
as experts in giving such report.
100
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
ELDORADO HOTEL ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARY
<TABLE>
<S> <C>
Report of Independent Public Accountants.................................... F-2
Consolidated Balance Sheets................................................. F-3
Consolidated Statements of Income........................................... F-4
Consolidated Statements of Partners' Equity................................. F-5
Consolidated Statements of Cash Flows....................................... F-6
Notes to Consolidated Financial Statements.................................. F-8
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
Eldorado Hotel Associates Limited Partnership:
We have audited the accompanying consolidated balance sheets of ELDORADO
HOTEL ASSOCIATES LIMITED PARTNERSHIP and subsidiary (the "Partnership") as of
December 31, 1994 and 1995 and the related consolidated statements of income,
partners' equity and cash flows for each of the three years in the period
ended December 31, 1995. These financial statements are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Eldorado Hotel Associates
Limited Partnership and subsidiary as of December 31, 1994 and 1995, and the
results of their operations and their cash flows for each of the three years
in the period ended December 31, 1995, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Las Vegas, Nevada
March 27, 1996
F-2
<PAGE>
ELDORADO HOTEL ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------- JUNE 30,
1994 1995 1996
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash
equivalents.............. $ 5,360 $ 6,122 $ 4,784
Accounts receivable, net.. 2,662 3,949 5,215
Inventories............... 1,209 1,992 2,358
Prepaid expenses.......... 1,126 1,528 2,426
-------- -------- --------
Total current assets.... 10,357 13,591 14,783
INVESTMENT IN JOINT
VENTURE.................... 42,229 44,644 44,583
PROPERTY AND EQUIPMENT,
net........................ 97,582 147,281 149,698
OTHER ASSETS, net........... 10,216 10,076 9,749
-------- -------- --------
Total assets............ $160,384 $215,592 $218,813
======== ======== ========
LIABILITIES AND PARTNERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-
term debt................ $ 1,119 $ 13,674 $ 18,146
Current portion of capital
lease obligations........ 213 520 627
Accounts payable.......... 3,296 3,279 3,677
Retention payable on
construction............. 411 1,361 175
Accrued and other
liabilities.............. 5,881 7,570 8,414
Due to partners and
affiliates............... 598 329 143
-------- -------- --------
Total current
liabilities............ 11,518 26,733 31,182
LONG-TERM DEBT, less current
portion.................... 77,643 107,477 97,817
CAPITAL LEASE OBLIGATIONS,
less current portion....... 89 1,959 2,498
-------- -------- --------
Total liabilities....... 89,250 136,169 131,497
-------- -------- --------
MINORITY INTEREST........... 1,500 4,655 4,641
COMMITMENTS AND
CONTINGENCIES (Note 11)....
PARTNERS' EQUITY............ 69,634 74,768 82,675
-------- -------- --------
Total liabilities and
partners' equity....... $160,384 $215,592 $218,813
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-3
<PAGE>
ELDORADO HOTEL ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE SIX
FOR THE YEARS ENDED MONTHS ENDED
DECEMBER 31, JUNE 30,
---------------------------- ----------------
1993 1994 1995 1996 1995
-------- -------- -------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES:
Casino....................... $ 95,261 $ 97,809 $106,737 $49,319 $50,124
Food and beverage............ 31,436 31,718 33,780 16,919 15,171
Hotel........................ 16,518 16,837 17,200 8,036 8,278
Other........................ 5,328 4,316 4,908 3,351 1,987
-------- -------- -------- ------- -------
148,543 150,680 162,625 77,625 75,560
Less--promotional allow-
ances....................... (11,486) (12,482) (13,895) (6,825) (6,767)
-------- -------- -------- ------- -------
Net revenues............... 137,057 138,198 148,730 70,800 68,793
OPERATING EXPENSES:
Casino....................... 34,573 37,554 42,692 21,084 20,441
Food and beverage............ 23,772 23,006 26,363 12,778 11,551
Hotel........................ 5,882 6,554 7,536 3,571 3,891
Other........................ 2,799 2,361 2,043 1,515 814
Selling, general and adminis-
trative..................... 27,316 27,509 28,335 13,980 13,260
Depreciation................. 7,443 7,612 8,409 5,067 3,662
Abandonment loss............. -- -- 1,862 -- --
Equity in net loss of subsid-
iary........................ -- -- 3,208 61 --
-------- -------- -------- ------- -------
Total operating expenses... 101,785 104,596 120,448 58,056 53,619
-------- -------- -------- ------- -------
OPERATING INCOME............... 35,272 33,602 28,282 12,744 15,174
INTEREST EXPENSE, net.......... (4,979) (2,967) (5,093) (4,651) (1,356)
-------- -------- -------- ------- -------
NET INCOME BEFORE MINORITY
INTEREST...................... 30,293 30,635 23,189 8,093 13,818
MINORITY INTEREST IN NET LOSS
OF
SUBSIDIARY.................... -- -- 745 14 --
-------- -------- -------- ------- -------
NET INCOME..................... $ 30,293 $ 30,635 $ 23,934 $ 8,107 $13,818
======== ======== ======== ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-4
<PAGE>
ELDORADO HOTEL ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
BALANCE, December 31, 1992............................................ $ 45,206
Distributions....................................................... (17,700)
Net income.......................................................... 30,293
--------
BALANCE, December 31, 1993............................................ 57,799
--------
Distributions....................................................... (18,800)
Net income.......................................................... 30,635
--------
BALANCE, December 31, 1994............................................ 69,634
--------
Distributions....................................................... (18,800)
Net income.......................................................... 23,934
--------
BALANCE, December 31, 1995............................................ 74,768
--------
Distributions (unaudited)........................................... (200)
Net income (unaudited).............................................. 8,107
--------
BALANCE, June 30, 1996 (unaudited).................................... $ 82,675
========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-5
<PAGE>
ELDORADO HOTEL ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE SIX
FOR THE YEARS ENDED MONTHS ENDED JUNE
DECEMBER 31, 30,
---------------------------- ------------------
1993 1994 1995 1996 1995
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income................. $ 30,293 $ 30,635 $ 23,934 $ 8,107 $ 13,818
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation............. 7,443 7,612 8,409 5,067 3,662
Equity in net loss of
subsidiary.............. -- -- 3,208 61 --
Minority interest in net
loss of subsidiary...... -- -- (745) (14) --
Loss on sale of property and
equipment................... 200 147 1,761 -- (40)
(Increase) Decrease in--
Accounts receivable, net... (193) (640) (1,287) (1,266) (8)
Inventories................ (63) 200 (783) (366) (378)
Prepaid expenses........... 173 (89) (402) (898) (430)
Other assets, net ......... (8,068) 1,112 (103) 327 (72)
(Decrease) Increase in--
Accounts payable, retention
payable, accrued and other
liabilities and due to
partners and affiliates... 2,217 (191) 2,353 (130) 1,234
-------- -------- -------- -------- --------
Net cash provided by
operating activities...... 32,002 38,786 36,345 10,888 17,786
-------- -------- -------- -------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchases of property and
equipment, net of
disposals................. (10,562) (12,053) (57,451) (6,524) (30,734)
Investment in joint
venture................... -- (25,014) (5,623) -- (5,372)
Proceeds from sale of
property and equipment.... 84 22 283 16 5
-------- -------- -------- -------- --------
Net cash used in investing
activities................ (10,478) (37,045) (62,791) (6,508) (36,101)
-------- -------- -------- -------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from long-term and
other debt................ 5,756 94,892 53,000 7,000 26,250
Principal payments on long-
term and other debt....... (9,932) (77,297) (10,892) (12,518) (6,646)
Contributions by minority
interest member........... -- -- 3,900 -- 3,900
Distributions.............. (17,700) (18,800) (18,800) (200) (9,700)
-------- -------- -------- -------- --------
Net cash provided by (used
in) financing activities.. $(21,876) $ (1,205) $ 27,208 $ (5,718) $ 13,804
-------- -------- -------- -------- --------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-6
<PAGE>
ELDORADO HOTEL ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS--(CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
FOR THE YEARS ENDED DECEMBER 31, JUNE 30,
--------------------------------- ----------------
1993 1994 1995 1996 1995
---------- ---------- ---------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
(DECREASE)/INCREASE IN
CASH AND CASH
EQUIVALENTS.............. $ (352) $ 536 $ 762 $(1,338) $(4,511)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD... 5,176 4,824 5,360 6,122 5,360
---------- ---------- ---------- ------- -------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD......... $ 4,824 $ 5,360 $ 6,122 $ 4,784 $ 849
---------- ---------- ---------- ------- -------
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Cash paid during period
for interest........... $ 5,121 $ 4,959 $ 6,639 $ 4,194 $ 3,448
========== ========== ========== ======= =======
</TABLE>
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
During the year ended December 31, 1994, the Partnership contributed land
totalling $17,215,000 ($325,000 of which was included in Other Assets) to a
joint venture (See Note 5).
During the year ended December 31, 1994, the minority interest member
contributed land valued at $1,500,000 to Eldorado Limited Liability Company
(See Notes 1 and 5).
During the year ended December 31, 1995, the Partnership entered into
capital lease obligations totalling $2,458,000 for slot machines and other
equipment.
During the six months ended June 30, 1996, the Partnership entered into
capital lease obligations totalling $976,000 for slot machines and other
equipment (unaudited).
The accompanying notes are an integral part of these consolidated statements.
F-7
<PAGE>
ELDORADO HOTEL ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation/Operations
The consolidated financial statements include the accounts of Eldorado Hotel
Associates Limited Partnership (the "Partnership") and its majority-owned
subsidiary, Eldorado Limited Liability Company ("ELLC"). All significant
intercompany accounts and transactions have been eliminated in consolidation.
The consolidated financial statements for the six months ended June 30, 1995
and 1996 and related amounts in the Notes to Consolidated Financial Statements
are unaudited, but in the opinion of management reflect all normal and
recurring adjustments necessary for a fair presentation of the results of
those periods.
The Partnership owns and operates the Eldorado Hotel & Casino, a 817-room
hotel casino in downtown Reno, Nevada. ELLC owns a 50% interest in a joint
venture that owns the Silver Legacy Resort Casino, a 1,711 room hotel that
opened July 28, 1995 and is located contiguous to the Eldorado Hotel & Casino.
ELLC was organized as a Nevada limited-liability company on March 1, 1994.
During 1994, the Partnership contributed land and received an initial 88.75%
interest in ELLC. During 1995, the Partnership's interest was reduced to
76.76% as a result of other members' contributions.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include investments purchased with an original
maturity of 90 days or less.
Inventories
Inventories are stated at the lower of cost, using a first-in, first-out
basis, or market value.
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed using
the straight-line method over the estimated useful life of the asset or the
term of the capitalized lease, whichever is less. Costs of major improvements
are capitalized, while costs of normal repairs and maintenance are charged to
expense as incurred.
Capitalization of Interest
The Partnership capitalizes interest on funds disbursed during the active
construction and development phases of its facilities and other major
projects. This includes interest capitalized on the Partnership's investment
in the Silver Legacy Resort Casino. Interest capitalized during the fiscal
years ended December 31, 1993, 1994 and 1995 was approximately $253,000,
$2,140,000 and $2,742,000, respectively.
Investment in the Silver Legacy Resort Casino
ELLC accounts for its 50% joint venture interest in the Silver Legacy Joint
Venture (as defined herein) under the equity method of accounting.
F-8
<PAGE>
ELDORADO HOTEL ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Casino Revenue and Promotional Allowances
In accordance with industry practice, the Partnership recognizes as casino
revenue the net win from gaming activities, which is the difference between
gaming wins and losses. The retail value of food, beverage, rooms and other
services furnished to customers on a complimentary basis is included in gross
revenue and then deducted as promotional allowances. The cost of providing
such complimentary services is charged to operating expenses in the casino
department. Such estimated costs of providing complimentary services are as
follows (in thousands):
<TABLE>
<CAPTION>
FOR THE SIX
FOR THE YEARS ENDED MONTHS ENDED
DECEMBER 31, JUNE 30,
-------------------- -------------
1993 1994 1995 1995 1996
------ ------ ------ ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Food and beverage...................... $6,026 $6,996 $7,716 $3,785 $3,722
Hotel.................................. 607 789 1,222 574 754
Other.................................. 300 1,018 1,033 490 507
------ ------ ------ ------ ------
$6,933 $8,803 $9,971 $4,849 $4,983
====== ====== ====== ====== ======
</TABLE>
Federal Income Taxes
The Partnership is not subject to income taxes; therefore, no provision for
income taxes has been made as the Partners include their respective shares of
partnership income in their income tax returns.
Reclassifications
Certain reclassifications have been made to prior years' consolidated
financial statements to conform to current year presentation.
2. ACCOUNTS RECEIVABLE
Components of accounts receivable, net are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------- JUNE 30,
1994 1995 1996
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Accounts receivable........................... $3,296 $4,524 $5,656
Due from partners and affiliates.............. 116 98 219
------ ------ ------
3,412 4,622 5,875
Allowance for doubtful accounts............... (750) (673) (660)
------ ------ ------
Total..................................... $2,662 $3,949 $5,215
====== ====== ======
</TABLE>
3. CERTAIN RISK AND UNCERTAINTIES
A significant portion of the Partnership's revenues and operating income are
generated from patrons who are residents of northern California. A change in
general economic conditions or the extent and nature of casino gaming in
California, Washington or Oregon could adversely affect the Partnership's
operating results.
F-9
<PAGE>
ELDORADO HOTEL ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS
DECEMBER 31, ENDED
ESTIMATED ------------------ JUNE 30,
SERVICE LIFE 1994 1995 1996
------------ -------- -------- -----------
(YEARS) (UNAUDITED)
<S> <C> <C> <C> <C>
Land and improvements............ -- $ 13,622 $ 14,511 $ 13,597
Buildings and other leasehold im-
provements...................... 10-33 78,972 129,715 132,282
Furniture, fixtures, and equip-
ment............................ 5-15 43,397 52,195 50,175
Property held under capital lease
(Note 11)....................... 3-15 3,159 5,682 6,685
Construction in progress......... 7,993 1,627 5,520
-------- -------- --------
147,143 203,730 208,259
Less--Accumulated depreciation... (49,561) (56,449) (58,561)
-------- -------- --------
Property and equipment, net.... $ 97,582 $147,281 $149,698
======== ======== ========
</TABLE>
Substantially all property and equipment are pledged as collateral for long-
term debt (see Note 7).
5. INVESTMENT IN THE SILVER LEGACY RESORT CASINO
Effective March 1, 1994, ELLC and Galleon, Inc. (a Nevada corporation owned
and controlled by Circus Circus Enterprises, Inc.) entered into a joint
venture (the "Silver Legacy Joint Venture") pursuant to a joint venture
agreement (the "Joint Venture Agreement") to develop the Silver Legacy Resort
Casino (the "Silver Legacy"). The Silver Legacy consists of a casino and hotel
located in Reno, Nevada, which began operations on July 28, 1995. During 1994,
ELLC contributed land to the Silver Legacy Joint Venture with a fair value of
$25,000,000 (a book value of $17,215,000), and cash of $23,000,000. Additional
cash contributions of $3,900,000 were made in 1995, for a total equity
investment of $51,900,000. Each partner owns a 50% interest in the Silver
Legacy Joint Venture. Galleon, Inc. contributed cash of $51,900,000 to the
Silver Legacy Joint Venture. Galleon, Inc. is entitled to receive a priority
allocation of operating income, up to an amount equal to 7.5% of the initial
investment, not to exceed $290,000,000, adjusted for taxes, and reduced for
depreciation and principal payments, starting May 1997, as defined in the
Joint Venture Agreement.
During 1994, the Partnership contributed land with a fair value of
$22,185,000 (cost of $15,715,000) to ELLC; the minority interest member of
ELLC contributed land with a fair value of $2,815,000 (cost of $1,500,000) to
ELLC. Based upon these contributions, the Partnership had an 88.75% interest
in ELLC as of December 31, 1994. In addition, during 1994, the Partnership
loaned $23,000,000 to ELLC to contribute to the Silver Legacy Joint Venture;
this note receivable from ELLC is eliminated in consolidation. During 1995,
the minority interest member contributed cash of $3,900,000 to ELLC; as a
result, the Partnership's interest in ELLC was reduced to 76.76%. For the year
ended December 31, 1995, ELLC's 50% share of the Silver Legacy Joint Ventures'
net loss was ($3,208,000). The minority interest member's investment in ELLC
was therefore adjusted by ($745,000), its respective share of the loss. For
the six months ended June 30, 1996, ELLC's 50% share of the Silver Legacy
Joint Ventures' net loss was ($61,000); the minority interest member's
investment in ELLC was therefore adjusted by ($14,000), its respective share
of the loss (unaudited).
F-10
<PAGE>
ELDORADO HOTEL ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The change in the Partnership's investment in the Silver Legacy Joint Venture
is as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996
------------ -----------
(UNAUDITED)
<S> <C> <C>
Beginning balance................................ $42,229 $44,644
Equity in net (loss) of subsidiary............... (3,208) (61)
Contributions.................................... 3,900 --
Distributions.................................... -- --
Other (capitalized interest)..................... 1,723 --
------- -------
Ending balance................................... $44,644 $44,583
======= =======
</TABLE>
Summarized balance sheet information for the Silver Legacy Joint Venture is
as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996
------------ -----------
(UNAUDITED)
<S> <C> <C>
Current assets................................... $ 16,165 $ 16,075
Property and equipment, net...................... 352,837 347,460
Other assets..................................... 958 887
-------- --------
Total assets................................... $369,960 $364,422
======== ========
Current liabilities.............................. $ 46,163 $ 41,380
Long-term liabilities............................ 226,413 225,779
Partners' equity................................. 97,384 97,263
-------- --------
Total liabilities and partners' equity......... $369,960 $364,422
======== ========
</TABLE>
Summarized results of operations for the Silver Legacy Joint Venture are as
follows (in thousands):
<TABLE>
<CAPTION>
FOR THE PERIOD OF INCEPTION FOR THE SIX
(MARCH 1, 1994) TO MONTHS ENDED
DECEMBER 31, 1995 JUNE 30, 1996
--------------------------- -------------
(UNAUDITED)
<S> <C> <C>
Net Revenues.................... $66,013 $ 71,016
Operating Expenses.............. (63,052) (60,754)
------- --------
Operating Income................ 2,961 10,262
------- --------
Other (Expense)................. (9,377) (10,384)
------- --------
Net Loss........................ $(6,416) $ (122)
======= ========
</TABLE>
The Silver Legacy commenced operations on July 28, 1995.
F-11
<PAGE>
ELDORADO HOTEL ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. ACCRUED AND OTHER LIABILITIES
Accrued and other liabilities consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------- JUNE 30,
1994 1995 1996
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Accrued payroll and benefits..................... $3,096 $3,386 $2,180
Accrued vacation................................. 646 740 858
Accrued medical claims........................... 653 1,068 866
Progressive slot liability....................... 585 666 646
Other............................................ 901 1,710 3,864
------ ------ ------
$5,881 $7,570 $8,414
====== ====== ======
</TABLE>
7. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------- JUNE 30,
1994 1995 1996
------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Outstanding portion of reducing revolver
and the revolving credit line due in
quarterly installments of principal (plus
interest calculated using either Base
rate or Eurodollar rate) due March 25,
2000; secured by substantially all real
property................................. $75,294 $118,544 $113,690
Notes payable to a corporation due in
quarterly principal installments of
$97,500 and $90,000, respectively,
(including monthly interest at prime plus
2%; the rate at December 31, 1995 and
June 30, 1996 was 10.5% and 10.25%,
respectively) to June 30, 1997 and July
30, 1999, respectively, when principal
balance is due; secured by real
property................................. 2,828 2,104 1,833
Notes Payable, Other...................... 640 503 440
------- -------- --------
78,762 121,151 115,963
Less--Current portion..................... (1,119) (13,674) (18,146)
------- -------- --------
$77,643 $107,477 $ 97,817
======= ======== ========
</TABLE>
Scheduled maturities of long-term debt are as follows for the years ended
December 31, (in thousands):
<TABLE>
<S> <C>
1996.............................................................. $ 13,674
1997.............................................................. 17,939
1998.............................................................. 17,617
1999.............................................................. 18,255
2000.............................................................. 53,546
Thereafter........................................................ 120
--------
$121,151
========
</TABLE>
F-12
<PAGE>
ELDORADO HOTEL ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The reducing revolver and the revolving credit lines consist of: Line A for
$115,000,000 (the reducing revolver) and Line B (the revolving credit line)
for $15,000,000 maturing March 25, 2000; of which $107,775,000 was drawn on
Line A as of December 31, 1995 and $10,769,000 of which was drawn on Line B as
of December 31, 1995 (see "Letters of Credit" in Note 11). The loan agreement,
among other things, includes various provisions which require a minimum
tangible net worth, a minimum total debt to EBITDA ratio and limitations on
expenditures for property and equipment and on additional borrowings. Under
the minimum tangible net worth covenant, $10.6 million was available for
equity distributions as of June 30, 1996 (unaudited).
On July 31, 1996, Eldorado Resorts LLC, a Nevada limited-liability company
and successor to the Partnership (the "Company"), and Eldorado Capital Corp.,
a Nevada corporation ("Capital" and, together with the Company, the
"Issuers"), sold $100,000,000 in aggregate principal amount of 10 1/2% Senior
Subordinated Notes due 2006 (the "Notes"). The Notes are joint and several
obligations of the Issuers. The Notes mature on August 15, 2006 and bear
interest at the rate of 10 1/2% per annum, payable semi-annually in arrears on
February 15 and August 15 of each year, commencing on February 15, 1997.
Pursuant to a Registration Rights Agreement dated as of July 31, 1996, among
the Issuers and the Initial Purchasers party thereto (the "Registration Rights
Agreement"), the Issuers will file a registration statement under the
Securities Act of 1933, as amended, with respect to an offer to exchange the
Notes for debt securities of the Issuers with terms identical to the Notes.
The Indenture relating to the Notes contains certain covenants which, among
other things, limit the ability of the Issuers and any Restricted Subsidiaries
(as defined in the Indenture) to incur additional indebtedness, pay dividends
or make other distributions, create certain liens, enter into certain
transactions with affiliates, utilize proceeds from asset sales, issue or sell
equity interests of subsidiaries and enter into certain mergers and
consolidations and requires the Company to maintain certain financial
requirements.
The net proceeds of the Offering of approximately $96.5 million were used by
the Company to repay a portion of its existing debt. Concurrent with this
repayment, the Company amended its $130 million existing bank credit facility,
which was scheduled to mature March 25, 2000. The amended credit facility (the
"Credit Facility") provides for a senior secured revolving credit facility of
$50 million. Borrowings bear interest, at the Company's option, at either (i)
the greater of (a) the reference rate publicly announced by Bank of America
and (b) the Federal Funds Rate plus .50% plus an applicable percentage or (ii)
the Eurodollar rate plus an applicable percentage. The Credit Facility will
mature July 31, 2001.
The Credit Facility is secured by substantially all of the Company's real
property. The facility includes various restrictions and other covenants
including: (i) restrictions on the disposition of property, (ii) restrictions
on investments and acquisitions, (iii) restrictions on distributions to
members of the Company, (iv) restrictions on the incurrence of negative
pledges, (v) restrictions on the incurrence of indebtedness and the issuance
of guarantees, (vi) restrictions on transactions with affiliates and, (vii)
restrictions on annual capital expenditures including capital leases. The
Credit Facility also contains financial covenants including a maximum total
debt to EBITDA ratio, a maximum senior debt to EBITDA ratio, a minimum fixed
charge coverage ratio and a minimum equity requirement. Included in prepaid
expenses and other accruals at June 30, 1996 are $500,000 of debt offering
costs related to the Indenture and the amendment to the credit facility which
will be amortized over the life of the applicable agreements (unaudited).
8. ABANDONMENT LOSS
During fiscal year 1995, the Partnership abandoned certain real property
with a net book value of $1,862,000 related to the expansion of the existing
casino.
F-13
<PAGE>
ELDORADO HOTEL ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9. EMPLOYEE BENEFIT PLANS
On May 1, 1990, the Partnership established a voluntary, qualified, defined
contribution plan covering all full-time employees of the Partnership who have
completed six months and 1,000 hours of service and are age twenty-one or
older. The plan allows an employer contribution up to 25 percent of the first
6 percent of each participating employee's compensation. Plan participants can
elect to defer before tax compensation through payroll deductions. These
deferrals are regulated under Section 401(K) of the Internal Revenue Code. The
Partnership's matching contributions were $208,000, $221,000 and $252,000 for
the fiscal years ended December 31, 1993, 1994 and 1995, respectively.
10. EXECUTIVE DEFERRED COMPENSATION PLANS
Effective January 1, 1990, the Partnership established a Deferred
Compensation Plan for the benefit of a select group of management or highly
compensated employees. The Partnership has established a trust fund to hold
and invest amounts elected by the executives to be deferred from their current
compensation. As of December 31, 1994 and 1995, the Partnership has accrued
$481,000 and $629,000, respectively, related to this deferred compensation
agreement.
The Partnership instituted the Eldorado Performance and Appreciation Rights
Plan (the "Plan") for the benefit of certain of its key executives and other
key employees of the Partnership and its general partners, effective for the
fiscal year commencing January 1, 1995. A person shall be eligible to be
granted performance and/or appreciation rights only if on the proposed grant
date, such person is an executive or other key employee of the Partnership or
an affiliate of the Partnership. The performance right allows the key employee
the right to receive an amount equal to a percentage of income from the grant
date, as defined, through the date of exercise. The appreciation right allows
the key employee to receive compensation based upon the difference between the
value of the Partnership, as defined, as of January 1, 1995 (the "Base Rate")
and the future value of the Partnership. One Partnership Unit (1% of the
Partnership) is equivalent to the combination of 100,000 performance rights
and 100,000 appreciation rights. The Base Rate for each appreciation right is
$26.66 as of January 1, 1995. The Partnership value is calculated as a factor
of eight (8) times trailing twelve months operating income (adjusted for
certain items to approximate EBITDA) less funded indebtedness and adjusted for
certain additional items, as defined. The rights are not ownership interests
in the Partnership. As of December 31, 1995, 860,000 appreciation rights have
been granted. The maximum amount of performance rights and appreciation rights
which may be granted shall not exceed 1,000,000 each.
The Plan's committee shall determine the date on which each performance
right or appreciation right shall vest and become exercisable; as of December
31, 1995, no vesting period has been established. The Partnership value as of
December 31, 1995, as calculated, is below the $26.66 Base Rate, and therefore
no accrual is required as of December 31, 1995. Except as defined in the Plan
agreement, the Partnership has no duty or obligation to fund or secure the
benefits payable to key executives.
11. COMMITMENTS AND CONTINGENCIES
Letters of Credit
Line B of the revolving credit line (see Note 7) allows for the issuance of
letters of credit which reduces the available line by the amount pledged. At
December 31, 1995 the amount pledged was $932,000.
F-14
<PAGE>
ELDORADO HOTEL ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Capital Leases
The Partnership leases certain equipment under agreements classified as
capital leases. The future minimum lease payments by year under these leases,
together with the present value of the minimum lease payments consisted of the
following at December 31, (in thousands):
<TABLE>
<S> <C>
1996............................................................. $ 705
1997............................................................. 604
1998............................................................. 604
1999............................................................. 604
2000............................................................. 482
Thereafter....................................................... --
------
Minimum lease payments........................................... 2,999
Less--Amounts representing interest.............................. (520)
------
$2,479
======
</TABLE>
Operating Leases
The Partnership leases equipment under operating leases. Future minimum
payments (expiring from 1996 and thereafter) under noncancellable operating
leases with initial terms of one year or more consisted of the following at
December 31, 1995 (in thousands):
<TABLE>
<CAPTION>
FUTURE MINIMUM
LEASE PAYMENTS
--------------
<S> <C>
1996...................................................... $245
1997...................................................... 189
1998...................................................... 189
1999...................................................... 10
Thereafter................................................ --
----
$633
====
</TABLE>
Total rental expense under operating leases was $939,000 for the year ended
December 31, 1993, $751,000 for the year ended December 31, 1994 and $751,000
for the year ended December 31, 1995. Additional rent for land upon which the
hotel casino resides of $649,000 in 1995 ($636,000 in 1993 and $642,000 in
1994) was paid to a related party based on gross gaming receipts. This rental
agreement expires June 30, 2027.
Legal Matters
The Partnership is a litigant in legal matters arising in the normal course
of business. In the opinion of management, all pending legal matters are
either adequately covered by insurance or, if not insured, will not have a
material adverse effect on the financial position or results of operations of
the Partnership.
12. CORPORATE EXPENSES/MANAGEMENT FEES
The Partnership pays management fees to Recreation Enterprises, Inc. and
Hotel Casino Management, Inc., the owners of 55% and 29% of the Partnership's
equity interests, respectively. Historically, the salaries of senior executive
officers and certain other key employees of the Partnership were not directly
incurred by the Partnership, but were paid from a portion of the management
fees paid to Recreational Enterprises, Inc. As of July 1, 1996, the aggregate
annual salaries of such senior executive officers and other key employees
became payroll obligations of the Partnership. In connection with the
consummation of the offering of the Notes, the Partnership entered into a
Management Agreement with Recreational Enterprises, Inc. and Hotel Casino
Management, Inc. providing that future management fees paid to Recreational
Enterprises, Inc. and Hotel Casino Management, Inc. will not exceed 1.5% of
the Partnership's annual net revenues.
F-15
<PAGE>
ELDORADO HOTEL ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
13. RELATED PARTIES
The Partnership pays management fees to two of its corporate Partners. Such
fees, included in selling, general and administrative and operating department
expenses, were $4,632,000, $3,777,000 and $4,288,000 for the years ended
December 31, 1993, 1994 and 1995, respectively. Salaries for certain of the
Partnership's executives were paid by the management company during the years
and are included in the management fee.
The Partnership also utilizes wine that is produced by a winery owned by one
of the owners of the Company.
F-16
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR ANY OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE ISSUERS SINCE THE DATE HEREOF OR THAT ANY INFOR-
MATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information.................................................... 3
Summary.................................................................. 4
Risk Factors............................................................. 13
The Exchange Offer....................................................... 20
Use of Proceeds.......................................................... 29
Capitalization........................................................... 29
Selected Consolidated Financial Data..................................... 30
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 33
Business................................................................. 40
Management............................................................... 51
Security Ownership of Certain Beneficial Owners and Management........... 57
Certain Transactions..................................................... 59
Material Agreements...................................................... 60
Description of Notes..................................................... 66
Certain Federal Income Tax Considerations................................ 96
Plan of Distribution..................................................... 96
Nevada Regulation and Licensing.......................................... 97
Legal Matters............................................................ 100
Independent Auditors..................................................... 100
Index to Consolidated Financial Statements............................... F-1
</TABLE>
----------------
UNTIL , 199 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EF-
FECTING TRANSACTIONS IN THE EXCHANGE NOTES, WHETHER OR NOT PARTICIPATING IN
THE EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
$100,000,000
ELDORADO RESORTS LLC
ELDORADO CAPITAL CORP.
10 1/2% SENIOR SUBORDINATED
NOTES DUE 2006
----------------
PROSPECTUS
----------------
, 199
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company
The Company's Articles of Organization provide that no manager, member or
interest holder of the Company shall be individually liable for a debt,
obligation or liability of the Company, unless otherwise agreed by such
person. The Articles of Organization also eliminate the personal liability of
the Company's managers to the fullest extent permitted or not prohibited by
Chapter 86 of the Nevada Revised Statutes (the "NRS"), including liability of
a manager for acts or omissions of such manager in connection with the
business or affairs of the Company including any breach of fiduciary duty,
mistake of judgment or business decision but excepting acts or omissions that
a final adjudication establishes involved intentional misconduct, fraud or a
knowing violation of law that was material to the subject cause of action.
The Company's Operating Agreement provides that no manager or officer of the
Company shall be liable to the Company or its members or interest holders for
acts or omissions in connection with the business or affairs of the Company,
including any breach of fiduciary duty, mistake of judgment or business
decision, except for acts or omissions that a final adjudication establishes
involved intentional misconduct, fraud or a knowing violation of law that was
material to the subject cause of action. The Operating Agreement provides for
indemnification of the Company's managers and officers against all liabilities
arising out of the Company or its business or affairs, except for those
related to acts or omissions that a final adjudication establishes involved
intentional misconduct, fraud or a knowing violation of law that was material
to the subject cause of action.
In addition, the Company's Operating Agreement provides for indemnification
of the Company's members in connection with actions, suits or proceedings
other than actions by or in the right of the Company, by reason of the fact
that they are or were such members, against expenses reasonably incurred in
connection with any such action, suit or proceeding, if they acted in good
faith and in a manner that they reasonably believed to be in or not opposed to
the best interests of the Company and, with respect to any criminal action or
proceeding, had no reasonable cause to believe their conduct was unlawful. The
Operating Agreement also provides for indemnification of the Company's members
in connection with actions or suits by or in the right of the Company, by
reason of the fact that they are or were such members, against expenses
reasonably incurred in connection with the defense or settlement of any such
action or suit, if they acted in good faith and in a manner that they
reasonably believed to be in or not opposed to the best interests of the
Company, except for claims, issues or matters as to which they have been
adjudged by a court of competent jurisdiction to be liable to the Company or
for amounts paid in settlement to the Company.
Section 86.371 of the General Corporation Law of Nevada (the "NGCL")
provides that unless otherwise provided in the articles of organization or an
agreement signed by the member or manager to be charged, no member or manager
of any Nevada limited-liability company is individually liable for the debts
or liabilities of the company.
Under Section 86.411 of the NGCL, a limited-liability company may indemnify
its managers, members, employees and agents in connection with actions, suits
or proceedings other than actions by or in the right of the company, by reason
of the fact that they are or were such managers, members, employees or agents,
against expenses and liabilities reasonably incurred in connection with any
such action, suit or proceeding, if they acted in good faith and in a manner
that they reasonably believed to be in or not opposed to the best interests of
the company and, with respect to any criminal action or proceeding, had no
reasonable cause to believe their conduct was unlawful. Under Section 86.421
of the NGCL, a limited-liability company may indemnify its managers, members,
employees and agents in connection with actions or suits by or in the right of
the company, by reason of the fact that they are or were such managers,
members, employees or agents, against expenses reasonably
II-1
<PAGE>
incurred in connection with the defense or settlement of any such action or
suit, if they acted in good faith and in a manner that they reasonably
believed to be in or not opposed to the best interests of the company, except
for claims, issues or matters as to which they have been adjudged by a court
of competent jurisdiction to be liable to the company or for amounts paid in
settlement to the company. In addition, Section 86.431 of the NGCL requires a
company to indemnify its managers, members, employees and agents to the extent
that they have been successful on the merits or otherwise in the defense of
any actions, suits or proceedings referred to in Sections 86.411 and 86.421,
or any claims, issues or matters therein, against expenses reasonably incurred
in connection with any such defense.
Notwithstanding the foregoing sections, Section 86.451 of the NGCL prohibits
indemnification of a manager or member, except under certain circumstances, if
a final adjudication establishes that such manager or member's acts or
omissions involved intentional misconduct, fraud or a knowing violation of law
that was material to the subject cause of action.
Capital
Capital's Articles of Incorporation provide that no director of Capital
shall be personally liable to the corporation or its stockholders for damages
for breach of fiduciary duty as a director, except for (i) acts or omissions
involving intentional misconduct, fraud or a knowing violation of law or (ii)
the payment of dividends in violation of Chapter 78 of the NRS, and provides
that if Chapter 78 is amended to authorize corporate action further
eliminating or limiting the personal liability of directors, the liability of
Capital's directors shall be eliminated or limited to the full extent
permitted by Chapter 78 as so amended. Capital's Articles of Incorporation
also provide for indemnification of its directors to the fullest extent
permitted by Chapter 78 of the NRS against any liabilities asserted against
and incurred by them by reason of the fact that they are or were such
directors. In addition, Capital's Articles of Incorporation provide for
indemnification of its directors and officers in accordance with the NRS.
Capital's Bylaws provide for indemnification of its directors and officers
against any liabilities incurred by reason of the fact that they are or were
such directors or officers, except to the extent prohibited by Chapter 78 of
the NRS.
Section 78.751(1) of the NGCL provides that a corporation may indemnify its
directors, officers, employees and agents in connection with actions, suits or
proceedings other than actions by or in the right of the corporation, by
reason of the fact that they are or were such directors, officers, employees
or agents, against expenses and liabilities reasonably incurred in connection
with any such action, suit or proceeding, if they acted in good faith and in a
manner that they reasonably believed to be in or not opposed to the best
interests of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe their conduct was unlawful.
Under Section 78.751(2), a corporation may indemnify its directors, officers,
employees and agents in connection with actions or suits by or in the right of
the corporation, by reason of the fact that they are or were such directors,
officers, employees or agents, against expenses reasonably incurred in
connection with the defense or settlement of any such action or suit, if they
acted in good faith and in a manner that they reasonably believed to be in or
not opposed to the best interests of the corporation, except for claims,
issues or matters as to which they have been adjudged by a court of competent
jurisdiction to be liable to the corporation or for amounts paid in settlement
to the corporation. In addition, Section 78.751(3) requires a corporation to
indemnify its directors, officers, employees and agents to the extent that
they have been successful on the merits or otherwise in the defense of any
actions, suits or proceedings referred to in subsections (1) and (2), or any
claims, issues or matters therein, against expenses reasonably incurred in
connection with any such defense.
Notwithstanding the foregoing subsections, Section 78.751(6) of the NGCL
prohibits indemnification of a director or officer, except under certain
circumstances, if a final adjudication establishes that such director or
officer's acts or omissions involved intentional misconduct, fraud or a
knowing violation of law that was material to the subject cause of action.
II-2
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL SCHEDULES.
(a) Exhibits
A list of exhibits filed with this Registration Statement on Form S-4 is set
forth in the Index to Exhibits on page E-1, and is incorporated herein by this
reference.
(b) Financial Statement Schedules
Schedules not listed are omitted because of the absence of the conditions
under which they are required or because the information required by such
omitted schedules is set forth in the financial statements or the notes
thereto.
ITEM 22. UNDERTAKINGS.
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
(b) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
(c) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrants
have duly caused this Registration Statement to be signed on their behalf by
the undersigned, thereunto duly authorized, in the City of Reno, State of
Nevada, on September 12, 1996.
ELDORADO RESORTS LLC
Date: September 12, 1996 By: /s/ Donald L. Carano
----------------------------------
Donald L. Carano
Chief Executive Officer, President
and Presiding Manager
ELDORADO CAPITAL CORP.
Date: September 12, 1996 By: /s/ Donald L. Carano
---------------------------------
Donald L. Carano
President
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Donald L.
Carano his true and lawful attorney and agent with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement and to file the same, with all
exhibits thereto and all other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney and agent full
power and authority to do and perform each and every act and thing requisite
or necessary to be done, as fully to all intents and purposes as he might or
could do in person, thereby ratifying and confirming that said attorney and
agent or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Donald L. Carano Chief Executive Officer, September 12, 1996
__________________________________ President and Presiding
Donald L. Carano Manager of the Board of
Managers of Eldorado Resorts
LLC (Principal Executive
Officer) and President
(Principal Executive
Officer) and Director of
Eldorado Capital Corp.
/s/ Robert M. Jones Chief Financial Officer of September 12, 1996
__________________________________ Eldorado Resorts LLC
Robert M. Jones (Principal Financial and
Accounting Officer)
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Gene R. Carano Treasurer of Eldorado September 12, 1996
____________________________________ Capital Corp. (Principal
Gene R. Carano Financial and Accounting
Officer)
/s/ Raymond J. Poncia, Jr. Member of the Board of September 12, 1996
____________________________________ Managers of Eldorado Resorts
Raymond J. Poncia, Jr. LLC--appointed by Hotel
Casino Management, Inc. as
its corporate representative
and Director of Eldorado
Capital Corp.
/s/ Gary L. Carano Member of the Board of September 12, 1996
____________________________________ Managers of Eldorado Resorts
Gary L. Carano LLC--appointed by
Recreational Enterprises,
Inc. as its corporate
representative
/s/ Gregg R. Carano Director of Eldorado Capital September 12, 1996
____________________________________ Corp.
Gregg R. Carano
</TABLE>
II-5
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBIT PAGE
------- ---------------------- ------------
<C> <S> <C>
2.1 Eldorado Resorts LLC Articles of Merger
2.2 Agreement and Plan of Merger dated as of June 28, 1996
by and between Eldorado Hotel Associates Limited
Partnership and Eldorado Resorts LLC
3.1 Articles of Organization of Eldorado Resorts LLC
3.2 Articles of Incorporation of Eldorado Capital Corp.
3.3 Operating Agreement of Eldorado Resorts LLC dated as of
June 28, 1996 by and among Recreational Enterprises,
Inc., Hotel-Casino Management, Inc., Hotel Casino
Realty Investments, Inc., Donald L. Carano and Ludwig
J. Corrao
3.4 Bylaws of Eldorado Capital Corp.
4.1 Indenture dated July 31, 1996 between Eldorado Resorts
LLC, Eldorado Capital Corp. and Fleet National Bank,
as trustee
4.2 Registration Rights Agreement dated as of July 31, 1996
by and among Eldorado Resorts LLC, Eldorado Capital
Corp., Bear, Stearns & Co. Inc., Wasserstein Perella
Securities, Inc. and BA Securities, Inc.
4.3 Form of Exchange Note (included in Exhibit 4.1)
4.4 Amended and Restated Loan Agreement dated as of July
31, 1996 among Eldorado Resorts LLC and Bank of
America National Trust and Savings Association, as
sole initial Bank, Issuing Bank and Administrative
Agent
5 Opinion of Latham & Watkins, including consent
8 Opinion of Latham & Watkins regarding certain federal
income tax matters, including consent
10.1 Agreement of Joint Venture of Circus and Eldorado Joint
Venture dated as of March 1, 1994 by and between
Eldorado Limited Liability Company and Galleon, Inc.
10.2 Environmental Indemnity entered into as of May 30, 1995
by Circus Circus Enterprises, Inc. and Eldorado Hotel
Associates Limited Partnership
10.3 Management Agreement dated as of June 28, 1996 by and
between Eldorado Resorts LLC, Recreational
Enterprises, Inc. and Hotel-Casino Management, Inc.
10.4 Indemnity Agreement dated as of July 25, 1996 between
Eldorado Resorts LLC and Eldorado Capital Corp.
10.5 Purchase Agreement and Joint Escrow Instructions dated
June 26, 1996 by and between Daniel's Motor Lodge,
Inc. and Eldorado Hotel Associates Limited Partnership
10.6.1 Lease dated July 21, 1972 by and between C. S. & Y
Associates and Eldorado Hotel Associates
10.6.2 Addendum to Lease dated March 20, 1973 by and between
C. S. & Y Associates and Eldorado Hotel Associates
10.6.3 Amendment to Lease dated January 1, 1978 by and between
C. S. & Y Associates and Eldorado Hotel Associates
10.6.4 Amendment to Lease dated January 31, 1985 by and
between C. S. & Y Associates and Eldorado Hotel
Associates
10.6.5 Third Amendment to Lease dated December 24, 1987 by and
between C. S. & Y Associates and Eldorado Hotel
Associates
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBIT PAGE
------- ---------------------- ------------
<C> <S> <C>
10.7 Eldorado Hotel Associates Limited Partnership 1995
Performance and Appreciation Rights Plan effective
January 1, 1995
10.8 Eldorado Hotel Casino Deferred Compensation Plan
effective January 1, 1990
10.9 Eldorado Hotel Casino Deferred Compensation Plan Trust
Agreement dated December 1, 1990 by and between
Eldorado Hotel Associates Limited Partnership and
Donald L. Carano
12 Computation of Ratio of Earnings to Fixed Charges
21 List of Subsidiaries
23 Consent of Independent Public Accountants
25 Statement of Eligibility and Qualification of Fleet
National Bank, as Trustee
27 Financial Data Schedule
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
99.3 Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9
</TABLE>
<PAGE>
EXHIBIT 2.1
ELDORADO RESORTS LLC
ARTICLES OF MERGER
------------------
These Articles of Merger are delivered to the Nevada Secretary of State for
filing under Nevada Revised Statutes, Section 92A.200.
1. The name and place of organization and governing law of each
constituent entity (a "Constituent Entity") of the merger (the "Merger") are as
follows:
(a) ELDORADO HOTEL ASSOCIATES LIMITED PARTNERSHIP, a Nevada
limited partnership (the "Disappearing Constituent Entity")
Place of organization: Nevada
Governing law: Nevada
(b) ELDORADO RESORTS LLC, a Nevada limited-liability
company (the "Surviving Constituent Entity")
Place of organization: Nevada
Governing law: Nevada
2. A plan of merger (the "Plan of Merger") has been adopted by each
Constituent Entity.
3. Neither Constituent Entity has a parent entity. Accordingly,
approval of the Plan of Merger by the owners of any parent entity was not
required.
4. Exceeding the requirements of Nevada Revised Statutes, Section
92A.140, the Plan of Merger was unanimously approved by all general and limited
partners of the Disappearing Constituent Entity. Exceeding the requirements of
Nevada Revised Statutes, Section 92A.150, the Plan of Merger was unanimously
approved by all members of the Surviving Constituent Entity.
5. The Articles of Organization of the Surviving Constituent Entity
will not be amended in connection with the Merger.
6. The complete executed Plan of Merger is on file at the registered
office of the Surviving Constituent Entity located at 345 North Virginia Street,
Reno, Nevada 89501.
<PAGE>
IN WITNESS WHEREOF, these Articles of Merger have been executed on this
28th day of June, 1996, by the duly authorized representatives of each
Constituent Entity, to be effective as of the date on which these Articles of
Merger are filed with the Nevada Secretary of State.
The "Disappearing Constituent Entity"
ELDORADO HOTEL ASSOCIATES LIMITED PARTNERSHIP,
a Nevada limited partnership
General Partners:
----------------
HOTEL-CASINO MANAGEMENT, INC.,
a Nevada corporation
By: /s/ Raymond J. Poncia, Jr.
__________________________________
Raymond J. Poncia, Jr.,
President
By: /s/ Timothy J. Henderson
__________________________________
Timothy J. Henderson,
Secretary
RECREATIONAL ENTERPRISES, INC.,
a Nevada corporation
By: /s/ Donald L. Carano
__________________________________
Donald L. Carano,
President
By: /s/ Glenn T. Carano
__________________________________
Glenn T. Carano,
Secretary
2
<PAGE>
(Signatures to Articles of Merger Continued)
The "Surviving Constituent Entity"
ELDORADO RESORTS LLC,
a Nevada limited-liability company
By: /s/ Donald L. Carano
____________________________________
Donald L. Carano,
Chief Executive Officer, President
and Presiding Manager
STATE OF NEVADA )
) ss.
COUNTY OF WASHOE )
On this 27th day of June, 1996, personally appeared before the undersigned,
a Notary Public, in and for the County of Washoe, State of Nevada, Raymond J.
Poncia, Jr. and Timothy J. Henderson, respectively as the President and the
Secretary of HOTEL-CASINO MANAGEMENT, INC., a Nevada corporation that is one of
two general partners of ELDORADO HOTEL ASSOCIATES LIMITED PARTNERSHIP, a Nevada
limited partnership, known to me to be the persons described in and who executed
the foregoing instrument freely and voluntarily and for the uses and purposes
mentioned.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal on the date set forth above.
[Signature Appears Here]
_____________________________________
NOTARY PUBLIC
3
<PAGE>
STATE OF NEVADA )
) ss.
COUNTY OF WASHOE )
On this 28th day of June, 1996, personally appeared before the undersigned,
a Notary Public, in and for the County of Washoe, State of Nevada, Donald L.
Carano and Glenn T. Carano, respectively as the President and the Secretary of
RECREATIONAL ENTERPRISES, INC., a Nevada corporation that is one of two general
partners of ELDORADO HOTEL ASSOCIATES LIMITED PARTNERSHIP, a Nevada limited
partnership, known to me to be the persons described in and who executed the
foregoing instrument freely and voluntarily and for the uses and purposes
mentioned.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal on the date set forth above.
[Signature Appears Here]
_____________________________________
NOTARY PUBLIC
STATE OF NEVADA )
) ss.
COUNTY OF WASHOE )
On this 27th day of June, 1996, personally appeared before the undersigned,
a Notary Public, in and for the County of Washoe, State of Nevada, Donald L.
Carano, as the Chief Executive Officer, President and Presiding Manager of
ELDORADO RESORTS LLC, a Nevada limited-liability company, known to me to be the
person described in and who executed the foregoing instrument freely and
voluntarily and for the uses and purposes mentioned.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal on the date set forth above.
[Signature Appears Here]
_____________________________________
NOTARY PUBLIC
4
<PAGE>
EXHIBIT 2.2
AGREEMENT AND PLAN OF MERGER
----------------------------
This AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into as of the 28th day of June, 1996, by and between ELDORADO HOTEL ASSOCIATES
LIMITED PARTNERSHIP, a Nevada limited partnership ("Disappearing Entity"), and
ELDORADO RESORTS LLC, a Nevada limited-liability company ("Surviving Entity").
R E C I T A L S
- - - - - - - -
A. Disappearing Entity is a Nevada limited partnership.
B. Surviving Entity is a Nevada limited-liability company.
C. Subject to the terms and provisions of this Agreement, Disappearing
Entity desires hereby to merge with and into Surviving Entity and thereupon to
cease to exist.
A G R E E M E N T
- - - - - - - - -
NOW, THEREFORE, in accordance with the recitals set forth above and AS
CONSIDERATION for the covenants and agreements set forth in this Agreement, as
well as for other good and valuable consideration the receipt and sufficiency of
which hereby are acknowledged, Disappearing Entity and Surviving Entity hereby
agree as follows:
1. Constituents of the Merger. The constituent entities of the merger
--------------------------
contemplated by this Agreement are Disappearing Entity and Surviving Entity.
The name, address, place of organization, governing law and kind of entity of
Disappearing Entity are as follows:
Name: ELDORADO HOTEL ASSOCIATES LIMITED PARTNERSHIP
Address: 345 North Virginia Street
Reno, Nevada 89501
Place of Organization: Nevada
Governing Law: Nevada
Kind of Entity: Limited Partnership
The name, address, place of organization, governing law and kind of entity of
Surviving Entity are as follows:
Name: ELDORADO RESORTS LLC
Address: 345 North Virginia Street
Reno, Nevada 89501
<PAGE>
Place of Organization: Nevada
Governing Law: Nevada
Kind of Entity: Limited-Liability Company
2. Merger. On the Effective Date (as defined in Section 3 of this
------
Agreement), Disappearing Entity shall merge with and into Surviving Entity (the
"Merger"), the separate legal existence of Disappearing Entity thereupon shall
cease, and the separate legal existence of Surviving Entity thereupon shall
continue. The identity, existence, name, purposes, rights, privileges,
immunities, powers, franchises and authority of Surviving Entity shall continue
unaffected and unimpaired by the Merger. Upon consummation of the Merger, (a)
the identity, existence, purposes, rights, privileges, immunities, powers,
franchises and authority of Disappearing Entity, and the title to and possession
of all property, interests and assets of Disappearing Entity, shall vest in
Surviving Entity; (b) Surviving Entity shall be subject to all of the debts and
liabilities of Disappearing Entity as if Surviving Entity itself had incurred
those debts; and (c) all rights of creditors and all liens upon the property of
each of Surviving Entity and Disappearing Entity shall be preserved unimpaired.
3. Filing of Merger Documents and Effective Date. The Merger shall be
---------------------------------------------
effective on the date (the "Effective Date") of the filing with the Nevada
Secretary of State of Articles of Merger as required by Nevada Revised Statutes,
Section 92A.200.
4. Articles of Organization and Operating Agreement. The Articles of
------------------------------------------------
Organization and the Operating Agreement of Surviving Entity, as in effect on
the Effective Date, shall be and remain (until amended or repealed as permitted
by applicable law and such documents) the Articles of Organization and the
Operating Agreement of Surviving Entity as of the Effective Date.
5. Managers and Officers. The Managers and officers of Surviving Entity
---------------------
from and after the Effective Date (until changed in accordance with applicable
law and the Operating Agreement of Surviving Entity) shall be those persons who
immediately before consummation of the Merger are the Managers and officers of
Surviving Entity.
6. Effect of Merger on Partnership Units and Membership Interests.
--------------------------------------------------------------
6.1 Disappearing Entity. On the Effective Date, by virtue of the
-------------------
Merger and without any action on the part of the holders thereof, each
partnership unit of Disappearing Entity that is outstanding immediately before
the Effective Date shall be changed and converted into a Membership Interest in
Surviving Entity as set forth in Sections 9.1 and 9.2 of that certain Operating
Agreement of Surviving Entity, dated as of June 28, 1996, a copy of which is
attached hereto as Exhibit A and incorporated herein by this reference.
6.2 Surviving Entity. On the Effective Date, by virtue of the
----------------
Merger and without any action on the part of the holders thereof, each
Membership Interest of Surviving Entity that is outstanding immediately before
the Effective Date shall be canceled.
2
<PAGE>
7. Filings and Approvals. Disappearing Entity and Surviving Entity each
---------------------
shall cooperate with the other in the preparation and filing, as soon as
possible after the date of this Agreement, of all necessary applications,
filings and other documents relating to the Merger, including, without
limitation, all licenses and approvals relating to the Merger required by
applicable gaming laws.
8. Conditions Precedent to Consummation of the Merger. The obligations
--------------------------------------------------
of Disappearing Entity and Surviving Entity to consummate the Merger under this
Agreement are subject to the following conditions precedent:
8.1 Necessary Actions. All actions necessary to authorize the
-----------------
execution, delivery and performance of this Agreement shall have been duly and
validly taken by each of Disappearing Entity and Surviving Entity. In accordance
with Nevada Revised Statutes, Section 92A.140, this Agreement shall have been
approved unanimously by all general partners of the Disappearing Entity and by
limited partners of the Disappearing Entity who own a majority in interest of
the Disappearing Entity then owned by all of the limited partners of the
Disappearing Entity. In accordance with Nevada Revised Statutes, Section
92A.150, this Agreement shall have been approved by Members of the Surviving
Entity who own a majority in interest of the Surviving Entity then owned by all
of the Members of the Surviving Entity.
8.2 Consents. All consents, approvals or agreements of any person
--------
or entity that is required to be obtained by either party hereto in connection
with the Merger and related transactions shall have been obtained, without
conditions or restrictions that the affected party hereto reasonably deems
unduly burdensome.
8.3 Approval From Gaming and Other Governmental Agencies. All
----------------------------------------------------
governmental approvals and other actions required to effect the Merger and
related transactions, including, without limitation, all approvals and licenses
from the Nevada Gaming Commission required to effect the Merger and related
transactions, shall have been obtained, without conditions or restrictions that
the affected party hereto reasonably deems unduly burdensome.
8.4 Compliance. Each of Surviving Entity and Disappearing Entity
----------
shall have complied with all agreements to be complied with by it in connection
with the Merger on or before the Effective Date.
9. Termination or Abandonment. This Agreement may be terminated and the
--------------------------
Merger abandoned at any time before the Effective Date (a) by the mutual consent
of both general partners of the Disappearing Entity and the Members of the
Surviving Entity who own a majority in interest of the Surviving Entity then
owned by all of the Members of the Surviving Entity or (b) by either
Disappearing Entity or Surviving Entity if any condition precedent to the
obligations of that party set forth in Section 8 of this Agreement has not been
satisfied and that party has notified the other party hereto of its intention to
terminate this Agreement and such other party hereto has not within TEN (10)
days after its receipt of such notice caused the satisfaction of that condition
precedent. In the event of termination of this Agreement as provided in this
Section 9, neither Disappearing Entity
3
<PAGE>
nor any of its partners shall be liable to Surviving Entity or any of its
Members, and neither Surviving Entity nor any of its Managers or Members shall
be liable to Disappearing Entity or any of its partners.
10. Miscellaneous.
-------------
10.1 Amendment and Modification. Subject to applicable law, this
--------------------------
Agreement may be amended or supplemented at any time with respect to any of the
terms contained herein only by an instrument executed by each of the parties
hereto.
10.2 Assignment. Neither this Agreement nor any of the rights,
----------
interests or obligations of either party hereto arising hereunder may be
assigned by either party hereto without the prior written consent of the other
party hereto.
10.3 Further Assurances. Each party hereto shall execute and
------------------
deliver such instruments and take such other actions as any other party hereto
reasonably may require in order to carry out the intent of this Agreement. From
time to time, as and when required by Surviving Entity, or by its successors or
assigns, such deeds and other instruments shall be executed and delivered on
behalf of Disappearing Entity, and all actions shall be taken or caused to be
taken on behalf of Disappearing Entity, as shall be appropriate or necessary to
vest, perfect or confirm, of record or otherwise, in Surviving Entity the
purposes, rights, privileges, immunities, powers, franchises and authority of
Disappearing Entity and the title to and possession of all property, interests
and assets of Disappearing Entity, and otherwise to carry out the purposes of
this Agreement, and the Managers of Surviving Entity are fully authorized in the
name and on behalf of Disappearing Entity or otherwise to execute and deliver
all such deeds and instruments and to take all such actions.
10.4 Headings. The subject headings of the Sections and subsections
--------
of this Agreement are included in this Agreement for the convenience of
reference only and shall not affect the construction or interpretation of any of
the terms or provisions of this Agreement.
10.5 Governing Law. This Agreement shall be deemed to be made and
-------------
interpreted under the laws of the State of Nevada, and the rights and
liabilities of the parties hereto shall be determined under those laws.
Notwithstanding the foregoing, if any law or set of laws in the State of Nevada
requires or otherwise dictates that the laws of another state or jurisdiction
must be applied in any proceeding involving this Agreement, then such Nevada law
or set of laws shall be superseded by this subsection 10.5, and the remaining
laws of the State of Nevada nonetheless shall be applied in such proceeding.
10.6 Successors in Interest. This Agreement shall be binding on and
----------------------
inure to the benefit of the parties hereto and their respective successors and
assigns.
10.7 Counterpart Execution. This Agreement may be executed
---------------------
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall
4
<PAGE>
constitute one and the same original.
10.8 No Waiver. The failure of any party hereto at any time to
---------
require performance by any other party hereto of any term or provision of this
Agreement shall not affect the right of such party to require performance of
that term or provision, and any waiver by any party hereto of any breach of any
term or provision of this Agreement shall not be construed as a waiver of any
continuing or succeeding breach of such term or provision, a waiver of the term
or provision itself or a waiver of any right under this Agreement.
10.9 Integration. This Agreement, together with its Exhibit, sets
-----------
forth all of the promises, covenants, agreements, conditions and understandings
between the parties hereto, and it supersedes all prior and contemporaneous
agreements and understandings, inducements or conditions, express or implied,
oral or written, except as contained in this Agreement.
IN WITNESS WHEREOF, the undersigned have caused this Agreement and Plan of
Merger to be executed by persons thereunto duly authorized on the date first set
forth above.
"Disappearing Entity"
ELDORADO HOTEL ASSOCIATES LIMITED PARTNERSHIP,
a Nevada limited partnership
General Partners:
----------------
HOTEL-CASINO MANAGEMENT, INC.,
a Nevada corporation
By: /s/ Raymond J. Poncia, Jr.
__________________________________
Raymond J. Poncia, Jr.,
President
RECREATIONAL ENTERPRISES, INC.,
a Nevada corporation
By: /s/ Donald L. Carano
__________________________________
Donald L. Carano,
President
5
<PAGE>
(Signatures to Agreement and Plan of Merger Continued)
Limited Partners:
----------------
HOTEL CASINO REALTY INVESTMENTS, INC.,
a Nevada corporation
By: /s/ Raymond J. Poncia, Jr.
_________________________________
Raymond J. Poncia, Jr.,
President
/s/ Donald L. Carano
_________________________________
Donald L. Carano,
a married man
/s/ Ludwig J. Corrao
_________________________________
Ludwig J. Corrao,
a married man
"Surviving Entity"
ELDORADO RESORTS LLC,
a Nevada limited-liability company
Managers:
--------
/s/ Donald L. Carano
__________________________________
Donald L. Carano,
Chief Executive Officer, President
and Presiding Manager
6
<PAGE>
(Signatures to Agreement and Plan of Merger Continued)
Managers (Continued):
--------------------
HOTEL-CASINO MANAGEMENT, INC.,
a Nevada Corporation, Assistant Presiding Manager
By: /s/ Raymond J. Poncia, Jr.
__________________________________
Raymond J. Poncia, Jr.,
President
RECREATIONAL ENTERPRISES, INC.,
a Nevada Corporation, Assistant Presiding Manager
By: /s/ Gary L. Carano
__________________________________
Gary L. Carano,
Vice President
Members:
-------
RECREATIONAL ENTERPRISES, INC.,
a Nevada corporation
By: /s/ Donald L. Carano
__________________________________
Donald L. Carano,
President
HOTEL-CASINO MANAGEMENT, INC.,
a Nevada corporation
By: /s/ Raymond J. Poncia, Jr.
__________________________________
Raymond J. Poncia, Jr.,
President
7
<PAGE>
(Signatures to Agreement and Plan of Merger Continued)
Members (Continued):
-------------------
HOTEL CASINO REALTY INVESTMENTS, INC.,
a Nevada corporation
By: /s/ Raymond J. Poncia, Jr.
__________________________________
Raymond J. Poncia, Jr.,
President
/s/ Donald L. Carano
__________________________________
Donald L. Carano,
a married man
/s/ Ludwig J. Corrao
__________________________________
Ludwig J. Corrao,
a married man
8
<PAGE>
EXHIBIT 3.1
ARTICLES OF ORGANIZATION
OF
ELDORADO RESORTS LLC
a Nevada Limited-Liability Company
The undersigned natural person hereinafter named as organizer and acting as
such hereby forms a limited-liability company under Nevada Revised Statutes,
Chapter 86, and adopts as the Articles of Organization of such limited-liability
company the following:
ARTICLE I
NAME OF LIMITED-LIABILITY COMPANY
---------------------------------
The name of the limited-liability company is "ELDORADO RESORTS LLC" (the
"Company").
ARTICLE II
LATEST DATE OF DISSOLUTION
--------------------------
The latest date upon which the Company is to dissolve is December 31, 2030.
ARTICLE III
RESIDENT AGENT
--------------
The name and complete street address of the Company's resident agent are as
follows:
SIERRA CORPORATE SERVICES
241 Ridge Street, 4th Floor
Reno, Nevada 89501
The mailing address of the Company's resident agent is not different from its
street address set forth above.
ARTICLE IV
RIGHT TO CONTINUE THE COMPANY
-----------------------------
The Members shall have the right to continue the Company upon the death,
insanity, retirement, resignation, expulsion, bankruptcy or dissolution of a
Member or upon the occurrence of any other event that terminates the continued
membership of a Member in the Company, provided that at least TWO (2) Members
remain upon and after such event and that within NINETY (90) days after such
event not less than a "majority in interest" of all of the remaining Members (as
defined in Nevada Revised Statutes Section 86.065) agree in writing to continue
the Company.
<PAGE>
ARTICLE V
ORGANIZER
---------
The name and post office or street address, either residence or business,
of the organizer executing these Articles of Organization are as follows:
<TABLE>
<CAPTION>
Name Address
---- -------
<S> <C>
DONALD L. CARANO 345 North Virginia Street
Reno, Nevada 89501
</TABLE>
ARTICLE VI
PURPOSES
--------
The Company may engage in any lawful activity except insurance. The
character and general nature of the business to be conducted by the Company is
(i) to operate, manage, and conduct gaming in a gaming casino on or within the
premises known as the Eldorado Hotel & Casino located at 345 North Virginia
Street, Reno, Nevada, (ii) to own, directly or indirectly, interests in the
gaming casino known as the Silver Legacy Resort Casino located at 407 North
Virginia Street, Reno, Nevada, and (iii) to engage in such other legal and
lawful purposes permitted by law except insurance.
ARTICLE VII
OPERATING AGREEMENT
-------------------
The Members, by their unanimous vote or unanimous written consent, shall
adopt an operating agreement for the Company (the "Operating Agreement"). The
Operating Agreement shall be executed by each Member of the Company and shall
set forth all provisions for the affairs of the Company and the conduct of the
Company's business to the extent that such provisions are not inconsistent with
law or these Articles of Organization. The Operating Agreement from time to
time may be restated, amended or altered in accordance with its terms.
ARTICLE VIII
MANAGEMENT OF THE COMPANY
-------------------------
The management of the Company is reserved to and vested in a manager or
managers (the "Managers") who shall be elected annually by the Members in the
manner prescribed by the Operating Agreement. One or more Members may be
elected to serve as Manager or Managers. The Managers shall hold the offices
and have the responsibilities accorded to them by the Members as set forth in
the Operating Agreement. The authorized number of Managers shall be set forth
in the Operating Agreement, which from time to time may be increased or
decreased as provided in the Operating Agreement. Only the Managers may act on
behalf of the Company. No Member who is not also a Manager shall have the right
to contract debts or incur liability on behalf or in the name of the Company.
The name and post office box or street address, either residence or business, of
each Manager who is to
2
<PAGE>
serve until the first annual meeting of the Members or until such Manager's
successor is elected and qualified are as follows:
Raymond J. Poncia, Jr.
Hotel-Casino Management, Inc.
221 South Virginia Street
Reno, Nevada 89501
Donald L. Carano
Recreational Enterprises, Inc.
345 North Virginia Street
P.O. Box 3399
Reno, Nevada 89505
Gary L. Carano
Recreational Enterprises, Inc.
345 North Virginia Street
P.O. Box 3399
Reno, Nevada 89505
ARTICLE IX
ADDITIONAL MEMBERS
------------------
Subject to all applicable law, additional Members may be admitted to the
Company at such times and under such terms and conditions as provided in the
Operating Agreement.
ARTICLE X
GAMING REGULATORY PROVISIONS
----------------------------
1. Notwithstanding anything to the contrary expressed or implied in
these Articles of Organization, the sale, assignment, transfer, pledge, or other
disposition of any interest in the Company is ineffective unless approved in
advance by the Nevada Gaming Commission (the "Commission"). If, at anytime, the
Commission finds that a Member which owns any such interest is unsuitable to
hold that interest, the Commission shall immediately notify the Company of that
fact. The Company shall, within ten days from the date it receives the notice
from the Commission, return to the unsuitable Member the amount of his capital
account as reflected on the books of the Company. Beginning on the date when
the Commission serves notice of a determination of unsuitability, pursuant to
the preceding sentence, upon the Company, it is unlawful for the unsuitable
Member: (a) to receive any share of the distribution of profits or cash or any
other property of, or payments upon dissolution of, the Company, other than a
return of capital as required above; (b) to exercise directly or through a
trustee or nominee, any voting right conferred by such interest; (c) to
participate in the management of the business and affairs of the Company; or (d)
to receive any remuneration in any form from the Company for services rendered
or otherwise.
3
<PAGE>
2. Any Member that is found unsuitable by the Commission shall
return all evidence of any ownership in the Company to the Company, at which
time the Company shall within ten days after the Company receives notice from
the Commission, return to the Member in cash, the amount of his capital account
as reflected on the books of the Company, and the unsuitable Member shall no
longer have any direct or indirect interest in the Company.
ARTICLE XI
LIABILITIES OF MANAGERS, MEMBERS AND OTHER PERSONS
--------------------------------------------------
Unless otherwise provided in an agreement signed by the Manager, Member or
other person that owns any interest in the Company to be charged, no Manager,
Member or other person that owns any interest in the Company shall be
individually liable under any judgment, decree or order of any court against the
Company or in any other manner for a debt, obligation or liability of the
Company. Except as otherwise provided by the immediately-following sentence
hereof, the personal liability of the Managers hereby is eliminated to the
fullest extent permitted or not prohibited by Nevada Revised Statutes, Chapter
86, as the same may be amended and supplemented. No Manager shall be liable to
the Company or to the Members or to other persons that own any interest in the
Company for acts or omissions of such Manager in connection with the business or
affairs of the Company, including, without limitation, any breach of fiduciary
duty of such Manager as a Manager, any mistake of judgment of such Manager and
any business decision of such Manager (including any decision regarding the
timing of any acquisition or disposition of any property of the Company), except
for acts or omissions of such Manager that a final adjudication establishes
involved intentional misconduct, fraud or a knowing violation of the law that
was material to the cause of action subject to such final adjudication.
ARTICLE XII
AMENDMENT/DEFINITIONS
---------------------
The Company reserves the right to amend, alter, change or repeal any
provision contained in these Articles of Organization in a manner now or
hereafter prescribed by Nevada law. Unless otherwise defined herein, terms not
otherwise defined herein shall have the meanings ascribed to them in Nevada
Revised Statutes, Chapter 86.
IN WITNESS WHEREOF, the undersigned organizer has hereunto set the
undersigned's hand and executed these Articles of Organization on this 14th day
of May, 1996.
/s/ Donald L. Carano
_________________________________
DONALD L. CARANO
4
<PAGE>
STATE OF NEVADA )
) ss.
COUNTY OF WASHOE )
On this 14th day of May, 1996, personally appeared before the undersigned,
a Notary Public, in and for the County of Washoe, State of Nevada, DONALD L.
CARANO, known to me to be the person described in and who executed the foregoing
instrument freely and voluntarily and for the uses and purposes mentioned.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal on the date set forth above.
[Signature Appears Here]
___________________________________
NOTARY PUBLIC
5
<PAGE>
EXHIBIT 3.2
ARTICLES OF INCORPORATION
OF
ELDORADO CAPITAL CORP.
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned do hereby associate themselves into a
corporation, under and by virtue of the Nevada Revised Statutes, Title 7,
Chapter 78, as amended, and do hereby certify and adopt the following Articles
of Incorporation:
ARTICLE I
---------
The name of the corporation is ELDORADO CAPITAL CORP.
ARTICLE II
----------
The registered agent of the corporation is Sierra Corporate Services
and the location of the registered office of the corporation in the State of
Nevada is 241 Ridge Street, 4th Floor, Reno, Nevada. Branch offices may
hereafter be established at such other place or places, either within or without
the State of Nevada as may be determined from time to time by the Board of
Directors.
ARTICLE III
-----------
The purpose for which said corporation is formed is to engage in any
lawful activity. The corporation shall have all powers authorized by Title 7,
Chapter 78, of the Nevada Revised Statutes, as amended, except as otherwise
provided in these Articles or subsequent amendments thereto.
ARTICLE IV
----------
<PAGE>
The amount of the authorized capital stock of this corporation is
2,500 shares with no par value.
Any and all shares of stock of this corporation of any class shall be
paid in as the Board of Directors may designate and as provided by law, in cash,
real or personal property, option to purchase, or any other valuable right or
thing, for the uses and purposes of the corporation, and said shares of stock
when issued in exchange therefor shall thereupon and thereby become and be fully
paid, the same as though paid for in cash, and shall be nonassessable forever,
and the judgment of the Board of Directors of the corporation concerning the
value of the property, right or thing, acquired in purchase or exchange for
capital stock shall be conclusive. No stockholder shall have any preemptive
rights.
ARTICLE V
---------
Section 1. Directors
Members of the governing board shall be known as "Directors," and the
number thereof shall not be less than three nor more than nine, except that, in
cases where all the shares of the corporation are owned beneficially and of
record by either one or two stockholders, the number of directors may be less
than three but not less than the number of stockholders.
Section 2. Personal Liability
Directors of the corporation shall not be personally liable to the
corporation or its stockholders for damages for
2
<PAGE>
breach of fiduciary duty as a director, except for (i) acts or omissions which
involve intentional misconduct, fraud, or a knowing violation of law; or (ii)
the payment of dividends in violation of the provisions of Chapter 78 of the
Nevada Revised Statutes. If Chapter 78 of the Nevada Revised Statutes is amended
after approval by the stockholders of this article to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director of the corporation shall be eliminated or limited to the
full extent permitted by Chapter 78 of the Nevada Revised Statutes, as so
amended.
Section 3. Indemnification
Each person who is or was a director of the corporation (including the
heirs, executors, administrators or estate of such person) shall be indemnified
by the corporation as of right to the full extent permitted by Chapter 78 of the
Nevada Revised Statutes against any liability, cost or expense asserted against
such director and incurred by such director by reason of the fact that such
person is or was a director. The expenses of directors, past or present,
incurred in defending a civil or criminal action, suit, or proceeding must be
paid by the corporation as incurred and in advance of the final disposition of
the action, suit or proceeding upon receipt of an undertaking by or on behalf of
the director to repay the amount if it is ultimately determined by a court of
3
<PAGE>
competent jurisdiction that he is not entitled to be indemnified by the
corporation.
Section 4. Indemnification and Insurance
The corporation to the full extent of its power to do so, shall
indemnify all directors, officers, employees, and/or agents in accordance with
the provisions the Nevada Revised Statutes. Further, the corporation shall have
power to purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee, or agent or
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him in any such capacity or arising out
of his status as such, whether or not the corporation would have the power to
indemnify him against such liability under the provisions of Nevada law.
Section 5. Modifications
Any repeal or modification of all or any portion of the provisions of
this Article by the stockholders of the corporation shall not adversely affect
any right or protection of an officer or director of the corporation existing at
the time of such repeal or modification.
ARTICLE VI
----------
The names and addresses of the first Board of Directors of the
corporation, which are three (3), are as follows:
4
<PAGE>
Sarah Smithson
1749 Terrace Heights Lane
Reno, Nevada 89523
Norma Zirbel
415 Rue De La Rouge
Sparks, Nevada 89434
Sybil Maldonado
1112 Bradley Square
Sparks, Nevada 89431
ARTICLE VII
-----------
The stock of this corporation, after the amount of the subscription
price, or par value has been fully paid in, shall be nonassessable forever, and
shall not be subject to pay the debts of the corporation.
ARTICLE VIII
------------
The names and addresses of the incorporators signing these Articles of
Incorporation are as follows:
Sarah Smithson
1749 Terrace Heights Lane
Reno, Nevada 89523
Norma Zirbel
415 Rue De La Rouge
Sparks, Nevada 89434
Sybil Maldonado
1112 Bradley Square
Sparks, Nevada 89431
ARTICLE IX
----------
The corporation is to have perpetual existence.
ARTICLE X
---------
5
<PAGE>
A resolution, in writing, signed by all of the members of the Board of
Directors of the corporation, shall be and constitute action by the Board of
Directors to the effect therein expressed with the same force and effect as
though such resolution had been passed at a duly convened meeting, and it shall
be the duty of the Secretary to record every such resolution in the Minute Book
of the corporation under its proper date.
ARTICLE XI
----------
The Directors shall have the power to make and alter the Bylaws of the
corporation. Bylaws so made by the Directors under the power so conferred may
be altered, amended or repealed
6
<PAGE>
by the Directors or by the Stockholders at any meeting called and held for that
purpose.
IN WITNESS WHEREOF, we have hereunto set our hands and executed these
Articles of Incorporation this 31st day of May 1996.
/s/ Sarah Smithson
___________________________________
SARAH SMITHSON
/s/ Norma Zirbel
___________________________________
NORMA ZIRBEL
/s/ Sybil Maldonado
___________________________________
SYBIL MALDONADO
7
<PAGE>
STATE OF NEVADA )
) ss.
COUNTY OF WASHOE )
On this 31st day of May 1996, personally appeared before the
undersigned, a Notary Public in and for the County of Washoe, State of Nevada,
Sarah Smithson, Norma Zirbel, and Sybil Maldonado, known to me to be the persons
described in and who executed the foregoing instrument freely and voluntarily
and for the uses and purposes therein mentioned.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
[Signature Appears Here]
________________________________
Notary Public
8
<PAGE>
EXHIBIT 3.3
OPERATING AGREEMENT
OF
ELDORADO RESORTS LLC,
a Nevada Limited-Liability Company
This OPERATING AGREEMENT (this "Operating Agreement") is made and entered
into as of this 28th day of June, 1996, by and among RECREATIONAL ENTERPRISES,
INC., a Nevada corporation, HOTEL-CASINO MANAGEMENT, INC., a Nevada corporation,
HOTEL CASINO REALTY INVESTMENTS, INC., a Nevada corporation, DONALD L. CARANO, a
married man, and LUDWIG J. CORRAO, a married man (each, individually, a
"Member," and together, collectively, the "Members").
R E C I T A L
- - - - - - -
The Members have formed a Nevada limited-liability company (the "Company")
pursuant to Nevada Revised Statutes, Chapter 86, to be governed according to the
terms and conditions hereinafter set forth.
A G R E E M E N T
- - - - - - - - -
NOW, THEREFORE, in accordance with the recital set forth above and AS
CONSIDERATION for the representations, warranties, covenants and agreements set
forth in this Operating Agreement, as well as for other good and valuable
consideration the receipt and sufficiency of which hereby are acknowledged, the
parties hereto hereby agree as follows:
ARTICLE I
NAME
The name of the Company is "ELDORADO RESORTS LLC."
ARTICLE II
DEFINITIONS
Capitalized words and phrases used in this Operating Agreement shall have
the following meanings:
"Operating Agreement" means this Operating Agreement of ELDORADO
---------------------
RESORTS LLC, as amended from time to time. Words appearing in this Operating
Agreement such as "herein," "hereinafter," "hereof" and "hereunder" refer to
this Operating Agreement as a whole, unless the context otherwise requires.
<PAGE>
"Adjusted Capital Account Deficit" means, with respect to any Member
----------------------------------
or Interest Holder, the deficit balance, if any, in such Member's or Interest
Holder's capital account with the Company as of the end of the relevant fiscal
year, after giving effect to the following adjustments:
(a) Decrease such deficit by any amount that such Member or
Interest Holder is obligated to restore pursuant to this Operating Agreement or
is deemed to be obligated to restore to the Company pursuant to Regulations
Section 1.704-1(b)(2)(ii)(c) or the penultimate sentence of each of Regulations
Section 1.704-2(g)(1) and Regulations Section 1.704-2(i)(5); and
(b) Increase such deficit by such Member's or Interest Holder's
shares of the items described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4),
(5) and (6).
"Articles of Organization" means the Articles of Organization of
--------------------------
ELDORADO RESORTS LLC, as amended from time to time, and as filed with the Nevada
Secretary of State.
"Board of Managers" means, collectively, all of the Managers of the
-------------------
Company.
"Chapter 86" means Chapter 86 of Nevada Revised Statutes or any
------------
corresponding set of provisions of succeeding law.
"Company" means ELDORADO RESORTS LLC, a Nevada limited-liability
---------
company.
"Company Minimum Gain" has the meaning set forth in Regulations
----------------------
Section 1.704-2(b)(2) for the term "partnership minimum gain."
"Interest Holder" means the Transferee holder of a Membership Interest
-----------------
that has not been admitted to the Company as a Member.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
-----------------------
amended from time to time, or any corresponding set of provisions of succeeding
law.
"Manager" means the Member, Members or Non-Member(s) who are referred
---------
to as the Manager(s) in ARTICLE V of this Operating Agreement and all successors
thereto.
"Member" means any holder of a Membership Interest who has become a
--------
Member pursuant to the terms and provisions of this Operating Agreement.
"Member Minimum Gain" means gain attributable to Member Nonrecourse
---------------------
Debt determined in accordance with Regulations Section 1.704-2(i).
2
<PAGE>
"Member Nonrecourse Debt" has the meaning set forth in Regulations
-------------------------
Section 1.704-2(b)(4) with respect to the term "partner nonrecourse debt."
"Member Nonrecourse Deduction" has the meaning set forth in
------------------------------
Regulations Section 1.704-2(i)(2) with respect to the term "partner nonrecourse
deduction."
"Membership Interest" means the respective right of a Member or
---------------------
Interest Holder to an allocative pro-rata share of the economic benefits of the
Company, including net profits, net losses and distributions, based on the
percentage represented by the total capital contributed to the Company by the
holder of such Membership Interest (and/or its predecessors in interest) in
relation to the total capital contributed to the Company with respect to all
outstanding Membership Interests.
"Membership Voting Interest" means, with respect to the Members only,
----------------------------
the right to vote on matters as to which this Operating Agreement requires or
permits the Members to vote in accordance with the terms and provisions of
Section 8.3 of this Operating Agreement. Only Members who have become such in
accordance with the terms and provisions of this Operating Agreement shall have
Membership Voting Interests. The voting power of any Membership Voting Interest
shall be determined under the terms and provisions of Section 8.3 of this
Operating Agreement.
"Net Profits" or "Net Losses" for each fiscal year of the Company
------------- ------------
shall mean the net income or net loss of the Company, determined by the method
of accounting for the Company as selected by the Board of Managers for federal
income tax purposes, including, without limitation, each item of Company income,
gain, loss and deduction with the following adjustments:
(a) Any income of the Company that is exempt from federal income
taxation shall be included as income;
(b) Any expenditure of the Company described in Internal Revenue
Code Section 705(a)(2)(B) or treated as Internal Revenue Code Section
705(a)(2)(B) expenditures pursuant to Regulations Section 1.704-1(b)(2)(iv)(i)
shall be treated as current expenses;
(c) No effect shall be given to adjustments made pursuant to
Internal Revenue Code Section 743;
(d) The basis of property contributed to the Company shall
initially be treated as equal to the agreed upon valuation of such property, and
all gain, loss, depreciation and amortization on such property shall be
determined and based on such agreed upon value in accordance with Regulations
Section 1.704-1(b)(2)(iv)(g);
3
<PAGE>
(e) If the Company distributes any property in kind, the
difference between the fair market value of such property immediately before
such distribution and the basis (or, if applicable, the carrying value
determined pursuant to subparagraph (d) or subparagraph (f) of this definition
of "Net Profits" and "Net Losses") of such property shall be treated as gain or
loss in accordance with Regulations Section 1.704-1(b)(2)(iv)(e);
(f) In the event of a revaluation of Company property as
described in subparagraph (d) of Section 10.1 of this Operating Agreement, "Net
Profits" and "Net Losses" of the Company shall be adjusted in accordance with
Regulations Section 1.704-1(b)(2)(iv)(g); and
(g) Any item of income or loss that is specially allocated
pursuant to Section 11.2 of this Operating Agreement shall not be taken into
account.
"Nonrecourse Deductions" has the meaning set forth in Regulations
------------------------
Section 1.704-2(b)(1).
"Regulations" means the regulations issued by the United States
-------------
Treasury Department under the Internal Revenue Code.
"Transferee" means a third person or entity to whom a Transferring
------------
Member sells, transfers, assigns or otherwise disposes of all or any portion of
a Membership Interest.
"Transferring Member" means a Member who sells, transfers, assigns or
---------------------
otherwise disposes of all or any portion of such Member's Membership Interest to
any third person or entity.
ARTICLE III
PRINCIPAL OFFICE/REGISTERED OFFICE
Section 3.1 Principal Office. The principal office of the Company in the
----------------
State of Nevada shall be located at 345 North Virginia Street, Reno, Washoe
County, Nevada 89501. The Company may have such other offices, either within
or without the State of Nevada, as the Board of Managers may designate or as the
business of the Company from time to time may require.
Section 3.2 Registered Office. The address of the initial registered
-----------------
office of the Company is 241 Ridge Street, 4th Floor, Reno, Nevada 89501, and
the Company's initial agent for service of process at such address is SIERRA
CORPORATE SERVICES. The Company's registered office and agent for service of
process may be changed from time to time by action of the Board of Managers and
by filing the prescribed form with the Nevada Secretary of State.
4
<PAGE>
ARTICLE IV
PURPOSES AND POWERS
Section 4.1 Purposes. The Company may engage in any lawful activity
--------
except insurance. The character and general nature of the business to be
conducted by the Company is (a) to operate, manage and conduct gaming in a
gaming casino on or within the premises known as the Eldorado Hotel & Casino
located at 345 North Virginia Street, Reno, Nevada, (b) to own, directly or
indirectly, interests in the gaming casino known as the Silver Legacy Resort
Casino located at 407 North Virginia Street, Reno, Nevada and (c) to engage in
such other legal and lawful purposes permitted by law except insurance.
Section 4.2 Powers. The Company shall have all the powers granted to a
------
limited-liability company under the laws of the State of Nevada.
ARTICLE V
MANAGERS
Section 5.1 Authorized Number of Managers. The Company shall be managed
-----------------------------
by a Board of Managers. The authorized number of Managers shall be THREE (3)
until changed by a resolution amending such exact number of Managers duly
adopted by the Members as provided in subparagraph (a) of Section 5.9 of this
Operating Agreement. A Manager need not be a Member. The initial Managers
shall be the following persons:
1. Donald L. Carano
2. Recreational Enterprises, Inc., a Nevada corporation ("REI")
3. Hotel-Casino Management, Inc., a Nevada corporation ("HCM")
By REI's execution of this Operating Agreement, REI shall be deemed to have
designated as of the date hereof Gary L. Carano, Vice President of REI, as REI's
corporate representative for all determinations to be made by the Board of
Managers. By HCM's execution of this Operating Agreement, HCM shall be deemed
to have designated as of the date hereof Raymond J. Poncia, Jr., President of
HCM, as HCM's corporate representative for all determinations to be made by the
Board of Managers. Such respective designations of REI and HCM may be
respectively changed by REI and HCM from time to time and at any time during
REI's and HCM's respective standing as a Manager by providing written notice of
such change to the Secretary of the Company. Every corporation that is elected
by the Members to the Board of Managers under this Operating Agreement thereupon
shall promptly designate a corporate officer as such corporation's
representative for all determinations to be made by the Board of Managers during
the term of such corporation's standing as a Manager. Any such designation of
any such corporation may be changed by such corporation from time to time and at
any time during such corporation's standing as a
5
<PAGE>
Manager by providing written notice of such change to the Secretary of the
Company. All acts, approvals and resolutions adopted by the Board of Managers
may be implemented and executed on behalf of a Manager that is a corporation by
any officer of such corporation.
Section 5.2 Election and Term of Managers. At each annual meeting of the
-----------------------------
Members, the Managers shall be elected by the Members to hold office until the
next annual meeting of the Members. At all elections of Managers, each Member
is entitled to as many votes as equal the number of percentage points
represented by such Member's Membership Voting Interest in relation to the total
outstanding Membership Voting Interests (determined as of the date of giving
notice of the annual meeting of the Members) multiplied by the number of
Managers to be elected, and each Member may cast all of such Member's votes for
a single Manager or may distribute them among the number of Managers to be voted
for or any TWO (2) or more of them, as such Member may see fit. The cumulative
voting provisions of this Section 5.2 cannot be amended or repealed unless such
amendment or repeal first has been approved by the affirmative vote or written
consent of the Members holding more than SEVENTY FIVE PERCENT (75%) of the
outstanding Membership Voting Interests. Each Manager shall hold office until
the expiration of the term for which such Manager is elected and until a
successor has been elected and qualified, except in the case of the death,
removal or resignation of such Manager.
Section 5.3 Removal, Resignation and Vacancies. Any Manager may be
----------------------------------
removed from office, without cause, by the affirmative vote or written consent
of the Members holding more than SIXTY PERCENT (60%) of the total outstanding
Membership Voting Interests; provided, however, that this provision shall have
no application and shall be of no force or effect in the event that the Company
has fewer than THREE (3) authorized Managers; and provided further that no
Manager may be removed from office when the votes of the Membership Voting
Interests cast against such removal, or not consenting in writing to such
removal, would be sufficient to elect such Manager if voted cumulatively at an
election at which the same total number of votes were cast (or, if the action is
taken by written consent, all Membership Voting Interests entitled to vote were
voted) and the entire number of Managers authorized at the time of the Manager's
most recent election were being elected. Any Manager may resign as a Manager at
any time by giving written notice of resignation to the remaining Managers. Any
such resignation shall take effect on the date of the receipt of such notice or
any later time specified therein. Unless otherwise specified in such notice,
the acceptance of such resignation shall not be necessary to make it effective.
If any position on the Board of Managers becomes vacant more than SIXTY (60)
days before an annual meeting of the Members to be held in accordance with the
terms and provisions of Section 8.1 of this Operating Agreement (provided that
such vacancy on the Board of Managers was not created by an increase in the
authorized number of Managers), then the Members (and/or their successors who
have been admitted as Members under either Section 14.2 or Section 14.5 of this
Operating Agreement), and only the Members (and/or such successors), whose
Membership Voting Interests originally were voted to elect the Manager whose
position on the Board of Managers has so become vacant may elect a substitute
Manager to fill such vacancy. Such election shall be effected in accordance with
the terms and provisions of Section 5.2 of this Operating Agreement; provided
that (a) Members whose
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Membership Voting Interests originally were not voted to elect such Manager
whose position on the Board of Managers has become vacant shall not participate
in such election, (b) such election may be effected by written consent, and (c)
such election shall be only for such substitute Manager. All other vacancies on
the Board of Managers shall be filled by the Members, and only the Members, at
annual meetings of the Members (or, as may be necessary or appropriate in
connection with vacancies on the Board of Managers created by an increase in the
authorized number of Managers, at special meetings of the Members) in accordance
with the terms and provisions of Section 5.2 of this Operating Agreement.
Section 5.4 General Authority. Subject to the terms and provisions of
-----------------
Sections 5.8, 5.9 and 5.10 of this Operating Agreement and all other provisions
of this Operating Agreement requiring approval of Company or Manager action by
the affirmative vote or written consent of the Members holding a specified
percentage of Membership Voting Interests, the Board of Managers shall have
control over the management of the business and affairs of the Company, shall
have authority to do all things necessary to carry on the business and affairs
of the Company and hereby is authorized to take any action of any kind and to do
anything and everything that the Board of Managers deems necessary or
appropriate with respect to the business and affairs of the Company in
accordance with the terms and provisions of this Operating Agreement and
applicable law. Notwithstanding the foregoing, as provided further in Section
5.11 of this Operating Agreement, the Board of Managers hereby delegates full
power and authority to the Chief Executive Officer, President and Presiding
Manager to make all policies and decisions with respect to the day-to-day
management and operation of the business and affairs of the Company, subject to
the terms and provisions of Sections 5.8, 5.9 and 5.10 of this Operating
Agreement and all other provisions of this Operating Agreement requiring
approval of Company or Manager action by the affirmative vote or written consent
of the Members holding a specified percentage of Membership Voting Interests.
With respect to each Company matter as to which the Board of Managers has
decision-making authority and responsibility, each Manager shall be entitled to
ONE (1) vote. If the Board of Managers consists of more than ONE (1) Manager,
then the presence of a majority of the authorized number of Managers at a
meeting of the Board of Managers constitutes a quorum for the transaction of
Company business, except as otherwise provided in this Operating Agreement.
Managers may participate in a meeting through use of conference telephone or
similar communications equipment, so long as all Managers participating in such
meeting can hear one another. Participation in a meeting as permitted by the
immediately-preceding sentence hereof constitutes presence in person at such
meeting. Every act done or decision made by a majority of the Managers present
at a meeting duly held at which a quorum is present shall be regarded as the act
of the Board of Managers, unless a greater number is required by law, by the
Articles of Organization or by this Operating Agreement.
Except where expressly provided to the contrary in this Operating
Agreement, and except for policies and decisions with respect to the day-to-day
management and operation of the business and affairs of the Company made or to
be made by the Chief Executive Officer, President and Presiding Manager pursuant
to the authority of the Chief Executive Officer, President and Presiding Manager
provided by this Section 5.4 and Section 5.11 of this Operating Agreement or as
otherwise
7
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delegated by the Board of Managers to the Chief Executive Officer, President and
Presiding Manager, all policies and decisions with respect to control over the
management of the business and affairs of the Company shall be made by the Board
of Managers and shall be binding on all of the Members and the Interest Holders.
Except as provided in Sections 5.8, 5.9 and 5.10 of this Operating Agreement and
all other provisions of this Operating Agreement requiring approval of Company
or Manager action by the affirmative vote or written consent of the Members
holding a specified percentage of Membership Voting Interests, the Members and
the Interest Holders as such shall have no right to participate in the
management or control of the business and affairs of the Company, and the
Members as such shall have only the voting rights specifically set forth in this
Operating Agreement or as otherwise required and not subject to waiver under
Chapter 86. In addition to the general management authority provided to the
Board of Managers in this Section 5.4, the Board of Managers shall have the
following specific rights, subject to compliance with the other terms and
provisions of this Operating Agreement:
(a) In any single transaction or series of related transactions
having a value equalling or exceeding FIVE MILLION DOLLARS ($5,000,000), to
cause the Company to contract to sell, sell, lease, exchange, grant any option
on, convert to condominiums or otherwise transfer or dispose of any of the real
or personal property of the Company or any portion thereof or any interest
therein as from time to time may be deemed by the Board of Managers to be
appropriate or expedient, including the sale of time-sharing units and/or
condominiums located on property of the Company;
(b) To fix, on an annual basis, compensation, if any, for each of the
Managers;
(c) To approve, adopt and implement such new or additional incentive
compensation policies and plans for the benefit of the Managers, officers,
agents and/or employees of the Company, such as the Performance and Appreciation
Rights Plan and the Deferred Compensation Plan of the Eldorado Limited
Partnership in effect before the Merger (which the Company shall continue in
effect after the Merger), as may be deemed necessary or expedient; provided,
however, that, in accordance with the terms and provisions of subparagraph (c)
of Section 5.9 of this Operating Agreement, any such new or additional incentive
compensation policy or plan that contemplates the issuance of any form of equity
interest in the Company must be approved by the affirmative vote or written
consent of the Members holding more than SEVENTY FIVE PERCENT (75%) of the
outstanding Membership Voting Interests;
(d) To cause the Company to keep or place title to the real property
of the Company or any part thereof on record in the name of the Company, or in
the name of a nominee or nominees;
(e) To cause the Company to institute, prosecute, defend and settle
any legal or administrative action or proceeding on behalf of or against the
Company having an actual or potential value equalling or exceeding FIVE MILLION
DOLLARS ($5,000,000);
8
<PAGE>
(f) To cause the Company to enter into and execute any agreement with
other persons, firms, corporations or other entities, under the terms of which
such persons, firms, corporations or other entities become joint venturers or
partners or limited-liability company members with the Company in the operation
of the Company's properties, or become entitled to an interest in the properties
owned or held by the Company, if, in the opinion of the Board of Managers, the
making of any such agreement is in the best interests of the Company; provided,
however, that, in accordance with the terms and provisions of subparagraph (d)
of Section 5.9 of this Operating Agreement, any such joint venture or
partnership or limited-liability company agreement must be approved by the
affirmative vote or written consent of the Members holding more than SEVENTY
FIVE PERCENT (75%) of the outstanding Membership Voting Interests;
(g) In any single transaction or series of related transactions
having a value equalling or exceeding FIVE MILLION DOLLARS ($5,000,000), to
cause the Company to acquire such real or tangible personal property and
intangible property as may be necessary or desirable to carry on the business of
the Company, and to sell, exchange or otherwise dispose of such property;
(h) In any single transaction or series of related transactions
having a value equalling or exceeding FIVE MILLION DOLLARS ($5,000,000), to
cause the Company to enter into such loans, mortgages and other financing
arrangements or rearrangements, and to grant such security interests in the
assets of the Company, as may be necessary or desirable to carry on the business
of the Company and to execute all documents, including chattel and real estate
mortgages and deeds of trust, promissory notes, pledge agreements, assignments
and other documents in connection with any such loan, mortgage, financing or
refinancing. All of the foregoing powers may be exercised at such price, rental
or amount, for cash, securities or other property, for such periods of time and
under such terms as the Board of Managers deems appropriate; provided, however,
that, in accordance with the terms and provisions of subparagraph (e) of Section
5.9 of this Operating Agreement, any loan that hypothecates property of the
Company and that results in assets of the Company being hypothecated in excess
of EIGHTY PERCENT (80%) of the fair market value of all assets of the Company
may only be entered into upon the prior approval by the affirmative vote or
written consent of the Members holding more than SEVENTY FIVE PERCENT (75%) of
the outstanding Membership Voting Interests;
(i) Notwithstanding any other term or provision of this Operating
Agreement, as may be necessary or desirable to carry on the business of the
Company, to cause the Company to effect the private placement of non-convertible
debt securities of the Company in any amount deemed appropriate or necessary
under Section 4(2) of, and/or Regulation D Rule 506 under, the Securities Act of
1933, as amended (the "Securities Act"), including, without limitation, sales of
such non-convertible debt securities of the Company to any securities dealer or
group of securities dealers as principals in such transactions for the purpose
of enabling such securities dealers to re-sell such non-convertible debt
securities of the Company to "qualified institutional buyers" as defined in Rule
144A under the Securities Act in reliance on Rule 144A under the Securities Act
and to institutional "accredited investors" as defined in Regulation D under the
Securities Act in reliance
9
<PAGE>
on Regulation D under the Securities Act;
(j) Notwithstanding any other term or provision of this Operating
Agreement, as may be necessary or desirable to carry on the business of the
Company, to cause the Company to effect any registration, including, without
limitation, any "shelf" registration, with the Securities and Exchange
Commission in compliance with the Securities Act, and the registration and/or
qualification with state securities administrators in compliance with applicable
state securities laws, of non-convertible debt securities of the Company,
including, without limitation, non-convertible debt securities of the Company
issued and sold by the Company in any private placement under subparagraph (i)
of this Section 5.4, for the purpose of effecting a public offering of such
securities and/or making such securities re-saleable to the public without
restriction;
(k) Notwithstanding any other term or provision of this Operating
Agreement, as may be necessary or desirable to carry on the business of the
Company, to cause the Company to effect offerings of non-convertible debt
securities of the Company that are exempt from the registration requirements of
the Securities Act;
(l) Notwithstanding any other term or provision of this Operating
Agreement, as may be necessary or desirable to carry on the business of the
Company, to cause the Company to effect public offerings of non-convertible debt
securities of the Company;
(m) To cause the Company to effect the registration with the
Securities and Exchange Commission in compliance with the Securities Act, and
the registration and/or qualification with state securities administrators in
compliance with applicable state securities laws, of equity securities of the
Company (or of any parent or successor entity of the Company), for the purpose
of effecting public offerings of such securities, including, without limitation,
secondary offerings of such securities (all present and future Members hereby
acknowledging that any such transaction may cause the Company thereafter to be
taxed under the Internal Revenue Code as a corporation); provided, however,
that, in accordance with the terms and provisions of subparagraph (k) of Section
5.9 of this Operating Agreement, any such registration or qualification of
equity securities of the Company (or of any parent or successor entity of the
Company) must be approved by the affirmative vote or written consent of the
Members holding more than SEVENTY FIVE PERCENT (75%) of the outstanding
Membership Voting Interests;
(n) To cause the Company to effect public offerings of equity
securities of the Company (or of any parent or successor entity of the Company),
including, without limitation, secondary offerings of such securities (all
present and future Members hereby acknowledging that any such transaction may
cause the Company thereafter to be taxed under the Internal Revenue Code as a
corporation); provided, however, that, in accordance with the terms and
provisions of subparagraph (l) of Section 5.9 of this Operating Agreement, any
such public offering of equity securities of the Company (or of any parent or
successor entity of the Company) must be approved by the affirmative vote or
written consent of the Members holding more than SEVENTY FIVE
10
<PAGE>
PERCENT (75%) of the outstanding Membership Voting Interests; and
(o) To cause the Company to prepay, modify, amend, renew or extend
any authorized Company indebtedness.
Section 5.5 General Obligations. The Board of Managers shall:
-------------------
(a) Take or cause to be taken all actions that may be necessary or
appropriate for the development, maintenance, preservation and operation of the
properties of the Company as a first class hotel and gaming casino and in
accordance with the terms and provisions of this Operating Agreement and
applicable laws and regulations;
(b) At all times conduct the affairs of the Company, or cause the
affairs of the Company to be conducted, in such a manner that the Company shall
be able to service all debts and financial obligations of the Company; and
(c) Use reasonable best efforts to assure that the Company shall not
be deemed an "Investment Company" as such term is defined in the Investment
Company Act of 1940, as amended.
Section 5.6 Scope of Duties. The Managers shall not be required to devote
---------------
their full time to the business or affairs of the Company but shall devote the
time reasonably necessary to perform the duties of the Managers under this
Operating Agreement and to manage and operate prudently the Company's business
and properties.
Section 5.7 Limitation of Liability and Indemnification of Managers.
-------------------------------------------------------
(a) The Managers shall not be liable for the return of any capital
contribution of any Member or Interest Holder or for any amount of profits
thereon, and any return of capital and profits shall be made, if at all, solely
from the assets and business of the Company.
(b) No Manager shall be liable to the Company or to the Members or to
the Interest Holders for acts or omissions of such Manager in connection with
the business or affairs of the Company, including, without limitation, any
breach of fiduciary duty of such Manager as a Manager, any mistake of judgment
of such Manager and any business decision of such Manager (including any
decision regarding the timing of any acquisition or disposition of any property
of the Company), except for acts or omissions of such Manager that a final
adjudication establishes involved intentional misconduct, fraud or a knowing
violation of the law that was material to the cause of action subject to such
final adjudication.
(c) In the event that the Board of Managers consists of more than ONE
(1) Manager when any alleged liability arises under this Operating Agreement or
in favor of any
11
<PAGE>
Member or Interest Holder against the Board of Managers, the liability of each
Manager shall be joint and several. Multiple Managers shall have the right
separately to agree on indemnification and contribution obligations among
themselves.
(d) Notwithstanding any other term or provision of this Operating
Agreement, but subject to the terms and provisions of Section 18.3 of this
Operating Agreement, the Company and/or its successor, trustee or receiver shall
indemnify, defend and hold harmless every Manager and every person who at any
time was but ceased to be a Manager, and the heirs, executors and administrators
of every Manager and of every such person, against all claims, demands, actions,
losses, liabilities, damages, costs and expenses, which after the date of this
Operating Agreement arise out of the Company or its business or affairs,
including reasonable attorneys' fees incurred in defending all such matters;
provided, however, that, unless otherwise ordered by a court pursuant to Nevada
Revised Statutes Section 86.421, this indemnification provision shall not apply
to any of such claims, demands, actions, losses, liabilities, damages, costs or
expenses that arise or result from, or otherwise are related to or based on,
acts or omissions of a Manager that a final adjudication establishes involved
intentional misconduct, fraud or a knowing violation of the law that was
material to the cause of action subject to such final adjudication.
(e) The satisfaction of the indemnification obligations of the
Company under this Section 5.7 shall be from and limited to the assets of the
Company, and no Member or Interest Holder shall have any personal liability for
the satisfaction of any such indemnification obligation.
(f) Notwithstanding any other term or provision of this Operating
Agreement, the terms and provisions of this Section 5.7 cannot and shall not be
amended or repealed under any circumstance, except as may be necessary to
increase or expand (but not to reduce) the rights or protections under this
Section 5.7 of Managers or other persons referenced in this Section 5.7 to the
maximum extent permitted by Chapter 86, as amended. No amendment or repeal of
any term or provision of this Section 5.7 that otherwise would restrict or limit
any right or protection of a Manager or other person under this Section 5.7
shall apply to or have any effect on any such right or protection of any Manager
existing at the time of such amendment or repeal or of any person who at any
time before such amendment or repeal was but ceased to be a Manager, or of the
heirs, executors and administrators of any such Manager or other person.
12
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Section 5.8 Restrictions on Authority of Board of Managers and Chief
--------------------------------------------------------
Executive Officer, President and Presiding Manager. Without the affirmative
- --------------------------------------------------
vote or written consent of the Members holding ONE HUNDRED PERCENT (100%) of the
outstanding Membership Voting Interests, neither the Board of Managers nor the
Chief Executive Officer, President and Presiding Manager shall directly or
indirectly:
(a) Do any act in contravention of this Operating Agreement, as
amended from time to time;
(b) Do any act that would make it impossible to carry on the ordinary
business of the Company, provided that actions of the Managers in accordance
with the purposes of the Company or rights and powers granted under this
Operating Agreement shall not be considered to breach this clause; or
(c) Commingle funds of the Company with funds of any other person.
Notwithstanding any other term or provision of this Operating Agreement, the
terms and provisions of this Section 5.8 cannot be amended or repealed unless
such amendment or repeal first has been approved by the affirmative vote or
written consent of the Members holding ONE HUNDRED PERCENT (100%) of the
outstanding Membership Voting Interests.
Section 5.9 Other Restrictions on Authority of Board of Managers and Chief
--------------------------------------------------------------
Executive Officer, President and Presiding Manager. Without the affirmative
- --------------------------------------------------
vote or written consent of the Members holding more than SEVENTY FIVE PERCENT
(75%) of the outstanding Membership Voting Interests, neither the Board of
Managers nor the Chief Executive Officer, President and Presiding Manager shall
directly or indirectly:
(a) Amend the authorized number of Managers set forth in Section 5.1
of this Operating Agreement;
(b) Cause the Company to merge or otherwise engage in any kind of
business combination or reorganization with another entity or other person;
(c) Approve, adopt and implement such new or additional incentive
compensation policies and plans for the benefit of the Managers, officers,
agents and/or employees of the Company that contemplate the issuance of any form
of equity interest in the Company as described in subparagraph (c) of Section
5.4 of this Operating Agreement;
(d) Cause the Company to enter into any joint venture or partnership
or limited-liability company agreement as described in subparagraph (f) of
Section 5.4 of this Operating Agreement;
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<PAGE>
(e) Cause the Company to enter into any loan that hypothecates
property of the Company and that results in assets of the Company being
hypothecated in excess of EIGHTY PERCENT (80%) of the fair market value of all
assets of the Company as described in subparagraph (h) of Section 5.4 of this
Operating Agreement and in subparagraph (a)(ix) of Section 5.11 of this
Operating Agreement;
(f) Cause or permit any new issuance and sale of Membership Interests
by the Company, in any ONE (1) or more related or unrelated transactions;
provided, however, that no new issuance and/or sale of Membership Interests by
the Company, in any ONE (1) or more related or unrelated transactions, shall be
effected or approved by the Board of Managers in any event unless with respect
thereto the terms and provisions of Section 7.1 of this Operating Agreement
first have been satisfied; provided further, however, that all of the preceding
terms and provisions of this subparagraph (f) of this Section 5.9 shall not
apply to any new issuance and sale of Membership Interests by the Company
effected in accordance with the terms and provisions of Section 9.3 of this
Operating Agreement;
(g) Cause or permit any person or entity to which a new issuance and
sale of Membership Interests has been made by the Company in accordance with the
terms and provisions of subparagraph (f) of this Section 5.9 to become a Member
by reason of or in connection with such new issuance of Membership Interests by
the Company; provided, however, that all of the preceding terms of this
subparagraph (g) of this Section 5.9 shall not apply to any new issuance and
sale of Membership Interests by the Company effected in accordance with the
terms and provisions of Section 9.3 of this Operating Agreement;
(h) Possess Company property, or assign rights in specific Company
property, for other than a Company purpose;
(i) Purchase or lease Company property from the Company or sell or
lease property to the Company;
(j) Cause the Company to guarantee the indebtedness of any person or
cause or suffer or permit any Company property to secure or become collateral
for any indebtedness of any person other than the Company;
(k) Cause the Company (or any parent or successor entity of the
Company) to effect the registration with the Securities and Exchange Commission
in compliance with the Securities Act, and/or the registration and/or
qualification with state securities administrators in compliance with applicable
state securities laws, of equity securities of the Company (or of any parent or
successor entity of the Company), for the purpose of effecting public offerings
of such securities, including, without limitation, secondary offerings of such
securities, as described in subparagraph (m) of Section 5.4 of this Operating
Agreement (all present and future Members hereby acknowledging that any such
transaction may cause the Company thereafter to be taxed under
14
<PAGE>
the Internal Revenue Code as a corporation);
(l) Cause the Company (or any parent or successor entity of the
Company) to effect public offerings of equity securities of the Company (or of
any parent or successor entity of the Company), including, without limitation,
secondary offerings of such securities, as described in subparagraph (n) of
Section 5.4 of this Operating Agreement (all present and future Members hereby
acknowledging that any such transaction may cause the Company thereafter to be
taxed under the Internal Revenue Code as a corporation);
(m) Request subsequent capital contributions from each Member and
Interest Holder under Section 9.3 of this Operating Agreement; or
(n) Cause or permit the Company at any time to have more than ONE
HUNDRED (100) Members and/or Interest Holders (including as Members and Interest
Holders those persons indirectly owning a Membership Interest through a
partnership, limited-liability company, S corporation or grantor trust (such
entity, a "Flow-Through Entity") but only if substantially all of the value of
such person's interest in the Flow-Through Entity is attributable to the Flow-
Through Entity's interest (direct or indirect) in the Company), as described in
Section 21.1 of this Operating Agreement.
Notwithstanding any other term or provision of this Operating Agreement, the
terms and provisions of this Section 5.9 cannot be amended or repealed unless
such amendment or repeal first has been approved by the affirmative vote or
written consent of the Members holding more than SEVENTY FIVE PERCENT (75%) of
the outstanding Membership Voting Interests.
Section 5.10 Other Restrictions on Authority of Board of Managers and
--------------------------------------------------------
Chief Executive Officer, President and Presiding Manager. Without the
- --------------------------------------------------------
affirmative vote or written consent of the Members holding more than FIFTY
PERCENT (50%) of the outstanding Membership Voting Interests, neither the Board
of Managers nor the Chief Executive Officer, President and Presiding Manager
shall directly or indirectly:
(a) Designate a new "Tax Matters Partner" as described in ARTICLE XX
of this Operating Agreement.
Section 5.11 Chief Executive Officer, President and Presiding Manager.
--------------------------------------------------------
(a) Authority. The Chief Executive Officer, President and Presiding
---------
Manager shall have the general powers and duties of management usually vested in
the office of Chief Executive Officer/President of a corporation and shall have
such other powers and duties as may be prescribed by the Board of Managers or
this Operating Agreement. Subject to the control of the Board of Managers with
respect to Company matters requiring a vote of the Board of Managers under this
Operating Agreement, the Chief Executive Officer, President and Presiding
Manager is
15
<PAGE>
the general manager of the Company, shall have supervising authority over and
may exercise general executive power concerning the supervision, direction and
control of the day-to-day business and affairs of the Company and shall carry
out the decisions voted on by the Board of Managers and/or by the Members, with
the authority from time to time and at any time to delegate to any Assistant
Presiding Manager or any other officer or executive employee of the Company such
executive powers and duties as the Chief Executive Officer, President and
Presiding Manager may deem advisable. Subject to the terms and provisions of
Sections 5.8, 5.9 and 5.10 of this Operating Agreement and all other provisions
of this Operating Agreement requiring approval of Company or Manager action by
the affirmative vote or written consent of the Members holding a specified
percentage of Membership Voting Interests, the Chief Executive Officer,
President and Presiding Manager shall have authority to do all things necessary
to carry on the day-to-day business and affairs of the Company and hereby is
authorized to take any action of any kind and to do anything and everything that
the Chief Executive Officer, President and Presiding Manager deems necessary or
appropriate with respect to the day-to-day business and affairs of the Company
in accordance with the terms and provisions of this Operating Agreement and
applicable law. The Chief Executive Officer, President and Presiding Manager has
authority to make all policies and decisions with respect to the day-to-day
management and operation of the business and affairs of the Company, subject to
the terms and provisions of Sections 5.8, 5.9 and 5.10 of this Operating
Agreement and all other provisions of this Operating Agreement requiring
approval of Company or Manager action by the affirmative vote or written consent
of the Members holding a specified percentage of Membership Voting Interests. In
addition to the general authority provided to the Chief Executive Officer,
President and Presiding Manager in this Section 5.11, and without limiting the
generality of any of the foregoing, the Chief Executive Officer, President and
Presiding Manager shall have the following specific rights, subject to
compliance with the other terms and provisions of this Operating Agreement:
(i) On behalf of the Company, to acquire or lease such
additional real or personal property as the Chief Executive Officer, President
and Presiding Manager from time to time may deem appropriate or expedient for
the operation of the business of the Company;
(ii) On behalf of the Company, to develop and improve, or cause
to be developed and improved, the property of the Company;
(iii) To maintain, operate and lease the property of the Company
and in connection therewith to execute and deliver on behalf of the Company (A)
licenses or other contracts, (B) checks, drafts and other orders with respect to
the payment of Company funds, (C) powers of attorney, consents, waivers and
other documents necessary or desirable to procure licenses, permits, surface
leases, rights of way and such other permits, licenses and leases as may be
necessary to the conduct of the business of the Company and (D) all other
agreements, documents and commitments relating to the affairs of the Company;
(iv) In any single transaction or series of related
transactions having a value
16
<PAGE>
of under FIVE MILLION DOLLARS ($5,000,000), on behalf of the Company, to
contract to sell, sell, lease, exchange, grant any option on, convert to
condominiums or otherwise transfer or dispose of any of the real or personal
property of the Company or any portion thereof or any interest therein as from
time to time may be deemed by the Chief Executive Officer, President and
Presiding Manager to be appropriate or expedient, including the sale of time-
sharing units and/or condominiums located on property of the Company;
(v) On behalf of the Company, to select and remove such
officers, agents and employees of the Company as may be deemed necessary or
expedient and to assist with the management or operation of Company property, to
prescribe such powers and duties for them as are not inconsistent with law, the
Articles of Organization or this Operating Agreement and to fix their
compensation;
(vi) On behalf of the Company, to employ and terminate the
services of such persons, firms, corporations or other entities, including any
ONE (1) or more of the Members, for or in connection with the business of the
Company or the acquisition, development, improvement, operation, maintenance,
management, leasing, financing, refinancing, sale, exchange or other disposition
of the property of the Company as may be deemed necessary or expedient and to
assist with the management or operation of Company property and to perform
Company administrative services, accounting services, independent auditing
services, legal services and other services for the benefit of the Company;
(vii) To institute, prosecute, defend and settle any legal or
administrative action or proceeding on behalf of or against the Company having
an actual or potential value of under FIVE MILLION DOLLARS ($5,000,000);
(viii) In any single transaction or series of related
transactions having a value of under FIVE MILLION DOLLARS ($5,000,000), on
behalf of the Company, to acquire such real or tangible personal property and
intangible property as may be necessary or desirable to carry on the business of
the Company, and to sell, exchange or otherwise dispose of the same;
(ix) In any single transaction or series of related
transactions having a value of under FIVE MILLION DOLLARS ($5,000,000), on
behalf of the Company, to enter into such loans, mortgages and other financing
arrangements or rearrangements, and to grant such security interests in the
assets of the Company, as may be necessary or desirable to carry on the business
of the Company and to execute all documents, including chattel and real estate
mortgages and deeds of trust, promissory notes, pledge agreements, assignments
and other documents in connection with any such loan, mortgage, financing or
refinancing. All of the foregoing powers may be exercised at such price, rental
or amount, for cash, securities or other property, for such periods of time and
under such terms as the Chief Executive Officer, President and Presiding Manager
deems appropriate; provided, however, that, in accordance with the terms and
provisions of subparagraph (e) of Section 5.9 of this Operating Agreement, any
loan that hypothecates property of the Company
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and that results in assets of the Company being hypothecated in excess of EIGHTY
PERCENT (80%) of the fair market value of all assets of the Company may only be
entered into upon the prior approval by the affirmative vote or written consent
of the Members holding more than SEVENTY FIVE PERCENT (75%) of the outstanding
Membership Voting Interests;
(x) On behalf of the Company, to operate, manage and collect
income from any real property owned by the Company in accordance with this
Operating Agreement;
(xi) On behalf of the Company, to make any reasonable
expenditure for the organization, operation and conduct of the business and
affairs of the Company and to negotiate, execute, acknowledge, file, record,
deliver and perform any agreement or instrument considered necessary or
appropriate by the Chief Executive Officer, President and Presiding Manager for
the conduct of the Company's business and affairs in accordance with this
Operating Agreement or for the implementation of the powers granted to the Chief
Executive Officer, President and Presiding Manager under this Operating
Agreement;
(xii) On behalf of the Company, to obtain or keep in force, or
cause to be obtained and kept in force, fire and extended coverage, workmen's
compensation and public liability insurance in favor of the Company reasonably
necessary to cover risks associated with the operation of the business of the
Company; and
(xiii) On behalf of the Company, to invest Company funds in
commercial paper, government securities, certificates of deposit, time deposits,
bankers' acceptances, money market funds or similar investments having a
maturity generally considered to be short term.
(b) General Obligations. The Chief Executive Officer, President and
-------------------
Presiding Manager shall:
(i) Preside at all meetings of the Board of Managers and at
all meetings of the Members;
(ii) Take or cause to be taken all actions that may be
necessary or appropriate for the development, maintenance, preservation and
operation of the properties of the Company as a first class hotel and gaming
casino and in accordance with the terms and provisions of this Operating
Agreement and applicable laws and regulations;
(iii) Execute and cause to be filed original or amended
documents and take all other actions that reasonably may be necessary to perfect
and maintain the status of the Company as a limited-liability company under the
laws of the State of Nevada and of other states or jurisdictions in which the
Company engages in business and, if required by law, execute and cause to be
recorded appropriate original or amended documents in each county in each state
in which the Company owns real property;
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(iv) Take such actions as may be necessary or appropriate in
order to qualify the Company under the laws of any jurisdiction in which the
Company is doing business or owns property or in which such qualification is
necessary in order to protect the limited liability of the Members or in order
to continue in effect such qualification;
(v) At all times conduct the affairs of the Company in such a
manner that the Company shall be able to service all debts and financial
obligations of the Company;
(vi) At all times use reasonable best efforts in the conduct of
the business of the Company to put all suppliers and other persons with whom the
Company does business on notice that the Members and the Interest Holders are
not liable for the obligations of the Company, and all agreements to which the
Company is a party shall include a statement to the effect that the Company is a
Nevada limited-liability company organized under Chapter 86; provided, however,
that the Chief Executive Officer, President and Presiding Manager shall not be
liable to the Members or the Interest Holders for any failure to give such
notice to such suppliers or other persons or for any such agreement to fail to
contain such statement; and
(vii) Use reasonable best efforts to assure that the Company
shall not be deemed an "Investment Company" as such term is defined in the
Investment Company Act of 1940, as amended.
Section 5.12 Assistant Presiding Managers. The Managers who are not
----------------------------
appointed by the Board of Managers as the Chief Executive Officer, President and
Presiding Manager shall be Assistant Presiding Managers. Any action taken by
any Assistant Presiding Manager acting as such on behalf of the Company shall be
subject to the control and direction of the Chief Executive Officer, President
and Presiding Manager. Each Assistant Presiding Manager individually acting as
such on behalf of the Company shall have no supervising authority over and may
not exercise general executive power concerning the supervision, direction and
control of the business and affairs of the Company except as authorized under
contract or otherwise as may be necessary and as specifically authorized to
carry out the decisions voted on by the Board of Managers and/or the decisions
of the Chief Executive Officer, President and Presiding Manager.
Section 5.13 Limitations on Manager Authority. If the authorized number
--------------------------------
of Managers under Section 5.1 (as may be amended from time to time) is ONE (1),
then such sole Manager shall hold the office of Chief Executive Officer,
President and Presiding Manager, and no person shall hold the office of
Assistant Presiding Manager. Notwithstanding any other term or provision of
this Operating Agreement, if the authorized number of Managers under Section 5.1
is more than ONE (1), then, except as otherwise expressly provided in Chapter 86
(excluding Sections 86.301 and 86.311 of Chapter 86), (a) no debt or liability,
in any single transaction or series of related transactions having a value
equalling or exceeding FIVE MILLION DOLLARS ($5,000,000), may be contracted or
incurred by or on behalf of the Company except upon the execution of the
documents creating such debt or liability by both the Chief Executive Officer,
President and
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Presiding Manager and ONE (1) Assistant Presiding Manager; (b) instruments and
documents providing for the acquisition, mortgage or disposition of property of
the Company, in any single transaction or series of related transactions having
a value equalling or exceeding FIVE MILLION DOLLARS ($5,000,000), shall be valid
and binding on the Company only if executed by both the Chief Executive Officer,
President and Presiding Manager and ONE (1) Assistant Presiding Manager; (c)
debt or liability, in any single transaction or series of related transactions
having a value of under FIVE MILLION DOLLARS ($5,000,000), may be contracted or
incurred by or on behalf of the Company upon the execution of the documents
creating such debt or liability solely by the Chief Executive Officer, President
and Presiding Manager or solely by any Assistant Presiding Manager but in such
latter case only as generally authorized under contract with the Company or
otherwise as may be necessary and as specifically authorized to carry out the
decisions voted on by the Board of Managers and/or the decisions or directions
of the Chief Executive Officer, President and Presiding Manager; and (d)
instruments and documents providing for the acquisition, mortgage or disposition
of property of the Company, in any single transaction or series of related
transactions having a value of under FIVE MILLION DOLLARS ($5,000,000), shall be
valid and binding on the Company if executed solely by the Chief Executive
Officer, President and Presiding Manager or solely by any Assistant Presiding
Manager but in such latter case only as generally authorized under contract with
the Company or otherwise as may be necessary and as specifically authorized to
carry out the decisions voted on by the Board of Managers and/or the decisions
or directions of the Chief Executive Officer, President and Presiding Manager.
If the authorized number of Managers under Section 5.1 is ONE (1), then, except
as otherwise expressly provided in Chapter 86 (excluding Sections 86.301 and
86.311 of Chapter 86), (i) no debt may be contracted or liability incurred by or
on behalf of the Company except upon the execution of the documents creating
such debt or liability by the Chief Executive Officer, President and Presiding
Manager, and (ii) instruments and documents providing for the acquisition,
mortgage or disposition of property of the Company shall be valid and binding on
the Company only if executed by the Chief Executive Officer, President and
Presiding Manager.
ARTICLE VI
COMPANY OFFICERS
Section 6.1 Authority. The terms and provisions of this ARTICLE VI shall
---------
not limit the general authority provided to the Chief Executive Officer,
President and Presiding Manager by the terms and provisions of subparagraph
(a)(v) of Section 5.11 of this Operating Agreement. Notwithstanding any term or
provision of this ARTICLE VI, no officer of the Company appointed under this
ARTICLE VI shall have any authority to contract or incur any debt or liability
on behalf or in the name of the Company or to execute any instrument or document
providing for the acquisition, mortgage or disposition of property of the
Company, unless such officer also is a Manager of the Company, in which case
such officer shall have such authority but only as provided in Section 5.13 of
this Operating Agreement.
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Section 6.2 Appointment. Except for such officers as may be appointed in
-----------
accordance with the terms and provisions of Section 6.3 of this Operating
Agreement, the Board of Managers annually may appoint persons to hold the
following respective offices and have the duties associated therewith. Any such
officer of the Company may, but need not, be a Manager. Each such officer of the
Company shall hold office until such officer resigns or is removed or otherwise
is disqualified to serve, or until such officer's successor is appointed. Any
single person can hold TWO (2) or more of the following offices and have the
duties associated therewith.
(a) Vice Presidents. Each Vice President of the Company shall have
---------------
such powers and perform such duties as from time to time may be prescribed for
them by the Board of Managers or the Chief Executive Officer, President and
Presiding Manager.
(b) Chief Financial Officer. The Chief Financial Officer shall have
-----------------------
the general powers and duties of management usually vested in the office of
Chief Financial Officer of a corporation and shall have such other powers and
duties as may be prescribed by the Board of Managers or the Chief Executive
Officer, President and Presiding Manager.
(c) Secretary. The Secretary shall have the general powers and
---------
duties of management usually vested in the office of Secretary of a corporation
and shall have such other powers and duties as may be prescribed by the Board of
Managers or the Chief Executive Officer, President and Presiding Manager.
Section 6.3 Subordinate Officers, Employees and Agents. Notwithstanding
------------------------------------------
the terms and provisions of Section 6.2 of this Operating Agreement, the Chief
Executive Officer, President and Presiding Manager shall have the right at any
time and from time to time to appoint such other officers, employees and agents
of the Company as the business of the Company may require in the discretion of
the Chief Executive Officer, President and Presiding Manager, including, without
limitation, a general manager for the Company's gaming casino operations, each
of whom shall hold office for such period, have such authority and perform such
duties as the Chief Executive Officer, President and Presiding Manager from time
to time may determine.
Section 6.4 Removal and Resignation. Any officer may be removed, either
-----------------------
with or without cause, by the Board of Managers at any regular or special
meeting of the Board of Managers, or, except in the case of an officer appointed
by the Board of Managers, by the Chief Executive Officer, President and
Presiding Manager (subject, in each case, to the rights, if any, of an officer
under any contract of employment). Any officer may resign at any time by giving
written notice to the Board of Managers or to the Chief Executive Officer,
President and Presiding Manager or to the Secretary, without prejudice, however,
to the rights, if any, of the Company under any contract to which such officer
is a party. Any such resignation shall take effect on the date of the Company's
receipt of such notice or at any later time specified therein, and, unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
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Section 6.5 Vacancies. A vacancy in any office because of death,
---------
resignation, removal, disqualification or any other cause shall be filled in the
manner prescribed in this ARTICLE VI for appointments to such office.
Section 6.6 Limitation of Liability and Indemnification of Company
------------------------------------------------------
Officers.
- --------
(a) No officer of the Company shall be liable to the Company or to
the Members or to the Interest Holders for acts or omissions of such officer of
the Company in connection with the business or affairs of the Company,
including, without limitation, any breach of fiduciary duty of such officer as
an officer of the Company, any mistake of judgment of such officer as an officer
of the Company and any business decision of such officer as an officer of the
Company, except for acts or omissions of such officer of the Company that a
final adjudication establishes involved intentional misconduct, fraud or a
knowing violation of the law that was material to the cause of action subject to
such final adjudication.
(b) Notwithstanding any other term or provision of this Operating
Agreement, but subject to the terms and provisions of Section 18.3 of this
Operating Agreement, the Company and/or its successor, trustee or receiver shall
indemnify, defend and hold harmless every officer of the Company and every
person who at any time was but ceased to be an officer of the Company, and the
heirs, executors and administrators of every officer of the Company and of every
such person, against all claims, demands, actions, losses, liabilities, damages,
costs and expenses, which after the date of this Operating Agreement arise out
of the Company or its business or affairs, including reasonable attorneys' fees
incurred in defending all such matters; provided, however, that, unless
otherwise ordered by a court pursuant to Nevada Revised Statutes Section 86.421,
this indemnification provision shall not apply to any of such claims, demands,
actions, losses, liabilities, damages, costs or expenses that arise or result
from, or otherwise are related to or based on, acts or omissions of an officer
of the Company that a final adjudication establishes involved intentional
misconduct, fraud or a knowing violation of the law that was material to the
cause of action subject to such final adjudication.
(c) The satisfaction of the indemnification obligations of the
Company under this Section 6.6 shall be from and limited to the assets of the
Company, and no Member or Interest Holder shall have any personal liability for
the satisfaction of any such indemnification obligation.
(d) Notwithstanding any other term or provision of this Operating
Agreement, the terms and provisions of this Section 6.6 cannot and shall not be
amended or repealed under any circumstance, except as may be necessary to
increase or expand (but not to reduce) the rights or protections under this
Section 6.6 of officers of the Company or other persons referenced in this
Section 6.6 to the maximum extent permitted by Chapter 86, as amended. No
amendment or repeal of any term or provision of this Section 6.6 that otherwise
would restrict or limit any right or protection of an officer of the Company or
other person under this Section 6.6 shall apply to or have
22
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any effect on any such right or protection of any officer of the Company
existing at the time of such amendment or repeal or of any person who at any
time before such amendment or repeal was but ceased to be an officer of the
Company, or of the heirs, executors and administrators of any such officer of
the Company or other person.
ARTICLE VII
RIGHTS AND RESTRICTIONS OF MEMBERS
Section 7.1 Members' Preemptive Rights. Each Member, and only a Member,
--------------------------
shall have a preemptive right for a period of THIRTY (30) days to subscribe for,
purchase or otherwise acquire any Membership Interest or any other equity and/or
voting interest in the Company that the Company and/or the Board of Managers at
any time proposes to issue and/or sell or any right or option that the Company
and/or the Board of Managers proposes to grant for the purchase of Membership
Interests or any other equity and/or voting interest in the Company or for the
purchase of documents, instruments, bonds, securities or obligations of the
Company that are convertible into or exchangeable for, or that carry rights to
subscribe for, purchase or otherwise acquire, Membership Interests or any other
equity and/or voting interest in the Company, whether now or hereafter
authorized or created, and whether the proposed issuance, sale or grant is for
cash, property or any other lawful consideration. The Company shall transmit
written notice (the "Preemptive Rights Notice") to every Member of any such
proposed issuance, sale or grant of Membership Interests, other interests,
rights or options (collectively, "New Securities"), stating (a) the exact amount
and type of New Securities proposed to be issued, sold or granted, (b) the
amount of the purchase price per New Security and for the total number of New
Securities proposed to be issued, sold or granted and (c) the terms of the
proposed issuance, sale or grant. Within THIRTY (30) days after the date of the
Company's transmission of the Preemptive Rights Notice, any of the Members that
desires to acquire all or any portion of the New Securities proposed to be
issued, sold or granted (as specified in the Preemptive Rights Notice) shall
deliver to the Company a written election to purchase such New Securities or a
specified number thereof. If the total number of New Securities specified in
such elections exceeds the number of New Securities to be issued, sold or
granted (as specified in the Preemptive Rights Notice), then each such Member
shall have priority, up to the number of New Securities specified in such
Member's notice of election to purchase, to purchase such proportion of the New
Securities to be issued, sold or granted (as specified in the Preemptive Rights
Notice) as the Membership Voting Interests that such Member holds bears to the
total Membership Voting Interests held by all of the Members electing to
purchase. If New Securities out of the total number of the New Securities
proposed to be issued, sold or granted (as specified in the Preemptive Rights
Notice) remain after the application of the foregoing formula, then such
remaining New Securities shall be allocated among the Members that have not
received the number of New Securities specified in their notices of election to
purchase in the proportion that the number of New Securities specified in each
individual Member's notice of election to purchase less the number of New
Securities allocated to that Member under the foregoing formula bears to the
total number of New Securities in all such elections to purchase less all New
Securities allocated to Members under the foregoing formula. If
23
<PAGE>
the Members do not purchase the total number of New Securities to be issued,
sold or granted (as specified in the Preemptive Rights Notice) within the above-
referenced THIRTY (30) day period, then, after the expiration of such THIRTY
(30) day period, but subject to all of the terms and provisions of this Section
7.1 and all other applicable terms and provisions of this Operating Agreement,
such New Securities not purchased by the Members, but only such New Securities,
may be issued, sold or granted by the Board of Managers, as the case may be, to
such persons, entities, corporations, partnerships and associations as the Board
of Managers in its discretion may determine, but only for the purchase price per
New Security and under the exact terms specified in the Preemptive Rights
Notice. If any Member transfers all or any portion of such Member's Membership
Interest to a person who by reason of such transfer becomes an Interest Holder
but is not admitted as a Member in accordance with the terms and provisions of
Section 14.2 or Section 14.5 of this Operating Agreement, then such Transferring
Member shall continue to be a Member and retain all of the preemptive rights
provided by this Section 7.1 theretofore associated with such transferred
Membership Interest until such time (if any) as the transferee Interest Holder
of such transferred Membership Interest (or such transferee Interest Holder's
successor in interest) is admitted to the Company as a Member in accordance with
the terms and provisions of Section 14.2 of this Operating Agreement. In every
such case, the Transferring Member shall continue to be a Member and retain the
preemptive rights provided by this Section 7.1 theretofore associated with the
transferred Membership Interest of such Member even if such Member so has
transferred such Members's entire Membership Interest to one or more assignees.
The preemptive rights terms and provisions of this Section 7.1 cannot be amended
or repealed unless such amendment or repeal first has been approved by the
affirmative vote or written consent of the Members holding ONE HUNDRED PERCENT
(100%) of the outstanding Membership Voting Interests. The preemptive rights
terms and provisions of this Section 7.1 shall not apply to any transaction that
is effected or proposed to be effected by the Company under any of subparagraphs
(i) through (n), inclusive, of Section 5.4 of this Operating Agreement or under
Section 9.3 of this Operating Agreement.
Section 7.2 Public Offerings of Securities. Provided that, in accordance
------------------------------
with the terms and provisions of subparagraphs (k) and (l) of Section 5.9 of
this Operating Agreement, it first has been reasonably proposed (a) that the
Company (or any parent or successor entity of the Company) effect the
registration and/or qualification of equity securities of the Company (or of any
parent or successor entity of the Company) with the Securities and Exchange
Commission and state securities administrators for the purpose of effecting an
initial public offering of such securities and (b) that the Company (or any
parent or successor entity of the Company) effect an initial public offering of
equity securities of the Company (or of any parent or successor entity of the
Company), and the Members holding more than SEVENTY FIVE PERCENT (75%) of the
outstanding Membership Voting Interests have failed or refused to authorize or
approve such proposal within THIRTY (30) days after such proposal is made, any
Member that at that time is not a publicly-traded entity shall have the
unrestricted right within SIX (6) months after such THIRTY (30) day period to
commence the registration and/or qualification of equity securities of
24
<PAGE>
such Member with the Securities and Exchange Commission and state securities
administrators for the purpose of effecting an initial public offering of such
securities and to commence an initial public offering of such securities of such
Member. At any time and from time to time after the consummation of any such
initial public offering of a Member's equity securities, such Member shall have
the unrestricted right to commence and effect additional public offerings of
securities of any class of such Member as such Member in its sole and absolute
discretion deems appropriate. Notwithstanding any other term or provision of
this Operating Agreement, the terms and provisions of this Section 7.2 cannot be
amended or repealed unless such amendment or repeal first has been approved by
the affirmative vote or written consent of the Members holding more than SEVENTY
FIVE PERCENT (75%) of the outstanding Membership Voting Interests.
Section 7.3 Restrictions on Members. No Member, otherwise than in such
-----------------------
Member's capacity as a Manager, without the written consent of the Members
holding ONE HUNDRED PERCENT (100%) of the outstanding Membership Voting
Interests, shall do any of the following:
(a) Borrow or lend money on behalf of the Company;
(b) Purport to or sell, mortgage, lease or otherwise dispose of or
encumber property of the Company;
(c) Purchase any real estate or equipment on behalf of the Company;
or
(d) Exercise or represent to any third party that such Member as such
has the right to exercise any of the powers of the Managers described in this
Operating Agreement.
Notwithstanding any other term or provision of this Operating Agreement, the
terms and provisions of this Section 7.3 cannot be amended or repealed unless
such amendment or repeal first has been approved by the affirmative vote or
written consent of the Members holding ONE HUNDRED PERCENT (100%) of the
outstanding Membership Voting Interests.
Section 7.4 Other Restrictions on Members. No Member, without the written
-----------------------------
consent of the Members holding more than SEVENTY FIVE PERCENT (75%) of the
outstanding Membership Voting Interests, shall hypothecate all or any portion of
such Member's Membership Interest.
Section 7.5 Admission of New Members. Subject to all of the requirements
------------------------
of applicable gaming law and securities law, and in accordance with the terms
and provisions of subparagraph (g) of Section 5.9 of this Operating Agreement,
new Members may be admitted to the Company from time to time in connection with
the Company's issuance and sale of new Membership Interests in accordance with
the terms and provisions of subparagraph (f) of Section 5.9 of this Operating
Agreement by the affirmative vote or written consent of the existing Members
holding more than SEVENTY FIVE PERCENT (75%) of the outstanding Membership
Voting Interests. Subject to all of the requirements of applicable gaming law
and securities law, new Members also may be admitted to the Company from time to
time in connection with transfers of Membership Interests effected or to be
effected in accordance with the terms and provisions of ARTICLE XIV of this
Operating
25
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Agreement but only in accordance with the terms and provisions of ARTICLE XIV of
this Operating Agreement. Every new Member, before becoming such, shall
complete, execute and deliver to the Company a securities law suitability
questionnaire for review by legal counsel in order to ensure that the admission
of such new Member as such to the Company can be and is effected in compliance
with all applicable securities law. Every new Member (and such new Member's
spouse, where applicable) shall execute and deliver to the Company and the
Members and the Interest Holders a counterpart of this Operating Agreement,
thereby binding such Member (and such Member's spouse, where applicable) to the
terms and provisions of this Operating Agreement, and further shall execute such
other documents and instruments as the Board of Managers deems necessary or
appropriate for admission as a Member. Notwithstanding any other term or
provision of this Operating Agreement, the terms and provisions of this Section
7.5 cannot be amended or repealed unless such amendment or repeal first has been
approved by the affirmative vote or written consent of the Members holding more
than SEVENTY FIVE PERCENT (75%) of the outstanding Membership Voting Interests.
Section 7.6 Resignation of Members. Subject to all of the requirements of
----------------------
applicable gaming and other law, a Member may not resign from the Company as a
Member before the dissolution and winding up of the Company in accordance with
the terms and provisions of ARTICLE XVII of this Operating Agreement, except
upon the transfer of a Member's entire Membership Interest to a Transferee in
accordance with the terms and provisions of ARTICLE XIV in connection with
which transfer such Transferee is admitted as a Member with respect to the
entire Membership Interest so transferred, upon which event, the resignation of
such Member shall be deemed to have occurred automatically.
ARTICLE VIII
MEETINGS OF THE MEMBERS
Section 8.1 Annual Meetings. The annual meeting of the Members shall be
---------------
held on the first day of June of each year at the hour of 10:00 a.m., beginning
in the year 1997. If the date of the annual meeting falls on a legal holiday or
Saturday or Sunday, then the annual meeting shall be held at the same time and
place on the next day that is not a legal holiday or Saturday or Sunday.
Section 8.2 Special Meetings. Special meetings of the Members may be
----------------
called at any time by any Manager or by Members holding more than TWENTY PERCENT
(20%) of the outstanding Membership Voting Interests by delivering written
notice of such meeting to the Managers.
Section 8.3 Voting Rights; Membership Voting Interests. Except as
------------------------------------------
otherwise required by Chapter 86, for the purpose of voting or approving or
taking action required or permitted to be taken or approved by the Members under
this Operating Agreement, each Member, upon and after becoming such, shall have
voting power equalling the percentage of all outstanding Membership Interests
held by such Member and, if applicable, any assignee of such Member that has not
been admitted as a Member under either Section 14.2 or Section 14.5 of this
Operating Agreement,
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determined as of the date of giving notice of the meeting of the Members or as
of the date of the notice for proposed action by written consent without a
meeting of the Members. For all purposes of this Operating Agreement, such
voting power of each Member shall constitute and be such Member's individual
Membership Voting Interest. If any Member transfers all or any portion of such
Member's Membership Interest to a person who by reason of such transfer becomes
an Interest Holder but is not admitted as a Member in accordance with the terms
and provisions of Section 14.2 or Section 14.5 of this Operating Agreement, then
such Transferring Member shall continue to be a Member and retain the Membership
Voting Interest theretofore associated with such transferred Membership Interest
until such time (if any) as the transferee Interest Holder of such transferred
Membership Interest (or such transferee Interest Holder's successor in interest)
is admitted to the Company as a Member in accordance with the terms and
provisions of Section 14.2 of this Operating Agreement, and in all events and
for all purposes such Membership Voting Interest theretofore associated with
such transferred Membership Interest shall continue to be, and shall continue to
be considered, outstanding. In every such case, the Transferring Member shall
continue to be a Member and retain the Membership Voting Interest theretofore
associated with the transferred Membership Interest of such Member even if such
Member so has transferred such Member's entire Membership Interest to one or
more assignees. If any such assignee desires to make a further assignment of any
Membership Interest, then such assignee shall be subject to all of the terms and
provisions of this Operating Agreement to the same extent and in the same manner
as any Member desiring to make such an assignment.
Section 8.4 Notice. The Managers shall cause written notice of the annual
------
meeting and any special meeting of the Members to be given to each Member
entitled to vote at such meeting, either in person or by first-class mail,
postage pre-paid, not less than TEN (10) days nor more than SIXTY (60) days
before such meeting. The notice shall specify the place, the day and the hour
of such meeting. In addition, the notice for any special meeting shall specify
the purpose or purposes for which such meeting is called. Notice shall be
deemed delivered by first class mail if mailed to the address of each Member as
such Member's address appears on the Company's records.
Section 8.5 Waiver of Notice. Any meeting of the Members, however called
----------------
and noticed or wherever held, shall be as valid as if duly held after regular
call and notice if a quorum is present at such meeting and, either before or
after such meeting, each of the Members not present at such meeting signs a
written waiver of notice or a consent to the holding of such meeting or an
approval of the minutes thereof. All such waivers, consents or approvals shall
be filed with the records or made a part of the minutes of the meeting.
Section 8.6 Adjourned Meetings and Notice Thereof. Any meeting of the
-------------------------------------
Members, annual, regular or special, whether or not a quorum is present, may be
adjourned from time to time by the vote of the Members holding more than FIFTY
PERCENT (50%) of the outstanding Membership Voting Interests present in person
or represented by proxy at such meeting, but in the absence of a quorum no other
business may be transacted at such meeting. Other than by announcement at the
meeting at which such adjournment is taken, it shall not be necessary to give
27
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any notice of an adjournment or of the business to be transacted at an adjourned
meeting; provided, however, that when any meeting of the Members, either annual,
regular or special, is adjourned for THIRTY (30) days or more, notice of the
adjourned meeting shall be given as in the case of an original meeting.
Section 8.7 Action by the Members; Meetings; Quorum; Vote Required. The
------------------------------------------------------
Members may vote only on matters as to which the Members are authorized to take
action in accordance with this Operating Agreement or by applicable law and not
subject to modification or waiver. Except as otherwise specifically provided
herein, Members may vote on or approve a matter or take any action by the vote
of Members at a meeting, in person or by proxy, or without a meeting by written
consent. For any meeting of the Members, the presence in person or by proxy of
Members holding more than FIFTY PERCENT (50%) of the outstanding Membership
Voting Interests at the time of the action taken constitutes a quorum.
Section 8.8 Action by Written Consent. Any action may be taken by the
-------------------------
Members without a meeting if authorized by the written consent of the Members
holding more than FIFTY PERCENT (50%) of the outstanding Membership Voting
Interests or such higher percentage as required under Chapter 86 or this
Operating Agreement. In no instance where action is authorized by written
consent need a meeting of the Members be called or noticed.
Section 8.9 Place of Meetings of the Members. The meetings of the Members
--------------------------------
shall be held at the location provided for in the notice thereof.
ARTICLE IX
CAPITAL CONTRIBUTIONS AND MEMBERSHIP INTERESTS
Section 9.1 Initial Capital Contributions. The initial capital
-----------------------------
contributions of the Members shall be the amounts of the capital accounts of the
Members as "Partners" (general and limited) of ELDORADO HOTEL ASSOCIATES LIMITED
PARTNERSHIP, a Nevada limited partnership (the "Eldorado Limited Partnership"),
immediately before and on the date of effectiveness of that certain merger to be
consummated by and between the Eldorado Limited Partnership and the Company (the
"Merger") by which the Eldorado Limited Partnership shall be merged with and
into the Company, the separate legal existence of the Company thereupon shall
continue, and the separate legal existence of the Eldorado Limited Partnership
shall cease. As of the date of effectiveness of the Merger, the Company
acknowledges having received all initial capital contributions of the Members,
which, in accordance with this Section 9.1, have been or shall be credited to
the Members' respective capital accounts as initial capital contributions to the
capital of the Company.
Section 9.2 Membership Interests. Each Member's respective Membership
--------------------
Interest shall equal the percentage represented by the total capital contributed
to the Company by such Member in relation to the total capital contributed to
the Company by all of the Members in accordance with
28
<PAGE>
the terms and provisions of Section 9.1 of this Operating Agreement. The
respective Membership Interests of the Members as of the effectiveness of the
Merger are as follows:
<TABLE>
<CAPTION>
Member Membership Interest
------ -------------------
<S> <C>
RECREATIONAL ENTERPRISES, INC. 55%
HOTEL-CASINO MANAGEMENT, INC. 29%
HOTEL CASINO REALTY INVESTMENTS, INC. 6%
DONALD L. CARANO 5%
LUDWIG J. CORRAO 5%
</TABLE>
Section 9.3 Subsequent Capital Contributions. Subject to the terms of
--------------------------------
subparagraph (m) of Section 5.9 of this Operating Agreement, at any time and
from time to time, the Board of Managers may request, but not require, that
every Member and Interest Holder make additional contributions of capital to the
Company. Each such request made to every Member and Interest Holder initially
shall be for such proportion of the total additional contribution of capital
requested from all of the Members and the Interest Holders as the Membership
Interest that such Member or Interest Holder holds bears to the total Membership
Interests held by all of the Members and the Interest Holders. If all of the
Members and the Interest Holders do not make additional contributions of capital
to the Company within TEN (10) days after being so requested, then those Members
and Interest Holders who make such additional contributions of capital to the
Company within that period (the "Contributing Members and Interest Holders")
collectively and individually shall have the right and option within TEN (10)
days after such initial TEN (10) day period to make more additional
contributions of capital to the Company up to the total amount of contributions
of capital to the Company requested in accordance with the foregoing but not
made (the "Uncontributed Amount"), each Contributing Member and Interest Holder
individually (a) first in such proportion of the total Uncontributed Amount as
the Membership Interest that each Contributing Member or Interest Holder holds
bears to the total Membership Interests held by all of the Contributing Members
and Interest Holders but (b) ultimately in such proportion of the total
Uncontributed Amount as the Membership Interest that each Contributing Member or
Interest Holder electing to exercise such right and option holds bears to the
total Membership Interests held by all of the Contributing Members and Interest
Holders electing to exercise such right and option. The foregoing formula
contemplates the possibility that, within such second TEN (10) day period, any
ONE (1) of the Contributing Members or Interest Holders individually (if no
other Contributing Member or Interest Holder elects to contribute any part of
the Uncontributed Amount in accordance with the foregoing formula) may make an
additional contribution of capital to the Company equalling the entire
Uncontributed Amount. If
29
<PAGE>
certain Members and Interest Holders elect to make additional contributions of
capital to the Company upon request in accordance with the foregoing terms and
provisions, and certain other Members and Interest Holders elect not to make
additional contributions of capital to the Company upon request in accordance
with the foregoing terms and provisions, then the Membership Interests of
Members and Interest Holders who elect to make such additional contributions of
capital to the Company shall increase accordingly, and the Membership Interests
of Members and Interest Holders who elect not to make such additional
contributions of capital to the Company shall be diluted accordingly. The Board
of Managers has no authority to, and shall not, request that any Member or
Interest Holder make an additional contribution of capital to the Company except
in accordance with the terms and provisions of this Section 9.3.
ARTICLE X
CAPITAL ACCOUNTS
Section 10.1 Composition of Capital Accounts. Separate capital accounts
-------------------------------
shall be maintained by the Company for each Member and Interest Holder in
accordance with Section 704(b) of the Internal Revenue Code and the Regulations
promulgated thereunder, representing the Members' and the Interest Holders'
respective capital contributions to the Company.
(a) The capital account of each Member and Interest Holder shall
consist of the original capital contribution credited by the Company to such
Member's or Interest Holder's respective capital account in accordance with the
terms and provisions of Sections 9.1 and 9.2 of this Operating Agreement,
increased by the following:
(i) The fair market value of additional capital contributions
of property made by such Member or Interest Holder to the Company (net of
liabilities secured by such contributed property to the extent that the Company
under Section 752 of the Internal Revenue Code is considered to assume such
liabilities or to take the contributed property subject to such liabilities);
(ii) Additional cash and other forms of capital contributions
made by such Member or Interest Holder in accordance with Section 9.3 of this
Operating Agreement; and
30
<PAGE>
(iii) Such Member's or Interest Holder's share of the Net
Profits and items of income and gain allocated to the Members and the Interest
Holders in accordance with ARTICLE XI of this Operating Agreement, including
income and gain as computed for book purposes in accordance with Regulations
Section 1.704-1(b)(2)(iv)(g).
(b) The capital account of each Member and Interest Holder shall be
decreased by the following:
(i) The amount of money distributed to such Member or Interest
Holder by the Company in accordance with ARTICLE XIII of this Operating
Agreement;
(ii) The fair market value of property distributed to such
Member or Interest Holder by the Company (net of liabilities secured by such
property to the extent that such Member or Interest Holder under Section 752 of
the Internal Revenue Code is considered to assume such liabilities or to take
such property subject to such liabilities); and
(iii) Allocations to such Member or Interest Holder of Net
Losses and Company deductions, including Net Losses and Company deductions
computed for book purposes described in Regulations Section 1.704-
1(b)(2)(iv)(g).
(c) In cases where Section 704(c) of the Internal Revenue Code
applies to property of the Company, the Members' and the Interest Holders'
capital accounts shall be adjusted in accordance with Regulations Section 1.704-
1(b)(2)(iv)(g) for allocations to the Members and the Interest Holders of
depreciation, depletion, amortization, gain and losses, as computed for book
purposes, with respect to such property.
(d) The capital accounts of the Members and the Interest Holders may
be adjusted to reflect a revaluation of Company property (including intangible
assets such as goodwill) on the Company's books to the extent provided in
Regulations Section 1.704-1(b)(2)(iv)(f).
(e) The Tax Matters Partner may make all elections for federal income
tax purposes, including an election to adjust the basis of the Company's
property in accordance with Sections 734, 743 and 754 of the Internal Revenue
Code, in the event of a transfer of a Membership Interest or a distribution of
property by the Company. The Members' and Interest Holders' capital accounts
shall be adjusted to the extent provided in Regulations Section 1.704-
1(b)(2)(iv)(m).
(f) The terms and provisions of this Operating Agreement regarding
the maintenance of capital accounts are intended to comply with Section 704(b)
of the Internal Revenue Code as amended from time to time ("Section 704(b)") and
the Regulations (especially Regulations Section 1.704-1(b)) as amended from time
to time, and shall be interpreted and applied in a manner consistent with
Section 704(b) and the Regulations. In the event that the Board of Managers
and/or the Tax Matters Partner determines that it is necessary to modify the
manner in which the capital
31
<PAGE>
accounts, or debits or credits thereto, are computed in order to comply with
Section 704(b) and the Regulations, the Board of Managers and/or the Tax Matters
Partner may make such modification, provided that such modification is not
likely to have a material effect on the amounts distributable to any Member or
Interest Holder under ARTICLE XIII of this Operating Agreement or upon the
dissolution of the Company. If the Board of Managers and/or the Tax Matters
Partner determines that such adjustments are necessary under Regulations Section
1.704-1(b)(2)(iv), the Board of Managers and/or the Tax Matters Partner shall
adjust the amounts debited or credited to capital accounts with respect to (a)
any property contributed to the Company or distributed to the Members and the
Interest Holders and (b) any liability that is secured by such contributed or
distributed property or that is assumed by the Company. The Board of Managers
and/or the Tax Matters Partner also shall make necessary modifications to the
capital accounts if unanticipated events otherwise might cause this Operating
Agreement not to comply with Regulations Section 1.704-1(b); provided, however,
that the Board of Managers and/or the Tax Matters Partner shall consult with the
Members before doing so to the extent feasible.
Section 10.2 No Withdrawal or Return of Capital Contribution. Except as
-----------------------------------------------
otherwise expressly provided in this Operating Agreement, no Member or Interest
Holder shall have the right to withdraw or receive any return of such Member's
or Interest Holder's capital contribution made to the Company.
Section 10.3 Transfer of Membership Interest. In the event that any
-------------------------------
Membership Interest is transferred in accordance with the terms and provisions
of this Operating Agreement, the Transferee shall succeed to the capital account
of the Transferring Member to the extent that such capital account relates to
the transferred Membership Interest.
ARTICLE XI
PROFITS AND LOSSES
Section 11.1 Net Profits and Losses. After giving effect to the special
----------------------
allocations set forth in Sections 11.2 and 11.3 of this Operating Agreement, Net
Profits and Net Losses shall be allocated and credited to the Members' and
Interest Holders' respective capital accounts in proportion to their respective
Membership Interests.
Section 11.2 Special Allocations. Notwithstanding Section 11.1 of this
-------------------
Operating Agreement:
(a) If there is a net decrease in Company Minimum Gain or Member
Minimum Gain during any fiscal year of the Company, then the Members and the
Interest Holders shall be allocated items of Company income and gain for such
fiscal year (and, if necessary, for subsequent fiscal years) in accordance with
Regulations Section 1.704-2(f) or Section 1.704-2(i)(4), as applicable.
32
<PAGE>
(b) Any Member Nonrecourse Deductions for any fiscal year shall be
specially allocated to the Members and the Interest Holders who bear the
economic risk of loss with respect to the Member Nonrecourse Debt to which such
Member Nonrecourse Deductions are attributable, in accordance with Regulations
Section 1.704-2(j).
(c) Items of Company income and gain shall be allocated to the
Members and Interest Holders in accordance with the "qualified income offset"
requirements of Regulations Section 1.704-1(b)(2)(ii)(d).
(d) To the extent that any allocation of losses would cause or
increase an Adjusted Capital Account Deficit as to any Member or Interest
Holder, such allocation of losses shall be reallocated among the other Members
and Interest Holders in proportion to their respective Membership Interests, but
in a manner that will not produce an Adjusted Capital Account Deficit as to any
other Member or Interest Holder.
Section 11.3 Curative Allocations. The allocations set forth in Section
--------------------
11.2 of this Operating Agreement (the "Regulatory Allocations") are intended to
comply with certain requirements of Section 704 of the Internal Revenue Code and
the Regulations promulgated thereunder. Notwithstanding any other provision of
Section 11.1, the Regulatory Allocations shall be taken into account in
allocating other profits, losses and items of income, gain, loss and deduction
among the Members and the Interest Holders so that, to the extent possible, the
net amount of such Regulatory Allocations of other profits, losses and other
items and the Regulatory Allocations to each Member and Interest Holder shall be
equal to the net amount that would have been allocated to each such Member and
Interest Holder if the Regulatory Allocations had not occurred.
Section 11.4 Federal Income Tax. It is the intent of the Company and all
------------------
of the Members that the Company shall be governed by the applicable terms and
provisions of Subchapter K of Chapter 1 of the Internal Revenue Code as amended
from time to time ("Subchapter K") and similar terms and provisions of state tax
laws. No election shall be made by the Company, the Board of Managers, the Tax
Matters Partner, any Member or any Interest Holder to be excluded from the
application of the terms and provisions of Subchapter K or from similar state
tax laws.
Section 11.5 Other Allocation Rules. For any fiscal year of the Company
----------------------
during which a Membership Interest is assigned by any Member or Interest Holder,
the portion of the Net Profits or Net Losses that is allocable in respect of
such Membership Interest shall be apportioned between the assignor and the
assignee on any basis selected by the Board of Managers, provided that such
basis is permitted by Section 706(d)(2) of the Internal Revenue Code.
Section 11.6 Tax Allocations.
---------------
(a) Except as otherwise provided in this Section 11.6, each item of
income, gain, loss and deduction shall be allocated for income tax purposes
among the Members and the Interest
33
<PAGE>
Holders in the same manner as its correlative item of "book" income, gain, loss
or deduction is allocated pursuant to the terms and provisions of this ARTICLE
XI.
(b) Notwithstanding subparagraph (a) of this Section 11.6, income,
gain, loss and deduction with respect to property contributed to the Company by
a Member shall be allocated among the Members, pursuant to Regulations
promulgated under Section 704(c) of the Internal Revenue Code, so as to take
account of the variation, if any, between the adjusted basis of such property to
the Company and its initial value. The Company shall account for such variation
under any method approved under Section 704(c) of the Internal Revenue Code and
the applicable Regulations as chosen by the Board of Managers. If the value of
any Company asset is adjusted pursuant to subparagraph (d) of Section 10.1 of
this Operating Agreement, then subsequent allocations of income, gain, loss and
deduction with respect to such asset shall take account of the variation, if
any, between the adjusted basis of such asset for federal income tax purposes
and its value in the same manner as under Section 704(c) of the Internal Revenue
Code and the applicable Regulations, consistent with the requirements of
Regulations Section 1.704-1(b)(2)(iv)(g), using any method approved under
Section 704(c) of the Internal Revenue Code and the applicable Regulations, as
chosen by the Board of Managers. Allocations pursuant to this subparagraph (b)
of this Section 11.6 are solely for the purposes of federal, state and local
income taxes and shall not affect, or in any way be taken into account in
computing, the capital account of any Member or Interest Holder or any Member's
or Interest Holder's share of Net Profits, Net Losses, other tax items or
distributions pursuant to any provision of this Operating Agreement.
ARTICLE XII
NO INTEREST
No Member or Interest Holder will be credited with interest on such
Member's or Interest Holder's capital account.
ARTICLE XIII
DISTRIBUTIONS TO MEMBERS
Section 13.1 Distributions. The Board of Managers shall determine the
-------------
amount of cash, if any, available for distribution to the Members and the
Interest Holders at such times as the Board of Managers deems advisable. The
distribution shall be based on all relevant factors, including, without
limitation, the operating expenses and debt service of the Company, sums
expended by the Company for capital expenditures and a reasonable reserve for
working capital.
Section 13.2 Amount of Distributions. Notwithstanding any other provision
-----------------------
of this Operating Agreement, no distribution to the Members or the Interest
Holders or to any other person shall be made if, after the distribution is made,
the assets of the Company are less than all liabilities
34
<PAGE>
of the Company, except liabilities to Members or Interest Holders on account of
their capital contributions.
Section 13.3 Allocation of Distributions. Distributions made shall be
---------------------------
made in proportion to the Members' and Interest Holders' Membership Interests as
of the date of distribution, unless otherwise agreed by the vote or written
consent of the Members holding ONE HUNDRED PERCENT (100%) of the outstanding
Membership Voting Interests.
Section 13.4 Mandatory Distributions. Except as provided in Section 13.2
-----------------------
of this Operating Agreement, the Board of Managers on an annual basis shall
distribute to each Member an amount equal to that Member's allocable share of
Net Profits for the applicable year multiplied by the highest marginal income
tax rate applicable to individuals under the Internal Revenue Code; provided,
however, that this Section 13.4 shall have no application or force or effect
upon and after any event that causes the Company thereafter to be taxed under
the Internal Revenue Code as a corporation.
ARTICLE XIV
RESTRICTIONS ON TRANSFER OF MEMBERSHIP INTERESTS
THE TERMS AND PROVISIONS OF THIS ARTICLE XIV ARE SUBJECT TO THE TERMS AND
PROVISIONS OF ARTICLE XV OF THIS OPERATING AGREEMENT.
Section 14.1 Options and Rights to Purchase. Except as otherwise provided
------------------------------
in this Operating Agreement, no Transferring Member shall sell, transfer, assign
or otherwise dispose of all or any portion of such Transferring Member's
Membership Interest to any proposed Transferee (a "Proposed Transferee") without
first offering to sell such Membership Interest to the Company and the Members
in the manner provided in this Section 14.1. The Transferring Member shall send
to the Company a written offer executed by the Proposed Transferee (the
"Proposed Transferee's Written Offer") stating (a) the exact Membership Interest
to be purchased by the Proposed Transferee, (b) the amount of the purchase
price, (c) the terms of the purchase and (d) the qualifications of the Proposed
Transferee, if any, required to own a Membership Interest.
Within THIRTY (30) days after the Company's receipt of the Proposed
Transferee's Written Offer (the "Company's Option Period"), the Company shall
have the option and right to purchase all, and only all, of the Membership
Interest of the Transferring Member described in the Proposed Transferee's
Written Offer under the terms set forth in the Proposed Transferee's Written
Offer; provided, however, that such option and right to purchase of the Company
shall be NULL and VOID if the sale to the Company of the Membership Interest of
the Transferring Member described in the Proposed Transferee's Written Offer
would result in the Company having only ONE (1) Member. Whether or not the
Company shall exercise such option and right to purchase shall be determined by
the vote or written consent of the Members holding more than FIFTY PERCENT (50%)
of the
35
<PAGE>
outstanding Membership Voting Interests, excluding the outstanding Membership
Voting Interests held by the Transferring Member.
Within FIVE (5) days after the Company's failure or election not to
exercise the Company's option and right to purchase provided by this Section
14.1 (for any reason, including that such right and option is NULL and VOID
under the immediately-preceding paragraph hereof), the Board of Managers shall
forward to each of the Members a copy of the Proposed Transferee's Written Offer
together with a statement that the Company has failed or elected not to exercise
the Company's option and right to purchase (such statement of the Company, for
the purposes of this Section 14.1, the "Company's Statement"), who collectively
and individually then shall have the right and option, but no obligation, to
purchase all, and only all, of the Membership Interest of the Transferring
Member described in the Proposed Transferee's Written Offer under the terms set
forth in the Proposed Transferee's Written Offer. Any Member desiring to
acquire all or a portion of the Membership Interest of the Transferring Member
described in the Proposed Transferee's Written Offer shall deliver to the Board
of Managers a written election to purchase such Membership Interest of the
Transferring Member or a specified portion thereof within THIRTY (30) days after
the date of the Company's Statement (such THIRTY (30) day period, for the
purposes of this Section 14.1, the "Members' Option Period"). If, in accordance
with the immediately-preceding sentence hereof, the Company during the Members'
Option Period receives notice from Members electing to purchase in the aggregate
more than the Membership Interest of the Transferring Member described in the
Proposed Transferee's Written Offer, then each purchasing Member shall have
priority, up to the amount of such Membership Interest of the Transferring
Member specified in such purchasing Member's notice, to purchase such proportion
of such Membership Interest of the Transferring Member as such purchasing
Member's Membership Interest bears to the total Membership Interests held by
Members electing to purchase.
Within FOURTEEN (14) days after the expiration of the Members' Option
Period, the Board of Managers shall notify each purchasing Member as to what
extent, if at all, such purchasing Member's election was effective. Each such
purchasing Member shall satisfy the terms and conditions of the purchase within
TWENTY ONE (21) days after receipt of such Board of Managers' notification.
If, in accordance with the foregoing terms and provisions of this Section
14.1, neither the Company nor the Members have elected to exercise their option
and right to purchase all of the Membership Interest of the Transferring Member
described in the Proposed Transferee's Written Offer, then (provided that, in
accordance with subparagraph (d) of Section 17.1 of this Operating Agreement,
such sale, transfer, assignment or other disposition does not cause the Company
to dissolve), subject to the remaining terms and provisions of this Section 14.1
and the terms and provisions of Section 14.2 of this Operating Agreement, the
Transferring Member may sell, transfer, assign or otherwise dispose of such
Membership Interest of the Transferring Member to the Proposed Transferee under
the exact terms specified in the Proposed Transferee's Written Offer.
Notwithstanding the foregoing, the Transferring Member's sale, transfer,
assignment or other
36
<PAGE>
disposition of such Membership Interest of the Transferring Member to the
Proposed Transferee under the exact terms specified in the Proposed Transferee's
Written Offer shall be conditioned (the "Gaming Approval Condition") on the
receipt by the Proposed Transferee, in accordance with the terms and provisions
of ARTICLE XV of this Operating Agreement, of a license (a "Nevada Gaming
License") to hold an ownership interest in a gaming licensee in the State of
Nevada unless otherwise provided by the Nevada Gaming Control Act as set forth
in Nevada Revised Statutes, Chapter 463.9, as amended from time to time, and the
regulations adopted pursuant thereto (the "Nevada Gaming Control Act"). Within
SIXTY (60) days after the expiration of the Members' Option Period, the Proposed
Transferee shall file with the Nevada Gaming Control Board and the Nevada Gaming
Commission an application for a Nevada Gaming License (the "Nevada Gaming
License Application"). The Nevada Gaming License Application shall comply with
the requirements of the Nevada Gaming Control Act. The Proposed Transferee
shall prosecute the Nevada Gaming License Application with all reasonable
diligence and otherwise use best efforts to obtain the Nevada Gaming License as
expeditiously as practicable, without delay. Notwithstanding the foregoing,
under no circumstance shall the Proposed Transferee have more than ONE HUNDRED
EIGHTY (180) days after the date of filing of the Nevada Gaming License
Application with the Nevada Gaming Control Board and the Nevada Gaming
Commission to obtain a Nevada Gaming License. If, in accordance with the
foregoing terms and provisions of this Section 14.1, the Transferring Member
does not sell, transfer, assign or otherwise dispose of the Membership Interest
of the Transferring Member described in the Proposed Transferee's Written Offer
to the Proposed Transferee under the exact terms specified in the Proposed
Transferee's Written Offer within TWO HUNDRED FIFTY (250) days after the
expiration of the Members' Option Period, then the Transferring Member shall,
before so selling, transferring, assigning or otherwise disposing of such
Membership Interest of the Transferring Member to the Proposed Transferee or any
other Transferee, re-offer such Membership Interest of the Transferring Member
to the Company and the Members in the manner provided in this Section 14.1.
Section 14.2 Substitute Members; Rights of Transferees. Notwithstanding
-----------------------------------------
any other term or provision of this Operating Agreement, a Transferee upon
receipt of a Membership Interest shall become a Member only if and when each of
the following conditions is satisfied:
(a) The Transferring Member of the Membership Interest transferred
shall send written notice to the other Members requesting the admission of the
Transferee as a substitute Member with respect to the Membership Interest
transferred and setting forth the name and address of the Transferee, the
Membership Interest transferred and the effective date of the transfer;
provided, however, that the foregoing shall not apply to any transfer of a
Membership Interest to a Proposed Transferee under Section 14.1 of this
Operating Agreement or to any transfer of all or any portion of a Membership
Interest effected under Section 14.5 of this Operating Agreement (except as
otherwise provided therein);
(b) Not less than a "majority in interest" (as hereinafter defined)
of the Members (excluding the Transferring Member) shall approve of the
Transferring Member's sale, transfer,
37
<PAGE>
assignment or other disposition to the Transferee of the Transferring Member's
Membership Interest so transferred and consent in writing to the admission of
such Transferee as a Member, which approval and consent may be given or withheld
by any Member in the sole and absolute discretion of such Member; provided,
however, that, with respect to any sale, transfer, assignment or other
disposition to a Proposed Transferee under Section 14.1 of this Operating
Agreement, the Members (excluding the Transferring Member) shall vote on such
sale, transfer, assignment or other disposition and the admission of such
Proposed Transferee as a Member at a special meeting or in writing by no later
than TEN (10) days after the expiration of the Members' Option Period as defined
in Section 14.1 of this Operating Agreement. For the purposes of this
subparagraph (b) of this Section 14.2, the term "majority in interest" means a
majority in interest in profits of the Members, which is based on Membership
Interests;
(c) The Transferee (and such Transferee's spouse, where applicable)
shall execute and deliver to the Company and the Members and the Interest
Holders a counterpart of this Operating Agreement, thereby binding such
Transferee (and such Transferee's spouse, where applicable) to the terms and
provisions of this Operating Agreement, and further shall execute such other
documents and instruments as the Board of Managers deems necessary or
appropriate for admission of the Transferee as a substitute Member; and
(d) Unless the Board of Managers approves otherwise, the Transferee
shall reimburse the Company for all reasonable accounting, legal and other
expenses incurred by the Company in connection with the transfer of a Membership
Interest to such Transferee and the admission of such Transferee as a Member.
If a sale, transfer, assignment or other disposition of a Membership Interest to
a Transferee under this ARTICLE XIV is approved and the admission of such
Transferee as a Member is consented to as required by subparagraph (b) of this
Section 14.2, then such Transferee shall be admitted to all of the rights and
powers of a Member, including holding a Membership Voting Interest, and shall be
subject to all of the restrictions and liabilities of the Transferring Member;
provided, however, that, in accordance with Nevada Revised Statutes Section
86.351, in every such event the Transferring Member is not released from
liability to the Company. Until such time, if any, as a Transferee is admitted
to the Company as a substitute Member in accordance with the terms and
provisions of this Section 14.2, (i) such Transferee shall be an assignee only,
and such Transferee only shall receive, to the extent transferred, the
distributions and allocations of income, gain, loss, deduction, credit or
similar item to which the Transferring Member that transferred its Membership
Interest to such Transferee would be entitled, and (ii) such Transferee shall
not be entitled or enabled to exercise any other right or power of a Member, all
of such other rights and powers remaining with the Transferring Member. In
every such case, the Transferring Member shall continue to be a Member and
retain all rights as such theretofore associated with the transferred Membership
Interest of such Member even if such Member so has transferred such Member's
entire Membership Interest to one or more assignees. If any such Transferee
desires to make a further assignment of any Membership Interest, then such
Transferee shall be subject to all of the terms and provisions of this
38
<PAGE>
Operating Agreement to the same extent and in the same manner as any Member
desiring to make such an assignment.
Section 14.3 Additional Conditions to Transfer. Notwithstanding the terms
---------------------------------
and provisions of Section 14.1 of this Operating Agreement, no Member shall have
the right voluntarily or involuntarily to sell, transfer, assign or otherwise
dispose of all or any portion of any Membership Interest, and no such purported
sale, transfer, assignment or other disposition need be recognized by the
Company, unless all of the following conditions are satisfied:
(a) The sale, transfer, assignment or other disposition shall not of
itself cause the Company to be in default under any indebtedness of the Company;
(b) The Transferring Member shall deliver to the Company an opinion
in form and substance and from legal counsel reasonably acceptable to the Board
of Managers stating that such sale, transfer, assignment or other disposition
does not violate any federal securities law, or any applicable gaming law, the
Transferee shall deliver such additional documents respecting the Transferee's
investor suitability and other legal or investment matters as the Board of
Managers reasonably may require, including, without limitation, the suitability
questionnaire referred to in Section 7.5 of this Operating Agreement, and the
Company shall have no duty to participate in, cause or pay for any registration
or qualification procedure under federal or state securities law;
(c) The Transferring Member shall deliver to the Company a fully-
executed written agreement of sale, transfer, assignment or other disposition
that sets forth the name, address and social-security or taxpayer-identification
number of the Transferee and the terms of such sale, transfer, assignment or
other disposition, provided that such terms shall not conflict with any
provision of this Operating Agreement; and
(d) The Transferee (and such Transferee's spouse, where applicable),
whether or not admitted to the Company as a Member under this Operating
Agreement, shall execute and deliver to the Company and the Members and the
Interest Holders a counterpart of this Operating Agreement, thereby binding the
Transferee (and such Transferee's spouse, where applicable) to the terms and
provisions of this Operating Agreement.
Section 14.4 Permitted Transfers. Notwithstanding Section 14.1 of this
-------------------
Operating Agreement, but subject to the terms and provisions of Section 14.2 of
this Operating Agreement and all of the requirements of applicable gaming law
and securities law, any Member at any time and from time to time may transfer
all or any portion of such Member's Membership Interest
39
<PAGE>
to any of the persons or entities listed in subparagraphs (a) through (c),
inclusive, of this Section 14.4:
(a) To the Company;
(b) To any other existing Member; and/or
(c) To any ONE (1) or more entities that directly, or indirectly
through one or more intermediaries, control, or are controlled by, or are under
common control with, any ONE (1) or more of the Members, whether or not such
Members, immediately before such transfer, are the owners of the Membership
Interests so transferred.
Section 14.5 Special Permitted Transfers. Notwithstanding Section 14.1 of
---------------------------
this Operating Agreement, but subject to all of the requirements of applicable
gaming law and securities law, all or any portion of the Membership Interests
(individually, a "Specially-Permitted Transferable Membership Interest," and,
collectively, the "Specially-Permitted Transferable Membership Interests")
originally issued to and respectively held as of the date of this Operating
Agreement by, and only by, Donald L. Carano and Ludwig J. Corrao (individually,
a "Current Individual Member," and, collectively, the "Current Individual
Members") may be transferred, subject to the limitation set forth below in this
Section 14.5, at any time and from time to time by the Current Individual
Members and any of the persons or entities listed in subparagraphs (a) through
(c), inclusive, of this Section 14.5 to any of the persons or entities listed in
subparagraphs (a) through (c), inclusive, of this Section 14.5 (individually, a
"Specially-Permitted Transferee," and, collectively, the "Specially-Permitted
Transferees"). For the purposes of this Section 14.5, the term "Specially-
Permitted Transferable Membership Interests" (i) shall not include Membership
Interests acquired by either of the Current Individual Members after the date of
this Operating Agreement and (ii) shall not include Membership Interests
acquired by any other person or entity after the date of this Operating
Agreement unless (a) such other person or entity is a Specially-Permitted
Transferee, and (b) such Membership Interests consist of all or any portion of
the Membership Interests originally issued to and respectively held by the
Current Individual Members as of the date of this Operating Agreement, in which
case such Membership Interests so acquired by such Specially-Permitted
Transferee shall be included in the term "Specially-Permitted Transferable
Membership Interests" for the purposes of this Section 14.5. Notwithstanding
any other term or provision of this Operating Agreement, but subject to the
limitation set forth below in this Section 14.5, all current Members holding ONE
HUNDRED PERCENT (100%) of the outstanding Membership Voting Interests, and all
future Members effective immediately upon their execution and delivery to the
Company of a counterpart of this Operating Agreement, hereby irrevocably approve
by their affirmative written consent (the execution and delivery of this
Operating Agreement or any counterpart of this Operating Agreement constituting
such written consent for this purpose) any transfer of all or any portion of the
Specially-Permitted Transferable Membership Interests effected under this
Section 14.5 and the admission as Members of any or all of the persons or
entities listed in subparagraphs (a) through (c), inclusive, of this Section
14.5 upon the receipt by such persons or entities of all or any portion of such
40
<PAGE>
Specially-Permitted Transferable Membership Interests so transferred. In the
alternative, notwithstanding any other term or provision of this Operating
Agreement, but subject to the limitation set forth below in this Section 14.5,
all current Members, and all future Members effective immediately upon their
execution and delivery to the Company of a counterpart of this Operating
Agreement, hereby irrevocably agree and bind themselves to be obligated, upon
request at any time and from time to time by any holder of Specially-Permitted
Transferable Membership Interests, such request being made in the sole and
absolute discretion of such holder of Specially-Permitted Transferable
Membership Interests, to approve by their affirmative written consent any
transfer of all or any portion of the Specially-Permitted Transferable
Membership Interests effected under this Section 14.5 and the admission as
Members of any or all of the persons or entities listed in subparagraphs (a)
through (c), inclusive, of this Section 14.5 upon the receipt by such persons or
entities of all or any portion of such Specially-Permitted Transferable
Membership Interests so transferred.
(a) To any ONE (1) or more entities that directly, or indirectly
through one or more intermediaries, control, or are controlled by, or are under
common control with, any ONE (1) or more of the Members, whether or not such
Members, immediately before such transfer, are the owners of the Specially-
Permitted Transferable Membership Interest so transferred;
(b) To any ONE (1) or more of the respective children and/or other
lineal descendants of the holder of the Specially-Permitted Transferable
Membership Interest, by inter-vivos transfer, devise, bequest, declaration of
trust (with the trustee of such trust being obligated under the terms of such
trust to hold such transferred Specially-Permitted Transferable Membership
Interest subject to the terms and provisions of this Operating Agreement) or any
other means; and/or
(c) To a revocable living trust for the benefit of the holder of the
Specially-Permitted Transferable Membership Interest to the extent allowed by
local law (with the trustee of such revocable living trust being obligated under
the terms of such trust to hold such transferred Specially-Permitted
Transferable Membership Interest subject to the terms and provisions of this
Operating Agreement).
Notwithstanding any other term or provision of this Operating Agreement, but
subject to the limitation set forth below in this Section 14.5, effective
immediately upon any sale, transfer, assignment or other disposition of all or
any portion of a Specially-Permitted Transferable Membership Interest effected
under this Section 14.5 to any of the persons or entities listed in
subparagraphs (a) through (c), inclusive, of this Section 14.5, such person or
entity shall be admitted to all of the rights and powers of a Member, including
holding a Membership Voting Interest, and shall be subject to all of the
restrictions and liabilities of the Transferring Individual Member; provided,
however, that, in accordance with Nevada Revised Statutes Section 86.351, in
every such event the Transferring Member is not released from liability to the
Company.
Notwithstanding the foregoing terms and provisions of this Section 14.5,
but subject to the
41
<PAGE>
immediately-following sentence hereof, all of the foregoing terms and provisions
of this Section 14.5 shall be NULL and VOID and of no force or effect whatsoever
if at any time the holders of the Specially-Permitted Transferable Membership
Interests own in the aggregate more than SEVENTY PERCENT (70%) of all Membership
Interests outstanding. The immediately-preceding sentence shall not have any
force or effect during time periods beginning on or after the effective date (if
any) of final Regulations promulgated by the United States Treasury Department
pursuant to Section 7701 of the Internal Revenue Code if (i) such Regulations
are promulgated in a form that is substantially similar to the Regulations
proposed by the United States Treasury Department on or about May 9, 1996
(Proposed Regulations Sections 1.7701-1 through 1.7701-3) and (ii) the Company
has obtained an opinion from its tax counsel to the effect that, based on such
final Regulations, the transferability of Specially-Permitted Transferable
Membership Interests under this Section 14.5 will not adversely affect the
treatment of the Company as a partnership for United States federal income tax
purposes.
Section 14.6 Transfer Upon Death of Individual Member. Provided that, in
----------------------------------------
accordance with subparagraph (d) of Section 17.1 of this Operating Agreement,
such event does not cause the Company to be dissolved, and subject to the terms
and provisions of Section 14.2 and Section 14.5 of this Operating Agreement,
within a period beginning with the death of any individual Member (a "Decedent
Individual Member") and ending ONE HUNDRED EIGHTY (180) days after the
qualification of the Decedent Individual Member's executor or administrator, the
Company shall have the right and option, but no obligation, to purchase all, and
only all, of the Decedent Individual Member's Membership Interest for the
purchase price determined under Section 14.8 of this Operating Agreement and,
subject to the remaining terms and provisions of this Section 14.6, under the
terms and provisions of Section 14.9 of this Operating Agreement; provided,
however, that such option and right to purchase of the Company shall be NULL and
VOID if the sale to the Company of the Membership Interest of the Decedent
Individual Member would result in the Company having only ONE (1) Member.
Whether or not the Company shall exercise such option and right to purchase
shall be determined by the vote or written consent of the Members holding more
than FIFTY PERCENT (50%) of the outstanding Membership Voting Interests,
excluding the outstanding Membership Voting Interests held by the Decedent
Individual Member.
Within FIVE (5) days after the Company's failure or election not to
exercise the Company's option and right to purchase provided by this Section
14.6 (for any reason, including that such right and option is NULL and VOID
under the immediately-preceding paragraph hereof), the Board of Managers shall
forward to each of the Members a notice of the Decedent Individual Member's
death together with a statement that the Company has failed or elected not to
exercise the Company's option and right to purchase (such statement of the
Company, for the purposes of this Section 14.6, the "Company's Statement"), who
collectively and individually then shall have the right and option, but no
obligation, to purchase all, and only all, of the Decedent Individual Member's
Membership Interest for the purchase price determined under Section 14.8 of this
Operating Agreement and under the terms and provisions of Section 14.9 of this
Operating Agreement. Any Member desiring to acquire all or a portion of the
Membership Interest of the Decedent Individual Member shall deliver
42
<PAGE>
to the Board of Managers a written election to purchase such Membership Interest
of the Decedent Individual Member or a specified portion thereof within THIRTY
(30) days after the date of the Company's Statement (such THIRTY (30) day
period, for the purposes of this Section 14.6, the "Members' Option Period").
If, in accordance with the immediately-preceding sentence hereof, the Company
during the Members' Option Period receives notice from Members electing to
purchase in the aggregate more than the Membership Interest of the Decedent
Individual Member, then each purchasing Member shall have priority, up to the
amount of such Membership Interest of the Decedent Individual Member specified
in such purchasing Member's notice, to purchase such proportion of such
Membership Interest of the Decedent Individual Member as such purchasing
Member's Membership Interest bears to the total Membership Interests held by
Members electing to purchase.
Within FOURTEEN (14) days after the expiration of the Members' Option
Period, the Board of Managers shall notify each purchasing Member as to what
extent, if at all, such purchasing Member's election was effective. Each such
purchasing Member shall satisfy the terms and conditions of the purchase within
TWENTY ONE (21) days after receipt of such Board of Managers' notification or,
if precluded from doing so by probate or other similar proceedings, then as soon
as practicable pursuant to such proceedings.
If, in accordance with the foregoing terms and provisions of this Section
14.6, neither the Company nor the Members have elected to exercise their option
and right to purchase all of the Membership Interest of the Decedent Individual
Member, then (provided that, in accordance with subparagraph (d) of Section 17.1
of this Operating Agreement, such sale, transfer, assignment or other
disposition does not cause the Company to dissolve) the executor or
administrator or other authorized representative of the Decedent Individual
Member's estate or any successor of the Decedent Individual Member may sell,
transfer, assign or otherwise dispose of the Membership Interest of the Decedent
Individual Member, but only in accordance with the terms and provisions of
Section 14.1 and Section 14.2 of this Operating Agreement.
If, in accordance with the foregoing terms and provisions of this Section
14.6, either the Company or the Members have elected to exercise their option
and right to purchase all of the Membership Interest of the Decedent Individual
Member, then the executor or administrator or other authorized representative of
the Decedent Individual Member's estate shall apply for and obtain any necessary
court approval or confirmation of the sale of the Membership Interest of the
Decedent Individual Member, and the Company shall file the necessary proofs of
death and collect the proceeds of outstanding insurance policies on the life of
the Decedent Individual Member owned by the Company, if any. If the purchase
price is fully funded by the proceeds of such insurance policies, then the
Company shall pay the purchase price in cash from the proceeds of such insurance
policies, and the remaining proceeds, if any, shall be Company property. If the
purchase price is not fully funded by the proceeds of such insurance policies,
then the Company shall pay the purchase price in cash up to the full amount of
the proceeds of such insurance policies and shall pay any remaining portion of
the purchase price in accordance with the terms and provisions of Section 14.9
of this
43
<PAGE>
Operating Agreement. In order to ensure that all or a substantial part of the
purchase price for the Membership Interest of an individual Member will be
available immediately in cash upon such individual Member's death, the Company
may procure and make subject to this Operating Agreement insurance on the lives
of any or all of the individual Members. The Company shall be the beneficiary
and sole owner of all insurance policies issued to the Company subject to this
Operating Agreement. The Company shall pay all premiums falling due under such
insurance policies. The Company shall have the right at any time to procure
additional insurance policies on the lives of the individual Members and make
such insurance policies subject to this Operating Agreement in order to keep the
value of the insurance policies owned by the Company in parity with the value of
the outstanding Membership Interests. The Company shall be the beneficiary and
sole owner of all such additional insurance policies. Other insurance policies
may be substituted for insurance policies made subject to this Operating
Agreement, and insurance policies subject hereto may be withdrawn. Any
addition, substitution or withdrawal of insurance policies shall be endorsed and
signed by the Company and all of the Managers.
Section 14.7 Triggering Events - Involuntary Transfer. Provided that, in
----------------------------------------
accordance with subparagraph (d) of Section 17.1 of this Operating Agreement,
such event does not cause the Company to be dissolved, if any of the triggering
events (individually, a "Triggering Event") listed below occurs as to any Member
(an "Affected Member"), the Company and the Members who are not Affected Members
shall have the rights and options, but no obligation, to purchase the entire
Membership Interest owned by the Affected Member under the remaining terms and
provisions of this Section 14.7.
(a) A Member is adjudicated a bankrupt, either voluntary or
involuntary;
(b) A Member makes an assignment for the benefit of creditors;
(c) A Member's Membership Interest is subject to a writ of attachment
or charging order; or
(d) The execution of any property-settlement agreement between any
Member and such Member's spouse, or the entry of any decree of divorce or
separate maintenance by a court of competent jurisdiction, wherein such spouse
is awarded any Membership Interest or a trust is imposed on such Membership
Interest for the benefit of such spouse. To the extent that such Membership
Interest is transferred, or to the extent that such Membership Interest is
subject to the imposition of any such trust or lien, a Triggering Event as to
the Membership Interest so affected shall be deemed to have occurred.
During the period that commences as of the date of a Triggering Event and
ends ONE HUNDRED EIGHTY (180) days thereafter, the Affected Member or the
authorized representative of the Affected Member may sell, transfer, assign or
otherwise dispose of the Membership Interest of the Affected Member, but only in
accordance with the terms and provisions of Section 14.1 and
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Section 14.2 of this Operating Agreement. If such sale does not occur within
such ONE HUNDRED EIGHTY (180) day period, then as soon as reasonably practicable
thereafter the Company shall give written notice to the Affected Member or the
authorized representative of the Affected Member of the rights and options of
the Company and the Members who are not Affected Members to purchase the
Membership Interest of the Affected Member in accordance with the terms and
provisions of this Section 14.7.
Within THIRTY (30) days after the date of such written notice of the
Company to the Affected Member or the authorized representative of the Affected
Member, the Company shall have the right and option, but no obligation, to
purchase all, and only all, of the Affected Member's Membership Interest for the
purchase price determined under Section 14.8 of this Operating Agreement and
under the terms and provisions of Section 14.9 of this Operating Agreement;
provided, however, that such option and right to purchase of the Company shall
be NULL and VOID if the sale to the Company of the Membership Interest of the
Affected Member would result in the Company having only ONE (1) Member. Whether
or not the Company shall exercise such option and right to purchase shall be
determined by the vote or written consent of the Members holding more than FIFTY
PERCENT (50%) of the outstanding Membership Voting Interests, excluding the
outstanding Membership Voting Interests held by the Affected Member.
Within FIVE (5) days after the Company's failure or election not to
exercise the Company's option and right to purchase provided by this Section
14.7 (for any reason, including that such right and option is NULL and VOID
under the immediately-preceding paragraph hereof), the Board of Managers shall
forward to each of the Members a notice of the Triggering Event and the identity
of the Affected Member together with a statement that the Company has failed or
elected not to exercise the Company's option and right to purchase (such
statement of the Company, for the purposes of this Section 14.7, the "Company's
Statement"), who collectively and individually then shall have the right and
option, but no obligation, to purchase all, and only all, of the Affected
Member's Membership Interest for the purchase price determined under Section
14.8 of this Operating Agreement and under the terms and provisions of Section
14.9 of this Operating Agreement. Any Member desiring to acquire all or a
portion of the Membership Interest of the Affected Member shall deliver to the
Board of Managers a written election to purchase such Membership Interest of the
Affected Member or a specified portion thereof within THIRTY (30) days after the
date of the Company's Statement (such THIRTY (30) day period, for the purposes
of this Section 14.7, the "Members' Option Period"). If, in accordance with the
immediately-preceding sentence hereof, the Company during the Members' Option
Period receives notice from Members electing to purchase in the aggregate more
than the Membership Interest of the Affected Member, then each purchasing Member
shall have priority, up to the amount of such Membership Interest of the
Affected Member specified in such purchasing Member's notice, to purchase such
proportion of such Membership Interest of the Affected Member as such purchasing
Member's Membership Interest bears to the total Membership Interests held by
Members electing to purchase.
Within FOURTEEN (14) days after the expiration of the Members' Option
Period, the Board
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<PAGE>
of Managers shall notify each purchasing Member as to what extent, if at all,
such purchasing Member's election was effective. Each such purchasing Member
shall satisfy the terms and conditions of the purchase within TWENTY ONE (21)
days after receipt of such Board of Managers' notification or, if precluded from
doing so by bankruptcy, divorce or other similar proceedings, then as soon as
practicable pursuant to such proceedings.
If, in accordance with the foregoing terms and provisions of this Section
14.7, neither the Company nor the Members have elected to exercise their option
and right to purchase all of the Membership Interest of the Affected Member,
then (provided that, in accordance with subparagraph (d) of Section 17.1 of this
Operating Agreement, such sale, transfer, assignment or other disposition does
not cause the Company to dissolve) the Affected Member or the authorized
representative of the Affected Member may sell, transfer, assign or otherwise
dispose of the Membership Interest of the Affected Member, but only in
accordance with the terms and provisions of Section 14.1 and Section 14.2 of
this Operating Agreement.
If, in accordance with the foregoing terms and provisions of this Section
14.7, either the Company or the Members have elected to exercise their option
and right to purchase all of the Membership Interest of the Affected Member,
then the Affected Member or authorized representative of the Affected Member
shall apply for and obtain any necessary court approval or confirmation of the
sale of the Membership Interest of the Affected Member.
Section 14.8 Valuation. The date for determining the valuation of a
---------
Membership Interest for the purposes of this ARTICLE XIV (except Section 14.1
hereof) (the "Determination Date") shall be the last day of the month
immediately preceding the month in which the event requiring a determination of
the purchase price occurs. The purchase price to be paid for a Membership
Interest subject to this Operating Agreement shall be determined by appraisal
and shall be equal to the appraised value of the Company and allocated among the
Membership Interests outstanding in accordance with each Member's and Interest
Holder's capital account. All appraisals shall be undertaken by TWO (2)
appraisers, ONE (1) selected by the selling party, or such party's estate,
successor or legal representative, as the case may be, and the other selected by
the purchasing party, or such party's estate, successor or legal representative,
as the case may be. The selection of such appraisers shall occur no later than
THIRTY (30) days after the occurrence of the event requiring determination of
the purchase price under this Operating Agreement. The appraised value of the
Company shall be the valuation arrived at by such TWO (2) appraisers within
SIXTY (60) days after the appointment of the last appraiser to be appointed. If
the TWO (2) appraisers cannot agree on such appraised value of the Company
within such SIXTY (60) days, then (a) if the appraisers' valuations are within
TEN PERCENT (10%) of each other, the appraised value of the Company shall be the
mean of the TWO (2) valuations, or (b) if the difference between the appraisers'
valuations is greater than TEN PERCENT (10%), the appraisers shall select a
third appraiser who shall calculate the appraised value of the Company
independently, and, except as provided in the immediately-following sentence
hereof, the appraised value of the Company in each such case shall be the
average of the TWO (2) valuations arrived at by the TWO (2) out of such THREE
(3)
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appraisers whose valuations are closest in amount. If ONE (1) appraiser's
valuation is the mean of the valuations determined by the other TWO (2)
appraisers, then the appraised value of the Company shall be such mean
valuation. If the TWO (2) original appraisers cannot agree upon a third
appraiser within THIRTY (30) days after the end of the SIXTY (60) day period
referred to above, then the third appraiser shall be appointed by the American
Arbitration Association. The selling party, or such party's estate, successor
or legal representative, as the case may be, shall pay all fees and costs of the
appraiser selected by such party. The purchasing party, or such party's estate,
successor or legal representative, as the case may be, shall pay all fees and
costs of the appraiser selected by such party. All fees and costs of any third
appraiser selected in accordance with the foregoing shall be paid equally by the
selling party and the purchasing party, or such parties' estates, successors or
legal representatives, as the case may be. For the purposes of an appraisal
under this Section 14.8, real estate and improvements shall be valued at fair
market value; machinery and equipment shall be valued at replacement cost or
fair market value, whichever is lower; finished inventory shall be valued at
cost or fair market value, whichever is lower; goods in process shall be valued
at cost, using the cost accounting procedures customarily employed by the
Company in preparing its financial statements; receivables shall be valued at
their face amount, less an allowance for uncollectible items that is reasonable
in view of the past experience of the Company and a recent review of their
collectability; all liabilities shall be deducted at their face value; and a
reserve for contingent liabilities shall be established if appropriate. The
value of other comparable companies, if known, also shall be considered.
Section 14.9 Payment. The consideration for a Membership Interest
-------
transferred to the Company or to other Members under Section 14.6 or Section
14.7 of this Operating Agreement shall be paid to the Transferring Member or
such Transferring Member's representative or successor, as the case may be, as
provided in this Operating Agreement. The terms for the payment of the purchase
price of such a transferred Membership Interest shall be as follows:
(a) Down Payment. A down payment in cash of not less that TWENTY
------------
PERCENT (20%) of the purchase price shall be paid within ONE HUNDRED FIFTY (150)
days of the Determination Date; and
(b) Promissory Note. The balance of the purchase price shall be paid
---------------
in accordance with the terms of a promissory note (the "Note") to be executed by
the Company or by the purchasing Members, as the case may be. The Note shall
provide for the payment of a minimum of TWENTY PERCENT (20%) of the balance of
the purchase price, plus accrued interest, on the first anniversary date of the
Note, and TWENTY PERCENT (20%) of the initial unpaid principal balance, plus
-------
accrued interest, on each anniversary date thereafter to and including the date
of payment in full. Interest shall accrue on the declining principal balance of
the Note at the rate of EIGHT PERCENT (8%) per annum from the date of the Note.
The Note shall be dated as of the date on which the down payment is required to
be made. The Note shall provide that its maker may prepay all or any portion of
the unpaid principal balance and accrued interest at any time, without penalty.
The Note shall provide that the entire unpaid principal balance of the Note, and
all accrued
47
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interest, shall become due and payable immediately upon the occurrence of any of
the following events:
(i) Adjudication of bankruptcy of the maker of the Note;
(ii) Voluntary or involuntary petition by or on behalf of the
maker of the Note for arrangement or reorganization or for the protection of
creditors and the debtor, under bankruptcy law;
(iii) Upon default in payment or of any of the terms of the Note
by the maker; or
(iv) If the sale is to the Company, upon the sale of all or
substantially all of the assets of the Company.
Section 14.10 Governmental and Administrative Approvals. The Company
-----------------------------------------
shall apply for and use its best efforts to obtain all governmental and
administrative approvals required in connection with the purchase and sale of
Membership Interests under this Operating Agreement. The Members shall
cooperate in obtaining such approvals and shall execute all documents that may
be required to be executed by the Members in connection with such approvals.
The Transferring Member and/or the Transferee shall pay all costs and filing
fees in connection with obtaining such approvals. Notwithstanding any other
term or provision of this ARTICLE XIV, any and every transaction involving the
transfer of any interest in the Company sought to be consummated in accordance
with the terms and provisions of this ARTICLE XIV shall be NULL AND VOID unless
such transaction is approved in advance by the Nevada Gaming Commission in
accordance with the terms and provisions of ARTICLE XV of this Operating
Agreement.
Section 14.11 "Transferring Member"/Transferring Interest Holder;
---------------------------------------------------
"Decedent Individual Member"/Decedent Individual Interest Holder; "Affected
- ---------------------------------------------------------------------------
Member"/Affected Interest Holder. For all purposes of this ARTICLE XIV, (a) the
- --------------------------------
term "Transferring Member" as it appears in this ARTICLE XIV shall be
interpreted to include any Interest Holder who sells, transfers, assigns or
otherwise disposes of all or any portion of such Interest Holder's Membership
Interest to any third person or entity; (b) the term "Decedent Individual
Member" as it appears in this ARTICLE XIV shall be interpreted to include any
individual Interest Holder who has died; and (c) the term "Affected Member" as
it appears in this ARTICLE XIV shall be interpreted to include any Interest
Holder affected by a Triggering Event. Notwithstanding the foregoing, in no
event shall any term or provision of this ARTICLE XIV be interpreted to provide
to any Interest Holder any option or right to purchase all or any portion of any
Membership Interest.
Section 14.12 Entity Member Transfers. If any Member is a closely-held
-----------------------
corporation, limited-liability company or unincorporated association or
partnership, then, in any single transaction or series of related transactions,
the original issuance, sale, transfer, assignment or other
48
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disposition of any stock or interest in such corporation, limited-liability
company, association or partnership constituting in the aggregate in excess of
FIFTY PERCENT (50%) of all such stock or interests then outstanding shall be
deemed an assignment or transfer of such Member's Membership Interest within the
meaning of this Operating Agreement, except as provided below in this Section
14.12. If any Member is a publicly-traded corporation, limited-liability
company, association or partnership, meaning for the purposes of this Operating
Agreement that such corporation, limited-liability company, association or
partnership has effected a bona fide initial public offering of any class of its
equity securities that were registered for such purpose with the Securities and
Exchange Commission under the Securities Act on Form S-1 (or any successor of
such form), then, in any single transaction or series of related transactions,
the original issuance, sale, transfer, assignment or other disposition of any
stock or interest in such corporation, limited-liability company, association or
partnership constituting in the aggregate in excess of EIGHTY PERCENT (80%) of
all such stock or interests then outstanding shall be deemed an assignment or
transfer of such Member's Membership Interest within the meaning of this
Operating Agreement, except as provided below in this Section 14.12.
Notwithstanding the foregoing, in no event shall any public offering of
securities of any class of any Member that is registered with the Securities and
Exchange Commission under the Securities Act and effected in accordance with the
terms and provisions of Section 7.2 of this Operating Agreement constitute or be
deemed an assignment or transfer of a Membership Interest within the meaning of
this Operating Agreement.
Notwithstanding any other term or provision of this Section 14.12, in no
event shall the sale, transfer, assignment or other disposition by any person or
entity to any of the persons or entities listed in subparagraphs (a) through
(c), inclusive, of this Section 14.12 of any stock or interest in any
corporation, limited-liability company, association or partnership that is a
Member, whether or not closely-held or publicly-traded, be deemed an assignment
or transfer of such Member's Membership Interest within the meaning of this
Operating Agreement.
(a) To any ONE (1) or more entities that directly, or indirectly
through one or more intermediaries, control, or are controlled by, or are under
common control with, the current or any future record or beneficial holder of
such stock or interest;
(b) To any ONE (1) or more of the respective children and/or other
lineal descendants of the current or any future record or beneficial holder of
such stock or interest, by inter-vivos transfer, devise, bequest, declaration of
trust or any other means; and/or
(c) To a revocable living trust for the benefit of the current or any
future record or beneficial holder of such stock or interest.
Notwithstanding any other term or provision of this Operating Agreement, the
terms and provisions of this Section 14.12 cannot be amended or repealed unless
such amendment or repeal first has been approved by the affirmative vote or
written consent of the Members holding more than SEVENTY FIVE PERCENT (75%) of
the outstanding Membership Voting Interests.
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Section 14.13 Restrictive Legend. In addition to any other restrictive
------------------
legend that may be imposed on any certificate evidencing ownership of any
Membership Interest, such certificate shall bear the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON TRANSFER AS SET FORTH IN THE OPERATING AGREEMENT OF
THE COMPANY.
ARTICLE XV
GAMING CONTROL ACT RESTRICTIONS
Section 15.1 Licensure. Each Member and Interest Holder must and shall be
---------
licensed individually to hold an ownership interest in a gaming licensee in the
State of Nevada unless otherwise provided by the Nevada Gaming Control Act.
Section 15.2 Sale, Assignment, Transfer, Pledge or Other Disposition. In
-------------------------------------------------------
accordance with the Nevada Gaming Control Act, and notwithstanding any other
term or provision of this Operating Agreement, the sale, assignment, transfer,
pledge or other disposition of any interest in the Company is ineffective unless
approved in advance by the Nevada Gaming Commission (the "Commission").
Section 15.3 Unsuitability. In accordance with the Nevada Gaming Control
-------------
Act, if, at any time, the Commission finds that a Member or Interest Holder
which owns any interest in the Company is unsuitable to hold that interest, the
Commission shall immediately notify the Company of that fact. The Company
shall, within TEN (10) days from the date it receives the notice from the
Commission, return to the unsuitable Member or Interest Holder the amount of his
capital account as reflected on the books of the Company. Beginning on the date
when the Commission serves notice of a determination of unsuitability, pursuant
to the preceding sentence, upon the Company, it is unlawful for the unsuitable
Member or Interest Holder (a) to receive any share of the distribution of
profits or cash or any other property of, or payments upon dissolution of, the
Company, other than a return of capital as required above; (b) to exercise
directly or through a trustee or nominee any voting right conferred by such
interest; (c) to participate in the management of the business and affairs of
the Company; or (d) to receive any remuneration in any form from the Company for
services rendered or otherwise. Any Member or Interest Holder that is found
unsuitable by the Commission shall return all evidence of any ownership in the
Company to the Company, at which time the Company shall within TEN (10) days
after the Company receives notice from the Commission, return to the Member or
the Interest Holder in cash, the amount of his capital account as reflected on
the books of the Company, and the unsuitable Member or Interest Holder shall no
longer have any direct or indirect interest in the Company.
Section 15.4 Restrictive Legend. In addition to any other restrictive
------------------
legend that may be
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imposed on any certificate evidencing ownership of any Membership Interest, such
certificate shall bear the following legend:
THE SALE, ASSIGNMENT, TRANSFER, PLEDGE OR OTHER DISPOSITION OF THIS
SECURITY IS INEFFECTIVE UNLESS APPROVED IN ADVANCE BY THE NEVADA
GAMING COMMISSION. IF AT ANY TIME SUCH COMMISSION FINDS THAT AN OWNER
OF THIS SECURITY IS UNSUITABLE TO CONTINUE TO HAVE AN INVOLVEMENT IN
GAMING IN SUCH STATE, SUCH OWNER MUST DISPOSE OF SUCH SECURITY AS
PROVIDED BY THE LAWS OF THE STATE OF NEVADA AND THE REGULATIONS OF THE
NEVADA GAMING COMMISSION THEREUNDER. SUCH LAWS AND REGULATIONS
RESTRICT THE RIGHT UNDER CERTAIN CIRCUMSTANCES: (A) TO RECEIVE ANY
SHARE OF THE DISTRIBUTION OF PROFITS OR CASH OR ANY OTHER PROPERTY OF,
OR PAYMENTS UPON DISSOLUTION OF, THE COMPANY, OTHER THAN A RETURN OF
CAPITAL; (B) TO EXERCISE DIRECTLY OR THROUGH A TRUSTEE OR NOMINEE ANY
VOTING RIGHT CONFERRED BY SUCH INTEREST; (C) TO PARTICIPATE IN THE
MANAGEMENT OF THE BUSINESS AND AFFAIRS OF THE COMPANY; OR (D) TO
RECEIVE ANY REMUNERATION IN ANY FORM FROM THE COMPANY FOR SERVICES
RENDERED OR OTHERWISE.
Section 15.5 Acceptance of Gaming Control Act Restrictions. The Members
---------------------------------------------
and the Interest Holders hereby acknowledge and agree to accept their Membership
Interests subject to the restrictions contained in this ARTICLE XV for so long
as such restrictions are required by law.
ARTICLE XVI
SECURITIES LAWS MATTERS
Section 16.1 Securities Law Representations and Warranties. Each Member
---------------------------------------------
hereby represents and warrants to the Company and to all of the other Members
all of the following:
(a) Such member is acquiring such Member's Membership Interest for
investment and not with a view to the sale or distribution of any part thereof.
(b) Such member has no present intention to sell or otherwise
distribute any part of such Member's Membership Interest.
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(c) The Company has advised such Member (i) that such Member's
Membership Interest has not been registered under the Securities Act, as the
offering and sale of such Member's Membership Interest is to be effected in
accordance with an exemption from the registration requirements of the
Securities Act and similar exemptions under applicable state securities law, and
(ii) that, in this connection, the Company is relying in part on the
representations and warranties of such Member set forth herein.
(d) Such Member shall make no disposition of all or any portion of
such Member's Membership Interest unless and until (i) such Member has notified
the Company of the proposed disposition, (ii) such Member has furnished the
Company with an opinion of legal counsel to the effect that such disposition
will not require registration of such Member's Membership Interest under the
Securities Act, (iii) such opinion of legal counsel has been concurred with by
the Company's legal counsel, and (iv) the Company has advised such Member of
such concurrence.
(e) Such Member has received all such information as such Member
deems necessary and appropriate to enable such Member to evaluate the financial
risk inherent in acquiring such Member's Membership Interest, and such Member
acknowledges receipt of satisfactory and complete information covering the
business and financial condition of the Company in response to all inquiries in
respect thereof.
(f) Such Member has had the opportunity to consult with such Member's
investment counselors, attorneys, accountants and other advisors regarding the
terms and conditions of this Operating Agreement and its tax and legal
consequences.
(g) Such Member has either or both of the following:
(i) a pre-existing business or personal relationship with the
Company and/or ONE (1) or more of its Managers; or
(ii) sufficient sophistication to make an informed investment
decision based on such Member's personal knowledge of the business and affairs
of the Company, based on such additional information as such Member may have
requested and received from the Company and based on the independent inquiries
and investigation undertaken by such Member.
(h) Such Member understands that such Member's investment in such
Member's Membership Interest is speculative and risky.
(i) Such Member understands that such Member has no assurance that
the Company will be a financial success or that such Member's investment in such
Member's Membership Interest will be recovered.
(j) Such Member has the financial ability to bear the economic risk
of such Member's investment in such Member's Membership Interest, has adequate
means for providing for
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such Member's current needs and personal contingencies and has no need for
liquidity with respect to such Member's Membership Interest.
(k) Neither the Company, nor any of the other Members nor any
employee, agent or affiliate of the Company or of any of the other Members has
made any representation or warranty to such Member.
(l) The Company used no general solicitation or general advertising
in connection with the Company's offer to sell (if any) or the Company's sale of
such Member's Membership Interest to such Member.
(m) Such Member recognizes that such Member's Membership Interest is
unregistered under the Securities Act and must be held indefinitely unless it is
subsequently registered under the Securities Act or an exemption from such
registration is available.
(n) Such Member understands that the Company is under no obligation
to register such Member's Membership Interest under the Securities Act or to
comply with any exemption from such registration.
(o) Such Member understands and agrees that, in addition to any other
restrictive legend that may be imposed on any certificate evidencing ownership
of such Member's Membership Interest, such certificate shall bear the following
legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933; THEY HAVE BEEN ACQUIRED
BY THE HOLDER FOR INVESTMENT AND MAY NOT BE PLEDGED, HYPOTHECATED,
SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT AS MAY BE AUTHORIZED
UNDER THE SECURITIES ACT OF 1933 AND THE RULES AND REGULATIONS
PROMULGATED THEREUNDER.
(p) Such Member understands that Rule 144 under the Securities Act
presently does not apply and may never apply to the Company's securities because
the Company does not now, and may never, file reports required by the Exchange
Act, and has not made, and may never make, publicly available the information
required by Rule 15c2-11 of the Exchange Act. Furthermore, such Member
understands that if Rule 144 were available, sales of Company securities made in
reliance thereon could be made only in certain limited amounts, after certain
holding periods, and only when specified current information about the Company
had been made available to the public, all in accordance with the terms and in
satisfaction of the conditions of Rule 144. Such Member understands that, in the
case of Company securities to which Rule 144 is not applicable, compliance with
some other exemption under the Securities Act will be required in order for any
re-sale or other
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transfer of such Company securities to be effected legally.
ARTICLE XVII
DISSOLUTION AND LIQUIDATION
Section 17.1 Events Requiring Dissolution. The Company shall be dissolved
----------------------------
upon the occurrence of any of the following events:
(a) The expiration of the term of the Company on December 31, 2030;
(b) The sale or disposition of all or substantially all of the
property and assets owned by the Company;
(c) The written consent of the Members holding more than SEVENTY FIVE
PERCENT (75%) of the outstanding Membership Voting Interests; or
(d) The death, insanity, retirement, resignation, expulsion,
bankruptcy or dissolution of a Member, or the occurrence of any other event that
terminates a Member's Membership Interest, unless at least TWO (2) Members
remain upon and after such event and within NINETY (90) days after such event
not less than a "majority in interest" of all of the remaining Members (as
defined in Nevada Revised Statutes Section 86.065) agree in writing to continue
the Company.
Section 17.2 Liquidation. Upon the occurrence of any event requiring
-----------
dissolution as set forth in Section 17.1 of this Operating Agreement, if the
Company is not continued as permitted under subparagraph (d) of Section 17.1 of
this Operating Agreement, then the Board of Managers in accordance with Nevada
Revised Statutes Section 86.491 immediately shall commence settling and closing
the Company's business, collecting and discharging the Company's obligations,
disposing of and conveying the Company's property and distributing the Company's
assets, but not for the purpose of continuing the business for which the Company
was established.
Section 17.3 Distribution of Assets. During the liquidation of the
----------------------
Company, the Members and the Interest Holders shall continue to share Net
Profits and Net Losses in the same proportions as before dissolution. In
settling accounts after dissolution, the proceeds from the liquidation of the
Company's assets shall be applied as follows:
(a) To creditors of the Company, including Members and Interest
Holders who are creditors of the Company (other than debts owed to Members
and/or Interest Holders for their capital contributions), in the order of
priority as provided by law; and then
(b) To the Members and the Interest Holders in accordance with their
positive
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capital account balances, as determined after taking into account all capital
account adjustments for the taxable year of the Company during which the
liquidation of the Company occurs (other than such capital account adjustments
made by reason of this clause);
and such distributions shall be made by the end of the taxable year of the
Company during which the liquidation of the Company occurs (or, if later, within
NINETY (90) days after the date of such liquidation).
Section 17.4 Gains or Losses. During liquidation, any gain or loss on the
---------------
disposition of the Company's property shall be credited or charged to the
Members and the Interest Holders in accordance with the terms and provisions of
ARTICLE X of this Operating Agreement. Any property distributed in kind in
liquidation shall be valued and treated as if the property were sold for its
fair market value and the cash proceeds distributed. The difference between the
value of the property distributed in kind and its book value to the Company
shall be treated as a gain or loss on the sale of the property to be allocated
between the Members and the Interest Holders in accordance with ARTICLE X of
this Operating Agreement.
Section 17.5 Right to Defer Sale of Certain Assets. Notwithstanding any
-------------------------------------
other term or provision of this ARTICLE XVII, if upon dissolution of the Company
the Board of Managers determines that an immediate sale of all or a portion of
the assets of the Company would cause undue loss to the Members and the Interest
Holders, then the Board of Managers, in order to avoid such loss, after giving
notice of intending to do so to all of the Members and the Interest Holders, to
the extent not then prohibited by Chapter 86 or any other applicable law, either
may defer the sale of and withhold from distribution for a reasonable time such
assets of the Company, unless a sale of such assets is necessary to satisfy the
Company's debts and obligations, or may distribute such assets of the Company to
the Members and the Interest Holders in kind.
Section 17.6 Liquidation Distributions in Kind. If any part of the assets
---------------------------------
of the Company are to be distributed in kind, then such assets shall be
distributed on the basis of their fair market value, and any Member or Interest
Holder entitled to any interest in such assets shall receive such interest as a
tenant-in-common with all other Members and Interest Holders so entitled in
proportion to their Membership Interests. The fair market value of such assets
shall be determined by an independent appraiser that shall be selected by the
Board of Managers. The book value of such assets shall be credited or charged
to the Members and the Interest Holders in proportion to their Membership
Interests.
Section 17.7 Limitation on Recourse at Liquidation. The Members and the
-------------------------------------
Interest Holders shall look solely to the assets of the Company for payment of
debts or liabilities owed by the Company to the Members or Interest Holders and
for the return of their capital contributions. If the assets of the Company
remaining after the payment or discharge of the debts and liabilities of the
Company to persons other than Members and Interest Holders is insufficient to
pay the debts or liabilities owed by the Company to the Members and the Interest
Holders and to return their capital
55
<PAGE>
contributions, then the Members and the Interest Holders shall have no recourse
therefor against the Company or any other Member or Interest Holder except to
the extent that such other Member or Interest Holder may have outstanding debts
or obligations owing to the Company.
Section 17.8 Articles of Dissolution. When all debts, liabilities and
-----------------------
obligations of the Company have been paid and discharged or adequate provision
has been made therefor, and all of the remaining property and assets have been
distributed to the Members and/or the Interest Holders, articles of dissolution
shall be prepared, signed, acknowledged and filed with the Nevada Secretary of
State in accordance with Nevada Revised Statutes Sections 86.531 and 86.541.
ARTICLE XVIII
INDEMNIFICATION
Section 18.1 Indemnification of Member, Employee or Agent: Proceeding
---------------------------------------------------------
Other Than by the Company. Subject to the terms and provisions of Section 18.4
- -------------------------
of this Operating Agreement, the Company may indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, except an action by or in the right of the Company, by reason of
the fact that such person is or was a Member, employee or agent of the Company,
or is or was serving at the request of the Company as a manager, member,
director, officer, employee or agent of another limited-liability company,
corporation, partnership, joint venture, trust or other enterprise, against
expenses, including attorneys' fees, judgments, fines and amounts paid in
settlement, actually and reasonably incurred by such person in connection with
the action, suit or proceeding, if such person acted in good faith and in a
manner that such person reasonably believed to be in or not opposed to the best
interests of the Company, and, with respect to a criminal action or proceeding,
such person had no reasonable cause to believe that such person's conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement or conviction, or upon a plea of nolo contendere or its equivalent,
does not, of itself, create a presumption that such person did not act in good
faith and in a manner that such person reasonably believed to be in or not
opposed to the best interests of the Company, and that, with respect to any
criminal action or proceeding, such person had reasonable cause to believe that
such person's conduct was unlawful.
Section 18.2 Indemnification of Member, Employee or Agent: Proceeding by
------------------------------------------------------------
the Company. Subject to the last sentence of this Section 18.2 and to the terms
- -----------
and provisions of Section 18.4 of this Operating Agreement, the Company may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
Company to procure a judgment in its favor by reason of the fact that such
person is or was a Member, employee or agent of the Company, or is or was
serving at the request of the Company as a member, manager, director, officer,
employee or agent of another limited-liability company, corporation,
partnership, joint venture, trust or other enterprise, against expenses,
including amounts paid in settlement and attorneys' fees actually and reasonably
incurred by such
56
<PAGE>
person in connection with the defense or settlement of the action or suit, if
such person acted in good faith and in a manner that such person reasonably
believed to be in or not opposed to the best interests of the Company.
Indemnification shall not be made for any claim, issue or matter as to which
such person has been adjudged by a court of competent jurisdiction, after
exhaustion of all appeals therefrom, to be liable to the Company, or for amounts
paid in settlement to the Company, unless and only to the extent that the court
in which the action or suit was brought or other court of competent jurisdiction
determines upon application that in view of all of the circumstances of the case
such person is fairly and reasonably entitled to indemnity for such expenses as
the court deems proper.
Section 18.3 Advancement of Expenses. The expenses of a Member or Manager
-----------------------
or officer of the Company incurred in defending a civil or criminal action, suit
or proceeding shall be paid by the Company as they are incurred and in advance
of the final disposition of such action, suit or proceeding, upon the Company's
receipt from such Member or Manager or officer of the Company of an undertaking
by or on behalf of such Member or Manager or officer of the Company to repay the
entire amount of monies so advanced by the Company if it ultimately is
determined by a court of competent jurisdiction that such Member or Manager or
officer of the Company is not entitled to be indemnified by the Company (which
determination, as to any Manager, shall have been made under the terms and
provisions of subparagraph (d) of Section 5.7 of this Operating Agreement; and
which determination, as to any officer of the Company, shall have been made
under the terms and provisions of subparagraph (b) of Section 6.6 of this
Operating Agreement). The terms and provisions of this Section 18.3 do not
affect any right to advancement of expenses to which personnel of the Company
other than Members or Managers or officers of the Company may be entitled under
any contract or otherwise by law.
Section 18.4 Authorization for Indemnity.
---------------------------
(a) Successful Defense. To the extent that any person referred to in
------------------
Section 18.1 or Section 18.2 of this Operating Agreement has been successful on
the merits or otherwise in defense of any action, suit or proceeding described
in Section 18.1 or Section 18.2 of this Operating Agreement, or in defense of
any claim, issue or matter therein, the Company shall indemnify such person
against expenses, including attorneys' fees, actually and reasonably incurred in
connection with such defense.
(b) Specific Case Authorization. Subject to the terms and provisions
---------------------------
of subparagraph (a) of this Section 18.4, any indemnification under Section 18.1
or Section 18.2 of this Operating Agreement, unless ordered by a court of
competent jurisdiction or advanced in accordance with Section 18.3 of this
Operating Agreement, may be made by the Company only as authorized in the
specific case upon a determination that indemnification is proper in the
circumstances. Except as prohibited by the last sentence of Section 18.2 of this
Operating Agreement, the Members hereby agree that in each specific case the
Members shall deem indemnification of a current or former Member to be proper in
the circumstances and shall authorize unanimously the indemnification of
57
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every current or former Member except in any case in which liability of such
current or former Member is determined by Members holding more than FIFTY
PERCENT (50%) of the outstanding Membership Voting Interests that are not owned
by parties to the act, suit or proceeding at issue to have resulted from or have
been caused by acts or omissions of such Member that involved intentional
misconduct, fraud or a knowing violation of law. In every case, the
determination that indemnification is proper in the circumstances may be made
under any of the following subparagraphs (i) through (iv):
(i) By the vote or written consent of a majority of the
authorized number of Managers; provided, however, that the Managers shall have
no authority to, and shall not, determine that indemnification is proper for any
person in any case in which liability of such person is determined by a majority
of the authorized number of Managers to have resulted from or have been caused
by acts or omissions of such person that involved intentional misconduct, fraud
or a knowing violation of law; or
(ii) By the vote or written consent of Members holding more
than FIFTY PERCENT (50%) of the outstanding Membership Voting Interests that are
not owned by parties to the act, suit or proceeding; provided, however, that the
Members shall have no authority to, and shall not, determine that
indemnification is proper for any person in any case in which liability of such
person is determined by Members owning more than FIFTY PERCENT (50%) of the
Membership Voting Interests that are not owned by parties to the act, suit or
proceeding at issue to have resulted from or have been caused by acts or
omissions of such person that involved intentional misconduct, fraud or a
knowing violation of law; or
(iii) If Members holding more than FIFTY PERCENT (50%) of the
outstanding Membership Voting Interests that are not owned by parties to the
act, suit or proceeding so order, by independent legal counsel in a written
opinion; provided, however, that such independent legal counsel shall have no
authority to, and shall not, determine that indemnification is proper for any
person in any case in which liability of such person is determined by such
independent legal counsel to have resulted from or have been caused by acts or
omissions of such person that involved intentional misconduct, fraud or a
knowing violation of law; or
(iv) If Members who are not parties to the act, suit or
proceeding cannot be obtained, by independent legal counsel in a written
opinion; provided, however, that such independent legal counsel shall have no
authority to, and shall not, determine that indemnification is proper for any
person in any case in which liability of such person is determined by such
independent legal counsel to have resulted from or have been caused by acts or
omissions of such person that involved intentional misconduct, fraud or a
knowing violation of law.
Section 18.5 Indemnification of Managers. The terms and provisions of
---------------------------
Section 5.7 of this Operating Agreement shall govern the indemnification of
Managers under this Operating Agreement. Notwithstanding any other term or
provision of this Operating Agreement, the terms
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and provisions of this Section 18.5 cannot and shall not be amended or repealed
under any circumstance, except as may be necessary to ensure the continued
compliance of this Operating Agreement with Chapter 86.
Section 18.6 Indemnification of Company Officers. Notwithstanding any
-----------------------------------
other term or provision of this ARTICLE XVIII, the terms and provisions of
Section 6.6 of this Operating Agreement shall govern the indemnification of
officers of the Company under this Operating Agreement. Notwithstanding any
other term or provision of this Operating Agreement, the terms and provisions of
this Section 18.6 cannot and shall not be amended or repealed under any
circumstance, except as may be necessary to ensure the continued compliance of
this Operating Agreement with Chapter 86.
Section 18.7 Limitation on Indemnification Obligation. The satisfaction
----------------------------------------
of the indemnification obligations of the Company under this ARTICLE XVIII shall
be from and limited to the assets of the Company, and no Member or Interest
Holder shall have any personal liability for the satisfaction of any such
indemnification obligation.
Section 18.8 Company Successor, Trustee or Receiver Liability. The
------------------------------------------------
obligations of the Company under this ARTICLE XVIII shall be binding on any
successor, trustee or receiver of the Company.
ARTICLE XIX
COMPANY BOOKS AND RECORDS
The Board of Managers shall cause the Company to keep the following:
(a) Complete books and records of account in which shall be entered
fully and accurately all transactions and other matters relating to the Company.
The Company's books and records shall be kept on an accrual basis, in accordance
with generally accepted accounting principles, except as the Board of Managers
otherwise may determine to be permitted under the Internal Revenue Code;
(b) A current list of the full name and last known business or
residence address of each Member set forth in alphabetical order listing the
Member's capital contribution to the Company and Membership Interest owned by
such Member;
(c) A copy of the Articles of Organization and all amendments thereto
and all filings effected by the Company in Nevada and other states;
(d) Copies of the Company's federal, state and local income tax
returns and reports, if any, for the SIX (6) most recent years (if applicable);
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(e) Copies of any then-effective written operating agreement and of
financial statements of the Company for the THREE (3) most recent years; and
(f) Unless contained in the Articles of Organization, a writing
setting forth:
(i) The amount of cash and a description and statement of the
agreed value of the other property or services contributed to capital by each
Member and that each Member has agreed to contribute to the Company;
(ii) The items as to which or events upon the occurrence of
which additional capital contributions agreed to be made by each Member are to
be made;
(iii) Any right of a Member to receive, or of a Manager to make,
distributions to a Member, which include a return of all or any portion of a
Member's capital contribution; and
(iv) Any event upon the occurrence of which the Company is to
be dissolved and its affairs wound up.
All such books and records shall be maintained at the principal
executive office of the Company and, as to those items designated in
subparagraphs (b) through (f) of this ARTICLE XIX, inclusive, also at the
registered office of the Company. In each location, such books and records
shall be available for inspection and copying by, and at the expense of, the
Members or their duly-authorized representatives, during reasonable business
hours.
ARTICLE XX
TAX MATTERS PARTNER
20.1 Designation. The Members hereby unanimously designate Recreational
-----------
Enterprises, Inc., a Nevada corporation that as of the date of this Operating
Agreement is both a Member and a Manager, as the "Tax Matters Partner" of the
Company as defined in Section 6231 of the Internal Revenue Code. Any future
alternative Tax Matters Partner that may be approved by the Members in
accordance with the terms and provisions of subparagraph (a) of Section 5.10 of
this Operating Agreement shall be both a Member and a Manager of the Company.
20.2 Powers and Duties. The Tax Matters Partner shall have such powers and
-----------------
perform such duties as provided in Sections 6221 through 6233 of the Internal
Revenue Code with respect to a "tax matters partner" as such term is defined in
Section 6231(a)(7) of the Internal Revenue Code.
ARTICLE XXI
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PREVENTION OF TAXATION OF COMPANY AS A CORPORATION
BY REASON OF BEING TREATED AS A PUBLICLY-TRADED PARTNERSHIP
Section 21.1 Number of Members and Interest Holders. Without the prior
--------------------------------------
affirmative vote or written consent of the Members holding more than SEVENTY
FIVE PERCENT (75%) of the outstanding Membership Voting Interests, the Company
shall not at any time have more than ONE HUNDRED (100) Members and/or Interest
Holders (including as Members and Interest Holders every person indirectly
owning a Membership Interest through a partnership, limited-liability company, S
corporation or grantor trust (such an entity, a "Flow-Through Entity") but only
if substantially all of the value of such person's interest in the Flow-Through
Entity is attributable to the Flow-Through Entity's interest (direct or
indirect) in the Company).
Section 21.2 Compliance With Safe Harbor. The Board of Managers and the
---------------------------
Chief Executive Officer, President and Presiding Manager shall monitor the
transfers of Membership Interests to determine (a) whether such Membership
Interests are being traded on an "established securities market" or a "secondary
market (or the substantial equivalent thereof)" within the meaning of Section
7704 of the Internal Revenue Code and (b) whether additional transfers of
Membership Interests would result in the Company being unable to qualify for at
least ONE (1) of the "safe harbors" set forth in Regulations Section 1.7704-1
(or such other guidance subsequently published by the Internal Revenue Service
setting forth safe harbors under which Membership Interests will not be treated
as "readily tradable on a secondary market (or the substantial equivalent
thereof)" within the meaning of Section 7704 of the Internal Revenue Code) (the
"Safe Harbors"). The Board of Managers and the Chief Executive Officer,
President and Presiding Manager shall take all steps reasonably necessary or
appropriate to prevent any trading of Membership Interests or any recognition by
the Company of transfers of Membership Interests made on such markets and,
except as otherwise provided in this Operating Agreement, to ensure that the
conditions of at least ONE (1) of the Safe Harbors is satisfied.
Section 21.3 Prohibited "Market" Transfers. Each Member and Interest
-----------------------------
Holder hereby covenants and agrees with the Company for the benefit of the
Company and of all other Members and Interest Holders (a) that such Member or
Interest Holder currently is not making a market in Membership Interests; (b)
that such Member or Interest Holder shall not transfer any Membership Interest
upon an "established securities market" or a "secondary market (or the
substantial equivalent thereof)" within the meaning of Section 7704 of the
Internal Revenue Code and all regulations, proposed regulations, revenue rulings
or other official pronouncements of the Internal Revenue Service or Treasury
Department that may be promulgated or published, and (c) that, in the event that
such regulations, revenue rulings or other pronouncements treat arrangements
that facilitate the selling of a Membership Interest that commonly are referred
to as "Matching Services" as being a "secondary market (or the substantial
equivalent thereof)," such Member or Interest Holder shall not transfer any
Membership Interest through a Matching Service that is not approved in advance
by the Board of Managers.
61
<PAGE>
ARTICLE XXII
MISCELLANEOUS
Section 22.1 Agreement to Perform Necessary Acts. Each party hereto
-----------------------------------
agrees to perform all further acts and execute and deliver all documents that
reasonably may be necessary to carry out the terms and provisions of this
Operating Agreement.
Section 22.2 Amendments. Except as otherwise expressly provided therein,
----------
the terms and provisions of ARTICLES IX, X, XI, XII, XIII, XIV, XVII and XVIII
may not be waived, altered, amended or repealed, in whole or in part, except
with the affirmative vote or written consent of the Members holding SEVENTY FIVE
PERCENT (75%) of the outstanding Membership Voting Interests. Subject to the
immediately-preceding sentence hereof, and except as otherwise expressly
provided in this Operating Agreement, the terms and provisions of this Operating
Agreement may not be waived, altered, amended or repealed, in whole or in part,
except with the written consent of the Members holding more than FIFTY PERCENT
(50%) of the outstanding Membership Voting Interests.
Section 22.3 Notices. All notices or other communications required or
-------
permitted to be given under this Operating Agreement shall be in writing and
shall be (a) delivered personally, (b) sent via Federal Express (or via another
comparable overnight delivery service), (c) sent via facsimile machine or (d)
mailed, certified or registered mail, return receipt requested, to the parties
hereto at the addresses set forth in relation to the signature lines of this
Operating Agreement. Personally-delivered notices shall be deemed given upon
actual personal delivery to the intended recipient. Facsimile notices shall be
deemed given upon completion of transmission of the receiving facsimile machine
and the return to the transmitting facsimile machine of an acknowledgement of
the receipt thereof. Notices sent via Federal Express (or via another
comparable overnight delivery service) shall be deemed given on the business day
immediately following the day of dispatch. Mailed notices shall be deemed given
upon the earlier of THREE (3) business days after deposit into the United States
mail, registered or certified, with postage fully-prepaid, or the date of actual
receipt as evidenced by the return receipt.
Section 22.4 Binding Effect. Subject to the terms and provisions of this
--------------
Operating Agreement, this Operating Agreement shall be binding on and inure to
the benefit of the parties hereto and their respective successors and assigns.
The parties hereto agree for themselves and for their successors and assigns,
and their successors in interest, no matter how such succession in interest is
acquired, to execute any instrument that may be necessary or proper to carry out
all of the purposes and intentions of this Operating Agreement. The Membership
Interest of any successor to any party hereto that is not also a party hereto
shall be treated hereunder as if it has continued and is continuing to be held
by such party hereto for the purposes of determining the priorities of the
rights of the parties hereto to purchase such Membership Interest under the
terms of this Operating Agreement.
62
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Section 22.5 Severability. If any sentence, paragraph, clause or
------------
combination of the same in this Operating Agreement is held by a court of
competent jurisdiction to be unenforceable in any jurisdiction, then such
sentence, paragraph, clause or combination shall be unenforceable in the
jurisdiction where it is so held, and the remainder of this Operating Agreement
shall remain binding on the parties hereto in such jurisdiction as if such
unenforceable provision had not been contained herein. The enforceability of
such sentence, paragraph, clause or combination of the same in this Operating
Agreement otherwise shall be unaffected and shall remain enforceable in all
other jurisdictions.
Section 22.6 Governing Law. The validity, construction, interpretation
-------------
and enforceability of this Operating Agreement shall be determined and governed
by the laws of the State of Nevada. Notwithstanding the foregoing, if any law
or set of laws in the State of Nevada requires or otherwise dictates that the
laws of another state or jurisdiction must be applied in any proceeding
involving this Operating Agreement, then such Nevada law or set of laws shall be
superseded by this Section 22.6, and the remaining laws of the State of Nevada
nonetheless shall be applied in such proceeding.
Section 22.7 Choice of Forum. Any judicial proceeding brought by any
---------------
party hereto as a result of a dispute or controversy arising out of or related
to this Operating Agreement shall be commenced in courts located within Washoe
County, Nevada. All parties hereto agree to submit to the jurisdiction of the
federal and state courts located within such county in the event of such a
dispute or controversy.
Section 22.8 Headings. The headings and captions appearing at the
--------
beginning of each ARTICLE and Section of this Operating Agreement are included
herein for the convenience of reference only, do not constitute a part of this
Operating Agreement and shall not be deemed to limit, characterize or in any way
affect any term or provision of this Operating Agreement. This Operating
Agreement shall be enforced and construed as if no headings or captions appeared
herein.
Section 22.9 Waiver. No waiver of any breach or default of this Operating
------
Agreement by any party hereto shall be considered to be a waiver of any other
breach or default of this Operating Agreement.
Section 22.10 Attorneys' Fees. If a dispute arises with respect to this
---------------
Operating Agreement, the party prevailing in such dispute shall be entitled to
recover all expenses, including, without limitation, reasonable attorneys' fees
and expenses, incurred in ascertaining such party's rights and in preparing to
enforce and in enforcing such party's rights under this Operating Agreement,
whether or not it was necessary for such party to institute suit.
Section 22.11 Dispute Resolution. The parties hereto hereby agree that
------------------
any controversy, dispute or claim arising out of or relating to this Operating
Agreement or any breach of this Operating Agreement shall be resolved in
accordance with the terms and provisions of this Section 22.11.
63
<PAGE>
(a) Agreement to Negotiate. Before submitting any controversy,
----------------------
dispute or claim arising out of or relating to this Operating Agreement or any
breach of this Operating Agreement to arbitration, the following procedures
shall be followed:
(i) The party desiring to submit any such controversy, dispute
or claim to arbitration ("Claimant") first shall give written notice thereof to
the other party ("Recipient") setting forth in detail the pertinent facts and
circumstances relating to such controversy, dispute or claim;
(ii) Recipient shall have a period of FIFTEEN (15) days in
which to consider the controversy, dispute or claim that is the subject of the
notice and to furnish in writing to Claimant a written statement of Recipient's
position with respect thereto;
(iii) Within SEVEN (7) days of Claimant's receipt of Recipient's
written statement, Claimant and Recipient shall meet with a mediator, whose
identity shall be mutually agreed upon by Claimant and Recipient, in an effort
to resolve amicably any difference that may exist between the respective
positions of Claimant and Recipient, and, if such resolution is not achieved,
either or both of Claimant and Recipient shall have the right to submit the
matter to arbitration.
(b) Procedure for Arbitration. Any controversy, dispute or claim
-------------------------
arising out of or relating to this Operating Agreement or any breach of this
Operating Agreement, including any dispute concerning the termination of this
Operating Agreement, that has not been resolved in accordance with subparagraph
(a) of this Section 22.11 shall be settled by arbitration in Washoe County,
Nevada in accordance with the commercial arbitration rules of the American
Arbitration Association then existing. In arbitration, this Operating Agreement
(including this provision providing for arbitration in the event of any
controversy, dispute or claim arising out of or relating to this Operating
Agreement or any breach of this Operating Agreement that has not been resolved
in accordance with subparagraph (a) of this Section 22.11) shall be specifically
enforceable. Judgement upon any award rendered by an arbitrator may be entered
in any court having jurisdiction. The prevailing party to an arbitration
proceeding commenced hereunder shall be entitled as a part of the arbitration
award to the costs and expenses (including reasonable attorneys' fees) of
investigating, preparing and pursuing an arbitration claim as such costs and
expenses are awarded by the arbitrator.
Section 22.12 Independence. Notwithstanding the existence of the Company
------------
and this Operating Agreement, each Member may severally engage in whatever
activities such Member chooses without having or incurring any obligation to
offer any interest in such activity to any party to this Operating Agreement.
Section 22.13 Confidential Information. Without the affirmative vote or
------------------------
written consent of the Members holding ONE HUNDRED PERCENT (100%) of the
outstanding Membership Voting Interests, and except as otherwise required by
law, including, without limitation, federal securities
64
<PAGE>
law, no Member, either during or after the termination of such Member's
Membership Interest, shall divulge to others any information not already known
to the public pertinent to the services, customers, financial condition or
operations of the Company, the business of the Company or the Eldorado Hotel and
Casino. Notwithstanding any other term or provision of this Operating Agreement,
the terms and provisions of this Section 22.13 cannot be amended or repealed
unless such amendment or repeal first has been approved by the affirmative vote
or written consent of the Members holding ONE HUNDRED PERCENT (100%) of the
outstanding Membership Voting Interests.
Section 22.14 Counterparts. This Operating Agreement may be executed in
------------
counterparts, each of which shall be deemed to be an original, but all of which,
when taken together, shall constitute one agreement.
Section 22.15 Entire Agreement. This Operating Agreement contains the
----------------
entire agreement between the parties hereto relating to the subject matter of
this Operating Agreement, and no written or oral prior representations,
agreements or warranties of any party hereto shall be of any force or effect
unless embodied herein.
IN WITNESS WHEREOF, the parties hereto have executed this Operating
Agreement on the date first written above.
The "Members"
RECREATIONAL ENTERPRISES, INC.,
a Nevada corporation
By: /s/ Donald L. Carano
___________________________ __________________________________
Donald L. Carano, Address
President
65
<PAGE>
The "Members" (Continued)
HOTEL-CASINO MANAGEMENT, INC.,
a Nevada corporation
By: /s/ Raymond J. Poncia, Jr.
______________________________ __________________________________
Raymond J. Poncia, Jr., Address
President
HOTEL CASINO REALTY INVESTMENTS, INC.,
a Nevada corporation
By: /s/ Raymond J. Poncia, Jr.
______________________________ __________________________________
Raymond J. Poncia, Jr., Address
President
/s/ Donald L. Carano
___________________________________ __________________________________
DONALD L. CARANO, Address
a married man
___________________________________ __________________________________
Spouse Address
/s/ Ludwig J. Corrao
___________________________________ __________________________________
LUDWIG J. CORRAO, Address
a married man
___________________________________ __________________________________
Spouse Address
I, the above-consenting spouse, by signing above, acknowledge that I
have read the foregoing Operating Agreement, that I know all of the Operating
Agreement's contents and that I am aware that by the Operating Agreement's
provisions my spouse is obligated to sell all of my spouse's Membership Interest
to the Company and/or to the other Members, upon the occurrence of certain
events. I hereby consent to such sale, approve of all of the terms and
provisions of the Operating
66
<PAGE>
Agreement and agree (i) that all of my spouse's Membership Interest (whether now
held or hereafter acquired) and all of my interests in such Membership Interest,
if any, are subject to the terms and provisions of the Operating Agreement or
such other agreement as hereafter may be entered into by and among the Members
and (ii) that I will take no action at any time to hinder the operation of the
Operating Agreement or such other agreement as hereafter may be entered into by
and among the Members on any part of my spouse's Membership Interest or my
interest, if any, in any of my spouse's Membership Interest.
67
<PAGE>
SCHEDULE 9.1
------------
INITIAL CAPITAL CONTRIBUTIONS OF THE MEMBERS
--------------------------------------------
<PAGE>
EXHIBIT 3.4
BYLAWS OF
ELDORADO CAPITAL CORP.
----------------------
ARTICLE I
OFFICES
Section 1. The principal office shall be in the City of Reno, County of
Washoe, State of Nevada, or other location as the Board of Directors may
determine.
Section 2. The corporation may also have offices at such other places as
the Board of Directors may from time to time determine or the business of the
corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All annual meetings of the stockholders shall be at the call of
the Directors. Special meetings of the stockholders may be held at such place
as shall be stated in the notice of the meeting, or in a duly executed waiver of
notice thereof.
Section 2. Special meetings of the stockholders for any purpose or
purposes, unless otherwise prescribed by statute or by the Articles of
Incorporation, may be called by the president, and shall be called by the
president or secretary at the request in writing of stockholders owning a
majority of the entire stock of the corporation issued and outstanding, and
entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting.
Section 3. Written notice of the annual meeting and of all special
meetings of the stockholders, signed by the president or a vice president, or
the secretary or an assistant secretary, stating the purpose or purposes for
which the meeting is called and the time when and the place where it is to be
held shall either be delivered personally or shall be mailed to each stockholder
of record entitled to vote thereat not less than ten nor more than sixty days
prior to the meeting, and if mailed it shall be directed to any such stockholder
at his address as it appears on the records of the corporation.
Section 4. Business transacted at all special meetings shall be confined
to the objects stated in the call.
Section 5. The holders of a majority of the stock issued and outstanding,
and entitled to vote thereat, present in person or represented by proxy, shall
be requisite and shall constitute a quorum at all meetings of the stockholders
for the transaction of
<PAGE>
business except as otherwise provided by statute, by the Articles of
Incorporation or by these Bylaws. If, however, such quorum shall not be present
or represented by proxy, at any meeting of the stockholders, the stockholders
entitled to vote thereat, present in person or represented by proxy, shall have
power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified.
Section 6. When a quorum is present or represented at any meeting, the
vote of the holders of a majority of the stock having voting power present in
person or represented by proxy shall decide any question brought before such
meeting, unless the question is one upon which by express provision of the
statutes or of the Articles of Incorporation or of these Bylaws, a different
vote is required in which case such express provision shall govern and control
the decision of such question.
Section 7. At each meeting of the stockholders, every stockholder having
the right to vote shall be entitled to vote in person, or by proxy appointed by
an instrument in writing subscribed by such stockholder or by his duly
authorized attorney. Each stockholder shall have one vote for each share of
stock having voting power, registered in his name on the books of the corpora-
tion on the date of closing the books of the corporation against transfers of
stock or on the record date fixed for the determination of stockholders
entitled to vote at such meeting or, if the books be not closed or a record date
fixed, then on the date of such meeting. All questions shall be decided by a
plurality vote.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole board
shall be not less than one nor more than nine, except that, in cases where all
the shares of the corporation are owned beneficially and of record by either one
or two stockholders, the number of directors may be less than three but not less
than the number of stockholders. Directors need not be stockholders. They
shall be elected at the annual meeting of the stockholders, and each director
shall be elected to serve until his successor shall be elected and shall
qualify.
Section 2. The directors may hold their meetings and have one or more
offices inside or outside Nevada at such places as they may from time to time
determine. The original or duplicate stock ledger or a statement setting out
the name and address of the
2
<PAGE>
custodian thereof shall be kept at the principal office in Nevada.
Section 3. Vacancies in the Board of Directors may be filled by a majority
vote of the remaining directors, though less than a quorum, and each director so
elected shall hold office for the unexpired term in respect to which such
vacancy occurred or until the next annual election of directors.
3
<PAGE>
Section 4. The property and business of the corporation shall be managed
by its Board of Directors which may exercise all such powers of the corporation
and do all such lawful acts and things as are not by statute or by the Articles
of Incorporation or by these Bylaws directed or required to be exercised or done
by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 5. The first meeting of each newly elected Board shall be held at
such time and place either within or without the State of Nevada, as shall be
fixed by the vote of the stockholders at the annual meeting and no notice of
such meeting shall be necessary to the newly elected directors in order to
legally constitute the meeting, provided a quorum shall be present or they may
meet at such place and time as shall be fixed by the consent in writing of all
the directors.
Section 6. Regular meetings of the Board of Directors may be held without
notice at such time and place either within or without the State of Nevada as
shall from time to time be determined by the Board.
Section 7. Special meetings of the Board of Directors may be called by the
president on three days notice to each director, either personally or by mail or
by telegram; special meetings shall be called by the president or secretary in
like manner and on like notice on the written consent of two directors.
Section 8. A majority of the directors at a meeting duly assembled shall
be necessary and sufficient to constitute a quorum for the transaction of
business, and the act of a majority of the directors present at any meeting at
which a quorum is present shall be the act of the Board of Directors, except as
may be otherwise specifically provided by statute or by the Articles of
Incorporation or by these Bylaws. Any action of a majority, although not at a
regularly called meeting, and the record thereof, if assented to in writing by
all of the other members of the board, shall be as valid and effective in all
respects as if passed by the board in regular meeting. The Directors may act in
lieu of a meeting by written resolutions.
COMMITTEES OF DIRECTORS
Section 9. The Board of Directors may, by resolution or resolutions passed
by a majority of the whole board, designate one or more committees, each
committee to consist of two or more of the directors of the corporation, which,
to the extent provided in said resolution or resolutions, shall have and may
exercise the powers
4
<PAGE>
of the Board of Directors in the management of the business and affairs of the
corporation, and may have power to authorize the seal of the corporation to be
affixed to all papers which may require it. Such committee or committees shall
have such name or names as may be determined from time to time by resolution
adopted by the Board of Directors.
Section 10. The committees shall keep regular minutes of their proceedings
and report the same to the Board of Directors when required.
COMPENSATION OF DIRECTORS
Section 11. Directors, as such shall not receive any stated salary for
their services, but by resolution of the board, a fixed sum and expenses of
attendance, if any, may be allowed for attendance at each regular or special
meeting of the board; provided, however, that nothing herein contained shall be
construed to preclude any director from serving the corporation in any other
capacity and receiving compensation therefor.
Section 12. Members of special or standing committees may be allowed like
compensation for attending committee meetings.
Section 13. Any director may be removed from office by the vote or written
consent of stockholders representing not less than two-thirds of the issued and
outstanding capital stock having voting power, and his successor may be elected
at the same meeting. No director shall be removed from office except upon the
vote or written consent of stockholders owning sufficient shares to have
prevented his election to office in the first instance.
ARTICLE IV
NOTICES
Section 1. Whenever under the provisions of the statutes or of the
Articles of Incorporation or of these Bylaws, notice is required to be given to
any director or stockholder, it shall not be construed to mean personal notice,
but such notice may be given in writing, by mail, addressed to such director or
stockholder at such address as appears on the books of the corporation, and such
notice shall be deemed to be given at the time when the same shall be thus
mailed.
Section 2. Whenever all parties entitled to vote at any meeting, whether
of directors or stockholders, consent, either by a writing on the records of the
meeting or filed with the secretary, or by presence at such meeting and oral
consent entered on the minutes, or by taking part in the deliberations at such
5
<PAGE>
meeting without objection, the actions taken at such meeting shall be as valid
as if had at a meeting regularly called and noticed, and at such meeting any
business may be transacted which is not excepted from the written consent or to
the consideration of which no objection for want of notice is made at the time,
and if any meeting be irregular for want of notice or such consent, provided a
quorum was present at such meeting, the proceedings of such meeting may be
ratified and approved and rendered valid and the irregularity or defect therein
waived by a writing signed by all parties having the right to vote thereat. Such
consent or approval, if given by stockholders, may be by proxy or attorney, but
all such proxies and powers of attorney must be in writing.
Section 3. Whenever any notice whatsoever is required to be given under
the provisions of the statute, of the Articles of Incorporation or of these
Bylaws, a waiver thereof in writing signed by the person entitled to said notice
either before or after the time stated therein, shall be deemed equivalent
thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the
directors and shall be a president, a vice president, a secretary, and a
treasurer. Any two offices, except the offices of president and vice president,
may be held by the same person.
Section 2. The Board of Directors, at its first meeting after each annual
meeting of stockholders, shall choose a president from its members, and shall
choose a vice president, a secretary and a treasurer, none of whom need be a
member of the board.
Section 3. The board may appoint additional vice presidents, and assistant
secretaries and assistant treasurers and such other officers and agents as it
shall deem necessary, who shall hold their offices for such terms and shall
exercise such powers and perform such duties as shall be determined from time to
time by the board.
Section 4. The salaries of all officers and agents of the corporation
shall be fixed by the Board of Directors.
Section 5. The officers of the corporation shall hold office until their
successors are chosen and qualify in their stead. Any officer elected or
appointed by the Board of Directors may be removed at any time by the Board by
the affirmative vote of a majority of the whole board of directors. If the
office of any officer becomes vacant for any reason, the vacancy shall be filled
by the Board of Directors.
6
<PAGE>
THE PRESIDENT
Section 6. The president shall be the chief executive officer of the
corporation; he shall preside at all meetings of the stockholders and directors,
shall be ex officio a member of all standing committees, shall have general and
active management of the business of the corporation and shall see that all
orders and resolutions of the board are carried into effect.
Section 7. He shall, execute bonds, mortgages and other contracts
requiring a seal, under the seal of the corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the corporation.
VICE PRESIDENT
Section 8. The vice president shall, in the absence or disability of the
president, perform the duties and exercise the powers of president, and shall
perform such other duties as the Board of Directors shall prescribe.
THE SECRETARY
Section 9. The secretary shall attend all sessions of the board and all
meetings of the stockholders and record all votes and the minutes of all
proceedings in a book to be kept for that purpose, and shall perform like duties
for the standing committees when required. He shall give, or cause to be given,
notice of all meetings of the stockholders and special meetings of the Board of
Directors, and shall perform such other duties as may be prescribed by the Board
of Directors or president, under whose supervision he shall be. He shall keep
in safe custody the seal of the corporation, and when authorized by the Board
of Directors, affix the same to any instrument requiring a seal, and when so
affixed, it shall be attested by his signature or by the signature of the
treasurer or an assistant secretary.
THE TREASURER
Section 10. The treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the Board of Directors.
Section 11. He shall disburse the funds of the corporation as
7
<PAGE>
may be ordered by the board, taking proper vouchers for such disbursements, and
shall render to the president and directors, at the regular meetings of the
board, or whenever they may require it, an account of all his transactions as
treasurer and of the financial condition of the corporation.
Section 12. If required by the Board of Directors, he shall give the
corporation a bond in such sum, and with such surety or sureties as shall be
satisfactory to the board, for the faithful performance of the duties of his
office, and for the restoration to the corporation, in case of his death,
resignation, retirement or removal from office, of all books, papers, vouchers,
money and other property of whatever kind in his possession or under his control
belonging to the corporation.
ARTICLE VI
CERTIFICATES OF STOCK
Section 1. Certificates of stock of the corporation shall be in such form
not inconsistent with the Articles of Incorporation as shall be approved by the
Board of Directors, shall be issued under the seal of the corporation and shall
be numbered and shall be entered in the books of the corporation as they are
issued. They shall exhibit the holder's name and the number of shares owned by
him and shall be signed by the president or vice president and the secretary or
an assistant secretary or the treasurer or an assistant treasurer. If any stock
certificate is countersigned or otherwise authenticated by a transfer agent or
transfer clerk and a registrar, a facsimile of the signatures of the said
officers may be printed or lithographed upon such certificates and the stock
certificates shall set forth the designations, preferences and relative,
participating, optional or other special rights of the various classes of stock
or series thereof and the qualifications, limitations or restrictions of such
rights.
TRANSFERS OF STOCK
Section 2. Upon surrender to the corporation or the transfer agent of the
corporation of a certificate of stock duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
CLOSING OF TRANSFER BOOKS
Section 3. The directors may prescribe a period not exceeding forty days
prior to any meeting of the stockholders or prior to the
8
<PAGE>
day appointed for the payment of dividends during which no transfer of stock on
the books of the corporation may be made, or may fix a day not more than forty
days prior to the holding of any such meeting or the date for the payment of any
such dividend as the day as of which stockholders entitled to notice of and to
vote at such meeting and entitled to receive payment of such dividend shall be
determined; and only stockholders of record on such day shall be entitled to
notice or to vote at such meeting or to receive payment of such dividend.
REGISTERED STOCKHOLDERS
Section 4. The corporation shall be entitled to treat the holder of record
of any share or shares of stock as the holder-in-fact thereof and, accordingly,
shall not be bound to recognize any equitable or other claim to or interest in
such share on the part of any other person, whether or not it shall have express
or other notice thereof, except as expressly provided by the laws of Nevada.
LOST CERTIFICATES
Section 5. The Board of Directors may direct a new certificate or
certificates of stock to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost or destroyed,
upon the making of an affidavit of that fact by the person claiming the
certificate of stock to be lost or destroyed. When authorizing such issue of a
new certificate or certificates, the Board of Directors may, in its discretion,
as a condition precedent to the issuance thereof, require the owner of such lost
or destroyed certificate or certificates, or his legal representative, to
advertise the same in such manner as it shall require and/or give the
corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the corporation with respect to the certificate alleged
to have been lost or destroyed.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation, subject to
the provisions of the Articles of Incorporation, if any relate thereto, may be
declared by the Board of Directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property, or in shares of the capital
stock, subject to the provisions of the Articles of Incorporation.
Section 2. Before payment of any dividend or making any
9
<PAGE>
distribution of profits, there may be set aside out of the funds of the
corporation available for dividends such sum or sums as the directors from time
to time, in their absolute discretion, think proper as a reserve fund to meet
contingencies, or for equalizing dividends, or for repairing or maintaining any
property of the corporation, or for such other purpose as the directors shall
think conducive to the interests of the corporation, and the directors may
modify or abolish any such reserve in the manner in which it was created.
CHECKS
Section 3. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers as the Board of Directors may from
time to time designate.
FISCAL YEAR
Section 4. The fiscal year shall begin the first day of each year.
SEAL
Section 5. The corporate seal shall have inscribed thereon the name of the
corporation, the date of its incorporation and the words "Corporate Seal,
Nevada."
INDEMNIFICATION
Section 6. Each person who is or was a director or officer of the
corporation (including the heirs, executors, administrators, or estate of such
person) shall be indemnified by the corporation as of right against any
liability, cost, or expense incurred by such director or officer by reason of
the fact that such person is or was a director, officer, employee, or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise, except to the extent that such
indemnification is prohibited by Chapter 78 of the Nevada Revised Statutes. The
expenses of directors or officers, past or present, incurred in defending a
civil or criminal action, suit, or proceeding must be paid by the corporation as
incurred and in advance of the final disposition of the action, suit, or
proceeding upon receipt of an undertaking by or on behalf of the director or
officer to repay the amount if it is ultimately determined by a court of
competent jurisdiction that he is not entitled to be indemnified by the
corporation.
10
<PAGE>
ARTICLE VIII
AMENDMENTS
Section 1. These Bylaws may be altered or amended at any regular meeting
of the stockholders or at any special meeting of the stockholders at which a
quorum is present or represented, if notice of the proposed alteration or
amendment be contained in the notice of such meeting, by the affirmative vote of
a majority of the stock issued and outstanding and entitled to vote at such
meeting and present and represented thereat, or by the affirmative vote of a
majority of the board or at any meeting of the board or by the written consent
of all of the members of the board.
I, THE UNDERSIGNED, being the Secretary of ELDORADO CAPITAL CORP., DO
HEREBY CERTIFY the foregoing to be the Bylaws of said corporation, as adopted at
a meeting of the directors held on the 25th day of June, 1996.
[Signature Appears Here]
____________________________________
Secretary
11
<PAGE>
EXHIBIT 4.1
______________________________________
ELDORADO RESORTS LLC and
ELDORADO CAPITAL CORP.,
as Issuers
and
FLEET NATIONAL BANK,
as Trustee
_____________________
INDENTURE
Dated as of July 31, 1996
_____________________
$100,000,000
10 1/2% SENIOR SUBORDINATED NOTES DUE 2006
______________________________________
<PAGE>
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Trust Indenture
Act Section Indenture Section
--------------- -----------------
<S> <C>
310(a)(1)....................................... 7.10
(a)(2)....................................... 7.10
(a)(3)....................................... N.A.
(a)(4)....................................... N.A.
(b) ....................................... 7.08; 7.10; 10.02
(c) ....................................... N.A.
311(a) ....................................... 7.11
(b) ....................................... 7.11
(c) ....................................... N.A.
312(a) ....................................... 2.05
(b) ....................................... 10.03
(c) ....................................... 10.03
313(a) ....................................... 7.06
(b)(1)....................................... N.A.
(b)(2)....................................... 7.06
(c) ....................................... 7.06; 10.02
(d) ....................................... 7.06
314(a) ....................................... 4.01; 10.02
(b) ....................................... N.A.
(c)(1)....................................... 10.04
(c)(2)....................................... 10.04
(c)(3)....................................... N.A.
(d) ....................................... N.A.
(e) ....................................... 10.05
(f) ....................................... N.A.
315(a) ....................................... 7.01(b)
(b) ....................................... 7.05; 10.02
(c) ....................................... 7.01(a)
(d) ....................................... 7.01(c)
(e) ....................................... 6.11
316(a)(last sentence)........................... 2.09
(a)(1)(A).................................... 6.05
(a)(1)(B).................................... 6.04
(a)(2)....................................... N.A.
(b) ....................................... 6.07
317(a)(1)....................................... 6.08
(a)(2)....................................... 6.09
(b) ....................................... 2.04
318(a) ....................................... 10.01
N.A. means not applicable.
---------------
</TABLE>
*This Cross-Reference Table is not part of the Indenture.
-i-
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE.......................... 1
Section 1.01 Definitions............................. 1
Section 1.02 Other Definitions....................... 22
Section 1.03 Incorporation by Reference of Trust
Indenture Act........................... 23
Section 1.04 Rules of Construction................... 23
ARTICLE 2
THE NOTES........................................................... 24
Section 2.01 Form and Dating......................... 24
Section 2.02 Execution and Authentication............ 25
Section 2.03 Registrar; Paying Agent; Depositary;
Global Note Holder...................... 26
Section 2.04 Paying Agent to Hold Money in Trust..... 26
Section 2.05 Noteholder Lists........................ 27
Section 2.06 Transfer and Exchange................... 27
Section 2.07 Replacement Notes....................... 33
Section 2.08 Outstanding Notes....................... 34
Section 2.09 When Treasury Notes Disregarded......... 34
Section 2.10 Temporary Notes......................... 34
Section 2.11 Gaming Redemption....................... 34
Section 2.12 Cancellation............................ 35
Section 2.13 Defaulted Interest...................... 35
Section 2.14 CUSIP Number............................ 36
ARTICLE 3
REDEMPTION AND PREPAYMENT........................................... 36
Section 3.01 Notices to Trustee...................... 36
Section 3.02 Selection of Notes to be Redeemed....... 37
Section 3.03 Notice of Redemption.................... 37
Section 3.04 Effect of Notice of Redemption.......... 38
Section 3.05 Deposit of Redemption Price............. 38
Section 3.06 Notes Redeemed in Part.................. 39
Section 3.07 Optional Redemption..................... 39
Section 3.08 Mandatory Redemption.................... 40
Section 3.09 Offer to Purchase by Application of
Excess Proceeds......................... 40
Section 3.10 Compliance with Tender Offer Rules...... 42
ARTICLE 4
COVENANTS OF THE ISSUERS............................................ 42
Section 4.01 Payment of Notes........................ 42
Section 4.02 SEC Reports............................. 43
Section 4.03 Compliance Certificate.................. 43
Section 4.04 Maintenance of Office or Agency......... 44
Section 4.05 Limitations on Restricted Payments...... 45
Section 4.06 Continued Existence; Restrictions on
Activities of Capital................... 47
Section 4.07 Taxes................................... 48
Section 4.08 Change of Control....................... 48
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C> <C>
Section 4.09 Limitation on Indebtedness.............. 50
Section 4.10 Limitation on Other Senior Subordinated
Debt.................................... 52
Section 4.11 Limitations on Liens.................... 52
Section 4.12 Dividend and Other Payment Restrictions
Affecting Subsidiaries.................. 52
Section 4.13 Limitations on Transactions with
Affiliates.............................. 53
Section 4.14 Stay, Extension and Usury Laws.......... 54
Section 4.15 Limitation on Sales of Assets........... 54
Section 4.16 Subsidiary Guarantees................... 57
Section 4.17 Payments for Consent.................... 57
Section 4.18 Designation of an Unrestricted
Subsidiary as Restricted................ 58
Section 4.19 Designation of a Subsidiary as
Unrestricted............................ 58
Section 4.20 Business Activities..................... 58
Section 4.21 Independent Member of the Management
Committee............................... 59
Section 4.22 Further Assurance to the Trustee........ 59
Section 4.23 Maintenance of Properties............... 60
Section 4.24 Insurance............................... 60
Section 4.25 Investment Company Act.................. 60
ARTICLE 5
SUCCESSORS........................................................ 60
Section 5.01 Merger, Consolidation, Etc.............. 60
Section 5.02 Successor Corporation Substituted....... 62
Section 5.03 Purchase Offer on Change of Control..... 62
ARTICLE 6
DEFAULTS AND REMEDIES............................................. 62
Section 6.01 Events of Default....................... 62
Section 6.02 Acceleration............................ 64
Section 6.03 Other Remedies.......................... 65
Section 6.04 Waiver of Past Defaults................. 65
Section 6.05 Control by Majority..................... 66
Section 6.06 Limitation on Suits..................... 66
Section 6.07 Rights of Holders to Receive Payment.... 67
Section 6.08 Collection Suit by Trustee.............. 67
Section 6.09 Trustee May File Proofs of Claim........ 67
Section 6.10 Priorities.............................. 67
Section 6.11 Undertaking for Costs................... 68
ARTICLE 7
TRUSTEE........................................................... 68
Section 7.01 Duties of Trustee....................... 68
Section 7.02 Rights of Trustee....................... 69
Section 7.03 Individual Rights of Trustee............ 70
Section 7.04 Trustee's Disclaimer.................... 71
Section 7.05 Notice of Defaults...................... 71
Section 7.06 Reports by Trustee to Holders........... 71
Section 7.07 Compensation and Indemnity.............. 71
Section 7.08 Replacement of Trustee.................. 72
</TABLE>
-iii-
<PAGE>
<TABLE>
<S> <C> <C>
Section 7.09 Successor Trustee by Merger, etc........ 74
Section 7.10 Eligibility; Disqualification........... 74
Section 7.11 Preferential Collection of Claims
Against Issuers......................... 74
ARTICLE 8
SATISFACTION AND DISCHARGE OF INDENTURE............................ 74
Section 8.01 Option To Effect Legal Defeasance Or
Covenant Defeasance..................... 74
Section 8.02 Legal Defeasance And Discharge.......... 74
Section 8.03 Covenant Defeasance..................... 75
Section 8.04 Conditions To Legal Or Covenant
Defeasance.............................. 76
Section 8.05 Deposited Money And Government
Securities To Be Held In Trust; Other
Miscellaneous Provisions................ 77
Section 8.06 Repayment To The Issuers................ 78
Section 8.07 Reinstatement........................... 78
ARTICLE 9
AMENDMENTS......................................................... 79
Section 9.01 Without Consent of Holders.............. 79
Section 9.02 With Consent of Holders................. 79
Section 9.03 Compliance with Trust Indenture Act..... 81
Section 9.04 Revocation and Effect of Consents....... 81
Section 9.05 Notation on or Exchange of Notes........ 81
Section 9.06 Trustee Protected....................... 82
ARTICLE 10
SUBORDINATION...................................................... 82
Section 10.01 Agreement To Subordinate................ 82
Section 10.02 Liquidation; Dissolution; Bankruptcy.... 83
Section 10.03 Default on Designated Senior Debt....... 83
Section 10.04 Acceleration of Notes................... 84
Section 10.05 When Distribution Must Be Paid Over..... 84
Section 10.06 Notice By The Issuers................... 85
Section 10.07 Subrogation............................. 85
Section 10.08 Relative Rights......................... 85
Section 10.09 Subordination May Not Be Impaired By the
Issuers................................. 86
Section 10.10 Distribution Or Notice To
Representative.......................... 86
Section 10.11 Rights Of Trustee And Paying Agent...... 86
Section 10.12 Authorization To Effect Subordination... 87
Section 10.13 Legend.................................. 87
Section 10.14 No Waiver............................... 87
ARTICLE 11
GENERAL PROVISIONS................................................. 88
Section 11.01 Trust Indenture Act Controls............ 88
Section 11.02 Notices................................. 88
Section 11.03 Communication by Holders with Other
Holders................................. 89
</TABLE>
-iv-
<PAGE>
<TABLE>
<S> <C> <C>
Section 11.04 Certificate and Opinion as to Conditions
Precedent............................... 89
Section 11.05 Statements Required in Certificate or
Opinion................................. 89
Section 11.06 Rules by Trustee and Agents............. 90
Section 11.07 No Recourse Against Others.............. 90
Section 11.08 Counterparts............................ 90
Section 11.09 Other Provisions........................ 90
Section 11.10 Governing Law........................... 91
Section 11.11 No Adverse Interpretation of Other
Agreements.............................. 91
Section 11.12 Successors.............................. 91
Section 11.13 Severability............................ 91
Section 11.14 Table of Contents, Headings, Etc........ 91
</TABLE>
EXHIBITS
Exhibit A Form of Private Placement Note
Exhibit B Form of Exchange Note
Exhibit C Certificate to be Delivered Upon Exchange or Registration of
Transfer of Notes
Exhibit D Form of Legal Opinion on Transfer
Exhibit E Form of Subsidiary Guarantee
-v-
<PAGE>
THIS INDENTURE, dated July 31, 1996, is entered into between Eldorado
Resorts LLC, a Nevada limited-liability company (the "Company") and Eldorado
-------
Capital Corp., a Nevada corporation ("Capital" and, together with the Company,
the "Issuers"), and Fleet National Bank, a national banking association, as
-------
trustee (the "Trustee").
-------
The Issuers and Trustee agree as follows for the benefit of each other
and for the equal and ratable benefit of the Holders of the Issuers' 10 1/2%
Senior Subordinated Notes due August 15, 2006 (the "Private Placement Notes")
-----------------------
and the Issuers' 10 1/2% Senior Subordinated Notes due August 15, 2006 to be
issued in exchange for the Private Placement Notes pursuant to the terms of the
Registration Rights Agreement (as hereinafter defined) (the "Exchange Notes"
--------------
and, together with the Private Placement Notes, the "Notes").
-----
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01 Definitions.
-----------
"Acquired Debt" means, with respect to any specified Person, (i)
-------------
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Restricted Subsidiary of such specified Person,
including, without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Restricted Subsidiary of such specified Person, and (ii) Indebtedness secured by
a Lien encumbering any asset acquired by such specified Person.
"Adjusted Net Assets" of a Guarantor at any date means the amount by
-------------------
which the book value of the property and assets of such Guarantor exceeds the
total amount of liabilities, including without limitation contingent liabilities
(after giving effect to all other fixed and contingent liabilities incurred or
assumed on such date), but excluding liabilities under the Guarantee, of such
Guarantor at such date.
"Affiliate" of any specified Person means any other Person directly or
---------
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
--------
Beneficial Ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
-1-
<PAGE>
"Agent" means any Registrar, Paying Agent or Co-Registrar.
-----
"assets" means any tangible or intangible assets or rights or real or
------
personal properties of any Person.
"Asset Sale" means (i) the sale, lease, conveyance or other
----------
disposition of any assets (including, without limitation, by way of a sale and
leaseback) and (ii) the issue or sale by the Issuers or any of their Restricted
Subsidiaries of Equity Interests of any of the Issuers' Restricted Subsidiaries,
in the case of either clause (i) or (ii) of this definition, whether in a single
transaction or a series of related transactions for net proceeds in excess of
$1.0 million. Notwithstanding the foregoing, the following shall be deemed not
to be Asset Sales: (A) the disposition of Cash Equivalents or the sale of
inventory or obsolete furniture, fixtures, equipment or other property (real or
personal) in the ordinary course of business; (B) dispositions of gaming
equipment in the ordinary course of business pursuant to an established program
for the maintenance and upgrading of such equipment; (C) the surrender or waiver
of contract rights or the settlement, release or surrender of contract, tort or
other claims of any kind; (D) the grant in the ordinary course of business of,
or lapse of, any license of patents, trademarks and other similar intellectual
property, including transfer of intellectual property relating exclusively to
the conduct of the business of The Brew Brothers, provided that, in such event,
--------
the Company shall be granted a license to use such transferred intellectual
property for a nominal fee; (E) pursuant to the foreclosure of any Lien on
assets securing any FF&E Financing or Capital Lease Obligation permitted
pursuant to the provisions of Section 4.09, provided that such FF&E Financing or
------------ --------
Capital Lease Obligation is secured by a Lien that relates only to assets
purchased with such FF&E Financing or Capital Lease Obligation, and provided,
--------
further, that such foreclosure or other remedy is conducted in a commercially
- -------
reasonable manner or in accordance with applicable law; (F) involving only the
lease or sublease for a term not to exceed ten years (other than a sale and a
leaseback transaction or similar transaction in which the owner, prior to the
transaction, does not retain the residual interest of the property at the
conclusion of the term of the lease) of real or personal property in the
ordinary course of business and provided that, with respect to a lease or
--------
sublease for which (i) the aggregate rental payments exceed $1.0 million per
annum the Company delivers to the Trustee a resolution of the Management
Committee set forth in an Officers' Certificate certifying that the lease has
been approved unanimously by the Management Committee and (ii) the aggregate
rental payments exceed $5.0 million per annum the Company delivers to the
Trustee an opinion as to the fairness to the Company of such lease from a
financial point of view by an accounting, appraisal or investment banking firm
of national standing; (G) resulting from (i) the designation of any Restricted
Subsidiary as an Unrestricted Subsidiary, or contribution to the capital of any
Unrestricted
-2-
<PAGE>
Subsidiary, in accordance with the applicable provisions of the Indenture, or
(ii) the sale of Capital Stock of any Unrestricted Subsidiary or the sale of all
or substantially all of the assets of any Unrestricted Subsidiary; (H) a
transfer of assets by the Issuers to a Consolidated Subsidiary or by a
Consolidated Subsidiary to the Issuers or to another Consolidated Subsidiary;
(I) an issuance of Equity Interests by a Consolidated Subsidiary to the Issuers
or to another Consolidated Subsidiary; (J) a Permitted Investment, Restricted
Payment or other payment or distribution that is permitted by the provisions of
Section 4.05; and (K) the contribution, in exchange for an equity interest or
- ------------
debt obligation, of Development Property to a joint venture in which the
Company, directly or indirectly, holds an equity interest.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or
--------------
state law for the relief of debtors.
"Beneficial Owner" (including, with correlative meanings,
----------------
"Beneficially Owned" and "Beneficial Ownership") means, with respect to any
- ------------------- --------------------
Capital Stock, a "person," as such term is used in Section 13(d)(3) of the
Exchange Act, that is a "beneficial owner," as such term is defined in Rule 13d-
3 and Rule 13d-5 under the Exchange Act, of such Capital Stock.
"Business Day" means any day other than a Saturday, Sunday or a Legal
------------
Holiday.
"Capital Lease Obligation" means, at the time any determination
------------------------
thereof is to be made, the amount of liability in respect of a capital lease
that would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means, (i) in the case of a corporation, corporate
-------------
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership, partnership
interests (whether general or limited), (iv) in the case of a limited-liability
company, membership interests and (v) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distribution of assets or, the issuing Person.
"Carano Interests" means Donald L. Carano, his spouse, lineal
----------------
descendants (including adopted children and their lineal descendants) and any
trust or entity owned, controlled by or established for the exclusive benefit
of, or the estate of, any of the foregoing.
"Cash Equivalents" means (i) United States dollars, (ii) securities
----------------
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof having maturities of not
more than six
-3-
<PAGE>
months from the date of acquisition, (iii) certificates of deposit and
eurodollar time deposits with maturities of six months or less from the date of
acquisition, bankers' acceptances with maturities not exceeding six months and
overnight bank deposits, in each case with any domestic commercial bank having
capital and surplus in excess of $500.0 million and a Keefe Bank Watch Rating of
"B" or better, (iv) repurchase obligations with a term of not more than seven
days for underlying securities of the types described in clauses (ii) and (iii)
of this definition entered into with any financial institution meeting the
qualifications specified in clause (iii) of this definition, (v) commercial
paper having the highest rating obtainable from Moody's Investors Service, Inc.
or Standard & Poor's Ratings Group and in each case maturing within six months
after the date of acquisition and (vi) shares of any fund investing exclusively
in investments of the type described in clauses (i), (ii), (iii) and (iv) of
this definition if such fund has net assets of not less than $500.0 million.
"Change of Control" means the occurrence of any of the following: (i)
-----------------
the sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Restricted Subsidiaries,
taken as a whole, to any "person" (as such term is used in Section 13(d)(3) of
the Exchange Act) other than the Carano Interests or an Included Person, (ii)
the adoption of a plan relating to the liquidation or dissolution of the
Company, (iii) prior to the consummation of an Initial Public Offering, the
consummation of any transaction (including, without limitation, any merger or
consolidation) the result of which is that the Carano Interests cease to control
a majority of the voting power of the Company (other than in connection with an
Initial Public Offering and sales or other dispositions of Capital Stock that do
not result in the Carano Interests as a group no longer Beneficially Owning such
Capital Stock), (iv) after an Initial Public Offering, the Company's becoming
aware of (by way of a report or any other filing pursuant to Section 13(d) of
the Exchange Act, proxy vote, written notice or otherwise) the acquisition by
any Person or related group (within the meaning of Section 13(d)(3) or Section
14(d)(2) of the Exchange Act, or any successor provision to either of the
foregoing, including any "group" acting for the purpose of acquiring, holding or
disposing of securities within the meaning of Rule 13d-5(b)(1) under the
Exchange Act), other than the Carano Interests, in a single transaction or in a
related series of transactions, by way of merger, consolidation or other
business combination or purchase of Beneficial Ownership of 35% or more of the
total voting power entitled to vote in the election of the Management Committee
or Board of Directors, as the case may be, or such other Person surviving the
transaction and, at such time, the Carano Interests shall fail to Beneficially
Own, directly or indirectly, securities representing greater than the combined
voting power of the Company's or such other Person's Capital Stock as is
-4-
<PAGE>
Beneficially Owned by such Person or group, (v) the first day on which the
Company fails to own 100% of the issued and outstanding Equity Interests of
Capital, other than by reason of a merger of Capital with and into a corporate
successor to the Company, and (vi) during any period of two consecutive years,
individuals who at the beginning of such period constituted the Management
Committee (together with any new managers whose election or appointment by such
committee or whose nomination for election by the members of the Company was
approved by a vote of a majority of the managers then still in office who were
either managers at the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason to constitute a
majority of the Management Committee then in office; provided, however, that the
-------- -------
sale or transfer by the Carano Interests to an Included Person shall not be a
Change of Control so long as such Included Person maintains an ownership
interest that, if held by the Carano Interests, would not constitute a Change of
Control; and provided, further, that for purposes of this definition (except
-------- -------
clause (v) of this definition) the term "Company" shall mean "Parent" should
Parent exist and for purpose of clause (vi) of this definition, Management
Committee and managers shall mean board of directors and directors should Parent
exist.
"Consolidated Cash Flow" means, with respect to any Person for any
----------------------
period, the Consolidated Net Income of such Person for such period plus, to the
----
extent deducted in computing Consolidated Net Income, (i) an amount equal to any
extraordinary loss plus any net loss realized in connection with an Asset Sale,
(ii) provision for taxes based on income or profits or, so long as such Person
is treated as a partnership or other pass through entity for United States
federal income tax purposes, the Tax Amount of such Person and its Restricted
Subsidiaries for such period, (iii) consolidated interest expense of such Person
and its Restricted Subsidiaries for such period, whether paid or accrued and
whether or not capitalized (including, without limitation, amortization of
original issue discount, non-cash interest payments, the interest component of
any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, commissions, discounts and other fees
and charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments (if any) pursuant to Hedging Obligations), (iv)
depreciation and amortization (including amortization of goodwill and other
intangibles but excluding amortization of prepaid cash expenses that were paid
in a prior period) and other non-cash charges (excluding any such non-cash
charge to the extent that it represents an accrual of or reserve for cash
charges in any future period or amortization of a prepaid cash expense that was
paid in a prior period) of such Person and its Restricted Subsidiaries for such
period, (v) pre-opening expenses to the extent that such pre-opening expenses
were deducted in computing Consolidated Net Income, in each case, on a
consolidated basis and determined in accordance with GAAP and (vi) any
abandonment
-5-
<PAGE>
loss incurred in connection with the expansion of the Eldorado which was
reflected on the Company's Consolidated Statement of Income for the period ended
December 31, 1995. Notwithstanding the foregoing, the provision for taxes on
the income or profits of, and the depreciation, amortization and other non-cash
charges of, a Restricted Subsidiary of the referent Person shall be added to
Consolidated Net Income to compute Consolidated Cash Flow only to the extent
(and in same proportion) that the Net Income of such Restricted Subsidiary was
included in calculating the Consolidated Net Income of such Person and only if a
corresponding amount would be permitted at the date of determination to be
dividended to the Issuers by such Restricted Subsidiary without prior
governmental approval (that has not been obtained), and without direct or
indirect restriction pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulation applicable to such Restricted Subsidiary or its equity interest
holders.
"Consolidated Net Income" means, with respect to any Person for any
-----------------------
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that (i) the Net Income (but not loss) of any Person that is
--------
not a Restricted Subsidiary or that is accounted for by the equity method of
accounting (including without limitation ELLC) shall be included only to the
extent of the amount of dividends or distributions paid in cash to the referent
Person or a Consolidated Subsidiary thereof, (ii) the Net Income of any
Restricted Subsidiary shall be excluded to the extent that the declaration or
payment of dividends or similar distributions by such Restricted Subsidiary of
such Net Income is not at the date of determination of Consolidated Net Income
for such period permitted without any prior governmental approval (that has not
been obtained) or, directly or indirectly, by operation of the terms of its
charter or any agreement, instrument, judgments, decrees, orders, statutes,
rules or governmental regulation applicable to such Restricted Subsidiary or its
equity interest holders, (iii) the Net Income of any Person acquired in a
pooling of interests transaction for any period prior to the date of such
acquisition shall be excluded, (iv) the cumulative effect of a change in
accounting principles and any losses resulting from the application of Statement
of Financial Accounting Standards No. 121 shall be excluded and (v) the Net
Income of any Unrestricted Subsidiary, other than ELLC, shall be excluded,
whether or not distributed to the Issuers or their Restricted Subsidiaries.
"Consolidated Net Worth" means, with respect to any Person, the amount
----------------------
by which the total assets of such Person and its Restricted Subsidiaries exceed
the sum of (i) the total liabilities of such Person and its Restricted
Subsidiaries plus (ii) any Disqualified Stock of such Person and its Restricted
Subsidiaries (other than any such Disqualified Stock issued to
-6-
<PAGE>
such Person or any of its Restricted Subsidiaries), in each case determined in
accordance with GAAP.
"Consolidated Subsidiary" of any Person means a Restricted Subsidiary
-----------------------
of such Person which could be included with such Person in a consolidated group
of such Person for federal income tax reporting.
"Continuing Member" means, as of any date of determination, any member
-----------------
of the Management Committee who (i) was a member of the Management Committee as
of the date of this Indenture or (ii) was nominated for election to the
Management Committee with the approval of at least a majority of the Continuing
Members who were members of the Management Committee at the time of such
nomination or election.
"Daniels Notes" means Indebtedness in an amount not to exceed $3.5
-------------
million incurred to finance the acquisition of the Daniels Property.
"Daniels Property" means that certain parcel of real property together
----------------
with improvements thereon located in the City of Reno, County of Washoe, State
of Nevada, located on Washoe Assessor Parcels 007-292-18, 007-292-20 and 007-
292-25, and more commonly known as Daniel's Motor Lodge, 275 North Sierra
Street, Reno, Nevada 89501.
"Default" means any event that is, or with the passage of time or the
-------
giving of notice or both would be, an Event of Default.
"Depositary" means, with respect to the Notes issuable or issued in
----------
whole or in part in global form, the Person specified in Section 2.03 hereof as
------------
the Depositary with respect to the Notes, and any successor thereto.
"Designated Senior Debt" means (i) Indebtedness under the Senior
----------------------
Credit Agreement and (ii) any other Senior Debt permitted to be incurred by the
Issuers under the terms of the Indenture the principal amount of which is $25.0
million or more and that has been designated by the Management Committee as
"Designated Senior Debt." Upon such designation, the Issuers shall notify the
Trustee in writing of the identity of the holders of each component of such
Designated Senior Debt and the principal amount of each such component of
Designated Senior Debt.
"Development Property" means a parcel of real property that is not
--------------------
part of a Gaming Facility and that (i) was owned as of the date of this
Indenture by the Company, (ii) was owned as of the date of this Indenture by
Affiliates of the Company and transferred to the Company or a joint venture in
which the Company participates and valued at the acquisition cost of such
parcels by such Affiliate plus an amount equal to interest at the
-7-
<PAGE>
rate of 10% per annum on such acquisition cost from the date of acquisition by
such Affiliate, (iii) the Daniels Property or (iv) is acquired by the Company
after the date of this Indenture and has a fair market value of less than $1.0
million on the date of determination.
"Disqualified Stock" means any Capital Stock that, by its terms (or by
------------------
the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the holder thereof, in whole or in part, on or prior to the date
that is 91 days after the Maturity Date.
"Eldorado" means the casino/hotel owned and operated by the Company
--------
and located at Fourth and Virginia Streets in Reno, Nevada.
"ELLC" means Eldorado Limited Liability Company, a Nevada limited-
----
liability company.
"ELLC Member Notes" means Indebtedness in an amount not to exceed $3.9
-----------------
million incurred in connection with the acquisition by the Company of certain
membership interests of ELLC from Affiliates of the Company.
"ELLC Note" means that certain promissory note (or other evidence of
---------
Indebtedness) in aggregate principal amount of $23.0 million made by ELLC in
favor of the Company.
"Equity Interests" means Capital Stock and all warrants, options or
----------------
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Event of Default" has the meaning set forth in Section 6.01 hereof.
---------------- ------------
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
------------
or any successor statute.
"Exchange Offer" means an offer to exchange Private Placement Notes
--------------
for Exchange Notes pursuant to the Registration Rights Agreement.
"Existing Indebtedness" means Indebtedness of the Issuers and their
---------------------
Restricted Subsidiaries in existence on the date of the Indenture, until such
amounts are repaid.
"FF&E" means furniture, fixtures and equipment, including gaming
----
equipment, used in connection with any Gaming Business.
-8-
<PAGE>
"FF&E Financing" means the incurrence of Indebtedness, the proceeds of
--------------
which shall be used to finance the acquisition by the Company or a Restricted
Subsidiary of FF&E used in connection with any Gaming Facility whether or not
secured by a Lien on such FF&E; provided that such Indebtedness does not exceed
--------
the fair market value of such FF&E at the time of its acquisition.
"Fixed Charges" means, with respect to any Person for any period, the
-------------
sum of (without duplication) (i) the consolidated interest expense of such
Person and its Restricted Subsidiaries for such period, whether paid or accrued
(including, without limitation, amortization of original issue discount, non-
cash interest payments, the interest component of any deferred payment
obligations, the interest component of all payments associated with Capital
Lease Obligations, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings, and net payments
(if any) pursuant to Hedging Obligations, but excluding all other amortization
of debt issuance costs) and (ii) the consolidated interest expense of such
Person and its Restricted Subsidiaries that was capitalized during such period
and (iii) any interest expense on Indebtedness of another Person that is
Guaranteed by such Person or one of its Restricted Subsidiaries or secured by a
Lien on assets of such Person or one of its Restricted Subsidiaries (whether or
not such Guarantee or Lien is called upon) and (iv) the product of (a) all cash
dividend payments or other distributions (and non-cash dividend payments in the
case of a Person that is a Restricted Subsidiary) on any series of Disqualified
Stock of such Person (other than payments to such Person and its Consolidated
Subsidiaries), times (b) a fraction, the numerator of which is one and the
-----
denominator of which is one minus the then current combined federal, state and
-----
local statutory tax rate of such Person (or, in the case of a Person that is a
partnership, the combined federal, state and local tax rate to which such Person
would be subject if it were a Nevada corporation filing separate tax returns
with respect to its Taxable Income), expressed as a decimal, in each case, on a
consolidated basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
---------------------------
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period; provided, however, that (i)
-------- -------
in the event that such Person or any of its Restricted Subsidiaries incurs,
assumes, Guarantees or redeems any Indebtedness (other than revolving credit
borrowings) or issues or redeems any preferred stock subsequent to the
commencement of the period for which the Fixed Charge Coverage Ratio is being
calculated but prior to the date on which the event for which the calculation of
the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed
Charge Coverage Ratio shall be calculated giving pro forma effect to such
incurrence, assumption, Guarantee or redemption of Indebtedness, or such
issuance or redemption of preferred stock, as if the same had occurred at the
beginning of the applicable
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<PAGE>
four-quarter reference period; (ii) in the event that such Person or any of its
Restricted Subsidiaries designates an Unrestricted Subsidiary as a Restricted
Subsidiary in accordance with Section 4.18 hereof, or makes any acquisitions or
------------
dispositions (including Asset Sales), including through mergers or
consolidations and including any related financing transactions, during the
four-quarter reference period or subsequent to such reference period and on or
prior to the Calculation Date, then the Fixed Charge Coverage Ratio shall be
calculated giving pro forma effect to such acquisitions or dispositions, as if
the same had occurred at the beginning of the applicable four-quarter reference
period, and, in the case of a redesignation of an Unrestricted Subsidiary as a
Restricted Subsidiary, Consolidated Cash Flow for such reference period shall be
calculated without giving effect to clause (iii) of the proviso set forth in the
definition of Consolidated Net Income; (iii) the Consolidated Cash Flow
attributable to discontinued operations, as determined in accordance with GAAP,
and operations or businesses disposed of prior to the Calculation Date, shall be
excluded; and (iv) the Fixed Charges attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses disposed of
prior to the Calculation Date, shall be excluded, but only to the extent that
the obligations giving rise to such Fixed Charges will not be obligations of the
referent Person or any of its Restricted Subsidiaries following the Calculation
Date.
"GAAP" means generally accepted accounting principles set forth in the
----
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of the Indenture.
"Gaming Authority" means any agency, authority, board, bureau,
----------------
commission, department, office or instrumentality of any nature whatsoever of
the United States federal or foreign government, any state, province or any city
or other political subdivision or otherwise, and whether now or hereafter in
existence, or any officer or official thereof, including the Nevada State Gaming
Commission, the Nevada State Gaming Control Board and any other applicable
gaming regulatory authority with authority to regulate any gaming operation (or
proposed gaming operation) owned, managed or operated by the Company or any of
its Subsidiaries.
"Gaming Business" means the gaming business and includes all
---------------
businesses necessary for, incident to, connected with or arising out of the
operation of a gaming establishment or facility (including developing and
operating lodging, retail and restaurant facilities, sports or entertainment
facilities, transportation services or other related activities or enterprises
and any additions or improvements thereto) and any
-10-
<PAGE>
businesses incident and useful to the Gaming Business, including without
limitation food and beverage distribution operations to the extent that they are
operated in connection with a gaming business.
"Gaming Facility" means any tangible vessel, building, or other
---------------
structure used or expected to be used to enclose space in which a Gaming
Business is conducted and (i) wholly or partially owned, directly or indirectly,
by the Company or any Restricted Subsidiary or (ii) any portion or aspect of
which is managed or used, or expected to be managed or used, by the Company or a
Restricted Subsidiary; provided that the term Gaming Facility does not include
--------
any real property whether or not such vessel, building or other structure is
located thereon or adjacent thereto or any furniture, fixtures and equipment,
including gaming equipment, used in connection with any Gaming Business.
"Gaming License" means any license, permit, franchise or other
--------------
authorization from any Gaming Authority required on the date of the Indenture or
at any time thereafter to own, lease, operate or otherwise conduct the Gaming
Business of the Company and its Subsidiaries, including all licenses granted
under the gaming laws of a jurisdiction or jurisdictions to which the Company or
any of its Subsidiaries is, or may at any time after the date of the Indenture,
be subject.
"Global Note Holder" means the Person specified in Section 2.03 hereof
------------------ ------------
as custodian with respect to the Global Notes, or any successor thereto.
"Government Securities" means direct obligations of, or obligations
---------------------
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States is pledged.
"Guarantee" means a guarantee (other than by endorsement of negotiable
---------
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Guarantor" means each Subsidiary that executes a Guarantee of the
---------
Issuers' payment obligations under the Notes and the Indenture in accordance
with the provisions of the Indenture, and their respective successors and
assigns.
"HCM" means Hotel Casino Management, Inc., a Nevada corporation.
---
"Hedging Obligations" means, with respect to any Person, the
-------------------
obligations of such Person under (i) interest and currency rate swap agreements,
interest rate cap agreements and
-11-
<PAGE>
interest rate collar agreements and (ii) other agreements or arrangements
designed to protect such Person against fluctuations in interest or currency
exchange rates.
"Holder" or "Noteholder" means a person in whose name a Note is
------ ----------
registered in the Registrar's books.
"Included Persons" means any Person that (i) has a class of equity
----------------
securities that is traded on the New York Stock Exchange, the American Stock
Exchange or the Nasdaq Stock Market, (ii) has equity market value as of the date
of determination of $2 billion or more, (iii) has senior unsecured debt
securities rated in a ratings category higher than the Notes, as rated by both
of Moody's Investors Service and Standard & Poor's Ratings Group and (iv)
engages primarily in the Gaming Business.
"incur" means, with respect to any Indebtedness or other obligation of
-----
any Person, to create, issue, incur (by conversion, exchange, in connection with
an acquisition or otherwise), assume, guaranty or otherwise become liable in
respect of such Indebtedness or other obligation or the recording, as required
pursuant to GAAP or otherwise, of any such Indebtedness or other obligation on
the balance sheet of such Person (and "incurrence," "incurred," "incurable" and
"incurring" shall have meanings correlative to the foregoing).
"Indebtedness" means, with respect to any Person, any indebtedness of
------------
such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof) or banker's acceptances
or representing Capital Lease Obligations or the balance deferred and unpaid of
the purchase price of any property or representing any Hedging Obligations or
the amount of any Person's obligation to the redemption, repayment or other
repurchase of its Disqualified Stock, except any such balance that constitutes
an accrued expense or trade payable, if and to the extent any of the foregoing
indebtedness (other than letters of credit and Hedging Obligations) would appear
as a liability upon a balance sheet of such Person prepared in accordance with
GAAP, as well as all indebtedness of others secured by a Lien on any asset of
such Person (whether or not such indebtedness is assumed by such Person) and, to
the extent not otherwise included, the Guarantee by such Person of any
indebtedness of any other Person; provided that, with respect to the Company and
--------
its Restricted Subsidiaries, the Guarantee of Indebtedness shall not be deemed
an incurrence of Indebtedness to the extent that the Indebtedness so guaranteed
is permitted to be incurred by the Company or a Restricted Subsidiary pursuant
to Section 4.05 hereof.
------------
"Indenture" means this Indenture as amended or supplemented from time
---------
to time.
-12-
<PAGE>
"Initial Public Offering" means the first underwritten public offering
-----------------------
of common Capital Stock of the Company or Parent registered under the Securities
Act (other than a public offering registered on Form S-8 under the Securities
Act) that results in net proceeds of at least $20.0 million to the Company or
Parent, as the case may be.
"Initial Purchasers" means Bear, Stearns & Co. Inc., Wasserstein
------------------
Perella Securities, Inc. and BA Securities, Inc., as the initial purchasers of
the Private Placement Notes pursuant to the Purchase Agreement, dated as of July
25, 1996, between the Company and Bear, Stearns & Co. Inc., Wasserstein Perella
Securities, Inc. and BA Securities, Inc.
"Interest Payment Date" when used with respect to any of the Notes
---------------------
means the stated maturity of an installment of interest specified in such Note.
"Interest Record Date" when used with respect to any of the Notes
--------------------
means the date for determining the payee of an installment of interest specified
in such Note.
"Investments" means, with respect to any Person, all investments by
-----------
such Person in other Persons in the forms of direct or indirect loans (including
guarantees of Indebtedness or other obligations), advances (other than advances
to vendors and customers in the ordinary course of business that are recorded as
accounts receivable in accordance with GAAP and excluding commission, travel,
relocation and similar advances to officers and employees made in the ordinary
course of business), capital contributions, purchases or other acquisitions for
consideration of Indebtedness, Equity Interests or other securities, together
with all items that are or would be classified as investments on a balance sheet
prepared in accordance with GAAP; provided that an acquisition of assets, Equity
--------
Interests or other securities by the Issuers or any of their Restricted
Subsidiaries for consideration consisting of Equity Interests (other than
Disqualified Stock) of the Company shall not be deemed to be an Investment. If
the Issuers or any of their Restricted Subsidiaries sells or otherwise disposes
of any Equity Interests of any Restricted Subsidiary of the Issuers such that,
after giving effect to any such sale or disposition, such Person is no longer a
Restricted Subsidiary of either Issuer, the Issuers shall be deemed to have made
an Investment on the date of any such sale or disposition equal to the fair
market value of the Equity Interests of such Restricted Subsidiary not sold or
disposed of.
"Issue Date" means the date on which the Notes are originally issued
----------
under this Indenture.
"Issuers" means each of the parties named as such above until a
-------
successor replaces it in accordance with Article 5 of this Indenture and
---------
thereafter means each successor and each
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<PAGE>
successor thereto replaced in accordance with Article 5 of this Indenture.
---------
"Joint Venture Agreement" means that certain Agreement of Joint
-----------------------
Venture of Circus and Eldorado Joint Venture dated as of March 1, 1994 by and
among ELLC, the Company, Circus Circus Enterprises, Inc. and Galleon, Inc. and
relating to the Silver Legacy.
"Legal Holiday" means a day which banking institutions in the City of
-------------
New York, the City of Hartford, Connecticut or the State of Nevada are not
required to be open.
"Legended Note" means any Note required to contain the legend set
-------------
forth in Section 2.06(h) hereof.
---------------
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
----
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Liquidated Damages" means all liquidated damages owed pursuant to
------------------
Section 4 of the Registration Rights Agreement.
"Management Agreement" means that certain Management agreement, dated
--------------------
the date hereof, between the Company, REC and HCM.
"Management Committee" means (i) for so long as the Company is a
--------------------
limited liability company, the Board of Managers appointed pursuant to Article V
of the Operating Agreement, (ii) if the Company is a partnership, the general
partners or a committee or board generally managing the business of such
partnership and (iii) otherwise, the board of directors of the Company.
"Managers" means REC and HCM, or any successors thereto.
--------
"Material Gaming Facility" means on any date any Gaming Facility that
------------------------
is owned by the Company or a Restricted Subsidiary (i) which has contributed
more than 10% of the Net Revenues of the Company during the Company's most
recently completed four full fiscal quarters for which internal financial
statements are available preceding such date (such contribution to be annualized
if such Gaming Facility has not been in full operation for all of such four
fiscal quarters) or (ii) the book value of which on such date constitutes more
than 10% of the total assets of the Company and its Restricted Subsidiaries as
of the end of the most
-14-
<PAGE>
recently completed fiscal quarter for which internal financial statements are
available.
"Maturity Date" means August 15, 2006.
-------------
"Member Notes" shall mean a series of notes of the Company that: (i)
------------
are issued pro rata, to the members of the Company in contemplation of the
Initial Public Offering; (ii) have terms specifying that principal amounts
thereof may be paid only by proceeds from the Initial Public Offering; (iii)
shall automatically be converted into membership interests, pro rata, (a) if not
paid with proceeds of the Initial Public Offering within 90 days of issuance or
(b) upon the occurrence of an event of default under the Notes; (iv) have a
stated maturity after the Notes; (v) are expressly subordinated in right of
payment to the prior payment in full of the Notes; (vi) have stated interest
payment dates no more often than semi-annually; (vii) have a stated interest
rate of less than 10%; (viii) are unsecured; (ix) are not redeemable prior to
stated maturity except from the proceeds of the Initial Public Offering; and (x)
do not contain any terms or covenants which would cause the Member Notes to be
in default prior to the Notes.
"Net Income" means, with respect to any Person for any period, (i) the
----------
net income (loss) of such Person for such period, determined in accordance with
GAAP and before any reduction in respect of preferred stock dividends,
excluding, however, (a) any gain (but not loss), together with any related
provision for taxes on such gain (but not loss), realized in connection with (a)
any Asset Sale (including, without limitation, dispositions pursuant to sale and
leaseback transactions) or (b) the disposition of any securities by such Person
or any of its Restricted Subsidiaries or the extinguishment of any Indebtedness
of such Person or any of its Restricted Subsidiaries and (b) any extraordinary
or nonrecurring gain (but not loss), together with any related provision for
taxes on such extraordinary or nonrecurring gain (but not loss), less (ii) in
----
the case of any Person that is treated as a partnership or other pass through
entity for United States federal or state income tax purposes, the Tax Amount of
such Person for such period.
"Net Proceeds" means the aggregate cash proceeds received by the
------------
Issuers, any of their Restricted Subsidiaries or ELLC in respect of any Asset
Sale (including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of
the direct costs relating to such Asset Sale (including, without limitation,
legal, accounting and investment banking fees, and sales commissions), any
relocation expenses incurred as a result thereof, any taxes or Tax Distributions
paid or payable by the Issuers, any of their Restricted Subsidiaries or ELLC as
a result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), any purchase money obligations
relating to the assets comprising such Asset Sale (to
-15-
<PAGE>
the extent repaid with the proceeds thereof) and any reserve for adjustment in
respect of the sale price of such asset or assets established in accordance with
GAAP.
"Net Revenues" means the net revenues as determined under GAAP of the
------------
Company and its Restricted Subsidiaries as shown on the Company's financial
statements.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the
-----------------
Issuers nor any of their Restricted Subsidiaries (a) provides credit support of
any kind (including any undertaking, agreement or instrument that would
constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor
or otherwise), or (c) constitutes the lender, (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Issuers or any of their Restricted Subsidiaries to declare a default on such
other Indebtedness or cause the payment thereof to be accelerated or payable
prior to its stated maturity and (iii) as to which the lenders have been
notified in writing that they will not have any recourse to the stock or assets
of the Issuers or any of their Restricted Subsidiaries.
"Notes" has the meaning ascribed thereto in the preamble hereof.
-----
"Obligations" means any principal, interest, penalties, fees,
-----------
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Officer" means, with respect to any person, Chairman of the Board,
-------
the Chief Executive Officer, the President, the Chief Financial Officer, the
Chief Accounting Officer, any Vice President, the Treasurer, the Secretary, any
Assistant Treasurer or any Assistant Secretary of such Person.
"Officers' Certificate" means a certificate signed by two Officers,
---------------------
one of whom must be the Chairman of the Board, the President, the Treasurer or a
Vice-President of the Company.
"Operating Agreement" means the Operating Agreement of Eldorado
-------------------
Resorts LLC, dated June 28, 1996, as amended as to the date hereof.
"Opinion of Counsel" means a written opinion in form and substance,
------------------
and from legal counsel, reasonably acceptable to the recipient of such opinion,
which opinion may be subject to any necessary or customary qualifications,
exceptions, or limitations. The counsel may be an employee of or counsel to the
Issuers or the Trustee.
-16-
<PAGE>
"Parent" means a corporation to be formed which shall own all or
------
substantially all of the common equity interests of the Company.
"Participants" means those Persons designated as participants by the
------------
Depositary.
"Permitted Investments" means (i) any Investment in the Issuers or in
---------------------
a Consolidated Subsidiary of the Issuers, including without limitation any
Investment in the Gaming Business of the Issuers or any such Consolidated
Subsidiaries of the Issuers; (ii) any Investment in Cash Equivalents; (iii) any
Investment by the Issuers or any of their Restricted Subsidiaries in a Person
if, as a result of such Investment, (a) such Person becomes a Consolidated
Subsidiary of the Company engaged in the Gaming Business or (b) such Person is
merged, consolidated or amalgamated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, the Company or a
Consolidated Subsidiary of the Company engaged in the Gaming Business; (iv) any
Restricted Investment made as a result of the receipt of non-cash consideration
from an Asset Sale that was made pursuant to and in compliance with Section 4.15
hereof; (v) advances and loans to employees of the Company and its Restricted
Subsidiaries in the ordinary course of business; (vi) Investments acquired by
the Company or any of its Restricted Subsidiaries (a) in exchange for any other
Investment or accounts receivable held by the Company or such Restricted
Subsidiary in connection with or as a result of a bankruptcy workout,
reorganization or recapitalization of the issuer of such Investment or accounts
receivable or (b) as a result of a foreclosure by the Company or such Restricted
Subsidiary or other transfer of title with respect to any secured Investment in
default; (vii) the contribution, in exchange for an equity interest or debt
obligation, of Development Property to a joint venture in which the Company,
directly or indirectly, holds an equity interest; (viii) any Hedging Obligation;
and (ix) capital expenditures including the acquisition of other tangible assets
or the payment of costs of construction of real property improvements, in each
case to be used or useful in the Gaming Business of the Company or its
Restricted Subsidiaries.
"Permitted Liens" means (i) Liens securing Senior Debt and
---------------
Indebtedness of Restricted Subsidiaries that is permitted to be incurred
pursuant to Section 4.02 hereof; (ii) Liens securing Indebtedness that is pari
------------ ----
passu in right of payment with the Notes, provided that the Notes are equally
- ----- --------
and ratably secured; (iii) Liens in favor of the Issuers or any of their
Restricted Subsidiaries; (iv) Liens on property of a Person existing at the time
such Person is merged into or consolidated with the Issuers or any of their
Restricted Subsidiaries, provided that such Liens were in existence prior to the
--------
contemplation of such merger or consolidation and do not extend to any assets
other than those of the Person merged into or consolidated with the Issuers or
any such Restricted Subsidiary; (v) Liens on property existing at the
-17-
<PAGE>
time of acquisition thereof by the Issuers or any of their Restricted
Subsidiaries, provided that such Liens were in existence prior to the
--------
contemplation of such acquisition; (vi) Liens to secure the performance of
statutory obligations, surety or appeal bonds, performance bonds or other
obligations of a like nature incurred in the ordinary course of business; (vii)
Liens to secure Indebtedness (including Capital Lease Obligations) permitted by
Section 4.09(b)(iv) hereof covering only the assets acquired with such
- -------------------
Indebtedness; (viii) Liens existing on the date hereof; (ix) Liens for taxes,
assessments or governmental charges or claims that are not yet delinquent or
that are being contested in good faith by appropriate proceedings promptly
instituted and diligently concluded, provided that any reserve or other
--------
appropriate provision as shall be required in conformity with GAAP shall have
been made therefor; (x) Liens of landlords or of mortgagees of landlords arising
by operation of law, provided that the rental payments secured thereby are not
--------
yet due and payable; (xi) Liens incurred or deposits made in the ordinary course
of business in connection with workers' compensation, unemployment insurance and
other types of social security, (xii) easements, rights-of-way, restrictions,
minor defects or irregularities in title and other similar charges or
encumbrances not interfering in any material respect with the business of the
Company or any of its Restricted Subsidiaries; (xiii) judgment or attachment
Liens not giving rise to an Event of Default; (xiv) Liens arising out of the
purchase, consignment, shipment or storage of inventory or other goods in the
ordinary course of business; (xv) any interest or title of a lessor in property
subject to any Capital Lease Obligation or other lease; (xvi) Liens arising from
filing Uniform Commercial Code financing statements regarding leases; (xvii)
leases or subleases permitted pursuant to Section 4.15 hereof and that are
------------
granted to others and that do not interfere in any material respect with the
business of the Company or any Restricted Subsidiary; (xviii) any interest or
title of a lessor in the property subject to any lease, whether characterized as
capitalized or operating other than any such interest or title resulting from or
arising out of a default by the Company or any Restricted Subsidiary of its
obligations under such lease; and (xix) Liens incurred in the ordinary course of
business of the Issuers or any of their Restricted Subsidiaries that (a) are not
incurred in connection with the borrowing of money or the obtaining of advances
or credit (other than trade credit in the ordinary course of business) and (b)
do not in the aggregate materially detract from the value of the property or
materially impair the use thereof in the operation of business by the Issuers or
any such Restricted Subsidiary.
"Permitted Refinancing Indebtedness" means any Indebtedness of the
----------------------------------
Issuers or any of their Restricted Subsidiaries issued in exchange for, or the
net proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Issuers or any such Restricted Subsidiary;
provided that: (i) the principal amount (or accreted
- --------
-18-
<PAGE>
value, if applicable) of such Permitted Refinancing Indebtedness does not exceed
the principal amount (or accreted value, if applicable) of the Indebtedness so
extended, refinanced, renewed, replaced, defeased or refunded (plus the amount
of reasonable expenses incurred in connection therewith); (ii) such Permitted
Refinancing Indebtedness has a final maturity date no earlier than the final
maturity date of, and has a Weighted Average Life to Maturity equal to or
greater than the Weighted Average Life to Maturity of, the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the
Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded
is subordinated in right of payment to the Notes, such Permitted Refinancing
Indebtedness is subordinated in right of payment to the Notes on terms at least
as favorable to the Holders of Notes as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; and (iv) such Indebtedness is incurred only by the Issuer
or the Restricted Subsidiary that is the obligor on the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded.
"Person" means an individual, partnership, limited-liability company,
------
corporation, trust or unincorporated organization and a government or agency or
a political subdivision thereof.
"Private Placement Notes" has the meaning ascribed thereto in the
-----------------------
preamble hereof.
"pro forma" means, with respect to any calculation made or required to
--- -----
be made pursuant to the terms of this Indenture, a calculation in accordance
with Article 11 of Regulation S-X under the Securities Act.
"Public Equity Offering" means an underwritten public offering of
----------------------
common Capital Stock of the Company or Parent registered under the Securities
Act (other than a public offering registered on Form S-8 under the Securities
Act) that results in net proceeds of a least $20.0 million to the Company.
"Qualified Institutional Buyer" has the meaning assigned to that term
-----------------------------
in Rule 144A under the Securities Act.
"REC" means Recreational Enterprises, Inc., a Nevada corporation.
---
"Registration Rights Agreement" means the Registration Rights
-----------------------------
Agreement, dated as of the date hereof, between the Issuers and the Initial
Purchasers.
"Representative" means the indenture trustee or other trustee, agent
--------------
or representative.
-19-
<PAGE>
"Restricted Investment" means an Investment other than a Permitted
---------------------
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of such
---------------------
Person that is not an Unrestricted Subsidiary.
"SEC" means the Securities and Exchange Commission.
---
"Securities Act" means the Securities Act of 1933, as amended, or any
--------------
successor statute.
"Senior Credit Agreement" means that certain Amended and Restated Loan
-----------------------
Agreement dated as of July 31, 1996 between the Company and Bank of America
National Trust and Savings Association, as administrative agent and sole initial
bank, together with the Guarantee issued by Capital and all instruments,
documents and agreements executed in connection therewith, and any further
substitution of lenders, amendments, modifications, restatements, renewals,
supplements, refundings, replacements or refinancings thereof.
"Senior Debt" means (i) Indebtedness under the Senior Credit Agreement
-----------
and (ii) any other Indebtedness permitted to be incurred by the Issuers pursuant
to Section 4.09 whether the same is outstanding on the date hereof or later
------------
incurred hereof, unless the instrument under which such Indebtedness is incurred
expressly provides that it is subordinated in right of payment to any Senior
Debt of the Issuers. Notwithstanding anything to the contrary in the foregoing,
Senior Debt shall not include (a) any liability for federal, state, local or
other taxes owed or owing by the Issuers, (b) any Indebtedness of the Issuers to
any of their Subsidiaries or other Affiliates, (c) any trade payables or (d) any
Indebtedness that is incurred in violation of the Indenture, except that
obligations under the Senior Credit Agreement shall not be deemed to be in
violation of this Indenture.
"Shelf Registration Statement" means a registration statement filed
----------------------------
with the Commission pursuant to the Securities Act and Rule 145 promulgated
thereunder in connection with the public resale of Notes pursuant to the terms
set forth in the Registration Rights Agreement.
"Significant Guarantor" means any Guarantor with Adjusted Net Assets
---------------------
in excess of $5.0 million.
"Significant Subsidiary" means any Restricted Subsidiary that would be
----------------------
a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date hereof.
"Silver Legacy Joint Venture" means the Circus and Eldorado Joint
---------------------------
Venture, a Nevada general partnership.
-20-
<PAGE>
"Subsidiary" or "subsidiary" means, with respect to any Person, (i)
---------- ----------
any corporation, association or other business entity of which more than 50% of
the total voting power of shares of Capital Stock entitled (without regard to
the occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly or
indirectly, by such Person or one or more of the other Subsidiaries of such
Person (or a combination thereof) and (ii) any partnership (a) the sole general
partner or the managing general partner of which is such Person or a Subsidiary
of such Person or (b) the only general partners of which are such Person or of
one or more Subsidiaries of such Person (or any combination thereof).
"Tax Amount" means, with respect to any period, without duplication,
----------
the amount of taxable income of any Person for such period multiplied by the
highest marginal combined federal, state and local tax rates applicable to
individuals during such period, but only at such blended state and local tax
rates at which such Person would have been subject to taxation if such Person
had been taxed as a corporation during such period.
"Tax Distribution" means a distribution in respect of taxes to the
----------------
partners of the Company pursuant to Section 4.05(b)(iv) hereof.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code (S)(S)77aaa-
---
77bbbb) as in effect on the date of execution of this Indenture.
"Trust Officer" means any officer or assistant officer of the Trustee
-------------
assigned by the Trustee to administer its corporate trust matters.
"Trustee" means the party named as such above until a successor
-------
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor.
"Unrestricted Subsidiary" means any Subsidiary, other than Capital,
-----------------------
that is designated by the Management Committee as an Unrestricted Subsidiary
pursuant to a Board Resolution, but only to the extent that such Subsidiary (i)
has no Indebtedness other than Non-Recourse Debt, (ii) is not party to any
agreement, contract, arrangement or understanding with the Issuers or any of
their Restricted Subsidiaries unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Issuers or such
Restricted Subsidiary than those that might be obtained at the time from Persons
who are not Affiliates of the Issuers, (iii) is a Person with respect to which
neither the Issuers nor any of their Restricted Subsidiaries has any direct or
indirect obligation (a) to subscribe for additional Equity Interests or (b) to
maintain or preserve such Person's financial condition or to cause such Person
to achieve any specified levels of operating results and (iv) is not a guarantor
of, and is not otherwise directly or
-21-
<PAGE>
indirectly providing credit support for, any Indebtedness of the Issuers or any
of their Restricted Subsidiaries. Any such designation by the Management
Committee shall be evidenced to the Trustee by filing with the Trustee a
certified copy of the board resolution giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing conditions and was permitted by Section 4.09 hereof. If, at any time,
------------
any Unrestricted Subsidiary would fail to meet the foregoing requirements as an
Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted
Subsidiary for purposes of the Indenture and any Indebtedness of such Subsidiary
shall be deemed to be incurred by a Restricted Subsidiary of the Issuers as of
such date (and, if such Indebtedness is not permitted to be incurred as of such
date under Section 4.09 hereof, the Issuers shall be in default of such
------------
section).
"Weighted Average Life to Maturity" means, when applied to any
---------------------------------
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
Section 1.02 Other Definitions.
-----------------
<TABLE>
<CAPTION>
Defined in
Term Section
---- ----------
<S> <C>
"Affiliate Transaction"............ 4.13
"Alternative Offer"................ 4.08(d)
"Asset Sale Offer"................. 4.15(c)
"Certificated Notes"............... 2.01
"Change of Control Offer".......... 4.08(a)
"Change of Control Offer Price".... 4.08(a)
"Change of Control Payment Date"... 4.08(a)
"Co-Registrar"..................... 2.03
"Covenant Defeasance".............. 8.03
"Event of Default"................. 6.01
"Excess Proceeds".................. 4.15(b)
"Global Note"...................... 2.01
"Independent"...................... 4.21
"Legal Defeasance"................. 8.02
"New York Office".................. 2.03
"Non-Global Purchasers"............ 2.01
"Offer Amount"..................... 3.09
"Offer Period"..................... 3.09
"Paying Agent"..................... 2.03
"Payment Blockage Notice".......... 10.03
"Purchase Date".................... 3.09
"Purchase Offer"................... 3.01(b)
"Registrar"........................ 2.03
"Regulation S"..................... 2.06(a)(ii)(B)
</TABLE>
-22-
<PAGE>
<TABLE>
<S> <C>
"Restricted Payment"............... 4.05
"Trustee Office"................... 2.03
</TABLE>
Section 1.03 Incorporation by Reference of Trust Indenture Act.
-------------------------------------------------
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"Commission" means the SEC;
"indenture securities" means the Notes;
"indenture security holder" means a Noteholder or Holder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the Notes means the Issuers or any other obligor on the
Notes.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
Section 1.04 Rules of Construction.
---------------------
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP as in effect at the date hereof;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular; and
(5) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
-23-
<PAGE>
ARTICLE 2
THE NOTES
Section 2.01 Form and Dating.
---------------
The Private Placement Notes shall be substantially in the form set
forth in Exhibit A, and the Exchange Notes shall be substantially in the form
---------
set forth as Exhibit B, which exhibits are part of this Indenture, with such
---------
appropriate insertions, omissions, substitutions and other variations as are
required or permitted by this Indenture. The Notes may have notations, legends
or endorsements required by law, stock exchange rule or usage. The Issuers
shall approve the forms of the Notes and any notation, legend or endorsement on
them. Each Note shall be dated the date of its authentication. The aggregate
principal amount of the Private Placement Notes shall be no greater than
$100,000,000; if Exchange Notes are issued, the aggregate principal amount of
Private Placement Notes then outstanding shall be reduced by the aggregate
principal amount of Exchange Notes so issued.
Private Placement Notes will be initially issued in global form,
substantially in the form of Exhibit A (including footnotes 1 and 2 thereto) and
---------
the Exchange Notes, if any, in exchange for Private Placement Notes will be
initially issued in global form, substantially in the form of Exhibit B
---------
(including footnotes 1 and 2 thereto) (each of Exhibit A and Exhibit B,
--------- ---------
including such footnotes, hereinafter referred to as a "Global Note", and with
-----------
any Private Placement Notes issued in exchange therefor, the "Global Notes").
------------
Each Global Note will represent such of the outstanding Notes as shall be
specified therein and will provide that it represents the aggregate amount of
outstanding Notes from time to time endorsed thereon and that the aggregate
amount of outstanding Notes represented thereby may from time to time be reduced
or increased, as appropriate, to reflect transfers, exchanges and redemptions.
Any endorsement of a Global Note to reflect the amount of any increase or
decrease in the amount of outstanding Notes represented thereby shall be made by
the Trustee or the Global Note Holder, at the direction of the Trustee, in
accordance with instructions given by the Holder thereof.
Holders of Private Placement Notes who elect to take physical delivery
of their certificates (collectively, the "Non-Global Purchasers") will be issued
---------------------
certificates in the registered form of certificated Notes, substantially in the
form of Exhibit A (excluding footnotes 1 and 2 thereto) and Exchange Notes that
---------
are issued to Non-Global Purchasers in exchange for Private Placement Notes will
initially be issued in the form of certificated Notes, substantially in the form
of Exhibit B (excluding footnotes 1 and 2 thereto) (collectively, the
---------
"Certificated Notes").
- -------------------
-24-
<PAGE>
Payment of the principal of, premium, interest and Liquidated Damages
on any Certificated Note shall be made to the Holder thereof by wire transfer of
immediately available funds to the accounts specified by the Holders thereof, or
if no such account is specified, by mailing a check to each Holder's registered
address.
Payment of the principal of, premium, interest and Liquidated Damages
on the Global Note will be made by wire transfer of immediately available funds
to the accounts specified by the Global Note Holder.
The terms and provisions contained in the Notes shall constitute, and
are hereby expressly made, a part of this Indenture and, to the extent
applicable, the Issuers and the Trustee, by their execution and delivery of this
Indenture, expressly agree to such terms and provisions and to be bound thereby.
Section 2.02 Execution and Authentication.
----------------------------
Two Officers of each Issuer shall sign the Notes for the Issuers by
manual or facsimile signature.
If an Officer whose signature is on a Note no longer holds that office
at the time the Note is authenticated, the Note shall nevertheless be valid.
A Note shall not be valid until authenticated by the manual signature
of the Trustee. Such signature shall be conclusive evidence that the Note has
been authenticated under this Indenture.
Upon a written order of the Issuers signed by an Officer of each
Issuer, the Trustee shall authenticate Notes for original issue up to the
aggregate principal amount of $100,000,000. The aggregate principal amount of
Notes outstanding at any time may not exceed that amount except as provided in
Section 2.07.
- ------------
The Notes shall be issuable only in registered form without coupons
and only in denominations of $1,000 or any integral multiple thereof.
The Trustee may appoint an authenticating agent acceptable to the
Issuers to authenticate Notes. Unless limited by the terms of its appointment,
an authenticating agent may authenticate Notes whenever the Trustee may do so.
Each reference in this Indenture to authentication by the Trustee includes
authentication by such agent. An authenticating agent has the same right as an
Agent to deal with the Issuers or an Affiliate.
-25-
<PAGE>
Section 2.03 Registrar; Paying Agent; Depositary; Global Note Holder.
-------------------------------------------------------
The Issuers shall maintain or cause to be maintained in The City of
New York, State of New York (the "Trustee Office"), and, to the extent required
--------------
by applicable law, (including without limitation any regulation or rule of a
national securities exchange), in the Borough of Manhattan, The City of New York
(the "New York Office"), State of New York, and in such other locations as it
---------------
shall determine: (i) an office or agency where securities may be presented for
registration of transfer or for exchange ("Registrar"); and (ii) an office or
---------
agency where Notes may be presented for payment ("Paying Agent"). The Registrar
------------
shall keep a register of the Notes and of their transfer and exchange. The
Issuers may appoint one or more co-registrars (a "Co-Registrar"), and one or
------------
more additional paying agents. The term Paying Agent includes any additional
paying agent. The Issuers may change any Paying Agent, Registrar or Co-
Registrar without prior notice to the Holders. The Issuers shall promptly
notify the Trustee in writing of the name and address of any Agent not a party
to this Indenture and shall enter into an appropriate agency agreement with any
Registrar, Paying Agent or Co-Registrar not a party to this Indenture. The
agreement shall implement the provisions of this Indenture that relate to such
Agent. Except as otherwise provided herein, the Issuers may act as Paying
Agent, Registrar or Co-Registrar. If the Issuers fail to appoint or maintain
another entity as Registrar or Paying Agent, the Trustee shall act as such and
shall be entitled to appropriate compensation in accordance with Section 7.07.
------------
The Trustee shall cause to be maintained the Trustee Office and the New York
Office (to the extent required by applicable law) as long as it acts as
Registrar or Paying Agent.
The Issuers initially appoint The Depository Trust Company to act as
Depositary with respect to the Global Notes and initially the Trustee, to act as
the Registrar and Paying Agent and to act as Global Note Holder with respect to
the Global Notes.
Section 2.04 Paying Agent to Hold Money in Trust.
-----------------------------------
Not later than two Business Days prior to each due date for the
payment of the principal of, premium, interest and Liquidated Damages, if any,
on any of the Notes, the Issuers shall deposit with a Paying Agent available
funds sufficient to make such payments so becoming due to Holders. The Issuers
shall require each Paying Agent (other than the Trustee, who hereby so agrees),
to agree in writing that the Paying Agent will hold in trust for the benefit of
Noteholders or the Trustee all money held by the Paying Agent for the payment of
the principal of, premium, interest or Liquidated Damages, if any, on the Notes,
and will promptly notify the Trustee in writing of any delay or default by the
Issuers in making any such payment. While any such delay in payment or default
continues, the Trustee may
-26-
<PAGE>
require a Paying Agent to pay all money held by it to the Trustee. The Issuers
at any time may require a Paying Agent to pay all money held by it to the
Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the
Issuers or their Restricted Subsidiary) shall have no further liability for such
money. If the Issuers or their Restricted Subsidiary act as Paying Agent, such
Person shall segregate and hold in a separate trust fund for the benefit of the
Noteholders all money held by such Person as Paying Agent. Upon any bankruptcy
or reorganization proceedings relating to either Issuer or their Restricted
Subsidiaries, the Trustee shall serve as Paying Agent.
Section 2.05 Noteholder Lists.
----------------
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Noteholders and shall otherwise comply with TIA Section 312(a). If the
Trustee is not the Registrar, the Issuers shall furnish to the Trustee on or at
least five (5) Business Days before each Interest Payment Date and at such other
times as the Trustee may request in writing a list in such form and as of such
date as the Trustee may reasonably require of the names and addresses of all
Noteholders, including the aggregate principal amount of Notes held by each
thereof, and the Issuers shall otherwise comply with TIA Section 312(a).
Section 2.06 Transfer and Exchange.
---------------------
(a) Transfer and Exchange of Certificated Notes. When Certificated
-------------------------------------------
Notes are presented to the Registrar or Co-Registrar with a request to register
the transfer of the Certificated Notes or to exchange such Certificated Notes
for an equal principal amount of Certificated Notes of other authorized
denominations, the Registrar or Co-Registrar shall register the transfer or make
the exchange as requested if its requirements for such transactions are met;
provided, however, that the Certificated Notes presented or surrendered for
- -------- -------
registration of transfer or exchange:
(i) shall be duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Registrar or Co-Registrar, duly
executed by the Holder thereof or by such Holder's attorney, duly
authorized in writing; and
(ii) in the case of Legended Notes that are Certificated Notes, shall
be accompanied by the following additional information and documents, as
applicable:
(A) if such Legended Note is being delivered to the Registrar or
Co-Registrar by a Noteholder for registration in the name of such
Noteholder, without transfer, a certification from such Noteholder to
that
-27-
<PAGE>
effect (in substantially the form of Exhibit C hereto); or
---------
(B) if such Legended Note is being transferred to a Qualified
Institutional Buyer in accordance with Rule 144A under the Securities
Act or pursuant to an exemption from registration in accordance with
Rule 144 under the Securities Act or a transaction meeting the
requirements of Regulation S under the Securities Act ("Regulation S")
------------
or pursuant to an effective registration statement under the
Securities Act, a certification to that effect (in substantially the
form of Exhibit C hereto); or
---------
(C) if such Legended Note is being transferred in reliance on
another exemption from the registration requirements of the Securities
Act or in a transaction exempt from the registration requirements of
the Securities Act, a certification to that effect (in substantially
the form of Exhibit C hereto) and an Opinion of Counsel to the effect
---------
that such transfer does not require registration under the Securities
Act (in substantially the form of Exhibit D hereto).
---------
(b) Restrictions on Transfer of a Certificated Note for a Beneficial
----------------------------------------------------------------
Interest in a Global Note. A Certificated Note may not be exchanged for a
- -------------------------
beneficial interest in a Global Note except upon satisfaction of the
requirements set forth below. Upon receipt by the Trustee of a Certificated
Note, duly endorsed or accompanied by appropriate instruments of transfer, in
form satisfactory to the Trustee, together with:
(i) if such Certificated Note is a Legended Note, certification (in
substantially the form of Exhibit C hereto) that such Certificated Note is
---------
being transferred (w) to a Qualified Institutional Buyer in accordance with
Rule 144A under the Securities Act, (x) in a transaction meeting the
requirements of Regulation S, (y) pursuant to an effective registration
statement under the Securities Act or (z) in reliance on another exemption
from the registration requirements of the Securities Act or in a
transaction exempt from the registration requirements of the Securities
Act, in either case based on an Opinion of Counsel to the effect that such
transfer does not require registration under the Securities Act (in
substantially the form of Exhibit D hereto); and
---------
(ii) whether or not such Certificated Note is a Legended Note, written
instructions directing the Trustee to make, or to direct the Global Note
Holder to make, an endorsement on the Global Notes to reflect an increase
in the aggregate principal amount of the Notes represented by the Global
Notes;
-28-
<PAGE>
then the Trustee shall cancel such Certificated Note in accordance with Section
-------
2.12 hereof and cause, or direct the Global Note Holder to cause, in accordance
- ----
with the standing instructions and procedures existing between the Depositary
and the Global Note Holder, the aggregate principal amount of Notes represented
by the Global Notes to be increased accordingly. If no Global Notes are then
outstanding, the Issuer shall issue and, upon receipt of an authentication order
in accordance with Section 2.02 hereof, the Trustee shall authenticate a new
------------
Global Note in the appropriate principal amount.
(c) Transfer and Exchange of Global Notes. The transfer and exchange
-------------------------------------
of Global Notes or beneficial interests therein shall be effected through the
Depositary, in accordance with this Indenture (including the restrictions on
transfer set forth herein) and the procedures of the Depositary therefor, which
shall include restrictions on transfer comparable to those set forth herein to
the extent required by the Securities Act.
(d) Transfer and Exchange of a Beneficial Interest in a Global Note
---------------------------------------------------------------
for a Certificated Note. Any Person having a beneficial interest in a Global
- -----------------------
Note may upon request exchange such beneficial interest for a Certificated Note.
Upon receipt by the Trustee of written instructions including registration
instructions from the Depositary or its nominee on behalf of any Person having a
beneficial interest in a Global Note, and, in the case of a beneficial interest
in a Legended Note only, the following additional information and documents:
(i) if such beneficial interest is being transferred to the Person
designated by the Depositary as being the beneficial owner, a certification
from such Person to that effect (in substantially the form of Exhibit C
---------
hereto);
(ii) if such beneficial interest is being transferred to a Qualified
Institutional Buyer in accordance with Rule 144A under the Securities Act
or pursuant to an exemption from registration in accordance with Rule 144
or in a transaction meeting the requirements of Regulation S or pursuant to
an effective registration statement under the Securities Act, a
certification to that effect from the transferee or transferor (in
substantially the form of Exhibit C hereto); or
---------
(iii) if such beneficial interest is being transferred in reliance on
an exemption from the registration requirements of the Securities Act other
than set forth in clauses (i) and (ii) of this Section 2.06(d), a
---------------
certification to that effect from the transferee or transferor (in
substantially the form of Exhibit C hereto) and an Opinion of Counsel to
---------
the effect that such transfer does not require registration under the
Securities Act (in substantially the form of Exhibit D hereto);
---------
-29-
<PAGE>
then the Trustee, or the Global Note Holder at the direction of the Trustee,
will cause, in accordance with the standing instructions and procedures existing
between the Depositary and the Global Note Holder, the aggregate principal
amount of the Global Note to be reduced and, following such reduction, the
Issuers will execute and the Trustee will authenticate and deliver a
Certificated Note to the transferee. Certificated Notes issued in exchange for
a beneficial interest in a Global Note pursuant to this Section 2.06(d) shall be
---------------
registered in such names and in such authorized denominations as the Depositary,
pursuant to instructions from its direct or indirect Participants or otherwise,
shall instruct the Trustee. The Trustee shall deliver such Certificated Notes
to the Persons in whose names such Notes are so registered.
(e) Restrictions on Transfer and Exchange of Global Notes.
-----------------------------------------------------
Notwithstanding any other provisions of this Indenture (other than the
provisions set forth in Section 2.06(f)), a Global Note may not be transferred
---------------
as a whole except by the Depositary to a nominee of the Depositary or by a
nominee of the Depositary to the Depositary or another nominee of the Depositary
or by the Depositary or any such nominee to a successor Depositary or a nominee
of such successor Depositary.
(f) Authentication of Certificated Notes in Absence of Depositary or
----------------------------------------------------------------
at the Issuer's Election. If at any time (i) the Depositary for a Global Note
- ------------------------
notifies the Issuers that the Depositary is unwilling or unable to continue as
Depositary for the Global Note and a successor Depositary for the Global Note is
not appointed by the Issuers within 90 days after delivery of such notice, or
(ii) the Issuers, at their sole discretion, notify the Trustee in writing that
they elect to cause the issuance of Certificated Notes under this Indenture,
then, the Issuers will execute, and the Trustee, upon receipt of an Officers'
Certificate requesting the authentication and delivery of Certificated Notes,
shall authenticate and deliver Certificated Notes, in an aggregate principal
amount equal to the principal amount of the Global Note, in exchange for such
Global Note.
(g) Cancellation and/or Adjustment of Global Note. At such time as
---------------------------------------------
all beneficial interests in a Global Note have either been exchanged for
Certificated Notes, redeemed, converted, repurchased, or canceled or, with
respect to a Global Note that is a Private Placement Note, exchanged for
beneficial interests in Exchange Notes, such Global Note shall be returned to or
retained by and canceled by the Trustee in accordance with Section 2.11 hereof.
------------
At any time prior to such cancellation, if any beneficial interest in a Global
Note is exchanged for Certificated Notes, redeemed, converted, repurchased,
canceled or, with respect to a Global Note that is a Private Placement Note,
exchanged for beneficial interests in Exchange Notes, the aggregate principal
amount of Notes represented by such Global Note shall be reduced and an
endorsement shall be made on such
-30-
<PAGE>
Global Note, by the Trustee or the Global Note Holder at the direction of the
Trustee, to reflect such reduction.
(h) Legends.
-------
(i) Except as otherwise provided by the following paragraphs (ii) and
(iii), each certificate evidencing the Global Notes and the Certificated Notes
(and all Notes issued in exchange therefor or substitution thereof) shall bear a
legend in substantially the following form:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED
IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE
SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED
IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM.
EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE
SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF
THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE
SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE ISSUERS THAT (A)
SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (i) (a)
TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED
STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 904 UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND
BASED UPON AN OPINION OF COUNSEL IF THE ISSUERS SO REQUEST), (ii) TO THE
ISSUERS, (iii) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS
REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY
OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE."
(ii) Upon any sale or transfer of a Legended Note, (including any
Legended Note represented by a Global Note) pursuant to Rule 144 under the
Securities Act, pursuant to an effective registration statement under the
Securities Act or in connection with which the Trustee receives an Opinion of
Counsel to the effect that such Note will no longer be subject to resale
restrictions under federal and state securities laws:
(A) in the case of any Legended Note that is a Certificated Note,
the Registrar shall permit the Holder thereof to exchange such Legended
Note for a Certificated
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<PAGE>
Note that does not bear the legend set forth in (i) above and rescind any
restriction on the transfer of such Legended Note; and
(B) in the case of any Legended Note represented by a Global
Note, such Legended Note shall not be required to bear the legend set forth
in (i) above, but shall continue to be subject to the provisions of Section
-------
2.06(c) hereof; provided, however, that with respect to any request for an
------- -------- -------
exchange of a Legended Note that is represented by a Global Note for a
Certificated Note that does not bear the legend set forth in (i) above,
which request is made in reliance upon Rule 144, the Holder thereof shall
certify in writing to the Registrar that such request is being made
pursuant to Rule 144 (such certification to be substantially in the form of
Exhibit C hereto).
---------
(iii) Notwithstanding the foregoing, upon consummation of the
Exchange Offer, the Issuers shall issue and, upon receipt of an authentication
order in accordance with Section 2.02 hereof, the Trustee shall authenticate
------------
Exchange Notes in exchange for Private Placement Notes accepted for exchange
pursuant to the Registration Rights Agreement, which Exchange Notes shall not
bear the legend set forth in (i) above, and the Registrar shall rescind any
restriction on the transfer of such Notes, in each case unless the Holder of
such Private Placement Notes is (A) a broker-dealer who purchased such Private
Placement Notes directly from the Issuers to resell pursuant to Rule 144A or any
other available exemption under the Securities Act, (B) a Person participating
in the distribution (within the meaning of the Securities Act) of the Private
Placement Notes or (C) a Person who is an affiliate (as defined in Rule 144
under the Securities Act) of either Issuer.
(i) Obligations with respect to Transfers and Exchanges of
------------------------------------------------------
Certificated Notes.
- ------------------
(i) To permit registrations of transfers and exchanges, the Issuers
shall execute and the Trustee shall authenticate Certificated Notes and Global
Notes at the Registrar's or Co-Registrar's request.
(ii) No service charge shall be made to a Noteholder for any
registration of transfer or exchange, but the Issuers may require payment of a
sum sufficient to cover any transfer tax or similar governmental charges payable
in connection therewith (other than any such transfer taxes or similar
governmental charges payable upon exchange or transfer pursuant to Sections
--------
2.10, 3.06, 4.08, 4.15 and 9.05 hereof).
- -------------------------------
(iii) The Registrar or Co-Registrar shall not be required to
register the transfer or exchange of any Certificated Note selected for
repurchase pursuant to an offer to purchase Notes required to be made by the
Issuers pursuant to Sections
--------
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<PAGE>
4.08 and 4.15 in whole or in part, except the unpurchased portion of any
- -------------
Certificated Note being repurchased in part.
(iv) All Certificated Notes and Global Notes issued upon any
registration of transfer or exchange of Certificated Notes or Global Notes shall
be the valid obligations of the Issuers, evidencing the same debt, and entitled
to the same benefits under this Indenture, as the Certificated Notes or Global
Notes surrendered upon such registration of transfer or exchange.
(v) The Issuers shall not be required to (A) issue, register the
transfer of or exchange Notes during a period beginning at the opening of
business 15 days before the date on which a notice of redemption is mailed under
Section 3.03 hereof and ending at the close of business on such the date on
- ------------
which such notice is mailed, (B) to register the transfer or exchange of any
Note redeemed in whole or in part, except the unpurchased portion of any Note
being purchased in part, or (C) to register the transfer or exchange of a Note
between the record date and the next succeeding interest payment date.
(vi) Prior to due presentment for registration of transfer of any
Note, the Trustee, any Agent and the Issuers shall deem and treat the Person in
whose name any Note is registered as the absolute owner of such Note for the
purpose of receiving payment of principal of, premium, interest and Liquidated
Damages, if any, on such Note, and for all other purposes whatsoever, whether or
not such Note is overdue, and neither the Trustee, any Agent nor the Issuers
shall be affected by notice to the contrary.
(vii) The Trustee shall authenticate Certificated Notes and the
Global Notes in accordance with the provisions of Section 2.02 hereof.
------------
Section 2.07 Replacement Notes.
-----------------
If any mutilated Note is surrendered to the Trustee or any Holder
claims, to the satisfaction of the Trustee and the Issuers, that any Note has
been lost, destroyed or wrongfully taken, the Issuers shall issue and the
Trustee shall authenticate a replacement Note if the Trustee's requirements are
met. If required by the Trustee or the Issuers as a condition of receiving a
replacement Note, the Holder shall provide an indemnity bond sufficient, in the
judgment of the Issuers and the Trustee, to fully protect the Issuers, the
Trustee, any Paying Agent and any authenticating agent from any loss that any of
them may suffer if such Note is replaced. The Issuers shall be entitled to
charge the holders of such Notes for the Issuers' expenses in replacing any such
Note.
Each replacement Note shall be an additional Obligation of the
Issuers.
-33-
<PAGE>
Section 2.08 Outstanding Notes.
-----------------
The Notes outstanding at any time are all the Notes properly
authenticated by the Trustee except for those canceled by the Trustee, those
delivered to it for cancellation, and those described in this Section 2.08 as
------------
not outstanding.
If a Note is replaced pursuant to Section 2.07 (other than a mutilated
------------
Note surrendered for replacement), it shall cease to be outstanding unless the
Trustee receives proof satisfactory to it that the replaced Note is held by a
bona fide purchaser. A mutilated Note shall cease to be outstanding upon
surrender of such Note and replacement thereof pursuant to Section 2.07.
------------
If Notes are considered paid in full under Section 4.01, they cease to
------------
be outstanding and interest on them ceases to accrue.
Subject to Section 2.09, a Note does not cease to be outstanding
------------
because the Issuers or an Affiliate of the Issuers holds the Note.
Section 2.09 When Treasury Notes Disregarded.
-------------------------------
In determining whether the Holders of the required aggregate principal
amount of Notes have concurred in any direction, waiver or consent, Notes owned
by the Issuers or an Affiliate of the Issuers shall be considered as though they
are not outstanding, except that for the purposes of determining whether the
Trustee shall be protected in relying on any such direction, waiver or consent,
only Notes which the Trustee knows are so owned shall be so disregarded.
Section 2.10 Temporary Notes.
---------------
Until Notes in certificated form are ready for delivery, the Issuers
may prepare and the Trustee shall authenticate temporary Notes. Temporary Notes
shall be substantially in the form of Notes in certificated form but may have
variations that the Issuers considers appropriate for temporary Notes. Without
unreasonable delay, the Issuers shall prepare and the Trustee shall authenticate
Notes in certificated form in exchange for temporary Notes. Until such
exchange, such temporary Notes shall be entitled to the same rights, benefits
and privileges as the Notes in certificated form.
Section 2.11 Gaming Redemption.
-----------------
Notwithstanding any other provision of this Indenture, if any Gaming
Authority requires that a Holder or beneficial owner of Notes must be licensed,
qualified or found suitable under any applicable gaming law and such Holder or
beneficial owner fails to apply for a license, qualification or a finding of
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<PAGE>
suitability within 30 days after being requested to do so by the Gaming
Authority (or such lesser period that may be required by such Gaming Authority),
or if such Holder or such beneficial owner is not so licensed, qualified or
found suitable, the Company shall have the right, at its option, (i) to require
such Holder or beneficial owner to dispose of such Holders or beneficial owner's
Notes within 30 days of receipt of such notice of such finding by the applicable
Gaming Authority or such earlier date as may be ordered by such Gaming Authority
or (ii) to redeem the Notes of such Holder or beneficial owner at the lesser of
the principal amount thereof or the price at which such Holder or beneficial
owner acquired such Notes, together with, in either case, accrued and unpaid
interest and Liquidated Damages, if any, thereon to the earlier of the date of
redemption or such earlier date as may be required by such Gaming Authority or
the date of the finding of unsuitability by such Gaming Authority, which may be
less than 30 days following the notice of redemption, if so ordered by such
Gaming Authority. The Holder or beneficial owner of Notes applying for a
license, qualification or a finding of suitability with any Gaming Authority
must pay all costs of the licensure or investigation for such qualification or
finding of suitability. The Company shall not be required to pay or reimburse
any Holder or beneficial owner of Notes who is required to apply for such
license, qualification or a finding of suitability for the costs of the
licensure or investigation for such qualification or finding of suitability.
Section 2.12 Cancellation.
------------
The Issuers at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange, or payment.
The Trustee and no one else shall cancel all Notes surrendered for registration
of transfer, exchange, payment, replacement, or cancellation, shall dispose of
canceled Notes subject to record retention requirements of the Exchange Act, and
shall promptly provide the Issuers with a certificate executed by an authorized
signatory certifying such destruction. The Issuers may not issue new Notes to
replace Notes that it has paid or that have been delivered to the Trustee for
cancellation.
Section 2.13 Defaulted Interest.
------------------
If the Issuers default in a payment of interest on the Notes, they
shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, which date shall be at the earliest
practicable date but in all events at least five Business Days prior to the
payment date, in each case at the rate provided in the Notes and in Section 4.01
------------
hereof. The Issuers shall notify the Trustee in writing of the amount of
defaulted interest proposed to be paid
-35-
<PAGE>
on each Note and the date of the proposed payment. The Issuers shall, with the
consent of the Trustee, fix or cause to be fixed each such special record date
and payment date. At least 15 days before the special record date, the Issuers
(or, upon the written request of the Issuers, the Trustee in the name and at the
expense of the Issuers) shall mail or cause to be mailed to the Holders a notice
that states the special record date, the related payment date and the amount of
such interest to be paid.
Section 2.14 CUSIP Number.
------------
The Issuers in issuing the Notes may use one or more CUSIP numbers to
identify the Notes, and if so, such CUSIP number shall be included in notices of
redemption or exchange as a convenience to Holders; provided, however, that any
-------- -------
such notice may state that no representation is made as to the correctness or
accuracy of such CUSIP number printed in the notice or on the Notes and that
reliance may be placed only on the other identification numbers printed on the
Notes. The Issuers shall promptly notify the Trustee of any change in the CUSIP
number.
ARTICLE 3
REDEMPTION AND PREPAYMENT
Section 3.01 Notices to Trustee.
------------------
(a) If the Issuers elect to redeem Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, they shall furnish to the Trustee,
------------
at least 30 days but not more than 60 days before a redemption date, an
Officers' Certificate setting forth (i) the Section of this Indenture pursuant
to which the redemption shall occur, (ii) the redemption date, (iii) the
principal amount of Notes to be redeemed and (iv) the redemption price.
(b) If the Issuers are required to make an offer to redeem Notes
pursuant to the provisions of Section 4.08 or 4.15 hereof (a "Purchase Offer"),
-------------------- --------------
they shall furnish to the Trustee at least 30 days but not more than 60 days
before a redemption date, an Officers' Certificate setting forth (i) the Section
of this Indenture pursuant to which the repurchase shall occur, (ii) the
repurchase date, (iii) the maximum principal amount of Notes to be repurchased,
(iv) the repurchase price and (v) further setting forth a statement to the
effect that (a) either Issuer or a Restricted Subsidiary has effected an Asset
Sale and the conditions set forth in Section 4.15 have been satisfied or (b) a
------------
Change of Control has occurred and the conditions set forth in Section 4.08 have
------------
been satisfied.
(c) If the Issuers are required to redeem Notes pursuant to a
redemption required by any Gaming Authority pursuant to the provisions of
Section 2.11 hereof, the Issuers
- ------------
-36-
<PAGE>
shall furnish substantially similar notice to the Trustee as set forth in
Section 3.01(b) to the extent permitted by such Gaming Authority.
- ---------------
Section 3.02 Selection of Notes to be Redeemed.
---------------------------------
If less than all of the Notes are to be redeemed at any time, the
Trustee shall select the Notes to be redeemed among the Holders (other than as
provided in Section 2.11 hereof) in compliance with the requirements of the
------------
principal national securities exchange, if any, on which the Notes are listed
or, if the Notes are not so listed, on a pro rata basis, by lot or in accordance
--- ----
with any other method the Trustee considers fair and appropriate; provided that
--------
no Notes of $1,000 or less shall be redeemed in part. In the event of partial
redemption by lot, the particular Notes to be redeemed shall be selected, unless
otherwise provided herein, not less than 30 nor more than 60 days prior to the
redemption date by the Trustee from the outstanding Notes not previously called
for redemption.
The Issuers shall promptly notify the Trustee in writing of the
listing of the Notes on any national securities exchange.
The Trustee shall promptly notify the Issuers in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
them selected shall be in amounts of $1,000 or whole multiples of $1,000; except
------
that if all Notes of a Holder are to be redeemed, the entire outstanding amount
of Notes held by such Holder, even if not a multiple of $1,000, shall be
redeemed. Except as provided in the preceding sentence, provisions of this
Indenture that apply to Notes called for redemption also apply to portions of
Notes called for redemption.
In the event the Issuers are required to make an offer to repurchase
Notes pursuant to Sections 3.09 and 4.15 hereof and the amount of the Excess
----------------------
Proceeds from the Asset Sale are not evenly divisible by $1,000, the Trustee
shall promptly refund to the Issuers any remaining Excess Proceeds.
Section 3.03 Notice of Redemption.
--------------------
Subject to the provisions of Section 3.09 hereof, at least 30 days but
------------
not more than 60 days before a redemption date (except in the case of a
redemption effected pursuant to Section 2.11 hereof, which may be less than 30
------------
days), the Issuers shall mail or cause to be mailed, by first class mail, a
notice of redemption to each Holder whose Notes are to be redeemed at its
registered address.
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<PAGE>
The notice shall identify the Notes to be redeemed (including
CUSIP numbers) and shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, that, after the
redemption date, upon surrender of such Note, a new Note or Notes in principal
amount equal to the unredeemed portion shall be issued upon cancellation of the
original Note;
(d) if any Note is being redeemed in part, the portion of the
principal amount thereof to be redeemed;
(e) the name and address of the Paying Agent;
(f) that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(g) that, unless the Issuers default in making such redemption
payment, interest on Notes called for redemption ceases to accrue on and after
the redemption date;
(h) the paragraph of the Notes and/or Section of this Indenture
pursuant to which the Notes called for redemption are being redeemed; and
(i) that no representation is made as to the correctness or
accuracy of the CUSIP number, if any, listed in such notice or printed on the
Notes.
At the Issuers' request, the Trustee shall give the notice of
redemption in the Issuers' name and at the Issuers' expense; provided, however,
-------- -------
that the Issuers shall have delivered to the Trustee, at least 45 days prior to
the redemption date, an Officers' Certificate requesting that the Trustee give
such notice and setting forth the information to be stated in such notice as
provided in the preceding paragraph.
Section 3.04 Effect of Notice of Redemption.
------------------------------
Once notice of redemption is mailed in accordance with Section
-------
3.03 hereof, Notes called for redemption become irrevocably due and payable on
- ----
the redemption date at the redemption price. A notice of redemption may not be
conditional.
Section 3.05 Deposit of Redemption Price.
---------------------------
One Business Day prior to the redemption date, the Issuers shall
deposit with the Trustee or with the Paying Agent money sufficient to pay the
redemption price of, plus premium, accrued interest and Liquidated Damages, if
any, on all Notes to be redeemed on that date. The Trustee or the Paying Agent
shall
-38-
<PAGE>
promptly return to the Issuers any money deposited with the Trustee or the
Paying Agent by the Issuers in excess of the amounts necessary to pay the
redemption price of, plus premium, accrued interest and Liquidated Damages, if
any, on all Notes to be redeemed.
If the Issuers comply with the provisions of the preceding paragraph,
on and after the redemption date, interest shall cease to accrue on the Notes or
the portions of Notes called for redemption. If a Note is redeemed on or after
an Interest Record Date but on or prior to the related Interest Payment Date,
then any accrued and unpaid interest shall be paid to the Person in whose name
such Note was registered at the close of business on such Interest Record Date.
If any Note called for redemption shall not be so paid upon surrender for
redemption because of the failure of the Issuers to comply with the preceding
paragraph, interest shall be paid on the unpaid principal from the redemption
date until such principal is paid and, to the extent lawful, on any premium,
interest and Liquidated Damages not paid on such unpaid principal, in such case
at the rate provided in the Notes and in Section 4.01 hereof.
------------
Section 3.06 Notes Redeemed in Part.
----------------------
Upon surrender of a Note that is redeemed in part, the Issuers shall
issue and, upon the Issuers' written request, the Trustee shall authenticate for
the Holder at the expense of the Issuers, a new Note equal in principal amount
to the unredeemed portion of the Note surrendered.
Section 3.07 Optional Redemption.
-------------------
(a) Except as set forth in Section 3.07(b) or as required by
---------------
applicable gaming law, the Issuers shall not have the option to redeem the Notes
prior to August 15, 2001. Thereafter, the Issuers shall have the option to
redeem the Notes, in whole or in part, at the redemption prices (expressed as
percentage of principal amount) set forth below plus accrued and unpaid interest
and Liquidated Damages, if any, thereon to the applicable redemption date, if
redeemed during the twelve-month period beginning on August 15 of the years
indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2001................................... 105.25%
2002................................... 103.50%
2003................................... 101.75%
2004 and thereafter.................... 100.00%
</TABLE>
(b) Notwithstanding the provisions of Section 3.07(a) hereof, on or
-------
prior to August 15, 1999, the Issuers may redeem up to 33% in aggregate
principal amount of the Notes originally issued under this Indenture at a
redemption price of 110% of the
-39-
<PAGE>
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the redemption date, with the net proceeds of one or
more Public Equity Offerings; provided that at least $67.0 million in aggregate
--------
principal amount of the Notes remain outstanding immediately after the
occurrence of each such redemption; and provided, further, that notice of each
-------- -------
such redemption shall have been given within 30 days after the date of the
closing of any such Public Equity Offering.
(c) Any redemption pursuant to this Section 3.07 shall be made, to the
------------
extent applicable, pursuant to the provisions of Sections 3.01 through 3.06
--------------------------
hereof and not inconsistent with this Section 3.07.
------------
Section 3.08 Mandatory Redemption.
--------------------
Except as set forth under Sections 4.08 and 4.15 hereof, the Issuers
----------------------
shall not be required to make mandatory redemption or sinking fund payments with
respect to the Notes.
Section 3.09 Offer to Purchase by Application of Excess Proceeds.
---------------------------------------------------
In the event that, pursuant to Section 4.15 hereof, the Issuers shall
------------
be required to commence an Asset Sale Offer, they shall follow the procedures
specified below.
The Asset Sale Offer shall remain open for a period of 20 Business
Days following its commencement and no longer, except to the extent that a
longer period is required by applicable law (the "Offer Period"). No later than
------------
three Business Days after the termination of the Offer Period (the "Purchase
--------
Date"), the Issuers shall purchase the principal amount of Notes required to be
- ----
purchased pursuant to Section 4.15 hereof (the "Offer Amount") or, if less than
------------ ------------
the Offer Amount has been tendered, all Notes tendered in response to the Asset
Sale Offer. Payment for any Notes so purchased shall be made in the same manner
as interest payments are made.
If the Purchase Date is on or after an Interest Record Date and on or
before the related Interest Payment Date, any accrued and unpaid interest, shall
be paid to the Person in whose name a Note is registered at the close of
business on such Interest Record Date, and no additional interest shall be
payable to Holders who tender Notes pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Issuers shall send,
by first class mail, a notice to the Trustee and to each of the Holders, with a
copy to the Trustee. The notice shall contain all instructions and materials
necessary to enable such Holders to tender Notes pursuant to the Asset Sale
Offer. The Asset Sale Offer shall be made to all Holders of
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<PAGE>
notes. The notice, which shall govern the terms of the Asset Sale Offer, shall
state:
(a) that the Asset Sale Offer is being made pursuant to this Section
-------
3.09 and Section 4.15 hereof and the length of time the Asset Sale Offer
---- ------------
shall remain open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Note not tendered or accepted for payment shall continue
to accrue interest;
(d) that, unless the Issuers default in making such payment, any Note
accepted for payment pursuant to the Asset Sale Offer shall cease to accrue
interest after the Purchase Date;
(e) that each Holder electing to have its Notes purchased pursuant to
an Asset Sale Offer may elect to have all or part (in integral multiples of
$1,000) of such Notes purchased;
(f) that Holders electing to have a Note purchased pursuant to any
Asset Sale Offer shall be required to surrender the Note, with the form
titled "Option of Holder to Elect Purchase" on the reverse of the Note
completed, or transfer by book-entry transfer, to the Issuers, a
depositary, if appointed by the Issuers, or a Paying Agent at the address
specified in the notice at least three days before the Purchase Date;
(g) that Holders shall be entitled to withdraw their election if the
Issuers, the depositary or the Paying Agent, as the case may be, receive,
not later than the expiration of the Offer Period, a facsimile transmission
or letter setting forth the name of the Holder, the principal amount of the
Note the Holder delivered for purchase and a statement that such Holder is
withdrawing its election to have such Note purchased;
(h) that, if the aggregate principal amount of Notes surrendered by
Holders exceeds the Offer Amount, the Issuers shall select the Notes to be
purchased on a pro rata basis (with such adjustments as may be deemed
--- ----
appropriate by the Issuers so that only Notes in denominations of $1,000,
or integral multiples thereof, shall be purchased); and
(i) that Holders whose Notes were purchased only in part shall be
issued new Notes in principal amount to the unpurchased portion of the
Notes surrendered (or transferred by book-entry transfer).
-41-
<PAGE>
On or before the Purchase Date, the Issuers shall, to the extent
lawful, accept for payment, on a pro rata basis to the extent necessary, the
--- ----
Offer Amount of Notes or portions thereof tendered pursuant to the Asset Sale
Offer, or if less than the Offer Amount has been tendered, all Notes tendered,
and shall deliver to the Trustee an Officers' Certificate stating that such
Notes or portions thereof were accepted for payment by the Issuers in accordance
with the terms of this Section 3.09. The Issuers, the Depositary or the Paying
------------
Agent, as the case may be, shall promptly (but in any case not later than three
Business Days after the Purchase Date) mail or deliver to each tendering Holder
an amount equal to the purchase price of the Notes tendered by such Holder and
accepted by the Issuers for purchase, and the Issuers shall promptly issue a new
Note, and the Trustee, upon written request from the Issuers, shall authenticate
and mail or deliver such new Note to such Holder, in a principal amount equal to
any unpurchased portion of the Note surrendered. Any Note not so accepted shall
be promptly mailed or delivered by the Issuers to the Holder thereof. The
Issuers shall publicly announce the results of the Asset Sale Offer on the
Purchase Date.
Other than as specifically provided in this Section 3.09, any purchase
------------
pursuant to this Section 3.09 shall be made pursuant to the provisions of
------------
Sections 3.01 through 3.06 hereof to the extent not inconsistent with the
- --------------------------
provisions of Section 4.15 hereof.
------------
Section 3.10 Compliance with Tender Offer Rules.
----------------------------------
Any offer to redeem or purchase Notes shall be made by the Issuers in
compliance with all tender offer rules, including but not limited to, Section
14(e) under the Exchange Act and Rule 14e-1 thereunder, to the extent applicable
to such offer, and shall include all instructions and materials necessary to
enable Noteholders to tender their Notes.
ARTICLE 4
COVENANTS OF THE ISSUERS
Section 4.01 Payment of Notes.
----------------
Subject to the subordination provisions of Article 10 hereof, the
----------
Issuers shall pay or cause to be paid the principal of and premium, interest and
Liquidated Damages, if any, on the Notes on the dates and in the manner provided
in the Notes. Principal of, and premium, interest and Liquidated Damages, if
any, on the Notes shall be considered paid on the date due if the Paying Agent,
if other than the Issuers or a Restricted Subsidiary thereof, holds as of 10:00
a.m. Eastern Time on the date money deposited by the Issuers in immediately
available funds and designated for and sufficient to pay all principal of, and
premium, interest and Liquidated Damages, if any, on the
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<PAGE>
Notes then due. The Paying Agent shall return to the Issuers, no later than
five days following the date of payment, any money (including accrued interest)
that exceeds such amount of principal of, and premium, interest and Liquidated
Damages, if any, paid on the Notes.
Section 4.02 SEC Reports.
-----------
(a) Whether or not required by the rules and regulations of the
Commission, so long as any Notes are outstanding, the Issuers shall furnish to
the Holders of Notes (i) all quarterly and annual financial information that
would be required to be contained in a filing with the Commission on Forms 10-Q
and 10-K if the Issuers were required to file such Forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" that describes the financial position and results of operations of
the Company and its Restricted Subsidiaries and, with respect to the annual
information only, a report thereon by the Issuers' certified independent
accountants and (ii) all current reports that would be required to be filed with
the Commission on Form 8-K if the Issuers were required to file such reports.
In addition, whether or not required by the rules and regulations of the
Commission, the Issuers shall file a copy of all such information and reports
with the Commission for public availability (unless the Commission will not
accept such a filing) and make such information available to securities analysts
and prospective investors upon request. In addition, the Issuers have agreed
that, for so long as any Notes remain outstanding, they will furnish to the
Holders and to securities analysts and prospective investors, upon their
request, the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act.
(b) The Issuers also shall comply with the other provisions of TIA
(S)314(a).
Section 4.03 Compliance Certificate.
----------------------
(a) The Issuers shall deliver to the Trustee, within 90 days after the
end of each fiscal year of the Company, an Officers' Certificate stating that a
review of the activities of the Issuers and the Restricted Subsidiaries during
the preceding fiscal year has been made under the supervision of the signing
Officers with a view to determining whether the Issuers have fully performed
their obligations under this Indenture, and further stating, as to each such
Officer signing such certificate, that to the best of his or her knowledge the
Issuers have kept, observed, performed and fulfilled each and every covenant
contained in this Indenture and are not in default in the performance or
observance of any of the terms and conditions hereof (or, if a Default or Event
of Default shall have occurred, describing all such Defaults or Events of
Default of which he or she may have knowledge and whatever action the Issuers
are taking or plan to take to cure all such Defaults or Events of Default).
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<PAGE>
(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, at the time the Officers'
Certificate required by Section 4.03(a) is delivered, the Issuers shall cause to
---------------
be delivered to the Trustee a letter or statement of the Issuers' independent
accountants who shall have certified the financial statements of the Issuers for
its preceding fiscal year in connection with the annual report of the Issuers to
the Company's Equity Interests for such year to the effect that, in making the
examination necessary for certification of such financial statements, nothing
came to their attention that caused them to believe that the Issuers were not in
compliance with any of the terms or conditions contained in Sections 4.01, 4.05,
--------------------
4.07, 4.09, 4.12, 4.13 and 4.15 and Article 5 of this Indenture, which Default
- ------------------------------- ---------
remains uncured at the date of such letter or statement or, if they shall have
obtained knowledge of any such uncured Default, specifying in such letter or
statement such Default or Defaults and the nature thereof, it being understood
that such accountants shall not be liable directly or indirectly for failure to
obtain knowledge of any such Default or Defaults and that their examination was
not directed primarily toward obtaining knowledge of such noncompliance.
(c) The Issuers shall, so long as any of the Notes are outstanding,
deliver to the Trustee forthwith upon any officer of the Issuers becoming aware
of (i) any Default, Event of Default or default in the performance of any term
or condition in this Indenture or (ii) any event of default under any other
Indebtedness, an Officers' Certificate specifying such Default, Event of Default
or default.
Section 4.04 Maintenance of Office or Agency.
-------------------------------
(a) The Issuers shall maintain or cause to be maintained the office
or agency required by Section 2.03. The Issuers shall give prompt written
------------
notice to the Trustee of the location, and any change in the location, of such
office and agency not maintained by or with the Trustee. If at any time the
Issuers shall fail to maintain any such required office or agency or shall fail
to furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the address of the Trustee set
forth in Section 11.09.
-------------
(b) The Issuers may also from time to time designate one or more
other offices or agencies where the Notes may be presented or surrendered for
any or all such purposes and may from time to time rescind such designation;
provided, however, that no such designation or rescission shall in any manner
- -------- -------
relieve the Issuers of their joint and several obligation to maintain or cause
to be maintained an office or agency in the City of New York for such purpose to
the extent required by any applicable law, regulation or rule. The Issuers will
give prompt written notice to the Trustee of such rescission or designation.
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<PAGE>
Section 4.05 Limitations on Restricted Payments.
----------------------------------
(a) The Issuers shall not, and shall not permit or cause any of their
Restricted Subsidiaries to, directly or indirectly, (i) declare or pay any
dividend or make any other distribution on account of the Company's Equity
Interests (including, without limitation, any payment in connection with any
merger or consolidation involving the Company), other than the Member Notes and
dividends or distributions payable in Equity Interests (other than Disqualified
Stock) of the Company or dividends or distributions payable to the Company or
any Consolidated Subsidiary of the Company; (ii) purchase, redeem or otherwise
acquire or retire for value any Equity Interests of the Company or any direct or
indirect parent of the Company, other than any such Equity Interests owned by
the Company or any Consolidated Subsidiary of the Company; (iii) make any
principal payment on, or purchase, redeem, defease or otherwise acquire or
retire for value any Indebtedness that is subordinated to the Notes (other than
the Notes and the Member Notes), except at final maturity or scheduled sinking
fund payments set forth in the original documentation governing such
Indebtedness; or (iv) make any Restricted Investment (all such payments and
other actions set forth in clauses (i) through (iv) of this paragraph being
collectively referred to as "Restricted Payments"), unless, at the time of and
---------- --------
after giving effect to such Restricted Payment:
(A) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof,
(B) the Issuers would, after giving pro forma effect to such
--- -----
Restricted Payment as if such Restricted Payment had been made at the
beginning of the Company's most recently completed four full fiscal
quarters for which internal financial statements are available
preceding the date of such Restricted Payment, have been permitted to
incur at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test under the provisions of Section 4.09(a);
---------------
and
(C) such Restricted Payment, together with the aggregate of all
other Restricted Payments made by the Issuers and their Restricted
Subsidiaries after January 1, 1996 (excluding the Restricted Payments
permitted by the next succeeding paragraph), is less than the sum of
$25 million plus (w) 50% of the Consolidated Net Income of the Company
----
for the period (taken as one accounting period) from January 1, 1996
to the end of the Company's most recently ended fiscal quarter for
which internal financial statements are available at the time of such
Restricted Payment (or, if such Consolidated Net Income for such
period is a deficit, less 100% of such deficit), plus (x) 100% of the
----
aggregate net cash
-45-
<PAGE>
proceeds, or the fair market value of assets (as determined in good
faith by the Management Committee), received by the Company from
capital contributions (other than the conversion of the Member Notes
into equity interests of the Company in accordance with the terms
thereof) or the issue or sale after the date of the Indenture of
Equity Interests of the Company or of debt securities of the Company
that have been converted into such Equity Interests (other than Equity
Interests (or convertible debt securities) sold to a Subsidiary of the
Company and other than Disqualified Stock or debt securities that have
been converted into Disqualified Stock), less any amounts paid to
holders of the Member Notes, plus (y) 50% of the net cash proceeds
----
received by the Company (net of payments on the ELLC Note) from the
sale or other liquidation of the Company's interest in ELLC or the
sale by ELLC of all or substantially all its assets, plus (z) 100% of
----
the net cash proceeds received by the Company from a distribution by,
or from the sale or other liquidation of, any Restricted Investment or
Unrestricted Subsidiary other than cash proceeds received from ELLC
and other than cash proceeds received from Investments and applied
pursuant to clause (vi) of Section 4.05(b).
---------------
(b) Section 4.05(a) shall not be construed to prohibit (i) the payment
---------------
of any dividend or other distribution within 60 days after the date of
declaration thereof, if at said date of declaration such payment would have
complied with the provisions of the Indenture; (ii) the making of any Restricted
Investment or the redemption, repurchase, retirement or other acquisition of any
Equity Interests of the Company (A) in exchange for, or out of the proceeds of,
a substantially concurrent capital contribution (other than the conversion of
the Member Notes into equity interests of the Company in accordance with the
terms thereof) or sale (other than to a Subsidiary of the Company) of other
Equity Interests of the Company or its Parent (other than any Disqualified
Stock), provided that the amount of any such net cash proceeds that are utilized
--------
for any such redemption, repurchase, retirement or other acquisition shall be
excluded from clause (C) of Section 4.05(a), or (B) to the extent required by
---------------
the final order of a Gaming Authority; (iii) the defeasance, redemption or
repurchase of subordinated Indebtedness with the net cash proceeds from an
incurrence of Permitted Refinancing Indebtedness or a substantially concurrent
capital contribution or sale (other than to a Subsidiary of the Company) of
Equity Interests of the Company (other than Disqualified Stock); provided that
--------
the amount of any such net cash proceeds that are utilized for any such
redemption, repurchase, retirement or other acquisition shall be excluded from
clause (C) of Section 4.05(a); (iv) so long as the Company is treated as a
---------------
partnership or other pass through entity for United States federal income tax
purposes, distributions to equity owners of the Company in an amount not to
exceed the Tax Amount for such period; (v) payment
-46-
<PAGE>
of a fee not to exceed 1.5% of Net Revenues to the Managers pursuant to the
Management Agreement as in effect on the date of the Indenture; (vi) Investments
in an amount not to exceed $15.0 million in any Person or Persons primarily
engaged in the Gaming Business, plus, to the extent not included in the
----
Consolidated Net Income of the Issuers, 100% of net cash proceeds received by
the Issuers from a distribution by, or from the sale or other liquidation of,
any Investment made pursuant to this clause (vi), provided in no event shall
--------
amounts permitted to be invested pursuant to this clause (vi) exceed $15.0
million; and (vii) any redemption required pursuant to the provisions of Section
-------
2.11 hereof.
- ----
(c) The Management Committee may designate any Restricted Subsidiary,
other than Capital, to be an Unrestricted Subsidiary if such designation would
not cause a Default. For purposes of making such determination, all outstanding
Investments by the Issuers and their Restricted Subsidiaries (except to the
extent repaid in cash) in the Subsidiary so designated shall be deemed to be
Restricted Payments at the time of such designation and shall reduce the amount
available for Restricted Payments under the paragraph (a) of this Section 4.05.
------------
All such outstanding Investments shall be deemed to constitute Investments in an
amount equal to the greatest of (i) the net book value of such Investments at
the time of such designation, (ii) the fair market value of such Investments at
the time of such designation and (iii) the original fair market value of such
Investments at the time they were made. Such designation shall only be
permitted if such Restricted Payment would be permitted at such time and if such
Restricted Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary.
(d) The amount of all Restricted Payments (other than cash) shall be
the fair market value (evidenced by a resolution of the Management Committee set
forth in an Officers' Certificate delivered to the Trustee) on the date of the
Restricted Payment of the asset(s) proposed to be transferred by the Company or
such Subsidiary, as the case may be, pursuant to the Restricted Payment. Not
later than ten business days following the end of each fiscal quarter, the
Company shall deliver to the Trustee an Officers' Certificate identifying each
Restricted Payment made by the Company during such fiscal quarter and stating
that each such Restricted Payment is permitted and setting forth the basis upon
which the calculations required by the provisions of Section 4.05 hereof were
------------
computed, which calculations may be based upon the Company's latest available
financial statements.
Section 4.06 Continued Existence; Restrictions on Activities of Capital.
----------------------------------------------------------
(a) Subject to Article 5 hereof, the Issuers shall do or cause to be
---------
done all things necessary to preserve and keep in full force and effect their
existence as a limited liability company or a corporation, as applicable, and
the corporate,
-47-
<PAGE>
limited-liability company, partnership or other existence of each Restricted
Subsidiary, in accordance with the respective organizational documents (as the
same may be amended from time to time) of the Issuers or each Restricted
Subsidiary and the rights (charter and statutory), licenses and franchises of
the Issuers and each Restricted Subsidiary; provided, however, that the Issuers
-------- -------
shall not be required to preserve any such right, license or franchise, or the
limited-liability company, corporate, partnership or other existence of any of
their Restricted Subsidiaries, if the Management Committee shall determine that
the preservation thereof is no longer desirable in the conduct of the business
of the Issuers and their Restricted Subsidiaries, taken as a whole, and that the
loss thereof is not adverse in any material respect to the Holders.
(b) Capital may not hold any material assets, become liable for any
material obligations or engage in any significant business activities; provided,
--------
that Capital may be a co-obligor or guarantor with respect to Indebtedness if
the Company is a primary obligor of such Indebtedness and the net proceeds of
such Indebtedness are retained by the Company or loaned to one or more of the
Company's Restricted Subsidiaries other than Capital.
Section 4.07 Taxes.
-----
The Issuers shall, and shall cause each their Subsidiaries to, pay
prior to delinquency all taxes, assessments and governmental levies, except as
contested in good faith and by appropriate proceedings or where the failure to
do so would not have a material adverse effect on the Issuers and their
Subsidiaries, taken as a whole.
Section 4.08 Change of Control.
-----------------
(a) Upon the occurrence of a Change of Control each Holder of Notes
shall have the right to require the Issuers to repurchase all or any part of
such Holder's Notes. In the event of a Change of Control the Issuers shall
promptly notify the Trustee and the Holders in writing of such occurrence and
shall make an offer (a "Change of Control Offer") to repurchase all or any part
(equal to $1,000 or an integral multiple thereof) of each Holder's Notes at an
offer price in cash equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest and Liquidated Damages, if any, thereon to the date
of repurchase (the "Change of Control Offer Price," and such date of payment
-----------------------------
being the "Change of Control Payment Date") which date is required to be no
------------------------------
earlier than 30 days nor later than 60 days from the date such notice is mailed
(unless a longer period is required by law). Within 30 days following any
Change of Control, the Issuers shall mail a notice to each Holder stating (1)
that the Change of Control Offer is being made pursuant to this Section 4.08 and
------------
that all Notes tendered shall be accepted for payment; (2) the purchase price
and purchase date, which shall be no later than 30 Business Days from the date
such notice
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<PAGE>
is mailed (the "Change of Control Payment Date"); (3) that any Note not tendered
------------------------------
shall continue to accrue interest; (4) that, unless the Issuers default in the
payment of the Change of Control Payment, all Notes accepted for payment
pursuant to the Change of Control Offer shall cease to accrue interest after the
Change of Control Payment Date; (5) that Holders electing to have any Notes
purchased pursuant to a Change of Control Offer shall be required to surrender
the Notes, with the form entitled "Option of Holder to Elect Purchase" on the
reverse of the Notes completed, to the Paying Agent at the address specified in
the notice prior to the close of business on the close of business on the third
Business Day preceding the Change of Control Payment Date; (6) that Holders
shall be entitled to withdraw their election if the Paying Agent receives, not
later than the close of business on the second Business Day preceding the Change
of Control Payment Date, a facsimile transmission or letter setting forth the
name of the Holder, the principal amount of Notes delivered for purchase, and a
statement that such Holder is withdrawing his election to have the Notes
purchased; and (7) that each Holder may elect to tender all or a portion of the
Notes held by such Holder and each Holder whose Notes are being purchased only
in part shall be issued new Notes equal in principal amount to the unpurchased
portion of the Notes surrendered, which unpurchased portion must be equal to
$1,000 in principal amount or an integral multiple thereof. The Issuers shall
comply with the requirements of Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of the Notes as a
result of a Change of Control.
(b) On the Change of Control Payment Date, the Issuers shall, to the
extent lawful, (i) accept for payment all of the Notes or portions thereof
properly tendered pursuant to the Change of Control Offer, (ii) deposit with the
Paying Agent an amount equal to the Change of Control Payment in respect of all
of the Notes or portions thereof so tendered and (iii) deliver or cause to be
delivered to the Trustee the Notes so accepted together with an Officers'
Certificate stating the aggregate principal amount of the Notes or portions
thereof being purchased by the Issuers. The Paying Agent shall promptly mail to
each Holder of the Notes so tendered the Change of Control Payment for such
Notes, and the Trustee shall promptly authenticate and mail (or cause to be
transferred by book entry) to each holder a new Note equal in principal amount
to any unpurchased portion of the Notes surrendered, if any; provided that each
--------
such new Note will be in a principal amount of $ 1,000 or an integral multiple
thereof.
(c) Prior to complying with the provisions of this Section 4.08, but
------------
in any event within 90 days following a Change of Control, the Issuers shall
either repay all outstanding Senior Debt or obtain the requisite consents, if
any, under all agreements governing outstanding Senior Debt to permit the
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<PAGE>
repurchase of Notes required by this Section 4.08. The Issuers shall publicly
------------
announce the results of the Change of Control Offer on or as soon as practicable
after the Change of Control Payment Date.
(d) Notwithstanding the foregoing, the Issuers shall not be required
to make a Change of Control Offer as provided in Section 4.08(a) if, in
---------------
connection with any Change of Control, the Issuers have made an offer to
purchase (an "Alternative Offer") any and all Notes validly tendered at a cash
-----------------
price equal to or higher than the Change of Control Offer Price and has
purchased all Notes properly tendered in accordance with the terms of such
Alternative Offer.
(e) Other than as specifically provided in this Section 4.08, any
------------
purchase pursuant to this Section 4.08 shall be made pursuant to the provisions
------------
of Section 3.01 through 3.06 hereof.
-------------------------
Section 4.09 Limitation on Indebtedness.
--------------------------
(a) The Issuers shall not, and shall not permit or cause any of their
Restricted Subsidiaries to, directly or indirectly, incur any Indebtedness
(including Acquired Debt), provided, however, that, so long as no Default or
-------- -------
Event of Default has occurred and is continuing, the Issuers and any of their
Restricted Subsidiaries may incur Indebtedness (including Acquired Debt) if the
Fixed Charge Coverage Ratio for the Company's most recently ended four full
fiscal quarters for which internal financial statements are available
immediately preceding the date on which such additional Indebtedness is incurred
would have been at least 2.5 to 1, in each case determined on a pro forma basis
--- -----
(including a pro forma application of the net proceeds therefrom, including
--- -----
without limitation the application of any such net proceeds to repay
Indebtedness), as if the additional Indebtedness had been incurred or had been
issued at the beginning of such four-quarter period.
(b) The limitations set forth in Section 4.09(a) hereof shall not
---------------
apply to:
(i) the incurrence by the Issuers and their Restricted
Subsidiaries of Indebtedness pursuant to the bank lines of credit
(including revolving and term loans and letters of credit) in an amount not
to exceed $75.0 million at any time outstanding, less the aggregate amount
of all permanent reductions thereto pursuant to the provisions of Section
-------
4.15 hereof;
----
(ii) the incurrence by the Issuers of Existing Indebtedness;
(iii) the incurrence by the Issuers of Indebtedness represented
by the Notes and the Indenture;
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<PAGE>
(iv) the incurrence by the Issuers or any of their Restricted Subsidiaries
of Indebtedness in one or more FF&E Financings and Capital Lease
Obligations to acquire or refinance furniture, fixtures or equipment
incident to and useful in the Gaming Business, in an aggregate principal
amount not to exceed $15.0 million outstanding at any one time;
(v) the incurrence of intercompany Indebtedness between or among
the Issuers and any of their Consolidated Subsidiaries; provided that any
--------
subsequent issuance or transfer of Equity Interests that results in any
such Indebtedness being held by a Person other than an Issuer or a
Consolidated Subsidiary of an Issuer, or any sale or other transfer of any
such Indebtedness to a Person that is not either an Issuer or a
Consolidated Subsidiary of an Issuer, shall be deemed to constitute an
incurrence of such Indebtedness by the Issuers or such Restricted
Subsidiary, as the case may be;
(vi) the incurrence by the Issuers or any of their Restricted
Subsidiaries of Hedging Obligations that are incurred for the purpose of
fixing or hedging interest rate risk with respect to any floating rate
Indebtedness that is permitted by the terms of this Indenture to be
outstanding or for the purpose of fixing or hedging any currency exchange
rate risk;
(vii) the incurrence by the Issuers or any of their Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the
net proceeds of which are used to extend, refinance, renew, replace,
defease or refund Indebtedness that was permitted by the provisions of this
Section 4.09 hereof to be incurred;
------------
(viii) the incurrence of other Indebtedness by the Company or
its Restricted Subsidiaries in an amount not to exceed $20.0 million to
fund expansions, renovations, land acquisitions and construction of real
property improvements with respect to the Eldorado;
(ix) the incurrence of Indebtedness pursuant to the Member Notes,
the Daniels Notes or the ELLC Member Notes; and
(x) to the extent that such incurrence does not result in the
incurrence by the Company or any Restricted Subsidiary of any obligation
for the payment of borrowed money of others, Indebtedness incurred solely
as a result of the execution by the Company or its Restricted Subsidiaries
of letters of credit relating to workers compensation or self insurance,
performance bonds or similar instruments; provided, however, that the
-------- -------
foregoing exception shall not be applicable to Indebtedness incurred in
connection with the
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<PAGE>
performance by the Company or its Restricted Subsidiaries of such bonds or
instruments or payment of such letters of credit.
Section 4.10 Limitation on Other Senior Subordinated Debt.
--------------------------------------------
The Issuers shall not incur, and shall not permit any of their
Restricted Subsidiaries to, directly or indirectly, incur or become responsible
for any Indebtedness that is subordinate or junior in right of payment to any
Senior Debt (or in the case of a Guarantor, debt that is subordinate or junior
in right of payment to such Guarantor's Senior Debt) and senior in any respect
in right of payment to the Notes or in the case of a Guarantor, senior to the
Guarantee executed by such Guarantor.
Section 4.11 Limitations on Liens.
--------------------
The Issuers shall not, and shall not permit any of their Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist, any Lien on any asset now owned or hereafter acquired, or any income or
profits therefrom or assign or convey any right to receive income therefrom,
except Permitted Liens.
Section 4.12 Dividend and Other Payment Restrictions Affecting Subsidiaries.
--------------------------------------------------------------
The Issuers shall not, and shall not permit or cause any of their
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary to (i)(a) pay dividends or make any other
distributions to the Issuers or any of their Restricted Subsidiaries on its
Capital Stock or with respect to any other interest or participation in, or
measured by, its profits, or (b) pay any indebtedness owed to the Issuers or any
of their Restricted Subsidiaries, (ii) make loans or advances to the Issuers or
any of their Restricted Subsidiaries or (iii) transfer any of its properties or
assets to the Issuers or any of their Restricted Subsidiaries, except for such
encumbrances or restrictions existing under or by reason of (a) the Senior
Credit Agreement as in effect on the date of the Indenture, and any amendments,
modifications, restatements, renewals, supplements, refundings, replacements or
refinancings thereof that contain restrictions that are no more restrictive than
those contained in the Senior Credit Agreement as in effect on the date of the
Indenture, (b) agreements existing and as in effect on the date of the
Indenture, (c) any instrument governing Indebtedness permitted to be incurred
pursuant to the terms of the Indenture, (d) applicable law, (e) any instrument
governing Indebtedness or Capital Stock of a Person acquired by the Issuers or
any of their Restricted Subsidiaries as in effect at the time of such
acquisition (except to the extent such Indebtedness was incurred in connection
with or in contemplation of such acquisition),
-52-
<PAGE>
which encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person, or the property or
assets of the Person, so acquired, (f) customary non-assignment, provisions in
leases or other agreements entered into in the ordinary course of business, (g)
purchase money obligations for property acquired in the ordinary course of
business that impose restrictions of the nature described in clause (iii) above
on the property so acquired, (h) any restriction or encumbrance contained in
contracts for the sale of assets permitted by the Indenture, provided that such
--------
restrictions relate only to the assets being sold pursuant to such contracts and
(i) Permitted Refinancing Indebtedness, provided that the restrictions contained
--------
in the agreements governing such Permitted Refinancing Indebtedness are no more
restrictive than those contained in the agreements governing the Indebtedness
being refinanced.
Section 4.13 Limitations on Transactions with Affiliates.
-------------------------------------------
The Issuers shall not, and shall not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property (except
Development Property) or assets from, or enter into or make or amend (for the
purpose of increasing the obligations of either Issuer or their Restricted
Subsidiaries thereunder or decreasing the obligations of any Affiliate
thereunder without a commensurate decrease of the obligations of such Issuer or
such Restricted Subsidiary thereunder) any contract, agreement, understanding,
loan, advance or guaranty with, or for the benefit of, any Affiliate (each of
the foregoing, an "Affiliate Transaction"), unless (i) such Affiliate
---------------------
Transaction is on terms that are no less favorable to such Issuer or the
relevant Restricted Subsidiary than those that would have been obtained in a
comparable transaction with an unrelated Person and (ii) such Issuer delivers to
the Trustee (a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of $1.0
million, a resolution of the Management Committee set forth in an Officers'
Certificate certifying that such Affiliate Transaction complies with clause (i)
above and that such Affiliate Transaction has been approved unanimously by the
Management Committee and (b) with respect to any Affiliate Transaction or series
of related Affiliate Transactions involving aggregate consideration in excess of
$5.0 million, an opinion as to the fairness to the Company of such Affiliate
Transaction from a financial point of view issued by an accounting, appraisal or
investment banking firm of national standing; provided that (1) any compensation
--------
paid to, indemnity provided on behalf of, or employment agreement entered into
with, any officer or director of the Issuers or any of their Restricted
Subsidiaries in the ordinary course of business, (2) transactions between or
among the Issuers and their Restricted Subsidiaries and (3) Restricted Payments,
Permitted Investments and other payments and distributions that are permitted by
the provisions of
-53-
<PAGE>
Section 4.05, in each case, shall not be deemed Affiliate Transactions. The
- ------------
Company shall not, and shall not permit ELLC to, modify, amend or otherwise
alter the terms of the ELLC Note to extend the maturity thereof, reduce the
amount payable by ELLC thereunder or the rate of interest applicable thereto or
otherwise diminish the obligations of ELLC thereunder; provided, however, that
-------- -------
the Company may, from time to time, contribute all or a portion of the ELLC Note
to ELLC in exchange for an increased equity interest in ELLC.
Section 4.14 Stay, Extension and Usury Laws.
------------------------------
The Issuers jointly and severally covenant (to the extent that they
may lawfully do so) that they shall not, and shall cause their Restricted
Subsidiaries not to, at any time insist upon, plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay, extension or waiver law or
any usury law or other law that would prohibit or forgive the Issuers from
paying all or any portion of the principal of, premium, interest or Liquidated
Damages, if any, on the Notes as contemplated herein, wherever in force, now or
at any time hereafter in force, or that may materially affect the covenants or
the performance of this Indenture or the Notes in a manner inconsistent with the
provisions hereof or thereof and (to the extent that it may lawfully do so) the
Issuers hereby expressly waive all benefit or advantage of any such law, and
covenant that they shall not, and shall cause their Restricted Subsidiaries not
to, hinder, delay or impede the execution of any power granted to the Trustee
under this Indenture or the Notes, but will suffer and permit the execution of
every such power as though no such law existed.
Section 4.15 Limitation on Sales of Assets.
-----------------------------
(a) The Issuers shall not, and shall not permit or cause any of their
Restricted Subsidiaries or ELLC to, engage in an Asset Sale unless:
(i) no Default or Event of Default exists or is continuing immediately
prior to and after giving effect to such Asset Sale;
(ii) the Issuers, the Restricted Subsidiary or ELLC, as the case may
be, receives (A) consideration at the time of such Asset Sale at least
equal to the fair market value of the assets or Equity Interests issued or
sold or otherwise disposed of or (B) in the case of a lease of assets which
constitutes an Asset Sale, a lease providing for rent and other
consideration which are no less favorable to the Company, the Restricted
Subsidiary or ELLC, as the case may be, than the then prevailing market
conditions (in the case of either (A) or (B) of this clause, evidenced by a
resolution of the Management Committee set forth in an Officers'
Certificate delivered to the Trustee); and
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<PAGE>
(iii) at least 80% of the consideration therefor received by the
Issuers, such Restricted Subsidiary or ELLC, as the case may be, is in the
form of cash or Cash Equivalents; provided that (A) the amount of any
--------
liabilities (as shown on the most recent balance sheet of the Issuers, such
Restricted Subsidiary or ELLC, as the case may be) of the Issuers, any
Restricted Subsidiary or ELLC (other than liabilities that are by their
terms subordinated to the Notes) that are assumed by the transferee of any
such assets pursuant to a customary novation agreement that releases the
Issuers, such Restricted Subsidiary or ELLC, as the case may be, from
further liability, shall be deemed to be Cash Equivalents for purposes of
this covenant, (B) the amount of any notes or other obligations received by
the Issuers, such Restricted Subsidiary or ELLC from such transferee that
are promptly (but in any event, within 30 days) converted by the Issuers,
such Restricted Subsidiary or ELLC into cash (to the extent of the cash
received) shall be deemed to be cash for purposes of this Section 4.15, (C)
------------
with respect to an Asset Sale of Development Property or other real
property except a hotel/casino (1) real property received in exchange
therefor and to be used or useful in any business in which the Company is
permitted to engage pursuant to the provisions of Section 4.20 hereof shall
------------
be deemed to be Cash Equivalents for purposes of this Section 4.15 and
------------
shall be deemed to have been applied in accordance with the first sentence
of Section 4.15(b) hereof and (2) notes or other evidences of indebtedness
---------------
received in exchange therefor shall be deemed Cash Equivalents for purposes
of this Section 4.15, provided that cash payments received in respect
------------
thereof shall be applied by the Company in accordance with Section 4.15(b)
---------------
hereof, (d) with respect to an Asset Sale by ELLC, consideration received
by ELLC in the form of a note pursuant to Section 12.2 of the Joint Venture
Agreement shall be deemed to be Cash Equivalents for purposes of this
provision and payments received by ELLC in respect of such note shall be
applied by ELLC as specified in Section 4.15(b) hereof and (e) with respect
---------------
to an Asset Sale by the Company of its interest in ELLC or an Asset Sale by
ELLC, voting equity securities issued by an Included Person that are
registered and freely-tradeable by the Company under applicable state and
federal securities laws and listed for trading on a national securities
exchange shall be deemed to be Cash Equivalents for purposes of this
Section 4.15, provided that the sale, transfer or other distribution by the
------------ --------
Company of such equity securities shall be subject to this Section 4.15;
------------
and provided, further, that contingent liabilities that are assumed by the
-------- -------
transferee of any such assets shall not be deemed to be the receipt of
consideration if such contingent liabilities are not shown as liabilities
on the most recent balance sheet of the Issuers, such Restricted Subsidiary
or ELLC, as the case may be.
-55-
<PAGE>
(b) Within 270 days after the receipt of any Net Proceeds from an
Asset Sale, the Issuers may either (i) apply such Net Proceeds to permanently
reduce Senior Debt of the Issuers or long-term Indebtedness of a Restricted
Subsidiary of the Company (and, in either case, to correspondingly reduce
commitments with respect thereto) or (ii) reinvest or to commit itself by
contract to reinvest the Net Proceeds in a Permitted Investment (other than Cash
Equivalents); provided, however, that, so long as ELLC is an Unrestricted
-------- -------
Subsidiary, in the case of an Asset Sale by ELLC, (A) the Net Proceeds shall
first be applied to pay the principal and interest on the ELLC Note, (B) the Net
Proceeds shall then be distributed to the members of ELLC, in accordance with
their membership interests, and (C) of the Net Proceeds received by the Company
pursuant to clause (B), 50% shall be subject to this Section 4.15, and provided,
------------ --------
further, however, that in the case of an Asset Sale by the Company of its
- ------- -------
interest in ELLC, only 50% of the Net Proceeds received by the Company (net of
payments on the ELLC Note) shall be subject to this Section 4.15, so long as
------------
ELLC is an Unrestricted Subsidiary prior to any such Asset Sale. Any Net
Proceeds from Asset Sales that are not applied or invested as provided in the
first sentence of this paragraph shall be deemed to constitute "Excess
------
Proceeds."
(c) Within five Business Days of each date on which the aggregate
amount of Excess Proceeds exceeds $5 million, the Issuers shall make an offer to
all holders of Notes (an "Asset Sale Offer") to purchase the maximum principal
----------------
amount of Notes that may be purchased out of the Excess Proceeds, at an offer
price in cash in an amount equal to 100% of the principal amount thereof plus
accrued and unpaid interest and Liquidated Damages, if any, thereon to the date
of purchase, in accordance with the procedures set forth in Section 3.09 hereof.
------------
To the extent that the aggregate amount of Notes tendered pursuant to an Asset
Sale Offer is less than the Excess Proceeds, the Company may use any remaining
Excess Proceeds for general corporate purposes (subject to the restrictions of
the provisions of this Article 4). If the aggregate principal amount of Notes
---------
surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes to be purchased on a pro rata basis. Upon
--- ----
completion of such offer to purchase, the amount of Excess Proceeds shall be
reset at zero. Pending the final application of any such Net Proceeds, the
Issuers may temporarily reduce Senior Debt, without a permanent reduction of
availability thereunder, or otherwise invest such Net Proceeds in Permitted
Investments.
(d) Notwithstanding any provision of this Section 4.15, the sale,
------------
lease, conveyance or other disposition of substantially all of the assets of the
Issuers and their Restricted Subsidiaries (when taken as a whole) shall be
governed by the provisions of Section 4.08 and Article V and not by the
------------ ---------
provisions of this Section 4.15.
------------
-56-
<PAGE>
Section 4.16 Subsidiary Guarantees.
---------------------
(a) Each Restricted Subsidiary shall, and, if the Issuers or any of
their Restricted Subsidiaries shall acquire or create another Subsidiary after
the date of the Indenture, then such Restricted Subsidiary or such newly
acquired or created Subsidiary shall execute a Guarantee in substantially the
form of Exhibit E attached hereto and deliver an opinion of counsel relating to
the enforceability and authorization of such Guarantee in accordance with the
terms of the Indenture, pursuant to which such Subsidiary shall become a
Guarantor, on a senior subordinated basis, of the Issuers' payment obligations
under the Notes and the Indenture; provided, that this Section 4.16 shall not
-------- ------------
apply to any Subsidiary during such period as such Subsidiary (i) is
incorporated in any jurisdiction outside the United States, (ii) has been
properly designated as an Unrestricted Subsidiary in accordance with the
Indenture for so long as it continues to constitute an Unrestricted Subsidiary,
(iii) has Adjusted Net Assets of less than $3.0 million or (iv) has less than
$5.0 million of outstanding Indebtedness owed to any Person other than the
Issuers or any Restricted Subsidiary.
(b) In the event of a sale or other disposition of all of the assets
of any Guarantor, by way of merger, consolidation or otherwise, or a sale or
other disposition of all of the capital stock of any Guarantor, then such
Guarantor (in the event of a sale or other disposition, by way of such a merger,
consolidation or otherwise, of all of the capital stock of such Guarantor) or
the corporation acquiring the property (in the event of a sale or other
disposition of all of the assets of such Guarantor) shall be released and
relieved of any obligations under its Subsidiary Guarantee; provided that the
--------
Net Proceeds of such sale or other disposition are applied in accordance with
the provisions of Section 4.15 hereof. In addition, in the event the Management
------------
Committee designates a Guarantor to be an Unrestricted Subsidiary, then such
Guarantor shall be released and relieved of any obligations under its Guarantee;
provided that such designation is conducted in accordance with the provisions of
- --------
Section 4.19 hereof.
- ------------
Section 4.17 Payments for Consent.
--------------------
The Issuers shall not, and shall not permit any of their Restricted
Subsidiaries to, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any Holder of
any Notes for or as an inducement to obtain any consent, waiver or amendment of
any of the terms or provisions of the Indenture or the Notes unless such
consideration is offered to be paid or is paid to all Holders of the Notes that
consent, waive or agree to amend in the time frame set forth in the solicitation
documents relating to such consent, waiver or agreement.
-57-
<PAGE>
Section 4.18 Designation of an Unrestricted Subsidiary as Restricted.
-------------------------------------------------------
Any Unrestricted Subsidiary may be designated by the Management
Committee as a Restricted Subsidiary; provided that (i) at the time of such
--------
designation after giving pro forma effect thereto as if such designation had
--- -----
occurred, and any Non-Recourse Debt previously incurred by such Unrestricted
Subsidiary had been incurred, at the beginning of the Company's most recently
completed four fiscal quarters for which internal financial statements are
available preceding the date of such designation, the Issuers would be permitted
to incur $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage
Ratio test contained in the provisions described in the first paragraph of
Section 4.09(a) hereof; (ii) if such newly designated Restricted Subsidiary has
Adjusted Net Assets of $3.0 million or more or $5.0 million or more of
outstanding Indebtedness owed to any Person other than the Issuers or any
Restricted Subsidiary, such newly designated Restricted Subsidiary executes and
delivers a Guarantee substantially in the form of Exhibit E attached hereto and
an opinion of counsel relating to the enforceability and authorization of such
Guarantee as required by the Indenture; and (iii) no Default has occurred and is
continuing immediately preceding such designation and after giving pro forma
--- -----
effect thereto.
Section 4.19 Designation of a Subsidiary as Unrestricted.
-------------------------------------------
Any newly-organized Subsidiary of the Issuers may be designated by the
Management Committee as an Unrestricted Subsidiary at the time of its formation,
provided that such Subsidiary has total assets of $1,000 or less at the time of
- --------
such designation. Any Restricted Subsidiary may be designated by the Management
Committee as an Unrestricted Subsidiary (at which time such Restricted
Subsidiary's Guarantee shall terminate); provided that (i) at the time of such
--------
designation after giving pro forma effect thereto as if such designation had
--- -----
occurred at the beginning of the Issuers' most recently completed four fiscal
quarters for which internal financial statements are available preceding the
date of such designation, (A) the Issuers would be permitted to incur $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test
contained in Section 4.09(a) hereof and (B) the Fixed Charge Coverage Ratio is
---------------
not less than 80% of the Fixed Charge Coverage Ratio for such period without
giving pro forma effect to such designation; and (ii) no Default has occurred
--- -----
and is continuing immediately preceding such designation and after giving pro
---
forma effect thereto, including the provisions of Section 4.05(c) hereof.
- ----- ---------------
Section 4.20 Business Activities.
-------------------
The Company shall not, and shall not permit any Restricted Subsidiary
to, engage, directly or indirectly, in any business other than (i) a Gaming
Business and (ii) such other
-58-
<PAGE>
businesses as the Company or any of its Restricted Subsidiaries is engaged in on
the date of this Indenture. Neither the Company nor any of its Subsidiaries
shall conduct a Gaming Business in any gaming jurisdiction in which the Company
or such Subsidiary is not licensed on the date of the Indenture if the holders
of the Notes would be required to be licensed as a result thereof; provided that
--------
the provisions described in this sentence shall not prohibit the Company or any
of its Subsidiaries from conducting a Gaming Business in any jurisdiction that
does not require the licensing or qualification of all of the holders of the
Notes, but reserves the discretionary right to require the licensing or
qualification of any Holder of Notes.
Until such time as ELLC is designated as a Restricted Subsidiary or
merged with the Company, in each case in accordance with the terms hereof, the
Issuers shall permit ELLC to (i) engage, directly or indirectly in any business
or activity other than holding an interest in the Silver Legacy Joint Venture,
subject to the right of ELLC to dispose of such interest in the Silver Legacy
Joint Venture in accordance with the provisions of Section 4.15 hereof, (ii)
------------
become the owner of any capital stock or other ownership interest in any other
entity, (iii) incur any Indebtedness to any other entity other than the ELLC
Note, Indebtedness payable to the Issuers or any Restricted Subsidiaries and
Indebtedness incurred pursuant to Section 2.7 of the Joint Venture Agreement or
(iv) issue membership interests representing more than 10% of the outstanding
equity interests of ELLC prior to such issuance without first obtaining an
opinion of fairness to ELLC of the consideration to be received by ELLC in
respect of such issuance of membership interests from an investment banking firm
of national standing.
Section 4.21 Independent Member of the Management Committee.
----------------------------------------------
Within 180 days from the date hereof, the Company shall cause an
independent person to be elected to serve on the Management Committee. As used
solely for the purposes of this Section 4.21, "independent" means that neither
------------ -----------
such Person nor any member of such person's family (i) has any material, direct
or indirect financial interest in the Issuers or any other obligor on the Notes
or in any Affiliate of the Issuers or of any other obligor on the Notes or (ii)
serves as an officer or employee of the Issuers or any other obligor on the
Notes or any such Affiliate, provided that service on the Management Committee
--------
or the board of managers of the Company or the board of directors of Capital or
any other obligor on the Notes or any such Affiliate shall not be deemed to
constitute service as an officer or employee thereof.
Section 4.22 Further Assurance to the Trustee.
--------------------------------
The Issuers shall, upon request of the Trustee, execute and deliver
such further instruments and do such further acts as
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<PAGE>
may reasonably be necessary or proper to carry out more effectively the
provisions of this Indenture and the Notes.
Section 4.23 Maintenance of Properties.
-------------------------
The Issuers shall, and shall cause each of their Subsidiaries to, take
reasonable action to maintain in appropriate condition each of their principal
properties that in the judgment of management is significant to the business
operations of the Issuers and the Subsidiaries, taken as a whole, and the loss
of which would have a material adverse effect on the financial condition of the
Issuers and their Subsidiaries, taken as a whole.
Section 4.24 Insurance.
---------
From and at all times after the Issue Date, the Issuers and their
Subsidiaries shall have in effect customary insurance (including self-insurance)
for general liabilities and other risks on terms and in amounts as are
customarily carried by similar businesses and reasonably sufficient to avoid a
material adverse change in the financial condition or results of operation of
the Issuers and their Subsidiaries taken as a whole. The Issuers shall provide
to the Trustee a summary of all insurance coverage prepared by the Issuers'
insurance broker, which expressly states the expiration date for such coverage
and which shall appear as an exhibit to the Officers' Certificate delivered to
the Trustee pursuant to Section 4.03(a).
---------------
Section 4.25 Investment Company Act.
----------------------
Neither the Issuers nor any their Restricted Subsidiaries shall become
an investment company subject to registration under the Investment Company Act
of 1940, as amended.
ARTICLE 5
SUCCESSORS
Section 5.01 Merger, Consolidation, Etc.
--------------------------
Neither Issuer shall, in a single transaction or series of
transactions, consolidate or merge with or into (whether or not such Issuer is
the surviving Person), or sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of its properties or assets in one or more
related transactions, to another limited-liability company, corporation, Person
or entity, unless (a) such Issuer is the surviving entity or the entity or the
Person formed by or surviving any such consolidation or merger (if other than
such Issuer) or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made is a limited-liability company,
partnership or a corporation organized
-60-
<PAGE>
or existing under the laws of the United States, any state thereof or the
District of Columbia; (b) the entity or Person formed by or surviving any such
consolidation or,merger (if other than such Issuer) or the entity or Person to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made assumes all the obligations of such Issuer under the Notes
and the Indenture pursuant to a supplemental indenture in a form reasonably
satisfactory to the Trustee; (c) immediately after such transaction, no Default
or Event of Default exists; (d) such Issuer or any entity or Person formed by or
surviving any such consolidation or merger, or to which such sale, assignment,
transfer, lease, conveyance or other disposition shall have been made (i) will
have Consolidated Net Worth immediately after the transaction equal to or
greater than the Consolidated Net Worth of such Issuer immediately preceding the
transaction and (ii) will, at the time of such transaction and after giving pro
forma effect thereto as if such transaction had occurred at the beginning of the
applicable four-quarter period, be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set
forth in Section 4.09(a) hereof; (e) any such transaction would not require any
---------------
Holder of Notes to obtain a Gaming License or be qualified under the laws of any
applicable gaming jurisdiction in the absence of such transactions, provided
--------
that a transaction involving a jurisdiction that does not require the licensing
or qualification of all of the holders of the Notes, but reserves the
discretionary right to require the licensing or qualification of any holder of
Notes, shall not be prohibited pursuant to the terms of this clause (e); (f) any
such transaction would not result in the loss of any qualification or any
material license of the Company or its Subsidiaries necessary for any Gaming
Business then operated by the Company or its Subsidiary; and (g) the Issuers
have delivered to the Trustee an opinion of counsel reasonably satisfactory to
the Trustee confirming that the holders of the outstanding Notes will not
recognize income, gain or loss for federal income tax purposes as a result of
such transaction and will be subject to federal income tax in the same manner
and at the same times as would have been the case if such transaction had not
occurred.
Upon creation of Parent or upon the other transfer of sufficient
membership interests to cause a dissolution for purposes of Section 708 of the
Internal Revenue Code of 1986, as amended, and any successor provision thereto,
the Company shall deliver to the Trustee an opinion of counsel reasonably
satisfactory to the Trustee confirming that the Holders of the outstanding Notes
will not recognize income, gain or loss for federal income tax purposes as a
result of such transaction and will be subject to federal income tax in the same
manner and at the same times as would have been the case if such transaction had
not occurred.
-61-
<PAGE>
Section 5.02 Successor Corporation Substituted.
---------------------------------
Upon any consolidation or merger, or any sale, lease, conveyance or
other disposition of all or substantially all of the assets of the Issuers in
accordance with Section 5.01, the successor corporation formed by such
------------
consolidation or into which such Issuer is merged or to which such sale,
assignment, transfer, lease, conveyance or other is made shall succeed to, and
be substituted for (so that, in the case of any consolidation or merger, or any
sale, assignment transfer, lease, conveyance or other disposition of all or
substantially all of the assets of either Issuer, from and after the date of
such event, the provisions of this Indenture referring to such Issuer shall
refer instead to the successor corporation and not to such Issuer), and may
exercise every right and power of, such Issuer under this Indenture with the
same effect as if such successor Person had been named as such Issuer herein;
provided, however, that the predecessor Issuer in the case of a sale, lease,
- -------- -------
conveyance or other disposition shall not be released from the obligation to pay
the principal of, premium, interest, if any, on the Notes in accordance with the
terms of the Notes and this Indenture.
Section 5.03 Purchase Offer on Change of Control.
-----------------------------------
This Article 5 shall not affect the obligations of the Issuers under
---------
Sections 4.08 and 4.15 hereof.
- ----------------------
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01 Events of Default.
-----------------
(a) The following are "Events of Default":
-----------------
(i) default for 30 days in the payment when due of interest or
Liquidated Damages, if any, on the Notes (whether or not prohibited by
Article 10 hereof);
----------
(ii) default in payment when due of the principal of or premium, if
any, on the Notes (whether or not prohibited by Article 10 hereof);
----------
(iii) failure by the Issuers to comply with the repurchase provisions
of Sections 3.09, 4.08 or 4.15 hereof or the covenants contained in Section
--------------------------- -------
4.05 hereof;
-----------
(iv) failure by the Issuers for 30 days after notice to comply with
any of its other agreements in the Indenture or the Notes;
(v) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money
-62-
<PAGE>
borrowed by the Issuers or any of their Restricted Subsidiaries (or the
payment of which is guaranteed by the Issuers or any of their Restricted
Subsidiaries) whether such Indebtedness or guarantee now exists, or is
created after the date of the Indenture having an outstanding principal
amount of more than $5.0 million, individually or in the aggregate, if such
Indebtedness has been accelerated (or has matured);
(vi) failure by the Issuers or any of their Restricted Subsidiaries
to pay final non-appealable judgments aggregating in excess of $5.0
million, which judgments are not paid, discharged or stayed for a period of
60 days;
(vii) any Guarantee of a Significant Guarantor shall be held in a
judicial proceeding to be unenforceable or invalid or shall cease for any
reason to be in full force and effect, or any Significant Guarantor, or any
Person acting on behalf of any Significant Guarantor, shall deny or
disaffirm its obligations under its Guarantee;
(viii) any Gaming License relating to a Material Gaming Facility is
revoked, terminated or suspended or otherwise ceases to be effective,
resulting in the cessation or suspension of operation for a period of more
than 30 days of any material portion or aspect of the Gaming Business of
any Gaming Facility;
(ix) the Member Notes represent Indebtedness for more than 90 days;
(x) either Issuer, any Significant Subsidiary of either Issuer, or
any group of Subsidiaries of either Issuer that, considered together, would
constitute a Significant Subsidiary of either Issuer, pursuant to or within
the meaning of any Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief against it in an
involuntary case,
(C) consents to the appointment of a custodian of it or for all
or substantially all of its property,
(D) makes a general assignment for the benefit of its creditors,
or
(E) admits in writing its inability to pay its debts as they
become due; and
-63-
<PAGE>
(xi) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(A) is for relief against either Issuer, any Significant
Subsidiary of either Issuer, or any group of Subsidiaries of either
Issuer that, considered together, would constitute a Significant
Subsidiary of either Issuer, in an involuntary case,
(B) appoints a custodian of either Issuer or any Significant
Subsidiary of either Issuer, or for all or substantially all of the
property of either Issuer or any Significant Subsidiary of either
Issuer, or
(C) orders the liquidation of either Issuer, any Significant
Subsidiary of either Issuer, or any group of Subsidiaries that,
considered together, would constitute a Significant Subsidiary of
either Issuer;
and the order or decree remains unstayed and in effect for 60 consecutive
days.
Section 6.02 Acceleration.
------------
(a) If any Event of Default occurs and is continuing, the Trustee or
the Holders of at least 25% in principal amount of the then outstanding Notes
may declare all the Notes to be due and payable upon delivery of a notice of
acceleration to the Issuers and to the agent for the lenders under the Senior
Credit Agreement at such address as the Issuers shall have previously provided
to the Trustee, provided, that the Notes shall become due and payable
--------
immediately if any Senior Debt has been or is accelerated following delivery of
a notice of acceleration. Notwithstanding the foregoing, if an Event of Default
specified in Section 6.01(a)(x) or 6.01(a)(xi) occurs with respect to either
Issuer, any Significant Subsidiary of the Issuers or any group of Restricted
Subsidiaries of the Issuers that, taken together, would constitute a Significant
Subsidiary of the Issuers, all outstanding Notes shall become due and payable
without further action or notice. Holders of the Notes may not enforce this
Indenture or the Notes except as provided in this Indenture. Subject to the
provisions of Section 6.05 hereof, Holders of a majority in principal amount of
the then outstanding Notes may direct the Trustee in its exercise of any trust
or power. The Trustee may withhold from Holders of the Notes notice of any
continuing Default or Event of Default (except a Default or Event of Default
relating to the payment of principal or interest) if it determines that
withholding notice is in their interest.
(b) In the case of any Event of Default occurring by reason of any
willful action (or inaction) taken (or not taken) by or on behalf of the Issuers
with the intention of avoiding payment of the premium that the Issuers would
have had to pay if
-64-
<PAGE>
the Issuers then had elected to redeem the Notes pursuant to Section 3.07
------------
hereof, an equivalent premium shall also become and be immediately due and
payable to the extent permitted by law upon the acceleration of the Notes. If
an Event of Default occurs prior to August 15, 2001 by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding the prohibition on redemption of the Notes prior to
such date, then, upon acceleration of the Notes, an additional premium shall
also become and be immediately due and payable in an amount, for each of the
years beginning on August 15, of the years set forth below, as set forth below:
<TABLE>
<CAPTION>
Year Percentage
- ------------ -----------
<S> <C>
1996... 110.50%
1997... 109.45
1998... 108.40
1999... 107.35
2000... 106.30
</TABLE>
Section 6.03 Other Remedies.
--------------
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of or premium, if any, or interest on the Notes or to
enforce the performance of any provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Noteholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies
are cumulative to the extent permitted by law.
Section 6.04 Waiver of Past Defaults.
-----------------------
At any time after declaration of acceleration with respect to the
Notes has been made and before a judgment or decree for payment of the money due
has been obtained by the Trustee or the Holders, where applicable, the Holders
of a majority in aggregate principal amount of the then outstanding Notes, by
written notice to the Issuers and the Trustee, may rescind and annul such
declaration and its consequences if (a) the Issuers have paid or deposited with
the Trustee a sum sufficient to pay (i) all overdue installments of interest on
all the Notes, (ii) the principal of any Notes that have become due otherwise
than by such declaration of acceleration and interest thereon at the rate or
rates prescribed therefor in the Notes, (iii) to the extent that payment of such
interest is lawful, interest on the defaulted interest at the rate or rates
prescribed therefor in the Notes, and (iv) all money paid or advanced by the
Trustee under this Indenture and the reasonable
-65-
<PAGE>
compensation, expenses, disbursements and advances of the Trustee, its agents,
counsel and other advisors and (b) all Defaults and Events of Default, other
than the non-payment of the principal of Notes that have become due solely by
such declaration of acceleration, have been cured or waived as provided in this
Indenture. No such rescission will affect any subsequent Default or impair any
right consequent thereon.
When a Default is waived, it is cured and stops continuing. No waiver
shall extend to any subsequent or other Default or impair any right consequent
thereto but any Event of Default arising from such Default shall be deemed to
have been cured for every purpose of this Indenture. This Section 6.04 shall be
------------
in lieu of TIA (S)316(a)(1)(B) and said TIA section is hereby expressly excluded
from this Indenture, as permitted by the TIA.
Section 6.05 Control by Majority.
-------------------
The Holders of a majority in aggregate principal amount of the then
outstanding Notes shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on such Trustee, provided that (a) such direction
--------
is not in conflict with any rule of law or with this Indenture and (b) the
Trustee may take any other action it deems proper that is not inconsistent with
such direction. The Trustee may refuse to follow any direction that conflicts
with law or this Indenture, is unduly prejudicial to the rights of other
Noteholders, or would involve the Trustee in personal liability. This Section
-------
6.05 shall be in lieu of TIA (S)316(a)1(A) and said TIA section is hereby
- ----
expressly excluded from this Indenture, as permitted by the TIA.
Section 6.06 Limitation on Suits.
-------------------
No Holder shall have any right to institute any proceeding, judicial
or otherwise, with respect to this Indenture, or for the appointment of a
receiver or trustee or for any other remedy under this Indenture, unless (a)
such Holder has previously given written notice to the Trustee of a continuing
Event of Default, (b) the Holders of not less than 25% in aggregate principal
amount of the then outstanding Notes have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name as
trustee under this Indenture, (c) such Holder or Holders have offered to the
Trustee an indemnity, adequate in the sole reasonable discretion of the Trustee,
against the costs, expenses and liabilities to be incurred in compliance with
such request, (d) the Trustee for 30 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such proceeding and
(e) no direction inconsistent with such written request has been given to the
Trustee during such 30-day period by the Holders of a majority in aggregate
principal amount of the outstanding Notes.
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<PAGE>
A Noteholder may not use this Indenture to prejudice the rights of
another Noteholder or to give or obtain a preference or priority over another
Noteholder.
Section 6.07 Rights of Holders to Receive Payment.
------------------------------------
Each Holder shall have the right, which is absolute and unconditional,
to receive payment of the principal of, premium, interest and Liquidated
Damages, if any, on, such Note on the stated maturity thereof and to institute
suit for the enforcement of any such payment, and such right may not be impaired
without the consent of such Holder.
Section 6.08 Collection Suit by Trustee.
--------------------------
If an Event of Default specified in Section 6.01(a) or (b) occurs and
----------------------
is continuing, the Trustee may recover judgment in its own name and as trustee
of an express trust against the Issuers for the whole amount of principal and
interest remaining unpaid on the Notes and interest on overdue principal and, to
the extent lawful, interest and such further amounts as shall be sufficient to
cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents,
counsel and other advisors.
Section 6.09 Trustee May File Proofs of Claim.
--------------------------------
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee and the Noteholders allowed in any judicial proceedings relative to the
Issuers, their Subsidiaries, their creditors or their property. Nothing
contained herein shall be deemed to authorize the Trustee to authorize or
consent to or accept or adopt on behalf of any Noteholder any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder thereof, or to authorize the Trustee to vote in respect
of the claim of any Noteholder in any such proceeding.
Section 6.10 Priorities.
----------
If the Trustee collects any money pursuant to this Article 6, it
---------
shall pay out the money in the following order:
First: to the Trustee for amounts due under Section 7.07;
------------
Second: to Noteholders for amounts due and unpaid on the Notes
for principal and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on
the Notes for principal and interest, respectively; and
Third: to the Issuers.
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The Trustee may fix a record date and payment date for any payment or
distribution of property or securities to Noteholders in accordance with Section
-------
2.12 and may set a record date or payment date as necessary to effectuate its
- ----
obligations under this Indenture and the Notes.
Section 6.11 Undertaking for Costs.
---------------------
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder
------------
pursuant to Section 6.07, or a suit by Holders of more than 10% in aggregate
------------
principal amount of the then outstanding Notes.
ARTICLE 7
TRUSTEE
The Trustee hereby accepts the trust imposed upon it by this Indenture
and covenants and agrees to perform the same, as herein expressed.
Section 7.01 Duties of Trustee.
-----------------
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in their exercise, as a prudent person
would exercise or use under the circumstances in the conduct of his or her own
affairs.
(b) Except during the continuance of an Event of Default:
(i) the Trustee need perform only those duties that are specifically
set forth in this Indenture and no others, and no implied covenants shall
be read into this Indenture against the Trustee; and
(ii) in the absence of wilful misconduct, gross negligence or bad
faith on its part, the Trustee may conclusively rely, as to the truth of
the statements and the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Trustee and conforming to the
requirements of this Indenture. However, in the case of an Officer's
Certificate or Opinion of Counsel required to be furnished to the Trustee,
the Trustee
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shall examine the certificates and opinions to determine whether or not
they conform on their face to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of
-------------
this Section;
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer, unless it is proved that the Trustee
was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
------------
Subparagraph (c)(iii) shall be in lieu of TIA (S)315(d)(3) and said TIA section
- ---------------------
is hereby expressly excluded from this Indenture, as permitted by the TIA.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section 7.01.
--------------------------- ------------
(e) The Trustee may refuse to perform any duty or exercise any right
or power unless it is provided with adequate funds or indemnity, adequate in the
sole reasonable discretion of the Trustee, against any loss, liability or
expense.
(f) The Trustee shall not be liable for interest on any money received
by it except as the Trustee may agree in writing with the Issuers. Money held
in trust by the Trustee need not be segregated from other funds except to the
extent required by law.
Section 7.02 Rights of Trustee.
-----------------
(a) The Trustee may rely and shall be protected from acting or
refraining from acting based on any document believed by it to be genuine and to
have been signed or presented by the proper person. The Trustee need not
investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting with respect to
any matter contemplated by this Indenture, it may require an Officers'
Certificate or an Opinion of Counsel, or both. The Trustee shall not be liable
for any action it takes or omits to take in good faith in reliance on such
Officers' Certificate or Opinion of Counsel.
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<PAGE>
(c) The Trustee may act through attorneys and agents and shall not be
responsible for the misconduct or negligence of any attorney or agent appointed
with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers.
(e) The Trustee may consult with counsel, and the advice of such
counsel or any Opinion of Counsel shall be full and complete authorization and
protection from liability irrespective of any action taken, suffered or omitted
by it hereunder in good faith and in reliance thereon.
(f) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document, but the
Trustee, in its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit, and, if the Trustee shall determine to
make such further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Issuers and their Subsidiaries, personally or
by agent or attorney.
(g) Except with respect to Section 4.01, the Trustee shall have no
------------
duty to inquire as to the performance of the Issuers' covenants in Article 3, 4
------------
and 5 hereof. In addition, the Trustee shall not be deemed to have knowledge of
- -----
any Default or Event of Default except (i) any Event of Default occurring
pursuant to Sections 6.01(a)(i) (other than a failure of the Issuers to
-------------------
repurchase the Notes duly tendered for purchase following a Change of Control
Offer or an Asset Sale Offer), Section 6.01(a)(ii) and Section 4.01, (ii) any
------------------- ------------
Default or Event of Default of which the Trustee shall have received written
notification or obtained actual knowledge.
(h) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers unless repayment of such funds shall reasonably be assured to
it or the Trustee is provided adequate indemnity in its sole reasonable
discretion.
Section 7.03 Individual Rights of Trustee.
----------------------------
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Issuers or an
Affiliate with the same rights it would have if it were not Trustee. However,
in the event that the Trustee acquires any conflicting interest, it must
eliminate such conflict within 90 days, apply to the Commission for permission
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<PAGE>
to continue as trustee or resign. Any Agent may do the same with like rights
and duties. However, the Trustee is subject to Sections 7.10 and 7.11.
----------------------
Section 7.04 Trustee's Disclaimer.
--------------------
The Trustee shall not be responsible and makes no representation as to
the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for any statement made by the Issuers or for the Issuers' use of the
proceeds from the Notes, and it shall not be responsible for any statement in
this Indenture or any statement in the Notes other than its authentication.
Section 7.05 Notice of Defaults.
------------------
If a Default of Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to each Noteholder a notice of the
Default within 90 days after it occurs. Except in the case of a Default in any
payment due on any Note (including any failure to make any mandatory redemption
payment required hereunder), the Trustee may withhold the notice if and so long
as a committee of its Trust Officers in good faith determines that withholding
the notice is in the interests of Noteholders. The second sentence of Section
-------
7.05 shall be in lieu of the proviso to TIA (S)315(b) and said TIA section is
- ----
hereby expressly excluded from this Indenture, as permitted by the TIA.
Section 7.06 Reports by Trustee to Holders.
-----------------------------
Within 60 days after the reporting date stated in Section 11.09, the
-------------
Trustee shall mail to Noteholders, if required by TIA (S) 313(a), a brief report
dated as of such reporting date that complies with such (S)313(a). The Trustee
also shall comply with TIA (S)313(b)(2) and transmit by mail all reports as
required by TIA (S)313(c).
After this Indenture has been qualified under the TIA, a copy of each
report at the time of its mailing to Noteholders shall be filed with the SEC and
each stock exchange on which the Notes are listed. The Issuers shall promptly
notify the Trustee in writing when the Notes are listed on any stock exchange.
Section 7.07 Compensation and Indemnity.
--------------------------
The Issuers shall pay to the Trustee, paying agents and registrars
from time to time reasonable compensation for their respective services
hereunder. The Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. The Issuers shall reimburse the
Trustee upon request for all reasonable out-of-pocket expenses incurred by it.
Such expenses may include the reasonable compensation and out-of-
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<PAGE>
pocket expenses of the Trustee's agents, counsel and other advisors.
The Issuers shall indemnify the Trustee, paying agents and registrars,
and their respective agents, counsel and other advisors, and shall hold them
harmless against any claim or demand (including but not limited to attorney's
fees and expenses) made against or as incurred by them in connection with the
acceptance of this trust or the administration of this Indenture and their
respective duties hereunder, except as set forth in the next paragraph. The
Trustee shall notify the Issuers promptly of any claim for which it may seek
indemnity. However, failure of the Trustee to do so shall not relieve the
Issuers of their obligations hereunder. The Issuers shall defend the claim at
its own expense with counsel, who may be outside counsel to the Issuers but
shall in all events be reasonably satisfactory to the Trustee, and the Trustee
shall cooperate in the defense; provided, however, that the Trustee may, at its
-------- -------
option, retain its own separate counsel to defend such claim and the Issuers
shall pay the reasonable fees and expenses of such separate counsel. In
addition, if the Issuers do not so defend the Trustee or if at any time the
counsel so selected is ethically prohibited from representing the Trustee
(whether because of a conflict of interest or the provisions of the TIA), then
the Trustee may retain one separate counsel and the Issuer shall pay the
reasonable fees and expenses of such separate counsel. The indemnification
herein extends to any settlement, provided that the Issuers shall not be liable
--------
for any settlement made without its consent, and provided further that such
----------------
consent shall not be unreasonably withheld.
The Issuers need not reimburse any expense or indemnify against any
loss or liability incurred by the Trustee through negligence or bad faith or
from the unreasonable refusal or failure of the Trustee to perform any of its
duties or obligations hereunder.
To secure the Issuers' payment obligations in this Section, the
Trustee and any such predecessor trustee shall have a lien prior to the Notes on
all money or property held or collected by the Trustee or the Holders, except
that held in trust to pay principal of and premium, if any, and interest on the
Notes.
When the Trustee, or its agents, counsel or advisors, incurs expenses
or renders services after an Event of Default specified in Section 6.01(a)(x) or
---------------------
(xi) occurs, the expenses and the compensation for the services are intended to
- ----
constitute expenses of administration under any Bankruptcy Law.
Section 7.08 Replacement of Trustee.
----------------------
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the
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successor Trustee's acceptance of appointment as provided in this Section.
The Trustee may resign by so notifying the Issuers. The Holders of a
majority in aggregate principal amount of the then outstanding Notes may remove
the Trustee by so notifying the removed Trustee and the Issuers and may appoint
a successor Trustee with the Issuers' consent. The Issuers may remove the
Trustee if:
(1) the Trustee fails to comply with Section 7.10;
------------
(2) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
(3) a Custodian or public officer takes charge of the Trustee or its
property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Issuers shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in aggregate principal amount of the then outstanding Notes may
appoint a successor Trustee to replace the successor Trustee appointed by the
Issuers.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Issuers or the
Holders of at least 10% in aggregate principal amount of the then outstanding
Notes may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee fails to comply with Section 7.10, any Noteholder may
------------
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Issuers. Thereupon the
resignation or removal of the retiring Trustee shall become effective without
any further act, deed or conveyance, and the successor Trustee shall have all
the rights, powers and duties of the Trustee under this Indenture. The
successor Trustee shall mail a notice of its succession to Noteholders. The
retiring Trustee shall promptly transfer all property held by it as Trustee to
the successor Trustee. Notwithstanding the replacement of the Trustee pursuant
to this Section 7.08, the Issuers' obligations and the Trustee's rights under
------------
Section 7.07 hereof shall continue for the benefit of the
- ------------
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<PAGE>
retiring Trustee with respect to expenses and liabilities incurred by it prior
to such replacement.
Section 7.09 Successor Trustee by Merger, etc.
--------------------------------
Subject to Section 7.10, if the Trustee consolidates with, merges or
------------
converts into, or transfers all or substantially all of its corporate trust
business to, another corporation, the resulting, surviving or transferee
corporation without any further act shall be the successor Trustee.
Section 7.10 Eligibility; Disqualification.
-----------------------------
This Indenture shall always have a Trustee who satisfies the
requirements of TIA (S)310(a)(1). The Trustee shall always have a combined
capital and surplus as stated in Section 11.09. The Trustee is subject to TIA
-------------
(S)310(b), including TIA (S)310(b)(9); provided, however, that there shall be
-------- -------
excluded from the operation of (S) 310(b)(1) any indenture or indentures under
which other securities are outstanding if the requirements of (S) 310(b)(1) are
met. If at any time the Trustee shall cease to be eligible in accordance with
the provisions of this Section, it shall resign immediately in the manner and
with the effect specified herein.
Section 7.11 Preferential Collection of Claims Against Issuers.
-------------------------------------------------
The Trustee shall comply with TIA (S)311(a), excluding any creditor
relationship set forth in TIA (S)311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S)311(a) to the extent indicated therein.
ARTICLE 8
SATISFACTION AND DISCHARGE OF INDENTURE
Section 8.01 Option To Effect Legal Defeasance Or Covenant Defeasance.
--------------------------------------------------------
The Issuers may, at the option of the Management Committee evidenced
by a resolution set forth in an Officers' Certificate, at any time, elect to
have either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon
--------------------
compliance with the conditions set forth below in this Article 8.
---------
Section 8.02 Legal Defeasance And Discharge.
------------------------------
Upon the Issuers' exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, the Issuers shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be deemed to have been
discharged from their obligations with respect to all outstanding Notes on the
date the conditions set forth below are satisfied (hereinafter, "Legal
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<PAGE>
Defeasance"). For this purpose, Legal Defeasance means that the Issuers shall
be deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, which shall thereafter be deemed to be outstanding only for
the purposes of Section 8.05 hereof and the other Sections of this Indenture
------------
referred to in (i) and (ii) below, and to have satisfied all their other
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of the Issuers, shall execute proper instruments
acknowledging the same), except for the following provisions which shall survive
until otherwise terminated or discharged hereunder: (i) the rights of Holders
of outstanding Notes to receive payments in respect of the principal of, and
premium, interest and Liquidated Damages (if any) on, the Notes when such
payments are due from the trust referred to in Section 8.04 hereof, (ii) the
------------
Issuers, obligations with respect to such Notes under Article 2 and Section 4.04
--------- ------------
hereof, (iii) the rights, powers, trusts, duties and immunities of the Trustee
hereunder, and the Issuers' obligations in connection therewith and (iv) this
Article 8. Subject to compliance with this Article 8, the Issuers may exercise
their option under this Section 8.02 notwithstanding the prior exercise of their
option under Section 8.03.
Section 8.03 Covenant Defeasance.
-------------------
Upon the Issuers' exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Issuers shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be released from their
obligations under the covenants contained in Sections 4.05, 4.06, 4.08, 4.09,
--------------------------------
4.10, 4.11, 4.12, 4.13, 4.15, 4.16 and 4.17 hereof with respect to the
- -------------------------------------------
outstanding Notes on and after the date the conditions set forth below are
satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall thereafter
-------------------
be deemed not outstanding for the purposes of any direction, waiver, consent or
declaration or act of Holders (and the consequences of any thereof) in
connection with such covenants, but shall continue to be deemed "outstanding"
for all other purposes hereunder (it being understood that such Notes shall not
be deemed outstanding for accounting purposes). For this purpose, Covenant
Defeasance means that, with respect to the outstanding Notes, the Issuers may
omit to comply with and shall have no liability in respect of any term,
condition or limitation set forth in any such covenant, whether directly or
indirectly, by reason of any reference elsewhere herein to any such covenant or
by reason of any reference in any such covenant to any other provision herein or
in any other document and such omission to comply shall not constitute a Default
or an Event of Default under Section 6.01 hereof, but, except as specified
------------
above, the remainder of this Indenture and such Notes shall be unaffected
thereby. In addition, upon the Issuers' exercise under Section 8.01 hereof of
------------
the option applicable to this Section 8.03, subject to the satisfaction of the
------------
conditions set forth in Section 8.04 hereof, Sections 6.01(a)(iii) through
------------ -----------------------------
6.01(a)(ix) hereof shall not constitute Events of Default.
- -----------
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<PAGE>
Section 8.04 Conditions To Legal Or Covenant Defeasance.
------------------------------------------
The following shall be the conditions to the application of either
Section 8.02 or 8.03 hereof to the outstanding Notes:
- --------------------
In order to exercise either Legal Defeasance or Covenant Defeasance:
(i) the Issuers must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders of the Notes, cash in United States dollars,
non-callable Government Securities, or a combination thereof, in such
amounts as shall be sufficient, without reinvestment, in the opinion of a
nationally recognized firm of independent public accountants, to pay the
principal of, and premium, interest and Liquidated Damages (if any) on, the
outstanding Notes on the stated maturity or on the applicable redemption
date, as the case may be, and the Issuers must specify whether the Notes
are being defeased to maturity or to a particular redemption date;
(ii) in the case of an election under Section 8.02 hereof, the
------------
Issuers shall have delivered to the Trustee an Opinion of Counsel in the
United States reasonably acceptable to the Trustee confirming that (a) the
Issuers have received from, or there has been published by, the Internal
Revenue Service a ruling or (b) since the date of this Indenture, there has
been a change in the applicable federal income tax law, in either case to
the effect that, and based thereon such Opinion of Counsel shall confirm
that, the Holders of the outstanding Notes will not recognize income, gain
or loss for federal income tax purposes as a result of such Legal
Defeasance and will be subject to federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if
such Legal Defeasance had not occurred;
(iii) in the case of an election under Section 8.03 hereof, the
------------
Issuers shall have delivered to the Trustee an Opinion of Counsel in the
United States reasonably acceptable to the Trustee confirming that the
Holders of the outstanding Notes will not recognize income, gain or loss
for federal income tax purposes as a result of such Covenant Defeasance and
will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Covenant
Defeasance had not occurred;
(iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of
Default resulting from the borrowing of funds to be applied to such
deposit) or insofar as Sections 6.01(a)(x) or 6.01(a)(xi) hereof are
----------------------------------
concerned,
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<PAGE>
at any time in the period ending on the 91st day after the date of deposit;
(v) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under, any material
agreement or instrument (other than this Indenture) to which the Issuers or
any of their Subsidiaries is a party or by which the Issuers or any of
their Subsidiaries is bound;
(vi) the Issuers shall have delivered to the Trustee an Opinion of
Counsel to the effect that after the 91st day following the deposit, the
trust funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally;
(vii) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Issuers with the
intent of preferring the Holders of Notes over the other creditors of the
Issuers with the intent of defeating, hindering, delaying or defrauding
creditors of the Issuers or others; and
(viii) the Issuers shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
Section 8.05 Deposited Money And Government Securities To Be Held In Trust;
--------------------------------------------------------------
Other Miscellaneous Provisions.
------------------------------
Subject to Section 8.06 hereof, all money and non-callable Government
------------
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.05, the Trustee)
------------
pursuant to Section 8.04 hereof in respect of the outstanding Notes shall be
------------
held in trust and applied by the Trustee, in accordance with the provisions of
such Notes and this Indenture, to the payment, either directly or through any
Paying Agent (including the Issuers acting as Paying Agent) as the Trustee may
determine, to the Holders of such Notes of all sums due and to become due
thereon in respect of principal, premium, interest and Liquidated Damages, if
any, but such money need not be segregated from other funds except to the extent
required by law.
The Issuers shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the cash or non-callable
Government Securities deposited pursuant to Section 8.04 hereof or the principal
------------
and interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Notes.
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Anything in this Article 8 to the contrary notwithstanding, the
Trustee shall deliver or pay to the Issuers from time to time upon the request
of the Issuers any money or non-callable Government Securities held by it as
provided in Section 8.04 hereof which, in the opinion of a nationally recognized
------------
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee (which may be the opinion delivered under
Section 8.04(i) hereof), are in excess of the amount thereof that would then be
- ---------------
required to be deposited to effect an equivalent Legal Defeasance or Covenant
Defeasance.
Section 8.06 Repayment To The Issuers.
------------------------
Any money deposited with the Trustee or any Paying Agent, or then held
by the Issuers, in trust for the payment of the principal of, or premium,
interest or Liquidated Damages, if any, on, any Note and remaining unclaimed for
two years after such principal, premium, interest or Liquidated Damages has
become due and payable shall be paid to the Issuers on their request or (if then
held by the Issuers) shall be discharged from such trust; and the Holder of such
Note shall thereafter look only to the Issuers for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust money,
and all liability of the Issuers as trustee thereof, shall thereupon cease;
provided, however, that the Trustee or such Paying Agent, before being required
to make any such repayment, may at the expense of the Issuers cause to be
published once, in the New York Times and The Wall Street Journal (national
edition), notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
notification or publication, any unclaimed balance of such money then remaining
will be repaid to the issuers.
Section 8.07 Reinstatement.
-------------
If the Trustee or Paying Agent is unable to apply any United States
dollars or non-callable Government Securities in accordance with Section 8.02 or
---------------
8.03 hereof, as the case may be, by reason of any order or judgment of any court
- ----
or governmental authority enjoining, restraining or otherwise prohibiting such
application, then the issuers, obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is
- --------------------
permitted to apply all such money in accordance with Section 8.02 or 8.03
--------------------
hereof, as the case may be; provided, however, that, if the issuers make any
payment of principal of, or premium, interest or Liquidated Damages, if any, on,
any Note following the reinstatement of its obligations, the Issuers shall be
subrogated to the rights of the Holders of such Notes to receive such payment
from the money held by the Trustee or Paying Agent.
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<PAGE>
ARTICLE 9
AMENDMENTS
Section 9.01 Without Consent of Holders.
--------------------------
The Issuers, when authorized by a resolution of the Management
Committee, and the Trustee may, without the consent of the Holders of any
outstanding Notes, amend, waive or supplement this Indenture or the Notes for
certain specified purposes, including, among other things:
(1) to cure any ambiguity, defect or inconsistency;
(2) to comply with Section 5.01;
------------
(3) to provide for uncertificated Notes in addition to or in place of
certificated Notes;
(4) to make any change that does not adversely affect the legal rights
hereunder of any Noteholder;
(5) to add to the covenants, conditions and restrictions of the
Issuers, for the benefit of the Noteholders, or to surrender any right or
power herein conferred upon the Issuers, or
(6) to modify, eliminate or add to the provisions of this Indenture to
such extent as shall be necessary to effect the qualification of this
Indenture under the TIA, or under any similar federal statute hereafter
enacted.
Upon the request of the Issuers accompanied by a resolution of the
Management Committee of the Company and a resolution of the board of directors
of Capital authorizing the execution of any such amended or supplemental
Indenture, and upon the receipt by the Trustee of an Officer's Certificate and
an Opinion of Counsel stating that the execution of such amended or supplemental
Indenture is authorized or permitted by this Indenture, the Trustee shall join
the Issuers in its execution of any such amended or supplemental Indenture and
shall make such further appropriate agreements and stipulations as may be
therein contained; provided that the Trustee shall not be obligated to enter
into any such amended or supplemental Indenture that affects its own rights,
duties or immunities under this Indenture or otherwise.
Section 9.02 With Consent of Holders.
-----------------------
(a) Except as provided in Section 9.02(b) hereof and subject to
---------------
Sections 6.02, 6.04 and 6.07, (i) the Issuers and the Trustee may amend, modify
- ----------------------------
or supplement this Indenture or the Notes with the written consent of the
Holders of at least a majority in aggregate principal amount of the then
outstanding
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<PAGE>
Notes (including without limitation consents obtained in connection with a
purchase of, or tender offer in exchange for, the Notes) and (ii) the Holders of
a majority in aggregate principal amount of the Notes then outstanding may by
written instrument waive any existing default or compliance in a particular
instance by the Issuers with any provision of this Indenture or the Notes.
(b) Notwithstanding anything to the contrary contained herein,
without the written consent of each Holder affected thereby, no amendment,
modification or supplement of this Indenture or the Notes, and no waiver of any
default of rights thereunder may (with respect to any of the Notes held by any
non-consenting Holder):
(i) reduce the principal amount of Notes whose Holders must consent
to an amendment, supplement or waiver;
(ii) reduce the principal of or change the fixed maturity of any Note
or alter the provisions with respect to the redemption of the Notes (other
than provisions relating to Sections 2.11, 3.09, 4.08 and 4.15 hereof);
----------------------------------
(iii) reduce the rate of or change the time for payment of interest
on any Note;
(iv) waive a Default or Event of Default in the payment of principal
of, or premium, interest or Liquidated Damages (if any) on, the Notes
(except a rescission of acceleration of the Notes by Holders of at least a
majority in aggregate principal amount of the Notes and a waiver of the
payment default that resulted from such acceleration);
(v) make any Note payable in money other than that stated in the
Notes;
(vi) make any change in Sections 6.04 or 6.07 hereof or in the
---------------------
foregoing amendment and waiver provisions; or
(vii) waive a redemption payment with respect to any Note (other than
a payment required by the provisions described in Sections 2.11, 3.09, 4.08
-------------------------
and 4.15 hereof).
--------
(c) To secure a consent of the Holders under this Section 9.02, it
------------
shall not be necessary for the Holders to approve the particular form of any
proposed amendment or waiver, but it shall be sufficient if such consent
approves the substance thereof. The calculation of holders so consenting shall
be made pursuant to Section 2.09 hereof.
------------
(d) After an amendment or waiver under this Section 9.02 becomes
------------
effective, the Issuers shall mail to Noteholders and the Trustee a notice
describing the amendment or
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<PAGE>
waiver, provided that failure to give the required notice shall not affect the
--------
validity and effect of such amendment or waiver.
Section 9.03 Compliance with Trust Indenture Act.
-----------------------------------
Every amendment to this Indenture or the Notes shall be set forth in a
supplemental indenture that complies with the TIA as then in effect.
Section 9.04 Revocation and Effect of Consents.
---------------------------------
Until the earlier of the time that an amendment or waiver becomes
effective or for a period of 90 days from the date the consent was given, a
consent to an amendment or waiver by a Holder of a Note is a continuing consent
by the Holder and every subsequent Holder of a Note or portion of a Note that
evidences the same debt as the consenting Holder's Note, even if notation of the
consent is not made on any Note.
The Trustee may, upon written direction of the Issuers, or as
otherwise required hereunder or by judgement, decree, order, statute, rule or
governmental regulation, fix a record date for the purpose of determining the
Holders entitled to consent to any amendment or waiver. If a record date is
fixed, then notwithstanding the provisions of the immediately preceding
paragraph, those Persons who were Holders at such record date (or their duly
designated proxies), and only those Persons, shall be entitled to consent to
such amendment or waiver or to revoke any consent previously given, whether or
not such Persons continue to be Holders after such record date. No consent
shall be valid or effective for more than 90 days after such record date unless
consents from Holders of the aggregate principal amount of Notes required
hereunder for such amendment or waiver to be effective shall have also been
given and not revoked within such 90-day period.
After an amendment or waiver becomes effective it shall bind every
Noteholder, unless it is of the type described in any of clauses (i) through
-------------------
(viii) of Section 9.02(b). In such case, the amendment or waiver shall bind
- ------ ---------------
each Holder of a Note who has consented to it.
Section 9.05 Notation on or Exchange of Notes.
--------------------------------
If an amendment, supplement or waiver changes the terms of the Notes,
the Trustee may require each Holder thereof to deliver its Notes to the Trustee.
The Trustee may place an appropriate notation about an amendment or waiver on
any Note thereafter authenticated. The Issuers in exchange for all Notes may
issue and the Trustee shall authenticate new Notes that reflect the amendment or
waiver. Failure to make the appropriate notation or issue a new Note shall not
affect the validity or effect of such amendment or waiver.
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<PAGE>
Section 9.06 Trustee Protected.
-----------------
The Trustee shall sign all supplemental indentures and amendments
authorized pursuant to this Article 9, except that the Trustee need not sign any
---------
supplemental indenture that adversely affects its rights. The Trustee, subject
to Sections 7.01 and 7.02, shall be entitled to receive if requested, an
----------------------
indemnity satisfactory to it in its sole reasonable discretion and shall be
entitled to be fully protected in relying upon, an Opinion of Counsel stating
that any amendment, supplement or waiver is authorized or permitted by this
Indenture and that such supplemental indenture and this Indenture, as so amended
or supplemented, constitute the valid and binding obligations of the Issuers,
enforceable against each of them in accordance with their respective terms
(subject to customary and necessary exceptions) and all conditions precedent
have been complied with.
ARTICLE 10
SUBORDINATION
Section 10.01 Agreement To Subordinate.
------------------------
The Issuers agree for themselves and for their successors, and each
Holder by accepting a Note agrees, that the payment of principal of, and
premium, interest, Liquidated Damages, if any, on, and any other amounts payable
by the Issuers with respect to, the Notes is subordinated in right of payment,
to the extent and in the manner provided in this Article 10, to the prior
payment in full of all Senior Debt (whether outstanding on the date hereof or
hereafter created, incurred, assumed or guaranteed), and that the subordination
is for the benefit of the holders of Senior Debt. This Article 10 shall
----------
constitute a continuing offer to all persons or entities who become holders of,
or continue to hold, Senior Debt. Notwithstanding anything to the contrary in
this Indenture or the Notes, the provisions of this Article 10 are made for the
----------
benefit of the holders of Senior Debt, each of whom is an obligee hereunder and
is entitled to enforce such holder's rights hereunder, without any act or notice
of acceptance hereof or reliance hereon. No amendment, modification or
discharge of any provision of this Article 10 shall be effective against any
----------
holder of Senior Debt unless expressly consented to in writing by such holder.
The provisions of this Article 10 apply notwithstanding anything to the contrary
----------
contained in the Notes or this Indenture. Upon the maturity of any Senior Debt
by lapse of time, acceleration or otherwise, all principal thereof and interest
thereon and other amounts due in connection therewith shall first be paid in
full, or such payment duly provided for in Cash or in manner satisfactory to the
holders of such Senior Debt, before any payment is made on account of the Notes
or this Indenture.
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<PAGE>
Section 10.02 Liquidation; Dissolution; Bankruptcy.
------------------------------------
Upon any distribution to creditors of either Issuer in a liquidation
or dissolution of such Issuer or in a bankruptcy (whether voluntary or
involuntary), reorganization, insolvency, receivership or similar proceeding
relating to such Issuer or its property, an assignment for the benefit of
creditors or any marshalling of either Issuers' assets and liabilities:
(1) holders of Senior Debt of such Issuer shall be entitled to receive
payment in full and in cash of all principal, interest, fees, expenses and
other Obligations due in respect of such Senior Debt (including interest
after the commencement of any such proceeding at the rate specified in the
applicable Senior Debt) before the Holders of Notes shall be entitled to
receive any payment with respect to the Notes (except that Holders of Notes
may receive securities that are subordinated at least to the same extent as
the Notes to Senior Debt and any securities issued in exchange for Senior
Debt and payments made from the trust described in Section 8.04 hereof);
------------
and
(2) until all principal, interest, fees, expenses and other
Obligations with respect to Senior Debt of such Issuer are paid in full,
any distribution to which the Holders of Notes would be entitled but for
this Article 10 shall be made to the holders of such Senior Debt (except
----------
that Holders of Notes may receive securities that are subordinated at least
to the same extent as the Notes to Senior Debt and any securities issued in
exchange for Senior Debt and payments made from the trust described in
Section 8.04 hereof).
------------
Section 10.03 Default on Designated Senior Debt.
---------------------------------
The Issuers may not make, and no Holder shall ask for, demand, sue for
or otherwise exercise remedies with respect to, any payment upon or in respect
of the Notes and may not offer to repurchase Notes (other than in the form of
securities that are subordinated to the same extent as the Notes to Senior Debt
and any securities issued in exchange for Senior Debt and payments made from the
trust described in Section 8.04 hereof) if:
------------
(i) a default in the payment of the principal of, or premium or
interest on, or fees or other amounts owing with respect to, Designated
Senior Debt occurs and has not been cured or waived in writing; or
(ii) any other default occurs and is continuing with respect to
Designated Senior Debt that permits holders of the Designated Senior Debt
as to which such default relates to accelerate its maturity and the Trustee
receives a notice of such default (a "Payment Blockage Notice") from the
-----------------------
Issuers or the holders of any Designated Senior Debt.
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<PAGE>
Payments on the Notes may and shall be resumed:
(a) in the case of default referred to in Section 10.03(i) hereof,
----------------
upon the date on which such default is cured or waived in writing, and
(b) in case of a default referred to in Section 10.03(ii) hereof, the
-----------------
earlier of the date on which such nonpayment default is cured or waived in
writing or 179 days after the date on which the applicable Payment Blockage
Notice is received, unless the maturity of any Designated Senior Debt has been
accelerated.
No new period of payment blockage may be commenced unless and until
360 days have elapsed since the effectiveness of the immediately prior Payment
Blockage Notice. No nonpayment default referred to in Section 10.03(ii) hereof
-----------------
that existed or was continuing on the date of delivery of any Payment Blockage
Notice to the Trustee by holders of Designated Senior Debt and which is known to
the holders of such Designated Senior Debt, shall be, or be made, the basis for
a subsequent Payment Blockage Notice (unless such nonpayment default shall have
been cured or waived for a period of not less than 181 days).
Section 10.04 Acceleration of Notes.
---------------------
The Issuers and the Trustee shall promptly notify holders of Senior
Debt of the issuance by the Trustee or the receipt of an acceleration notice
following an Event of Default, whereupon the Trustee shall promptly notify the
holders of Designated Senior Debt of such acceleration notice, provided that
failure to give such notice shall not affect the subordination of the Notes to
the Senior Debt as provided in this Article 10.
----------
Section 10.05 When Distribution Must Be Paid Over.
-----------------------------------
In the event that the Trustee or any Holder receives any payment of
any Obligations with respect to the Notes at a time when the Trustee or such
Holder, as applicable, in violation of this Article 10, such payment shall be
----------
held by the Trustee or such Holder, in trust for the benefit of and shall be
paid forthwith over and delivered to, the holders of Senior Debt as their
interests may appear or their Representative under the credit facility,
indenture or other agreement (if any) pursuant to which Senior Debt may have
been issued, as their respective interests may appear, for application to the
payment of all Obligations with respect to Senior Debt remaining unpaid to the
extent necessary to pay such obligations in full in accordance with their terms,
after giving effect to any concurrent payment or distribution to or for the
holders of Senior Debt.
With respect to the holders of Senior Debt, the Trustee undertakes to
perform only such obligations on the part of the Trustee as are specifically set
forth in this Article 10, and no
----------
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<PAGE>
implied covenants or obligations with respect to the holders of Senior Debt
shall be read into this Indenture against the Trustee. The Trustee shall not be
deemed to owe any fiduciary duty to the holders of Senior Debt, and shall not be
liable to any such holders if the Trustee shall pay over or distribute to or on
behalf of Holders or the Issuers or any other Person money or assets to which
any holders of Senior Debt shall be entitled by virtue of this Article 10,
----------
except if such payment is made as a result of the willful misconduct or gross
negligence of the Trustee.
Section 10.06 Notice By The Issuers.
---------------------
The Issuers shall promptly notify the Trustee and the Paying Agent of
any facts known to the Issuers that would cause a payment of any Obligations
with respect to the Notes to violate this Article 10, but failure to give such
----------
notice shall not affect the subordination of the Notes to the Senior Debt as
provided in this Article 10.
----------
Section 10.07 Subrogation.
-----------
After all Senior Debt is irrevocably paid in full in cash or cash
equivalents satisfactory to the holders thereof and until the Notes are paid in
full, Holders shall be subrogated (equally and ratably with all other
Indebtedness pari passu with the Notes) to the rights of holders of Senior Debt
---- -----
to receive distributions applicable to Senior Debt to the extent that
distributions otherwise payable to the Holders have been applied to the payment
of Senior Debt. A distribution made under this Article 10 to holders of Senior
----------
Debt that otherwise would have been made to Holders is not, as between the
Issuers and Holders, a payment by the Issuers on the Notes.
Section 10.08 Relative Rights.
---------------
This Article 10 defines the relative rights of Holders and holders of
----------
Senior Debt. Nothing in this Indenture shall:
(1) impair, as between the Issuers and Holders, the obligation of the
Issuers, which is absolute and unconditional, to pay principal of and
interest on the Notes in accordance with their terms;
(2) affect the relative rights of Holders and creditors of the Issuers
other than their rights in relation to holders of Senior Debt; or
(3) prevent the Trustee or any Holder from exercising its available
remedies upon a Default or Event of Default, subject to the rights of
holders and owners of Senior Debt to receive distributions and payments
otherwise payable to Holders.
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<PAGE>
If the Issuers fail because of this Article 10 to pay principal of or
----------
interest on a Note on the due date, the failure is still a Default or Event of
Default.
Section 10.09 Subordination May Not Be Impaired By the Issuers.
------------------------------------------------
No right of any holder of Senior Debt to enforce the subordination of
the Indebtedness evidenced by the Notes shall be impaired by any act or failure
to act by the Issuers or any Holder or by the failure of the Issuers or any
Holder to comply with this Indenture.
Section 10.10 Distribution Or Notice To Representative.
----------------------------------------
Whenever a distribution is to be made or a notice given to holders of
Senior Debt, the distribution may be made and the notice given to their
Representative.
Upon any payment or distribution of assets of the Issuers referred to
in this Article 10, the Trustee and the Holders shall be entitled to rely upon
----------
any order or decree made by any court of competent jurisdiction or upon any
certificate of such Representative or of the liquidating trustee or agent or
other Person making any distribution to the Trustee or to the Holders for the
purpose of ascertaining the Persons entitled to participate in such
distribution, the holders of Senior Debt and other Indebtedness of the Issuers,
the amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article 10.
----------
Section 10.11 Rights Of Trustee And Paying Agent.
----------------------------------
Notwithstanding the provisions of this Article 10 or any other
----------
provision of this Indenture, the Trustee shall not be charged with knowledge of
the existence of any facts that would prohibit the making of any payment or
distribution by the Trustee, and the Trustee and the Paying Agent may continue
to make payments on the Notes, unless the Trustee shall have received at its
Trustee Office prior to the date of such payment written notice of facts that
would cause the payment of any obligations with respect to the Notes to violate
this Article. Nothing in this Article 10 shall impair the claims of, or
----------
payments to, the Trustee under or pursuant to Section 7.07 hereof.
------------
The Trustee shall be entitled to rely on the delivery to it of a
written notice by a person representing himself to be a holder of Senior Debt
(or a Representative of such holder) to establish that such notice has been
given by a holder of Senior Debt (or a Representative of any such holder). In
the event that the Trustee determines in good faith that further evidence is
required with respect to the right of any Person as a holder of Senior Debt to
participate in any payment or distribution pursuant to this Article 10, the
----------
Trustee may request such Person
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<PAGE>
to furnish evidence to the reasonable satisfaction of the Trustee as to the
amount of Senior Debt held by such Person, the extent to which such Person is
entitled to participate in such payment or distribution and any other facts
pertinent to the rights of such Person under this Article 10, and if such
----------
evidence is not furnished, the Trustee may defer any payment which it may be
required to make for the benefit of such person pursuant to the terms of this
Indenture pending judicial determination as to the rights of such Person to
receive such payment.
The Trustee in its individual or any other capacity may hold Senior
Debt with the same rights it would have if it were not Trustee. Any Agent may
do the same with like rights.
Section 10.12 Authorization To Effect Subordination.
-------------------------------------
Each Holder of a Note by the Holder's acceptance thereof authorizes
and directs the Trustee on the Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in this
Article 10, and appoints the Trustee to act as the Holder's attorney-in-fact for
- ----------
any and all such purposes. If the Trustee does not file a proper proof of claim
or proof of debt in the form required in any proceeding referred to in Section
-------
6.09 hereof at least 30 days before the expiration of the time to file such
- ----
claim, the agents of the lenders under the Senior Credit Agreement are hereby
authorized to file an appropriate claim for and on behalf of the Holders of the
Notes.
Section 10.13 Legend.
------
The Notes and any instrument evidencing any of the Indebtedness
arising under or with respect to this Indenture will, on the date issued, be
inscribed with a legend conspicuously indicating that the payment thereof is
subordinated to the Senior Debt pursuant to the terms of this Indenture.
Section 10.14 No Waiver.
---------
No right of any present or future holder of any Senior Debt to enforce
subordination as herein provided shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of the Issuers or by any act
or failure to act, in good faith, by any such holder, or by any noncompliance by
the Issuers with the terms and provisions and covenants of this Indenture,
regardless of any knowledge thereof which any such holder may have or be
otherwise charged with. The holders of Senior Debt or any security or guarantee
thereof, or therefor, may release, sell, exchange or enforce such security or
guarantee or elect any right or remedy, or delay in enforcing, or release any
right or remedy or otherwise deal freely with the Issuers and any security for
the Senior Debt all without notice to the Noteholders and all without affecting
the liabilities and obligations of the parties to this Indenture, even if any
right
-87-
<PAGE>
or reimbursement or subrogation or other right or remedy of the Noteholders is
extinguished, affected or impaired thereby. No provision of any supplement or
amendment to this Indenture or the Notes which adversely affects in any way the
holders of Senior Debt shall be effective against the holders of Senior Debt who
have not consented thereto in writing.
ARTICLE 11
GENERAL PROVISIONS
Section 11.01 Trust Indenture Act Controls.
----------------------------
This Indenture, whether or not qualified under the TIA, shall be
subject to the terms and provisions if the TIA as if so qualified.
If any provision of this Indenture limits, qualifies, or conflicts
with another provision that is required to be included in this Indenture by the
TIA as in effect at the date hereof or, to the extent required by law, as
amended after the date hereof, the required provision shall control.
Section 11.02 Notices.
-------
Any notice or communication by the Issuers or the Trustee to the other
is duly given if in writing and delivered in person or mailed by first-class
mail, nationally recognized overnight courier, telex or telecopier to the
other's address stated in Section 11.09. The Issuers or the Trustee by written
-------------
notice to the other may designate an additional or different address for
subsequent notices or communications.
Any notice or communication to a Noteholder shall be mailed by first-
class mail to its address shown on the register kept by the Registrar. Failure
to mail a notice or communication to a Noteholder or any defect in it shall not
affect its sufficiency with respect to other Noteholders.
If a notice or communication is given in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Issuers mail a notice or communication to Noteholders, they
shall mail a copy to the Trustee and each Agent at the same time.
All other notices or communications shall be in writing.
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<PAGE>
Section 11.03 Communication by Holders with Other Holders.
-------------------------------------------
Noteholders may communicate pursuant to TIA (S)312(b) with other
Noteholders with respect to their rights under this Indenture or the Notes. The
Issuers, the Trustee, the Registrar and anyone else shall have the protection of
TIA (S)312(c).
Section 11.04 Certificate and Opinion as to Conditions Precedent.
--------------------------------------------------
Upon any request or application by the Issuers to the Trustee to take
any action under this Indenture, the Issuers shall furnish to the Trustee:
(1) an Officers' Certificate stating that, in the opinion of the
Issuers, all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(2) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with; and
(3) where applicable, a certificate or opinion by an independent
certified public accountant satisfactory to the Trustee that complies with
TIA (S) 314(c).
Section 11.05 Statements Required in Certificate or Opinion.
---------------------------------------------
Each certificate or opinion of a Person with respect to compliance
with a condition or covenant provided for in this Indenture shall include:
(1) a statement that the Person making such certificate or opinion has
read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such Person, such Person has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(4) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been complied with; provided, however, that
-------- -------
with respect to matters of fact an Opinion of Counsel may rely on an
Officers' Certificate.
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<PAGE>
Section 11.06 Rules by Trustee and Agents.
---------------------------
The Trustee may make reasonable rules for action by or at a meeting of
Noteholders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
Section 11.07 No Recourse Against Others.
--------------------------
A director, officer, employee, member, manager or stockholder, as
such, of the Issuers or of any Guarantor shall not have any liability for any
obligations of the Issuers or any Guarantor under the Notes or any Guarantee
thereof or this Indenture, or for any claim based thereon, by reason of such
status as director, officer, employee, member, manager or stockholder. Each
Noteholder by accepting a Note waives and releases all such liability. The
waiver and release are part of the consideration for the Notes. Each director,
officer, employee, manager, member and stockholder (other than the Company) is a
third party beneficiary of this Section 11.07.
-------------
Section 11.08 Counterparts.
------------
This Indenture may be executed in any number of counterparts and by
the parties hereto in separate counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
Section 11.09 Other Provisions.
----------------
The Issuers initially appoint the Trustee as Paying Agent, Registrar
and authenticating agent.
The first certificate pursuant to Section 4.03(a) shall be for the
---------------
fiscal year ending on December 31, 1996. The reporting date for Section 7.06 is
------------
December 31 of each year. The first reporting date is December 31, 1996.
The Trustee shall always have, or shall be a subsidiary of a bank or
bank holding company that has, a combined capital and surplus of at least
$100,000,000 as set forth in its most recent published annual report of
condition pursuant to applicable law.
The Issuers' address is:
345 North Virginia Street
Reno, Nevada 89501
Telecopier: (702) 348-7513
Attention: Chief Financial Officer
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<PAGE>
The Trustee's address for notice is:
Fleet National Bank
777 Main Street
Hartford, Connecticut 06115
Attention: Corporate Trust Administration
Telecopier: (860) 986-7920
Section 11.10 Governing Law.
-------------
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN THIS INDENTURE
AND THE NOTES, WITHOUT REGARD TO THE CONFLICTS OF LAWS PROVISIONS THEREOF TO THE
EXTENT THAT THE APPLICATION OF THE LAW OF ANOTHER JURISDICTION WOULD BE REQUIRED
THEREBY. IF ANY ACTION OR PROCEEDING SHALL BE BROUGHT BY A HOLDER OF ANY OF THE
NOTES OR BY THE TRUSTEE IN ORDER TO ENFORCE ANY RIGHT OR REMEDY UNDER THIS
INDENTURE OR UNDER THE NOTES, THE ISSUERS HEREBY CONSENTS AND WILL SUBMIT TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN THE CITY OF NEW
YORK OR ANY FEDERAL COURT SITTING IN THE CITY OF NEW YORK. THE ISSUERS HEREBY
AGREES TO ACCEPT SERVICE OF PROCESS BY NOTICE GIVEN TO IT PURSUANT TO THE
PROVISIONS OF SECTION 11.02.
-------------
Section 11.11 No Adverse Interpretation of Other Agreements.
---------------------------------------------
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Issuers or any of their Subsidiaries. Any such other
indenture, loan or debt agreement may not be used to interpret this Indenture.
Section 11.12 Successors.
----------
All agreements of the Issuers in this Indenture and the Notes shall
bind their successor. All agreements of the Trustee in this Indenture shall
bind its successor.
Section 11.13 Severability.
------------
In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Section 11.14 Table of Contents, Headings, Etc.
--------------------------------
The Table of Contents, Cross-Reference Table and headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof and shall in no way
modify or restrict any of the terms or provisions hereof.
[signature pages follows]
-91-
<PAGE>
The parties have caused this Indenture to be duly executed and
attested, all as of the date first above written, signifying their agreements
contained in this Indenture.
The Issuers:
-----------
ELDORADO RESORTS, LLC
By: /s/ Donald L. Carano
--------------------------------------
Donald L. Carano
Chief Executive Officer,
President and Presiding
Manager
By: /s/ Raymond J. Poncia, Jr.
--------------------------------------
Raymond J. Poncia, Jr.
Corporate Representative of
Hotel Casino Management,
Inc., Manager
ELDORADO CAPITAL CORP.
By: /s/ Donald L. Carano
--------------------------------------
Donald L. Carano
President
By: /s/ Raymond J. Poncia, Jr.
--------------------------------------
Raymond J. Poncia, Jr.
Vice President
Trustee:
-------
FLEET NATIONAL BANK
-------------------
By: /s/ Michael Hopkins
--------------------------------------
Michael Hopkins
Vice President
-92-
<PAGE>
EXHIBIT A
FORM OF PRIVATE PLACEMENT NOTE
CUSIP NO.: 284710AA8
THESE SECURITIES ARE SUBJECT TO SUBORDINATION IN THE MANNER SET FORTH IN THE
INDENTURE REFERRED TO HEREIN.
SEE REVERSE FOR TRANSFER RESTRICTIONS
ELDORADO RESORTS LLC
ELDORADO CAPITAL CORP.
10 1/2% SERIES A SENIOR SUBORDINATED NOTE DUE AUGUST 15, 2006
$ New York, New York
------------------
Note No. July 31, 1996
-------------
Interest Payment Dates: February 15 and August 15
Record Dates: February 1 and August 1
FOR VALUE RECEIVED, the undersigned, Eldorado Resorts LLC, a Nevada
limited-liability company, and Eldorado Capital Corp., a Nevada corporation (the
"Issuers"), hereby jointly and severally promise to pay to __________ or its
-------
registered assigns, the principal sum of $_______________ (or so much thereof as
shall not have been prepaid) on August 15, 2006.
This is one of the Notes Dated: _____________ mentioned in the
within-mentioned Indenture.
ELDORADO RESORTS LLC
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
ELDORADO CAPITAL CORP.
FLEET NATIONAL BANK, By:
as Trustee -----------------------------------
Name:
Title:
By: By:
------------------------------- -----------------------------------
Authorized Signatory Name:
Title:
A-1
<PAGE>
EXHIBIT A
FORM OF PRIVATE PLACEMENT NOTE
CUSIP NO.: 284710AB6
THESE SECURITIES ARE SUBJECT TO SUBORDINATION IN THE MANNER SET FORTH IN THE
INDENTURE REFERRED TO HEREIN.
SEE REVERSE FOR TRANSFER RESTRICTIONS
ELDORADO RESORTS LLC
ELDORADO CAPITAL CORP.
10 1/2% SERIES A SENIOR SUBORDINATED NOTE DUE AUGUST 15, 2006
$ New York, New York
-------------------- July 31, 1996
Note No.
-------------
Interest Payment Dates: February 15 and August 15
Record Dates: February 1 and August 1
FOR VALUE RECEIVED, the undersigned, Eldorado Resorts LLC, a Nevada
limited-liability company, and Eldorado Capital Corp., a Nevada corporation (the
"Issuers"), hereby jointly and severally promise to pay to __________ or its
-------
registered assigns, the principal sum of $___________________ (or so much
thereof as shall not have been prepaid) on August 15, 2006.
This is one of the Notes Dated: _____________ mentioned in the within-
mentioned Indenture.
ELDORADO RESORTS LLC
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
ELDORADO CAPITAL CORP.
FLEET NATIONAL BANK, By:
as Trustee -----------------------------------
Name:
Title:
By: By:
------------------------------- -----------------------------------
Authorized Signatory Name:
Title:
A-1
<PAGE>
BACK OF NOTE
10 1/2% Series A Senior Subordinated Note
Due August 15, 2006
Unless this certificate is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC") to the Issuers
---
or their agent for registration of transfer, exchange or payment, and any
certificate issued is registered in the name of Cede & Co. or in such other name
as is requested by an authorized representative of DTC (and any payment is made
to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein./1/
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE SECURITY
EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER
MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY
EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE ISSUERS THAT (A) SUCH SECURITY
MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (i)(a) TO A PERSON WHO THE
SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT), IN A TRANSACTION MEETING THE REQUIREMENTS
OF RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER
THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (d)
IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE ISSUERS SO REQUEST),
(ii) TO THE ISSUERS, (iii) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO,
NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE
RESTRICTIONS SET FORTH IN (A) ABOVE.
- -------------
/1/ This is to be included only if the Note is in global form.
A-2
<PAGE>
Unless otherwise indicated herein, capitalized terms used herein shall
have the meanings assigned to them in the Indenture (referred to below) and if
no meaning is assigned therein, the meanings assigned to them in the
Registration Rights Agreement (as defined in the Indenture).
1. Interest. Eldorado Resorts LLC, a Nevada limited-liability company
--------
(the "Company") and Eldorado Capital Corp., a Nevada corporation ("Capital" and,
------- -------
together with the Company, the "Issuers") promise to pay interest on the
-------
principal amount of this Note at the rate of 10 1/2% per annum from July 31,
--- -----
1996 until maturity (plus any Liquidated Damages required to be paid pursuant to
the terms of the Registration Rights Agreement). The Issuers shall pay interest
semiannually on February 15 and August 15 of each year, or if any such day is
not a Business Day, on the next succeeding Business Day (each an Interest
Payment Date). Interest on the Notes will accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from the first
date on which any Notes are issued; provided, that if there is no existing
--------
Default in the payment of interest, and if this Note is authenticated between a
Record Date referred to on the face hereof and the next succeeding Interest
Payment Date, interest shall accrue from such next succeeding Interest Payment
Date; and provided, further, that the first Interest Payment Date shall be
-------- -------
February 15, 1997. Interest will be computed on the basis of a 360-day year of
twelve 30-day months.
The Issuer shall pay default interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue installments of
interest and Liquidated Damages (without regard to any applicable grace periods)
at the same interest rate as is applicable to the Notes, to the extent lawful.
Such default interest shall be paid to the Persons who are Holders on a
subsequent special record date, which date shall be at the earliest practicable
date but in all events at least five Business Days prior to the payment date.
The Issuers shall notify the Trustee in writing of the amount of defaulted
interest proposed to be paid on each Note and the date of the proposed payment.
The Issuers shall, with the consent of the Trustee, fix or cause to be fixed
each such special record date and payment date. At least 15 days before the
special record date, the Issuers (or, upon the written request of the Issuers,
the Trustee in the name and at the expense of the Issuers) shall mail or cause
to be mailed to the Holders a notice that states the special record date, the
related payment date and the amount of such default interest to be paid.
Notwithstanding the foregoing, at no time shall the maximum aggregate
interest rate borne by the Notes exceed the maximum amount permitted under
applicable usury laws.
A-3
<PAGE>
2. Method of Payment. The Issuers shall pay interest on the Notes (except
-----------------
defaulted interest) to the Persons who are registered Holders of Notes at the
close of business on the February 1 or August 1 immediately preceding the
Interest Payment Date (each a "Record Date") even if such Notes are cancelled
after the Record Date and on or before the Interest Payment Date, except as
provided in Section 2.13 of the Indenture with respect to defaulted interest.
Holders must surrender Notes to a Paying Agent to collect principal payments and
premium payments, if any. The Issuers shall pay principal of and premium,
interest and Liquidated Damages, if any, on the Notes at the office or agency of
the Issuers maintained for such purpose or, at the option of the Issuers,
payment of interest may be made by check mailed to the Holders of the Notes at
their respective addresses set forth in the register of Holders of Notes;
provided, that payment by wire transfer of immediately available funds will be
- --------
required with respect to principal of, and premium, interest and Liquidated
Damages, if any, on all Global Notes and all other Notes the Holders of which
shall have provided appropriate wire transfer instructions to the Issuers or the
Paying Agent. Until otherwise designated by the Issuers, the Issuers' office or
agency will be the office of the Trustee maintained for such purpose. Such
payment shall be in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private debts.
3. Paying Agent and Registrar. Fleet National Bank, 14 Wall Street, 8th
--------------------------
Floor, New York, New York 10005 (the "Trustee") will act as the initial Paying
-------
Agent or Registrar without prior notice to the Holders. Except as otherwise
provided in the Indenture, the Issuers may act in any such capacity.
4. Indenture. The Issuers issued the Notes under an Indenture dated as of
---------
July 31, 1996 (the "Indenture") between the Issuers and the Trustee. The terms
---------
of the Notes include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S.
Code (S)(S)77aaa-77bbbb) as in effect on the date of the Indenture. The Notes
are subject to, and qualified by, all such terms, certain of which are
summarized herein, and Noteholders are referred to the Indenture and such Act
for a statement of such terms. The Notes are general, unsecured obligations of
the Issuers limited to $100,000,000 in aggregate principal amount.
5. Subordination. The payment of principal of, and premium, interest and
-------------
Liquidated Damages, if any, on the Notes shall be subordinated in right of
payment as set forth in the Indenture, to the prior payment in full of all
Senior Debt, whether outstanding on the date of the Indenture or thereafter
incurred.
A-4
<PAGE>
6. Optional Redemption.
-------------------
(a) Except as set forth in subparagraph (b) below of this Paragraph 6
or as required by applicable gaming law, the Issuers shall not have the option
to redeem the Notes prior to August 15, 2001. Thereafter, the Issuers shall
have the option to redeem the Notes, in whole or in part, at the redemption
prices (expressed as percentages of principal amount) set forth below plus
accrued and unpaid interest and Liquidated Damages, if any, thereon, to the
applicable redemption date, if redeemed during the twelve-month period beginning
on August 15 of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
<S> <C>
2001.................. 105.25%
2002.................. 103.50%
2003.................. 101.75%
2004 and thereafter... 100.00%
</TABLE>
(b) Notwithstanding the provisions of subparagraph (a) of this
Paragraph 6, on or prior to August 15, 1999, the Issuers may redeem up to 33% in
aggregate principal amount of the Notes originally issued under the Indenture at
a redemption price of 110% of the principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages, if any, thereon, to the redemption date,
with the net proceeds of one or more Public Equity Offerings; provided that at
--------
least $67.0 million in aggregate principal amount of the Notes remain
outstanding immediately after the occurrence of each such redemption; and
provided, further, that notice of each such redemption shall have been given
- -------- -------
within 30 days after the date of the closing of any such Public Equity Offering.
7. Mandatory Redemption.
--------------------
Except as set forth in Paragraph 8 below, the Issuers shall not be
-----------
required to make mandatory redemption or sinking fund payments with respect to
the Notes.
A-5
<PAGE>
8. Repurchase at the Option of Holders.
-----------------------------------
(a) If there is a Change of Control, the Issuers shall be required to
make an offer (a "Change of Control Offer") pursuant to Section 4.08 of the
-----------------------
Indenture to repurchase all or any part (equal to $1,000 or an integral multiple
thereof) of each Holder's Notes at a purchase price in cash equal to 101% of the
aggregate principal amount thereof, plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the date of purchase in accordance with
the procedures set forth in the Indenture. The Issuers shall first comply with
the subordination provisions of the Indenture before they shall be required to
repurchase Notes pursuant to a Change of Control Offer.
(b) If the Issuers or a Restricted Subsidiary consummates any Asset
Sales, the Issuers shall be required to make an offer to all Holders of Notes
(an "Asset Sale Offer") pursuant to Sections 3.09 and 4.15 of the Indenture to
----------------
purchase the maximum principal amount of Notes that may be purchased out of the
Excess Proceeds, at a purchase price in cash equal to 100% of the principal
amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the date of purchase in accordance with the procedures set forth in
the Indenture. If the aggregate principal amount of Notes surrendered by
Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select
the Notes to be purchased on a pro rata basis.
--- ----
(c) Holders of Notes that are the subject of a Change of Control
Offer or an Asset Sale Offer, as applicable, will receive notice from the
Issuers prior to any related purchase date and may elect to have such Notes
purchased by completing the form titled "Option of Holder to Elect Purchase" on
the reverse of the Notes.
9. Gaming Redemption. Notwithstanding any other provision of this
-----------------
Note, if any Gaming Authority requires that a Holder or beneficial owner of
Notes must be licensed, qualified or found suitable under any applicable gaming
law and such Holder or beneficial owner fails to apply for a license,
qualification or a finding of suitability within 30 days after being requested
to do so by the Gaming Authority (or such lesser period that may be required by
such Gaming Authority), or if such Holder or such beneficial owner is not so
licensed, qualified or found suitable, the Issuers shall have the right, at
their option, (i) to require such Holder or beneficial owner to dispose of such
Holders or beneficial owner's Notes within 30 days of receipt of such notice of
such finding by the applicable Gaming Authority or such earlier date as may be
ordered by such Gaming Authority or (ii) to redeem the Notes of such Holder or
beneficial owner at the lesser of the principal amount thereof or the price at
which such Holder or beneficial owner acquired such Notes, together with, in
A-6
<PAGE>
either case, accrued and unpaid interest and Liquidated Damages, if any, thereon
to the earlier of the date of redemption or such earlier date as may be required
by such Gaming Authority or the date of the finding of unsuitability by such
Gaming Authority, which may be less than 30 days following the notice of
redemption, if so ordered by such Gaming Authority. The Holder or beneficial
owner of Notes applying for a license, qualification or a finding of suitability
with any Gaming Authority must pay all costs of the licensure or investigation
for such qualification or finding of suitability. The Issuers shall not be
required to pay or reimburse any Holder or beneficial owner of Notes who is
required to apply for such license, qualification or a finding of suitability.
10. Notice of Redemption. Except in the case of a redemption
--------------------
effected pursuant to Section 9 hereof, notice of redemption shall be mailed by
first class mail at least 30 days but not more than 60 days before the
redemption date to each Holder of Notes to be redeemed at its registered
address. If any Note is to be redeemed in part only, the notice of redemption
that relates to such Note shall state the portion of the principal amount
thereof to be redeemed. Notes may be redeemed in part but only in whole
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date, interest ceases to accrue on Notes
or portions thereof called for redemption.
11. Denominations, Transfer, Exchange. The Notes are in registered
---------------------------------
form without coupons in denominations of $1,000 and integral multiples of
$1,000. The transfer of Notes may be registered and Notes may be exchanged as
provided in the Indenture. The Registrar and the Trustee may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and the Issuers may require a Holder to pay any taxes and fees required by law
or permitted by the Indenture. The Issuers need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, the Issuers
need not exchange or register the transfer of any Notes for a period of 15 days
before the date on which a notice of redemption is mailed or during the period
between a Record Date and the corresponding Interest Payment Date.
12. Persons Deemed Owners. The registered Holder of a Note may be
---------------------
treated as its owner for all purposes.
13. Amendment, Supplement and Waiver. The Issuers and the Trustee
--------------------------------
may, without the consent of the Holders of any outstanding Notes, amend, waive
or supplement the Indenture or the Notes for certain specified purposes,
including, among other things: (1) to cure any ambiguity, defect or
inconsistency,
A-7
<PAGE>
(2) to comply with Section 5.01 of the Indenture, (3) to provide for
------------
uncertificated Notes in addition to or in place of certificated Notes, (4) to
make any change that does not adversely affect the legal rights hereunder of any
Noteholder, (5) to add to the covenants, conditions and restrictions of the
Issuers, for the benefit of the Noteholders, or to surrender any right or power
herein conferred upon the Issuers, or (6) to modify, eliminate or add to the
provisions of this Indenture to such extent as shall be necessary to effect the
qualification of this Indenture under the TIA, or under any similar federal
statute hereafter enacted.
Upon the request of the Issuers accompanied by a resolution of the
Management Committee of the Company and a resolution of the board of directors
of Capital authorizing the execution of any such amended or supplemental
Indenture, and upon the receipt by the Trustee of an Officer's Certificate and
an Opinion of Counsel stating that the execution of such amended or supplemental
Indenture is authorized or permitted by this Indenture, the Trustee shall join
the Issuers in its execution of any such amended or supplemental Indenture and
shall make such further appropriate agreements and stipulations as may be
therein contained; provided that the Trustee shall not be obligated to enter
into any such amended or supplemental Indenture that affects its own rights,
duties or immunities under this Indenture or otherwise.
(b) Except as provided in Section 9.02(b) of the Indenture and
---------------
subject to Sections 6.02, 6.04 and 6.07 thereof, (i) the Issuers and the Trustee
----------------------------
may amend, modify or supplement the Indenture or the Notes with the written
consent of the Holders of at least a majority in aggregate principal amount of
the then outstanding Notes (including without limitation consents obtained in
connection with a purchase of, or tender offer in exchange for, the Notes) and
(ii) the Holders of a majority in aggregate principal amount of the Notes then
outstanding may by written instrument waive any existing default or compliance
in a particular instance by the Issuers with any provision of the Indenture or
the Notes.
(c) Notwithstanding anything to the contrary contained in the
Indenture or the Notes, without the written consent of each Holder affected
thereby, no amendment, modification or supplement of the Indenture or the Notes,
and no waiver of any default of rights thereunder may (with respect to any of
the Notes held by any non-consenting Holder): (i) reduce the principal amount of
Notes whose Holders must consent to an amendment, supplement or waiver, (ii)
reduce the principal of or change the fixed maturity of any Note or alter the
provisions with respect to the redemption of the Notes (other than provisions
relating to Sections 2.11, 3.09, 4.08 and 4.15 of the
----------------------------------
A-8
<PAGE>
Indenture), (iii) reduce the rate of or change the time for payment of interest
on any Note, (iv) waive a Default or Event of Default in the payment of
principal of, or premium, interest or Liquidated Damages (if any) on, the Notes
(except a rescission of acceleration of the Notes by Holders of at least a
majority in aggregate principal amount of the Notes and a waiver of the payment
default that resulted from such acceleration), (v) make any Note payable in
money other than that stated in the Notes, (vi) make any change in Sections 6.04
-------------
or 6.07 of the Indenture or in the foregoing amendment and waiver provisions or
- -------
(vii) waive a redemption payment with respect to any Note (other than a payment
required by the provisions described in Sections 2.11, 3.09, 4.08 and 4.15 of
----------------------------------
the Indenture).
14. Defaults and Remedies. Events of Default include:
---------------------
(i) default for 30 days in the payment when due of interest or
Liquidated Damages, if any, on the Notes (whether or not prohibited by
Article 10 of the Indenture);
----------
(ii) default in payment when due of the principal of or premium, if
any, on the Notes (whether or not prohibited by Article 10 of the
----------
Indenture);
(iii) failure by the Issuers to comply with the repurchase provisions
of Sections 3.09, 4.08 or 4.15 of the Indenture or the covenants contained
---------------------------
in Section 4.05 of the Indenture;
-----------------------------
(iv) failure by the Issuers for 30 days after notice to comply with
any of its other agreements in the Indenture or the Notes;
(v) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Issuers or any of their Restricted
Subsidiaries (or the payment of which is guaranteed by the Issuers or any
of their Restricted Subsidiaries) whether such Indebtedness or guarantee
now exists, or is created after the date of the Indenture having an
outstanding principal amount of more than $5.0 million, individually or in
the aggregate, if such Indebtedness has been accelerated (or has matured);
(vi) failure by the Issuers or any of their Restricted Subsidiaries
to pay final non-appealable judgments aggregating in excess of $5.0
million, which judgments are not paid, discharged or stayed for a period of
60 days;
A-9
<PAGE>
(vii) any Guarantee of a Significant Guarantor shall be held in a
judicial proceeding to be unenforceable or invalid or shall cease for any
reason to be in full force and effect, or any Significant Guarantor, or any
Person acting on behalf of any Significant Guarantor, shall deny or
disaffirm its obligations under its Guarantee;
(viii) any Gaming License relating to a Material Gaming Facility is
revoked, terminated or suspended or otherwise ceases to be effective,
resulting in the cessation or suspension of operation for a period of more
than 30 days of any material portion or aspect of the Gaming Business of
any Gaming Facility;
(ix) the Member Notes represent Indebtedness for more than 90 days;
(x) either Issuer, any Significant Subsidiary of either Issuer, or
any group of Subsidiaries of either Issuer that, considered together, would
constitute a Significant Subsidiary of either Issuer, pursuant to or within
the meaning of any Bankruptcy Law: (A) commences a voluntary case, (B)
consents to the entry of an order for relief against it in an involuntary
case, (C) consents to the appointment of a custodian of it or for all or
substantially all of its property, (D) makes a general assignment for the
benefit of its creditors, or (E) admits in writing its inability to pay its
debts as they become due; and
(xi) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that: (A) is for relief against either Issuer, any
Significant Subsidiary of either Issuer, or any group of Subsidiaries of
either Issuer that, considered together, would constitute a Significant
Subsidiary of either Issuer, in an involuntary case, (B) appoints a
custodian of either Issuer or any Significant Subsidiary of either Issuer,
or for all or substantially all of the property of either Issuer or any
Significant Subsidiary of either Issuer, or (C) orders the liquidation of
either Issuer, any Significant Subsidiary of either Issuer, or any group of
Subsidiaries that, considered together, would constitute a Significant
Subsidiary of either Issuer; and the order or decree remains unstayed and
in effect for 60 consecutive days.
15. Trustee Dealings with the Issuers. The Trustee under the Indenture,
---------------------------------
or any of its Affiliates, in their individual or any other capacities, may make
or continue loans to or guaranteed by, accept deposits from, and perform
services for the Issuers or their Affiliates, and may otherwise deal with the
Issuers or their Affiliates, as if the Trustee were not Trustee.
A-10
<PAGE>
16. No Recourse Against Others. A director, officer, employee, member,
--------------------------
manager or stockholder, as such, of the Issuers or of any Guarantor shall not
have any liability for any obligations of the Issuers or any Guarantor under the
Notes or the Indenture or for any claim based thereon, in respect of or by
reason of such status as director, officer, employee, member, manager or
stockholder. Each Noteholder by accepting a Note waives and releases all such
liability.
17. Authentication. This Note shall not be valid until authenticated by
--------------
the manual signature of the Trustee or an authenticating agent.
18. Abbreviations. Customary abbreviations may be used in the name of a
-------------
Noteholder or an assignee, such as: TEN CO (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
19. Additional Rights of Holders. In addition to the rights provided to
----------------------------
Holders of the Notes under the Indenture, Holders shall have all the rights set
forth in the Registration Rights Agreement.
20. CUSIP Numbers. The Issuers have caused one or more CUSIP numbers to
-------------
be printed on the Notes and the Trustee may use CUSIP numbers in notices of
redemption or exchange as a convenience to the Holders. No representation is
made as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption or exchange and reliance may be placed
only on the other identification numbers placed thereon.
21. GOVERNING LAW. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN
-------------
AND BE USED TO CONSTRUE THE INDENTURE AND THE NOTES WITHOUT REGARD TO THE
CONFLICTS OF LAWS PROVISIONS THEREOF TO THE EXTENT THAT THE APPLICATION OF THE
LAW OF ANOTHER JURISDICTION WOULD BE REQUIRED.
The Issuers shall furnish to any Noteholder upon written request and
without charge a copy of the Indenture. Requests may be made to: Eldorado
Resorts LLC, 345 North Virginia Street, Reno, Nevada 89501, Attention:
Secretary.
A-11
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below:
I or we assign and transfer this Note to:
_____________________________________________
(Assignee)
_____________________________________________
(Assignee's soc. sec. or tax I.D. no.)
_____________________________________________
(Assignee's name, address and zip code)
and irrevocably appoint:
_____________________________________________
as agent to transfer this Note on the books of the Issuers. The agent may
substitute another to act for him or her.
Dated: _____________________
-------------------------------------------------
(name as appears on the face of the Note)
By:
---------------------------------------------
Signature guaranteed by:
------------------------
A-12
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Issuers pursuant to
Sections 3.09 and 4.08 or Section 4.15 of the Indenture and paragraph 8 of this
- -------------------------------------- -----------
Note, check the box:
[_]
If you want to elect to have only part of this Note purchased by the
Issuers pursuant to Sections 3.09 and 4.08 or Section 4.15 of the Indenture and
--------------------------------------
paragraph 8 of this Note, state the amount:
- -----------
$___________________________________
(in an integral multiple of $1,000)
Date: Your Signature:__________________________________________
(Sign exactly as your name appears on the
other side of this Note)
Signature Guarantee:
A-13
<PAGE>
SCHEDULE OF EXCHANGES OF CERTIFICATED SECURITIES/1/
The following exchanges of a part of this Global Note for Certificated Notes
have been made:
Principal Signature
Amount of Amount of Amount of of authorized
Decrease in Increase in this Global officer of
Principal Principal Note Trustee or
Date of Amount of Amount of following Global Note
Exchange this Global this Global such Holder
Note Note decreases
(or increases)
- -------------
/1/ This is to be included only if the Note is in global form.
A-14
<PAGE>
EXHIBIT B
FORM OF EXCHANGE NOTE
CUSIP NO.: __________
THESE SECURITIES ARE SUBJECT TO SUBORDINATION IN THE MANNER SET FORTH IN THE
INDENTURE REFERRED TO HEREIN.
SEE REVERSE FOR TRANSFER RESTRICTIONS
ELDORADO RESORTS LLC
ELDORADO CAPITAL CORP.
10 1/2% SERIES B SENIOR SUBORDINATED NOTE DUE AUGUST 15, 2006
$ New York, New York
--------------------
Note No. , 1996
------------- ------------
Interest Payment Dates: February 15 and August 15
Record Dates: February 1 and August 1
FOR VALUE RECEIVED, the undersigned, Eldorado Resorts LLC, a Nevada
limited-liability company, and Eldorado Capital Corp., a Nevada corporation (the
"Issuers"), hereby jointly and severally promise to pay to __________ or its
-------
registered assigns, the principal sum of $_________________ (or so much thereof
as shall not have been prepaid) on August 15, 2006.
This is one of the Notes Dated: ______________ mentioned in the
within-mentioned Indenture.
ELDORADO RESORTS LLC
By:
----------------------------------------
Name:
Title:
By:
----------------------------------------
Name:
Title:
ELDORADO CAPITAL CORP.
FLEET NATIONAL BANK,
By:
--------------------------
as Trustee Name:
Title:
By: By:
-------------------------- --------------------------------------
Authorized Signatory Name:
Title:
B-1
<PAGE>
BACK OF NOTE
10 1/2% Series B Senior Subordinated Note
Due August 15, 2006
Unless this certificate is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC") to the Issuers
---
or their agent for registration of transfer, exchange or payment, and any
certificate issued is registered in the name of Cede & Co. or in such other name
as is requested by an authorized representative of DTC (and any payment is made
to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein./2/
Unless otherwise indicated herein, capitalized terms used herein shall
have the meanings assigned to them in the Indenture (referred to below) and if
no meaning is assigned therein, the meanings assigned to them in the
Registration Rights Agreement (as defined in the Indenture).
1. Interest. Eldorado Resorts LLC, a Nevada limited-liability company
--------
(the "Company") and Eldorado Capital Corp., a Nevada corporation ("Capital" and,
------- -------
together with the Company, the "Issuers") promise to pay interest on the
-------
principal amount of this Note at the rate of 10 1/2% per annum from July 31,
--- -----
1996 until maturity (plus any Liquidated Damages required to be paid pursuant to
the terms of the Registration Rights Agreement). The Issuers shall pay interest
semiannually on February 15 and August 15 of each year, or if any such day is
not a Business, or the next succeeding Business Day (each an Interest Payment
Date). Interest on the Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the first date on
which any Notes are issued; provided, that if there is no existing Default in
--------
the payment of interest, and if this Note is authenticated between a Record Date
referred to on the face hereof and the next succeeding Interest Payment Date,
interest shall accrue from such next succeeding Interest Payment Date; and
provided, further, that the first Interest Payment Date shall be February 15,
- -------- -------
1996. Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
The Issuer shall pay default interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue installments of
interest and Liquidated Damages (without regard to any applicable grace periods)
at the same interest rate
- ------------
/2/ This is to be included only if the Note is in global form.
B-2
<PAGE>
as is applicable to the Notes, to the extent lawful. Such default interest
shall be paid to the Persons who are Holders on a subsequent special record
date, which date shall be at the earliest practicable date but in all events at
least five Business Days prior to the payment date. The Issuers shall notify
the Trustee in writing of the amount of defaulted interest proposed to be paid
on each Note and the date of the proposed payment. The Issuers shall, with the
consent of the Trustee, fix or cause to be fixed each such special record date
and payment date. At least 15 days before the special record date, the Issuers
(or, upon the written request of the Issuers, the Trustee in the name and at the
expense of the Issuers) shall mail or cause to be mailed to the Holders a notice
that states the special record date, the related payment date and the amount of
such default interest to be paid.
Notwithstanding the foregoing, at no time shall the maximum aggregate
interest rate borne by the Notes exceed the maximum amount permitted under
applicable usury laws.
2. Method of Payment. The Issuers shall pay interest on the Notes (except
-----------------
defaulted interest) to the Persons who are registered Holders of Notes at the
close of business on the February 1 or August 1 immediately preceding the
Interest Payment Date (each a "Record Date") even if such Notes are cancelled
after the Record Date and on or before the Interest Payment Date, except as
provided in Section 2.13 of the Indenture with respect to defaulted interest.
Holders must surrender Notes to a Paying Agent to collect principal payments and
premium payments, if any. The Issuers shall pay principal of and premium,
interest and Liquidated Damages, if any, on the Notes at the office or agency of
the Issuers maintained for such purpose or, at the option of the Issuers,
payment of interest may be made by check mailed to the Holders of the Notes at
their respective addresses set forth in the register of Holders of Notes;
provided, that payment by wire transfer of immediately available funds will be
- --------
required with respect to principal of, and premium, interest and Liquidated
Damages, if any, on all Global Notes and all other Notes the Holders of which
shall have provided appropriate wire transfer instructions to the Issuers or the
Paying Agent. Until otherwise designated by the Issuers, the Issuers' office or
agency will be the office of the Trustee maintained for such purpose. Such
payment shall be in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private debts.
3. Paying Agent and Registrar. Fleet National Bank, 14 Wall Street, 8th
--------------------------
Floor, New York, New York 10005 (the "Trustee") will act as the initial Paying
-------
Agent or Registrar without prior notice to the Holders. Except as otherwise
provided in the Indenture, the Issuers may act in any such capacity.
B-3
<PAGE>
4. Indenture. The Issuers issued the Notes under an Indenture dated as of
---------
_______________, 1996 (the "Indenture") between the Issuers and the Trustee.
---------
The terms of the Notes include those stated in the Indenture and those made part
of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15
U.S. Code (S)(S)77aaa-77bbbb) as in effect on the date of the Indenture. The
Notes are subject to, and qualified by, all such terms, certain of which are
summarized herein, and Noteholders are referred to the Indenture and such Act
for a statement of such terms. The Notes are general, unsecured obligations of
the Issuers limited to $100,000,000 in aggregate principal amount.
5. Subordination. The payment of principal of, and premium, interest and
-------------
Liquidated Damages, if any, on the Notes shall be subordinated in right of
payment as set forth in the Indenture, to the prior payment in full of all
Senior Debt, whether outstanding on the date of the Indenture or thereafter
incurred.
6. Optional Redemption.
-------------------
(a) Except as set forth in subparagraph (b) below of this Paragraph 6
or as required by applicable gaming law, the Issuers shall not have the option
to redeem the Notes prior to August 15, 2001. Thereafter, the Issuers shall
have the option to redeem the Notes, in whole or in part, at the redemption
prices (expressed as percentages of principal amount) set forth below plus
accrued and unpaid interest and Liquidated Damages, if any, thereon, to the
applicable redemption date, if redeemed during the twelve-month period beginning
on August 15 of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
<S> <C>
2001.................. 105.25%
2002.................. 103.50%
2003.................. 101.75%
2004 and thereafter... 100.00%
</TABLE>
(b) Notwithstanding the provisions of subparagraph (a) of this
Paragraph 6, on or prior to August 15, 1999, the Issuers may redeem up to 33% in
aggregate principal amount of the Notes originally issued under the Indenture at
a redemption price of 110% of the principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages, if any, thereon, to the redemption date,
with the net proceeds of one or more Public Equity Offerings; provided that at
--------
least $67.0 million in
B-4
<PAGE>
aggregate principal amount of the Notes remain outstanding immediately after the
occurrence of each such redemption; and provided, further, that notice of each
-------- -------
such redemption shall have been given within 30 days after the date of the
closing of any such Public Equity Offering.
7. Mandatory Redemption.
--------------------
Except as set forth in Paragraph 8 below, the Issuers shall not be
-----------
required to make mandatory redemption or sinking fund payments with respect to
the Notes.
8. Repurchase at the Option of Holders.
-----------------------------------
(a) If there is a Change of Control, the Issuers shall be required to
make an offer (a "Change of Control Offer") pursuant to Section 4.08 of the
-----------------------
Indenture to repurchase all or any part (equal to $1,000 or an integral multiple
thereof) of each Holder's Notes at a purchase price in cash equal to 101% of the
aggregate principal amount thereof, plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the date of purchase in accordance with
the procedures set forth in the Indenture. The Issuers shall first comply with
the subordination provisions of the Indenture before they shall be required to
repurchase Notes pursuant to a Change of Control Offer.
(b) If the Issuers or a Restricted Subsidiary consummates any Asset
Sales, the Issuers shall be required to make an offer to all Holders of Notes
(an "Asset Sale Offer") pursuant to Sections 3.09 and 4.15 of the Indenture to
----------------
purchase the maximum principal amount of Notes that may be purchased out of the
Excess Proceeds, at a purchase price in cash equal to 100% of the principal
amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the date of purchase in accordance with the procedures set forth in
the Indenture. If the aggregate principal amount of Notes surrendered by
Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select
the Notes to be purchased on a pro rata basis.
--- ----
(c) Holders of Notes that are the subject of a Change of Control
Offer or an Asset Sale Offer, as applicable, will receive notice from the
Issuers prior to any related purchase date and may elect to have such Notes
purchased by completing the form titled "Option of Holder to Elect Purchase" on
the reverse of the Notes.
9. Gaming Redemption. Notwithstanding any other provision of this
-----------------
Note, if any Gaming Authority requires that a Holder or beneficial owner of
Notes must be licensed, qualified or found suitable under any applicable gaming
law and such Holder or beneficial owner fails to apply for a license,
qualification or a
B-5
<PAGE>
finding of suitability within 30 days after being requested to do so by the
Gaming Authority (or such lesser period that may be required by such Gaming
Authority), or if such Holder or such beneficial owner is not so licensed,
qualified or found suitable, the Issuers shall have the right, at their option,
(i) to require such Holder or beneficial owner to dispose of such Holders or
beneficial owner's Notes within 30 days of receipt of such notice of such
finding by the applicable Gaming Authority or such earlier date as may be
ordered by such Gaming Authority or (ii) to redeem the Notes of such Holder or
beneficial owner at the lesser of the principal amount thereof or the price at
which such Holder or beneficial owner acquired such Notes, together with, in
either case, accrued and unpaid interest and Liquidated Damages, if any, thereon
to the earlier of the date of redemption or such earlier date as may be required
by such Gaming Authority or the date of the finding of unsuitability by such
Gaming Authority, which may be less than 30 days following the notice of
redemption, if so ordered by such Gaming Authority. The Holder or beneficial
owner of Notes applying for a license, qualification or a finding of suitability
with any Gaming Authority must pay all costs of the licensure or investigation
for such qualification or finding of suitability. The Issuers shall not be
required to pay or reimburse any Holder or beneficial owner of Notes who is
required to apply for such license, qualification or a finding of suitability.
10. Notice of Redemption. Except in the case of a redemption
--------------------
effected pursuant to Section 9 hereof, notice of redemption shall be mailed by
first class mail at least 30 days but not more than 60 days before the
redemption date to each Holder of Notes to be redeemed at its registered
address. If any Note is to be redeemed in part only, the notice of redemption
that relates to such Note shall state the portion of the principal amount
thereof to be redeemed. Notes may be redeemed in part but only in whole
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date, interest ceases to accrue on Notes
or portions thereof called for redemption.
11. Denominations, Transfer, Exchange. The Notes are in registered
---------------------------------
form without coupons in denominations of $1,000 and integral multiples of
$1,000. The transfer of Notes may be registered and Notes may be exchanged as
provided in the Indenture. The Registrar and the Trustee may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and the Issuers may require a Holder to pay any taxes and fees required by law
or permitted by the Indenture. The Issuers need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, the Issuers
need not exchange or register the transfer of any Notes
B-6
<PAGE>
for a period of 15 days before the date on which a notice of redemption is
mailed or during the period between a Record Date and the corresponding Interest
Payment Date.
12. Persons Deemed Owners. The registered Holder of a Note may be
---------------------
treated as its owner for all purposes.
13. Amendment, Supplement and Waiver. The Issuers and the Trustee
--------------------------------
may, without the consent of the Holders of any outstanding Notes, amend, waive
or supplement the Indenture or the Notes for certain specified purposes,
including, among other things: (1) to cure any ambiguity, defect or
inconsistency, (2) to comply with Section 5.01 of the Indenture, (3) to provide
------------
for uncertificated Notes in addition to or in place of certificated Notes, (4)
to make any change that does not adversely affect the legal rights hereunder of
any Noteholder, (5) to add to the covenants, conditions and restrictions of the
Issuers, for the benefit of the Noteholders, or to surrender any right or power
herein conferred upon the Issuers, or (6) to modify, eliminate or add to the
provisions of this Indenture to such extent as shall be necessary to effect the
qualification of this Indenture under the TIA, or under any similar federal
statute hereafter enacted.
Upon the request of the Issuers accompanied by a resolution of the
Management Committee of the Company and a resolution of the board of directors
of Capital authorizing the execution of any such amended or supplemental
Indenture, and upon the receipt by the Trustee of an Officer's Certificate and
an Opinion of Counsel stating that the execution of such amended or supplemental
Indenture is authorized or permitted by this Indenture, the Trustee shall join
the Issuers in its execution of any such amended or supplemental Indenture and
shall make such further appropriate agreements and stipulations as may be
therein contained; provided that the Trustee shall not be obligated to enter
into any such amended or supplemental Indenture that affects its own rights,
duties or immunities under this Indenture or otherwise.
(b) Except as provided in Section 9.02(b) of the Indenture and
---------------
subject to Sections 6.02, 6.04 and 6.07 thereof, (i) the Issuers and the Trustee
----------------------------
may amend, modify or supplement the Indenture or the Notes with the written
consent of the Holders of at least a majority in aggregate principal amount of
the then outstanding Notes (including without limitation consents obtained in
connection with a purchase of, or tender offer in exchange for, the Notes) and
(ii) the Holders of a majority in aggregate principal amount of the Notes then
outstanding may by written instrument waive any existing default or compliance
in a particular instance by the Issuers with any provision of the Indenture or
the Notes.
B-7
<PAGE>
(c) Notwithstanding anything to the contrary contained in the
Indenture or the Notes, without the written consent of each Holder affected
thereby, no amendment, modification or supplement of the Indenture or the Notes,
and no waiver of any default of rights thereunder may (with respect to any of
the Notes held by any non-consenting Holder): (i) reduce the principal amount of
Notes whose Holders must consent to an amendment, supplement or waiver, (ii)
reduce the principal of or change the fixed maturity of any Note or alter the
provisions with respect to the redemption of the Notes (other than provisions
relating to Sections 2.11, 3.09, 4.08 and 4.15 of the Indenture), (iii) reduce
----------------------------------
the rate of or change the time for payment of interest on any Note, (iv) waive a
Default or Event of Default in the payment of principal of, or premium, interest
or Liquidated Damages (if any) on, the Notes (except a rescission of
acceleration of the Notes by Holders of at least a majority in aggregate
principal amount of the Notes and a waiver of the payment default that resulted
from such acceleration), (v) make any Note payable in money other than that
stated in the Notes, (vi) make any change in Sections 6.04 or 6.07 of the
---------------------
Indenture or in the foregoing amendment and waiver provisions or (vii) waive a
redemption payment with respect to any Note (other than a payment required by
the provisions described in Sections 2.11, 3.09, 4.08 and 4.15 of the
----------------------------------
Indenture).
14. Defaults and Remedies. Events of Default include:
---------------------
(i) default for 30 days in the payment when due of interest or
Liquidated Damages, if any, on the Notes (whether or not prohibited by
Article 10 of the Indenture);
----------
(ii) default in payment when due of the principal of or premium, if
any, on the Notes (whether or not prohibited by Article 10 of the
----------
Indenture);
(iii) failure by the Issuers to comply with the repurchase provisions
of Sections 3.09, 4.08 or 4.15 of the Indenture or the covenants contained
---------------------------
in Section 4.05 of the Indenture;
-----------------------------
(iv) failure by the Issuers for 30 days after notice to comply with
any of its other agreements in the Indenture or the Notes;
(v) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Issuers or any of their Restricted
Subsidiaries (or the payment of which is guaranteed by the Issuers or any
of their Restricted Subsidiaries) whether such Indebtedness or guarantee
now exists, or is created
B-8
<PAGE>
after the date of the Indenture having an outstanding principal amount of
more than $5.0 million, individually or in the aggregate, if such
Indebtedness has been accelerated (or has matured);
(vi) failure by the Issuers or any of their Restricted Subsidiaries
to pay final non-appealable judgments aggregating in excess of $5.0
million, which judgments are not paid, discharged or stayed for a period of
60 days;
(vii) any Guarantee of a Significant Guarantor shall be held in a
judicial proceeding to be unenforceable or invalid or shall cease for any
reason to be in full force and effect, or any Significant Guarantor, or any
Person acting on behalf of any Significant Guarantor, shall deny or
disaffirm its obligations under its Guarantee;
(viii) any Gaming License relating to a Material Gaming Facility is
revoked, terminated or suspended or otherwise ceases to be effective,
resulting in the cessation or suspension of operation for a period of more
than 30 days of any material portion or aspect of the Gaming Business of
any Gaming Facility;
(ix) the Member Notes represent Indebtedness for more than 90 days;
(x) either Issuer, any Significant Subsidiary of either Issuer, or
any group of Subsidiaries of either Issuer that, considered together, would
constitute a Significant Subsidiary of either Issuer, pursuant to or within
the meaning of any Bankruptcy Law: (A) commences a voluntary case, (B)
consents to the entry of an order for relief against it in an involuntary
case, (C) consents to the appointment of a custodian of it or for all or
substantially all of its property, (D) makes a general assignment for the
benefit of its creditors, or (E) admits in writing its inability to pay its
debts as they become due; and
(xi) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that: (A) is for relief against either Issuer, any
Significant Subsidiary of either Issuer, or any group of Subsidiaries of
either Issuer that, considered together, would constitute a Significant
Subsidiary of either Issuer, in an involuntary case, (B) appoints a
custodian of either Issuer or any Significant Subsidiary of either Issuer,
or for all or substantially all of the property of either Issuer or any
Significant Subsidiary of either Issuer, or (C) orders the liquidation of
either Issuer, any Significant Subsidiary of either Issuer, or any group of
Subsidiaries that, considered
B-9
<PAGE>
together, would constitute a Significant Subsidiary of either Issuer; and
the order or decree remains unstayed and in effect for 60 consecutive days.
15. Trustee Dealings with the Issuers. The Trustee under the Indenture,
---------------------------------
or any of its Affiliates, in their individual or any other capacities, may make
or continue loans to or guaranteed by, accept deposits from, and perform
services for the Issuers or their Affiliates, and may otherwise deal with the
Issuers or their Affiliates, as if the Trustee were not Trustee.
16. No Recourse Against Others. A director, officer, employee, member,
--------------------------
manager or stockholder, as such, of the Issuers or of any Guarantor shall not
have any liability for any obligations of the Issuers or any Guarantor under the
Notes or the Indenture or for any claim based thereon, in respect of or by
reason of such status as director, officer, employee, member, manager or
stockholder. Each Noteholder by accepting a Note waives and releases all such
liability.
17. Authentication. This Note shall not be valid until authenticated by
--------------
the manual signature of the Trustee or an authenticating agent.
18. Abbreviations. Customary abbreviations may be used in the name of a
-------------
Noteholder or an assignee, such as: TEN CO (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
19. Additional Rights of Holders. In addition to the rights provided to
----------------------------
Holders of the Notes under the Indenture, Holders shall have all the rights set
forth in the Registration Rights Agreement.
20. CUSIP Numbers. The Issuers have caused one or more CUSIP numbers to
-------------
be printed on the Notes and the Trustee may use CUSIP numbers in notices of
redemption or exchange as a convenience to the Holders. No representation is
made as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption or exchange and reliance may be placed
only on the other identification numbers placed thereon.
21. GOVERNING LAW. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN
-------------
AND BE USED TO CONSTRUE THE INDENTURE AND THE NOTES WITHOUT REGARD TO THE
CONFLICTS OF LAWS PROVISIONS THEREOF TO THE EXTENT THAT THE APPLICATION OF THE
LAW OF ANOTHER JURISDICTION WOULD BE REQUIRED.
B-10
<PAGE>
The Issuers shall furnish to any Noteholder upon written request and
without charge a copy of the Indenture. Requests may be made to: Eldorado
Resorts LLC, 345 North Virginia Street, Reno, Nevada 89501, Attention:
Secretary.
B-11
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below:
I or we assign and transfer this Note to:
_____________________________________________
(Assignee)
_____________________________________________
(Assignee's soc. sec. or tax I.D. no.)
_____________________________________________
(Assignee's name, address and zip code)
and irrevocably appoint:
_____________________________________________
as agent to transfer this Note on the books of the Issuers. The agent may
substitute another to act for him or her.
Dated: _____________________
-------------------------------------------
(name as appears on the face of the Note)
By:
----------------------------------------
Signature guaranteed by:
-------------------
B-12
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Issuers pursuant to
Sections 3.09 and 4.08 or Section 4.15 of the Indenture and paragraph 8 of this
- -------------------------------------- -----------
Note, check the box:
[_]
If you want to elect to have only part of this Note purchased by the
Issuers pursuant to Sections 3.09 and 4.08 or Section 4.15 of the Indenture and
--------------------------------------
paragraph 8 of this Note, state the amount:
- -----------
$___________________________________
(in an integral multiple of $1,000)
Date: Your Signature:__________________________________________
(Sign exactly as your name appears on the
other side of this Note)
Signature Guarantee:
B-13
<PAGE>
SCHEDULE OF EXCHANGES OF CERTIFICATED SECURITIES/1/
The following exchanges of a part of this Global Note for Certificated Notes
have been made:
Principal Signature
Amount of Amount of Amount of of authorized
Decrease in Increase in this Global officer of
Principal Principal Note Trustee or
Date of Amount of Amount of following Global Note
Exchange this Global this Global such Holder
Note Note decreases
(or increases)
- --------------
/1/ This is to be included only if the Note is in global form.
B-14
<PAGE>
EXHIBIT C
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER
OF NOTES
Re: 10 1/2% Senior Subordinated Note due 2006 of Eldorado Resorts LLC and
Eldorado Capital Corp.
This Certificate relates to $___________ principal amount of Notes held in
* _____________ book-entry or * ______________ certificated form by
________________ (the "Transferor").
----------
The Transferor*:
[_] has requested the Trustee by written order to deliver in
exchange for its beneficial interest in the Global Note held by the
Depositary, a Note or Notes in certificated, registered form of
authorized denominations and an aggregate principal amount equal to
its beneficial interest in such Global Note (or the portion thereof
indicated above); or
[_] has requested the Trustee by written order to exchange or
register the transfer of a Note or Notes.
In connection with such request and in respect of each such Note, the
Transferor does hereby certify as follows:
[_] Such Note is being acquired for its own account, without
transfer.
[_] Such Note is being transferred to a qualified institutional
buyer (as defined in Rule 144A under the Securities Act of 1933, as
amended (the "Securities Act")), in reliance on Rule 144A or in a
--------------
transaction meeting the requirements of Regulation S under the
Securities Act.
[_] Such Note is being transferred in accordance with Rule 144
under the Securities Act, or pursuant to an effective registration
statement under the Securities Act.
[_] Such Note is being transferred in reliance on and in
compliance with an exemption from the registration requirements of the
Securities Act, other than Rule 144A, Rule 144 or Regulation S under
the Securities Act. An opinion of counsel to the effect that such
transfer does not require registration under the Securities Act
accompanies this Certificate.
________________________________
Insert Name of Transferor
By: ____________________________
Dated:
_________________________
* Check applicable box
C-1
<PAGE>
EXHIBIT D
FORM OF LEGAL
OPINION ON TRANSFER
__________________, 199__
Eldorado Resorts LLC
Eldorado Capital Corp.
345 Virginia Street
Reno, Nevada 89501
Re: 10 1/2% Senior Subordinated Notes Due August 15,
2006 of Eldorado Resorts LLC and Eldorado Capital Corp.
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Ladies and Gentlemen:
This opinion is being furnished to you in connection with the sale by
_________________ (the "Transferor") to __________________ (the "Purchaser") of
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$________ aggregate principal amount of 10 1/2% Senior Subordinated Notes due
2006 of Eldorado Resorts LLC and Eldorado Capital Corp. (the "Notes").
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We have examined such documents and records as we have deemed appropriate.
In our examination of the foregoing, we have assumed the authenticity of all
documents, the genuineness of all signatures and the due authorization,
execution and delivery of the aforementioned by each of the parties thereto. We
have further assumed the accuracy of the representations contained in the
documents referred to above made by the parties executing such documents. We
have also assumed that the sale of the Notes to the Transferor was exempt from
the registration and prospectus delivery requirements of the Securities Act of
1933, as amended (the "Securities Act").
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Based on the foregoing, we are of the opinion that the sale to the
Purchaser of the Notes does not require registration of such Notes under the
Securities Act.
Very truly yours,
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EXHIBIT E
Form of Subsidiary Guarantee
THIS GUARANTEE (as the same may be amended, modified or supplemented
from time to time, this "Guarantee"), dated as of _____________, is made by
_____________________________ (hereinafter referred to as the "Guarantor") in
favor of Fleet National Bank, a national banking association, as trustee under
the Indenture hereinafter described (the "Trustee"), for the ratable benefit of
the holders from time to time (the "Holders") of the Senior Subordinated Notes
(as hereinafter defined).
All terms not otherwise defined herein shall have for the purposes
hereof the meanings set forth in the Indenture (as hereinafter defined) unless
the context otherwise requires.
Recitals
A. Eldorado Resorts LLC (the "Company") and Eldorado Capital Corp.
("Capital" and, together with the Company, the "Issuers") are parties to that
certain indenture dated as of July 31, 1996 (as amended, supplemented or
otherwise modified from time to time, the "Indenture") among the Issuers and the
Trustee, pursuant to which the Issuers issued $100.0 million principal amount of
their 10 1/2% Senior Subordinated Notes due 2006 (including all Private
Placement Notes and Exchange Notes issued from time to time pursuant to the
Indenture, collectively, the "Senior Subordinated Notes"); and
B. The Guarantor is a direct or indirect Subsidiary of the Company, and
will derive both direct and indirect economic benefit from the proceeds of the
Senior Subordinated Notes and other financial accommodations made to the Issuers
under the Indenture.
C. The Indenture requires that the Guarantor execute and deliver this
Guarantee to guarantee the payment and performance by the Issuers of all of
their obligations under the Indenture and the Senior Subordinated Notes,
including, in each case, all reasonable costs of collection and enforcement
thereof and interest thereon which would be owing by the Issuers or such
Guarantor but for the effect of the Bankruptcy Code, 11 U.S.C. (S) 101 et seq.
(collectively, the "Guaranteed Obligations").
NOW, THEREFORE, for and in consideration of the foregoing and of any
financial accommodations or extensions of credit (including, without limitation,
any loan or advance by renewal, refinancing or extension of the Indenture or
otherwise) heretofore, now or hereafter made to or for the benefit of the
Issuers pursuant to the Indenture or any other agreement, instrument or document
executed pursuant to or in connection therewith, and for other good and valuable
consideration, the
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receipt and sufficiency of which are acknowledged, the Guarantor and the Trustee
agree as follows:
1. The Guarantee. The Guarantor hereby absolutely, unconditionally and
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irrevocably guarantees the full and punctual payment (whether at stated
maturity, upon acceleration or otherwise) of the Guaranteed Obligations;
provided, however, the obligations of the Guarantor hereunder shall be limited
to the maximum amount which may be paid hereunder without resulting in any
payment hereunder being deemed to constitute a fraudulent conveyance. This
Guarantee is a guarantee of payment and not of collection. All payments made by
the Guarantor under this Guarantee shall be paid at the place and in the manner
specified in the Indenture and the Senior Subordinated Notes.
2. Amendments, etc. with respect to the Guaranteed Obligations; Waiver of
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Rights. The Guarantor shall remain obligated hereunder notwithstanding that
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without any reservation of rights against the Guarantor and without notice to or
further assent by the Guarantor any demand for payment of any of the Guaranteed
Obligations made by the Trustee or the Holders may be rescinded by them and any
of the Guaranteed Obligations continued, and the Guaranteed Obligations, or the
liability of any other party upon or for any part thereof, or guarantee therefor
or right of offset with respect thereto, may, from time to time, in whole or in
part, be renewed, extended, amended, modified, accelerated, compromised, waived,
surrendered or released by the Trustee or the Holders, and the Indenture and any
other documents executed and delivered in connection therewith may be amended,
modified, supplemented or terminated, in whole or in part, as the Trustee or the
Holders may deem advisable from time to time or as provided in the Indenture,
and any guarantee or right of offset at any time held by the Trustee for the
payment of the Guaranteed Obligations may be sold, exchanged, waived,
surrendered or released.
3. Guarantee Absolute and Unconditional. The Guarantor waives any and
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all notice of the creation, renewal, extension or accrual of any of the
Guaranteed Obligations and notice of or proof of reliance by the Trustee or the
Holders upon this Guarantee, the Guaranteed Obligations, and any of them shall
conclusively be deemed to have been created, contracted or incurred, or renewed,
extended, amended or waived, in reliance upon this Guarantee; and all dealings
between the Issuers and the Guarantor, on the one hand, and the Trustee and the
Holders, on the other hand, likewise shall be conclusively presumed to have been
had or consummated in reliance upon this Guarantee. The Guarantor waives
diligence, presentment, protest, demand for payment and notice of default or
nonpayment to or upon the Issuers or the Guarantor with respect to the
Guaranteed Obligations. The Guarantor understands and agrees that this
Guarantee shall be construed as a continuing, absolute and unconditional
guarantee of payment without regard to (a) the validity, regularity or
enforceability of the Indenture or any of the Senior Subordinated Notes, any of
the Guaranteed Obligations
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or guarantee or right of offset with respect thereto at any time or from time to
time held by the Trustee or the Holders, (b) any defense, set-off or
counterclaim (other than a defense of payment or performance) which may at any
time be available to or be asserted by the Issuers against the Trustee or the
Holders, or (c) any other circumstances whatsoever (with or without notice to or
knowledge of the Issuers or such Guarantor) which constitute, or might be
construed to constitute, an equitable or legal discharge of the Issuers for the
Guaranteed Obligations, or of the Guarantor under this Guarantee, in bankruptcy
or in any other instance. When pursuing its rights and remedies hereunder
against the Guarantor, the Trustee and/or the Holders may, but shall be under no
obligation to, pursue such rights and remedies as it or they may have against
the Issuers or any other Person or against any guarantee for the Guaranteed
Obligations or any right of offset with respect thereto, and any failure by the
Trustee or the Holders to pursue such other rights or remedies or to collect any
payments from the Issuers or any such other Person or to realize upon any such
guarantee or to exercise any such right of offset, or any release of the Issuers
or any such other Person or any such guarantee or right of offset, shall not
relieve the Guarantor of any liability hereunder, and shall not impair or affect
the rights and remedies, whether express, implied or available an a matter of
law, of the Trustee and/or the Holders against the Guarantor. This Guarantee
shall remain in full force and effect and be binding in accordance with and to
the extent of its terms upon the Guarantor and its successors and assigns
thereof, and shall inure to the benefit of the Trustee, and its successors,
indorsees, transferees and assigns, and the Holders from time to time of the
Senior Subordinated Notes until all the Guaranteed Obligations and the
obligations of the Guarantor under this Guarantee shall have been satisfied by
payment in full, notwithstanding that from time to time during the term of the
Indenture the Issuers may be free from any Guaranteed Obligations.
4. Discharge Only Upon Payment In Full; Reinstatement In Certain
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Circumstances. The Guarantor's obligations hereunder shall remain in full force
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and effect until the Guaranteed Obligations shall have been paid in full or
released pursuant to Section 4.16 of the Indenture. If at any time any payment
of any of the Guaranteed Obligations is rescinded or must be otherwise restored
or returned upon the insolvency, bankruptcy or reorganization of the Issuers or
otherwise, the Guarantor's obligations hereunder with respect to such payment
shall be reinstated at such time as though such payment had been due but not
made at such time.
5. Waiver by the Guarantor. The Guarantor irrevocably waives acceptance
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hereof, presentment, demand, protest and any notice not provided for herein, as
well as any requirement that at any time any action be taken by any Person
against the Issuers or any other Person.
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6. Subrogation. Notwithstanding any payments made by the Guarantor under
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this Guarantee, the Guarantor shall not be entitled to be subrogated to any of
the rights of any other Guarantor, the Trustee or any Holder against the Issuers
until all amounts of principal of and interest and premium on the Senior
Subordinated Notes and all other amounts payable by the Issuers under the
Indenture and the Senior Subordinated Notes and by the Guarantor under its
Guarantee have been paid in full. If any amount shall be paid to the Guarantor
on account of such subrogation rights at any time when all of the Guaranteed
Obligations shall not have been paid in full, such amount shall be held by the
Guarantor in trust for the Trustee segregated from other funds of the Guarantor,
and shall, forthwith upon receipt by the Guarantor, be turned over to the
Trustee in the exact form received by the Guarantor (duly indorsed by the
Guarantor to the Trustee, if required), to be applied against the Guaranteed
Obligations, whether matured or unmatured, at such time and in such order as the
Trustee may determine.
7. Stay of Acceleration. In the event that acceleration of the time for
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payment of any of the Guaranteed Obligations is stayed upon insolvency,
bankruptcy or reorganization of the Issuers, all such amounts otherwise subject
to acceleration under the terms of the Indenture and the Senior Subordinated
Notes shall nonetheless be payable by the Guarantor forthwith on demand by the
Trustee.
8. Subordination.
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a. Definitions. As used in this Section 8, the terms set forth below
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shall have the following meanings:
"Designated Guarantor Senior Debt" shall mean (i) the guarantee by the
Guarantor of Indebtedness under the Senior Credit Agreement and (ii) other
Guarantor Senior Debt permitted to be incurred by the Guarantor under the terms
of the Indenture the principal amount of which is $25.0 million or more and that
has been designated by the Management Committee as "Designated Guarantor Senior
Debt."
"Guarantor Senior Debt" shall mean (i) the guarantee by the Guarantor of
Indebtedness under the Senior Credit Agreement and (ii) any other Indebtedness
permitted to be incurred by the Guarantor under the terms of the Indenture,
unless the instrument under which such Indebtedness is incurred expressly
provides that it is subordinated in right of payment to any Guarantor Senior
Debt. Notwithstanding anything to the contrary in the foregoing, Guarantor
Senior Debt will not include (a) any liability for federal, state, local or
other taxes owed or owing by the Guarantor, (b) any Indebtedness of the
Guarantor to any of its Subsidiaries or other Affiliates, (c) any trade payables
or (d) any Indebtedness that is incurred in violation of the Indenture.
b. Agreement to Subordinate. The Guarantor agrees, and each Holder by
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accepting a Note agrees, that the payment of the
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Guaranteed Obligations is subordinated in right of payment, to the extent and in
the manner provided in this Section 8, to the prior payment in full of all
Guarantor Senior Debt (whether outstanding on the date hereof or hereafter
created, incurred, assumed or guaranteed), and that the subordination is for the
benefit of the holders of Guarantor Senior Debt.
c. Liquidation; Dissolution; Bankruptcy. Upon any distribution to
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creditors of the Guarantor in a liquidation or dissolution of the Guarantor or
in a bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to the Guarantor or its property, an assignment for the benefit of
creditors or any marshalling of the Guarantor's assets and liabilities:
(i) holders of Guarantor Senior Debt of the Guarantor shall be
entitled to receive payment in full of all Obligations due in respect of
such Guarantor Senior Debt (including interest after the commencement of
any such proceeding at the rate specified in the applicable Guarantor
Senior Debt) before the Holders shall be entitled to receive any payment
with respect to the Guarantee (except that Holders may receive securities
that are subordinated at least to the same extent as the Guarantees to
Guarantor Senior Debt and any securities issued in exchange for Guarantor
Senior Debt); and
(ii) until all Obligations with respect to Guarantor Senior Debt of
the Guarantor are paid in full, any distribution to which the Holders of
Notes would be entitled but for this Section 8 shall be made to the holders
of such Guarantor Senior Debt (except that Holders may receive securities
that are subordinated at least to the same extent as the Guarantee to
Guarantor Senior Debt and any securities issued in exchange for Guarantor
Senior Debt).
d. Default on Designated Guarantor Senior Debt. The Guarantor may not
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make any payment upon or in respect of the Guarantee (except that Holders may
receive securities that are subordinated to the same extent as the Notes to
Guarantor Senior Debt and any securities issued in exchange for Guarantor Senior
Debt) if:
(i) a default in the payment of the principal of, or premium or
interest on, or fees or other amounts owing with respect to, Designated
Guarantor Senior Debt occurs and has not been cured or waived in writing;
or
(ii) any other default occurs and is continuing with respect to
Designated Guarantor Senior Debt that permits holders of the Designated
Guarantor Senior Debt as to which such default relates to accelerate its
maturity and the Trustee receives a notice of such default (a "Payment
Blockage Notice") from the Guarantor or the holders of any Designated
Guarantor Senior Debt.
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Payments on the Guarantee may and shall be resumed:
(y) in the case of default referred to in Section 8(d)(i), upon the
date on which such default is cured or waived, and
(z) in case of a default referred to in Section 8(d)(ii), the earlier
of the date on which such nonpayment default is cured or waived or 179 days
after the date on which the applicable Payment Blockage Notice is received,
unless the maturity of any Designated Guarantor Senior Debt has been
accelerated.
No new period of payment blockage may be commenced unless and until 360
days have elapsed since the effectiveness of the immediately prior Payment
Blockage Notice. No nonpayment default referred to in Section 8(d)(ii) hereof
that existed or was continuing on the date of delivery of any Payment Blockage
Notice to the Trustee shall be, or be made, the basis for a subsequent Payment
Blockage Notice (unless such nonpayment default shall have been cured or waived
for a period of not less than 180 days).
e. Acceleration of Guarantee. The Guarantor shall promptly notify
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holders of Guarantor Senior Debt of the receipt by the Issuers of an
acceleration notice following an Event of Default under the Indenture.
f. When Distribution Must Be Paid Over. In the event that the Trustee or
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any Holder receives any payment of any Obligations with respect to the Guarantee
at a time when the Trustee or such Holder, as applicable, has actual knowledge
that such payment is prohibited by Section 8(d) hereof, such payment shall be
held by the Trustee or such Holder, in trust for the benefit of and, upon
written request, shall be paid forthwith over and delivered to, the holders of
Guarantor Senior Debt as their interests may appear or their Representative
under the indenture or other agreement (if any) pursuant to which Guarantor
Senior Debt may have been issued, as their respective interests may appear, for
application to the payment of all obligations with respect to Guarantor Senior
Debt remaining unpaid to the extent necessary to pay such Obligations in full in
accordance with their terms, after giving effect to any concurrent payment or
distribution to or for the holders of Guarantor Senior Debt.
With respect to the holders of Guarantor Senior Debt, the Trustee
undertakes to perform only such obligations on the part of the Trustee as are
specifically set forth in this Section 8, and no implied covenants or
obligations with respect to the holders of Guarantor Senior Debt shall be read
into this Guarantee against the Trustee. The Trustee shall not be deemed to owe
any fiduciary duty to the holders of Guarantor Senior Debt, and shall not be
liable to any such holders if the Trustee shall pay over or distribute to or on
behalf of Holders or the Guarantor or any other Person money or assets to which
any
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holders of Guarantor Senior Debt shall be entitled by virtue of this Section 8,
except if such payment is made as a result of the willful misconduct or gross
negligence of the Trustee.
g. Notice by the Guarantor. The Guarantor shall promptly notify the
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Trustee and the Paying Agent of any facts known to the Guarantor that would
cause a payment of any obligations with respect to the Guarantee to violate this
Section 8, but failure to give such notice shall not affect the subordination of
the Guarantee to the Guarantor Senior Debt as provided in this Section 8.
h. Subrogation. After all Guarantor Senior Debt is irrevocably paid in
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full in cash or cash equivalents reasonably satisfactory to the holders thereof
and until the Guaranteed Obligations are paid in full, Holders shall be
subrogated (equally and ratably with all other Indebtedness pari passu with the
Guarantee) to the rights of holders of Guarantor Senior Debt to receive
distributions applicable to Guarantor Senior Debt to the extent that
distributions otherwise payable to the Holders have been applied to the payment
of Guarantor Senior Debt. A distribution made under this Section 8 to holders
of Guarantor Senior Debt that otherwise would have been made to Holders is not,
as between the Guarantor and Holders, a payment by the Guarantor on the
Guarantee.
i. Relative Rights. This Section 8 defines the relative rights of
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Holders and holders of Guarantor Senior Debt. Nothing in this Guarantee shall:
(i) impair, as between the Guarantor and Holders, the obligation of
the Guarantor, which is absolute and unconditional, to pay the Guaranteed
Obligations in accordance with the terms of this Guarantee;
(ii) affect the relative rights of Holders and creditors of the
Guarantor other than their rights in relation to holders of Guarantor
Senior Debt; or
(iii) prevent the Trustee or any Holder from exercising its available
remedies upon a Default or Event of Default, subject to the rights of
holders and owners of Guarantor Senior Debt to receive distributions and
payments otherwise payable to Holders.
j. Subordination May Not Be Impaired by the Guarantor. No right of any
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holder of Guarantor Senior Debt to enforce the subordination of the Indebtedness
evidenced by the Guarantee shall be impaired by any act or failure to act by the
Guarantor or any Holder or by the failure of the Guarantor or any Holder to
comply with this Guarantee.
k. Distribution or Notice to Representative. Whenever a distribution is
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to be made or a notice given to holders of
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Guarantor Senior Debt, the distribution may be made and the notice given to
their Representative.
Upon any payment or distribution of assets of the Guarantor referred to in
this Section 8, the Trustee and the Holders shall be entitled to rely upon any
order or decree made by any court of competent jurisdiction or upon any
certificate of such Representative or of the liquidating trustee or agent or
other Person making any distribution to the Trustee or to the Holders for the
purpose of ascertaining the Persons entitled to participate in such
distribution, the holders of Guarantor Senior Debt and other Indebtedness of the
Guarantor, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Section 8.
l. Rights of Trustee and Paying Agent. Notwithstanding the provisions of
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this Section 8 or any other provision of the Indenture, the Trustee shall not be
charged with knowledge of the existence of any facts that would prohibit the
making of any payment or distribution by the Trustee, and the Trustee and the
Paying Agent may continue to make payments on the Guarantee, unless the Trustee
shall have received at its Corporate Trust Office at least five Business Days
prior to the date of such payment written notice of facts that would cause the
payment of any Obligations with respect to the Guarantee to violate this Section
8. Only the Guarantor or a Representative may give the notice. Nothing in this
Section 8 shall impair the claims of, or payments to, the Trustee under or
pursuant to Section 7.07 of the Indenture.
The Trustee shall be entitled to rely on the delivery to it of a written
notice by a person representing himself to be a holder of Guarantor Senior Debt
(or a Representative of such holder) to establish that such notice has been
given by a holder of Guarantor Senior Debt (or a Representative of any such
holder). In the event that the Trustee determines in good faith that further
evidence is required with respect to the right of any person as a holder of
Guarantor Senior Debt to participate in any payment or distribution pursuant to
this Section 8, the Trustee may request such person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Guarantor Senior Debt
held by such person, the extent to which such person is entitled to participate
in such payment or distribution and any other facts pertinent to the rights of
such person under this Section 8, and if such evidence is not furnished, the
Trustee may defer any payment which it may be required to make for the benefit
of such person pursuant to the terms of this Guarantee pending judicial
determination as to the rights of such Person to receive such payment.
The Trustee in its individual or any other capacity may hold Guarantor
Senior Debt with the same rights it would have if it were not Trustee. Any
Agent may do the same with like rights.
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m. Authorization to Effect Subordination. Each Holder of a Note by the
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Holder's acceptance thereof authorizes and directs the Trustee on the Holder's
behalf to take such action as may be necessary or appropriate to effectuate the
subordination as provided in this Section 8, and appoints the Trustee to act as
the Holder's attorney-in-fact for any and all such purposes. If the Trustee
does not file a proper proof of claim or proof of debt in the form required in
any proceeding referred to in Section 6.09 of the Indenture at least 30 days
before the expiration of the time to file such claim, the holders of Guarantor
Senior Debt (or a Representative of any such holder) are hereby authorized to
file an appropriate claim for and on behalf of the Holders.
n. Amendments. The provisions of this Section 8 shall not be amended or
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modified without the written consent of the holders of all Guarantor Senior
Debt.
9. Merger, Consolidation or Sale of Assets.
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a. The Guarantor may not, in a single transaction or series of
transactions, consolidate with or merge with or into (whether or not the
Guarantor is the surviving Person) another corporation, Person or entity,
whether or not affiliated with the Guarantor, unless (i) subject to the
provisions of Section 9(b), the Person formed by or surviving any such
consolidation or merger (if other than the Guarantor) assumes all the
obligations of the Guarantor, pursuant to a supplemental Guarantee in form and
substance reasonably satisfactory to the Trustee, under the Guarantee; (ii)
immediately after giving effect to such transaction, no Default or Event of
Default exists; (iii) the Guarantor, or any Person formed by or surviving any
such consolidation or merger, would have Consolidated Net Worth (immediately
after giving effect to such transaction) equal to or greater than the
Consolidated Net Worth of the Guarantor immediately preceding the transaction;
and (iv) the Company would be permitted by virtue of the Company's pro forma
Fixed Charge Coverage Ratio, immediately after giving effect to such
transaction, to incur at least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in Section 4.09 of the Indenture;
provided, however, that the foregoing will not apply to the consolidation or
merger of the Guarantor with and into either Issuer or another Guarantor.
b. In the event of a sale or other disposition of all of the assets of
the Guarantor, by way of merger, consolidation or otherwise, or a sale or other
disposition of all of the capital stock of the Guarantor, then the Guarantor (in
the event of a sale or other disposition, by way of such a merger, consolidation
or otherwise, of all of the capital stock of the Guarantor) or the corporation
acquiring the property (in the event of a sale or other disposition of all of
the assets of the Guarantor) will be released and relieved of any obligations
under this Guarantee; provided that the Net Proceeds of such sale or other
disposition are applied in accordance with Section 4.15 of the Indenture. In
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addition, in the event the Management Committee designates the Guarantor to be
an Unrestricted Subsidiary, then the Guarantor shall be released and relieved of
any obligations under this Guarantee; provided that such designation is
conducted in accordance with Section 4.05 of the Indenture.
10. Miscellaneous.
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a. Benefits of Guarantee; Successors and Assigns. Nothing in this
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Guarantee, expressed or implied, shall give to any person, other than Trustee,
the Holders and their respective successors, transferees and assigns hereunder,
any benefit or any legal or equitable rights, remedy or claim under this
Guarantee. This Guarantee shall be binding upon the Guarantor, its successors
and assigns, and inure, together with the rights and remedies of Trustee
hereunder, to the benefit of Trustee, the Holders and their respective
successors, transferees and assigns. The Guarantor shall not, without the prior
written consent of Trustee, assign any rights, duties or obligations under this
Guarantee.
b. Notices. All notices, demands and other communications hereunder
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shall be given and shall be effective in accordance with the Indenture, except
that notices to the Guarantor shall be given to its address set forth on the
signature page hereof, or to such other address as the Guarantor may specify in
writing from time to time to the Trustee.
c. Amendments. Neither this Guarantee nor any provision hereof may be
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amended, modified, waived, discharged or terminated other than pursuant to the
provisions of the Indenture.
d. No Personal Liability of Directors, Officers, Employees, Partners and
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Stockholders. No past, present or future director, officer, employee,
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incorporator, partner or stockholder of the Guarantor, as such, shall have any
liability for any obligations of the Guarantor under this Guarantee or for any
claim based on, in respect of, or by reason of, this Guarantee. Each Holder by
accepting a Note has waived and released all such liability. The waiver and
release are part of the consideration for issuance of this Guarantee.
e. Governing Law. THE INTERNAL LAW OF THE STATE OF NEW YORK, WITHOUT
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REGARD TO PRINCIPLES OF CONFLICTS OF LAWS, SHALL GOVERN AND BE USED TO CONSTRUE
THIS GUARANTEE.
f. No Adverse Interpretation of Other Agreements. This Guarantee may not
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be used to interpret any other guarantee, indenture, loan or debt agreement of
the Issuers, the Guarantor or their respective Subsidiaries or of any other
Person. Any such guarantee, indenture, loan or debt agreement may not be used
to interpret this Guarantee.
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g. Successors. All agreements of the Guarantor in this Guarantee shall
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bind its successors. All agreements of the Trustee in this Guarantee shall bind
its successors.
h. Severability. In case any provision in this Guarantee shall be
------------
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
i. Counterpart Originals. The parties may sign any number of copies of
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this Guarantee. Each signed copy shall be an original, but all of them together
represent the same agreement.
j. Headings, etc. The headings of the sections of this Guarantee have
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been inserted for convenience of reference only, are not to be considered a part
of this Guarantee and shall in no way modify or restrict any of the terms or
provisions hereof.
[Signature Pages Follow]
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IN WITNESS WHEREOF, the undersigned Guarantor has caused this instrument to
be duly executed and delivered to the Trustee as of the date first above
written.
[GUARANTOR]
[Address]
By:_______________________________
Name:
Title:
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EXHIBIT 4.2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is dated as of
July 31, 1996, by and among Eldorado Resorts LLC, a Nevada limited-liability
company (the "Company"), and Eldorado Capital Corp., a Nevada corporation
("Capital" and, together with the Company, the "Issuers"), and each of Bear,
Stearns & Co. Inc., Wasserstein Perella Securities, Inc. and BA Securities, Inc.
(the "Initial Purchasers").
This Agreement is entered into in connection with the Purchase
Agreement, dated as of July 25, 1996, between the Issuers and the Initial
Purchasers (the "Purchase Agreement") relating to the sale by the Issuers to the
Initial Purchasers of $100,000,000 aggregate principal amount of the Issuers' 10
1/2% Senior Subordinated Notes due 2006 (the "Notes"). In order to induce the
Initial Purchasers to enter into the Purchase Agreement, the Issuers have agreed
to provide the registration rights set forth in this Agreement for the equal
benefit of the Initial Purchasers and their respective direct and indirect
transferees. The execution and delivery of this Agreement is a condition to the
Initial Purchasers' obligation to purchase the Notes under the Purchase
Agreement.
The parties hereby agree as follows:
1. Definitions
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As used in this Agreement, the following terms shall have the
following meanings:
Additional Interest: See Section 4.
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Advice: See Section 5.
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Affiliates: Of any specified Person means any other Person directly
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or indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
--------
Beneficial Ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
Applicable Period: See Section 2.
-----------------
Broker-Dealer: Any broker or dealer registered under the Exchange
-------------
Act.
<PAGE>
Business Day: Any day other than a Saturday, or Sunday or a day on
------------
which banking institutions in The City of New York or at a place of payment are
authorized by law, regulation or executive order to remain closed.
Closing Date: The Closing Date as defined in the
------------
Purchase Agreement.
Company: See the introductory paragraph to this Agreement.
-------
Effectiveness Date: The 180th day after the Closing Date.
------------------
Event Date: See Section 4.
----------
Exchange Act: The Securities Exchange Act of 1934, as amended, and
------------
the rules and regulations of the SEC promulgated thereunder.
Exchange Notes: Debt securities of the Issuers, which are
--------------
substantially identical to the Notes (and which are entitled to the benefits of
the Indenture or a trust indenture which is substantially identical to the
Indenture (other than such changes to the Indenture or any such identical trust
indenture as are necessary to comply with any requirements of the SEC to effect
or maintain the qualification thereof under the TIA) and which, in either case,
has been qualified under the TIA, except that the Exchange Notes shall have been
registered pursuant to an effective Registration Statement under the Securities
Act and shall contain no restrictive legends thereon.
Exchange Offer: See Section 2.
--------------
Exchange Registration Statement: See Section 2.
-------------------------------
Exchange Notes: See Section 2.
--------------
Filing Date: The 45th day after the Closing Date.
-----------
Holder: Any holder of Registrable Notes.
------
Indenture: The Indenture, dated as of July 31, 1996, between the
---------
Issuers and Fleet National Bank, a national banking association, as trustee,
pursuant to which the Notes are being issued, as amended or supplemented from
time to time in accordance with the terms thereof.
Initial Purchasers: See the introductory paragraph to this Agreement.
------------------
Initial Shelf Registration: See Section 3.
--------------------------
-2-
<PAGE>
Liquidated Damages: See Section 4.
------------------
Notes: See the introductory paragraphs to this Agreement.
-----
Participating Broker-Dealers: See Section 2.
----------------------------
Person: An individual, trustee, limited-liability company,
------
corporation, partnership, joint stock company, trust, unincorporated
association, union, business association, firm or other legal entity.
Private Exchange: See Section 2.
----------------
Private Exchange Notes: See Section 2.
----------------------
Prospectus: The prospectus included in any Registration Statement
----------
(including, without limitation, any prospectus subject to completion and a
prospectus that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act), as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering of any portion
of the Registrable Notes covered by such Registration Statement, and all other
amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
Registrable Notes: Each Note upon original issuance of the Notes and
-----------------
at all times subsequent thereto and, if issued, each Private Exchange Note,
until in the case of each such Note or each such Private Exchange Note, as the
- -----
case may be, (i) either (a) the Note is exchanged in the Exchange Offer and the
Exchange Note can be resold to the public by the Holder thereof without
complying with the prospectus delivery requirements of the Securities Act, or
(b) the Note is exchanged in the Private Exchange and the Private Exchange Note
is sold to a purchaser who receives from the Holder thereof on or prior to the
date of such sale a copy of the Prospectus contained in the Exchange
Registration Statement, (ii) a Shelf Registration Statement covering such Note
or Private Exchange Note, as the case may be, has been declared effective by the
SEC and such Note or such Private Exchange Note, as the case may be, has been
disposed of in accordance with such effective Shelf Registration Statement, or
(iii) such Note or such Private Exchange Note, as the case may be, is sold to
the public in compliance with Rule 144.
Registration Statement: Any registration statement of the Issuers,
----------------------
including but not limited to the Exchange Registration Statement, that covers
any of the Registrable Notes pursuant to the provisions of this Agreement,
including the Prospectus, amendments and supplements to such registration
-3-
<PAGE>
statement, including post-effective amendments, all exhibits, and all material
incorporated by reference or deemed to be incorporated by reference in such
registration statement.
Rule 144: Rule 144 under the Securities Act, as such Rule may be
--------
amended from time to time, or any similar rule (other than Rule 144A) or
regulation hereafter adopted by the SEC providing for offers and sales of
securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.
Rule 144A: Rule 144A under the Securities Act, as such Rule may be
---------
amended from time to time, or any similar rule (other than Rule 144) or
regulation hereafter adopted by the SEC providing for offers and sales of
securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act if made in compliance with such rule.
Rule 415: Rule 415 under the Securities Act, as such Rule may be
--------
amended from time to time, or any similar rule or regulation hereafter adopted
by the SEC.
SEC: The Securities and Exchange Commission.
---
Securities Act: The Securities Act of 1933, as amended, and the rules
--------------
and regulations of the SEC promulgated thereunder.
Shelf Effectiveness Date: See Section 3.
------------------------
Shelf Effectiveness Period: See Section 3.
--------------------------
Shelf Filing Date: See Section 3.
-----------------
Shelf Notice: See Section 3.
------------
Shelf Registration: The Initial Shelf Registration and any Subsequent
------------------
Shelf Registration as such terms are defined in Section 3.
Subsequent Shelf Registration: See Section 3.
-----------------------------
TIA: The Trust Indenture Act of 1939, as amended.
---
Trustee: The trustee under the Indenture and, if existent, the
-------
trustee under any indenture governing the Exchange Notes and Private Exchange
Notes (if any).
-4-
<PAGE>
Underwritten registration or underwritten offering: A registration in
--------------------------------------------------
which securities of the Issuers are sold to an underwriter for reoffering to the
public.
2. Exchange Offer
--------------
(a) The Issuers agree to prepare and, to the extent not prohibited by
law or applicable SEC policy, file with the SEC on or prior to the Filing Date,
an offer to exchange (the "Exchange Offer") any and all of the Registrable
Notes, other than the Private Exchange Notes, if any, for a like aggregate
principal amount of the Exchange Notes. The Exchange Offer will be registered
under the Securities Act on the appropriate form (the "Exchange Registration
Statement") and will comply with all applicable federal and state securities
laws and state gaming regulations, including, but not limited to, the tender
offer rules and regulations under the Exchange Act.
The Issuers agree to use their best efforts to (i) cause the Exchange
Registration Statement to become effective under the Securities Act on or before
the Effectiveness Date; (ii) keep the Exchange Offer open for at least 20
Business Days (or longer if required by applicable law) after the date that the
Prospectus is first sent or given to Holders; and (iii) consummate the Exchange
Offer on or prior to the 30th Business Day following the date on which the
Exchange Registration Statement is declared effective. No securities other than
the Registrable Notes shall be included in the Exchange Registration Statement.
(b) In connection with the Exchange Offer, the Issuers shall:
(i) mail to each Holder a copy of the Prospectus forming part of
the Exchange Registration Statement, together with an
appropriate letter of transmittal and related documents;
(ii) utilize the services of a depositary for the Exchange Offer
with an address in the Borough of Manhattan, The City of New
York; and
(iii) permit Holders to withdraw tendered Registrable Notes at any
time prior to the close of business, New York time, on the
last Business Day on which the Exchange Offer shall remain
open.
-5-
<PAGE>
(c) As soon as practicable after the close of the Exchange Offer or
the Private Exchange, as the case may be, the Issuers shall:
(i) accept for exchange all Registrable Notes tendered and not
validly withdrawn pursuant to the Exchange Offer or the
Private Exchange;
(ii) deliver to the Trustee for cancellation all Registrable
Notes so accepted for exchange; and
(iii) cause the Trustee to authenticate and deliver promptly to
each Holder of Notes, Exchange Notes or Private Exchange
Notes, as the case may be, equal in principal amount to the
Registrable Notes of such Holder so accepted for exchange.
(d) Each Holder who participates in the Exchange Offer will be
required to represent that (i) any Exchange Notes received by it will be
acquired in the ordinary course of its business, (ii) at the time of the
consummation of the Exchange Offer such Holder will have no arrangement or
understanding with any Person to participate in the distribution (within the
meaning of the Securities Act) of the Exchange Notes, and (iii) such Holder is
not an Affiliate of the Issuers.
(e) The Issuers shall include within the Prospectus contained in the
Exchange Registration Statement a section entitled "Plan of Distribution,"
reasonably acceptable to the Initial Purchasers, which shall contain a summary
statement of the positions taken or policies made by the Staff of the SEC with
respect to the potential "underwriter" status (under the Securities Act) of any
Broker-Dealer that is the beneficial owner (as defined in Rule 13d-3 under the
Exchange Act) of Exchange Notes received by such Broker-Dealer in the Exchange
Offer (a "Participating Broker-Dealer"), whether such positions or policies have
been publicly disseminated by the Staff of the SEC or such positions or
policies, in the judgment of the Initial Purchasers, represent the prevailing
views of the Staff of the SEC. Such "Plan of Distribution" section shall also,
to the extent permitted by applicable SEC policies, allow the use of the
Prospectus included in the Exchange Registration Statement by all Persons
subject to the prospectus delivery requirements of the Securities Act,
including, but not limited to, all Participating Broker-Dealers, and include a
statement describing the means by which Participating Broker-Dealers may resell
the Exchange Notes.
The Issuers shall use their best efforts (i) to keep the Exchange
Registration Statement effective and to amend and supplement the Prospectus
contained therein, in order to permit
-6-
<PAGE>
such Prospectus to be lawfully delivered by all Persons subject to the
prospectus delivery requirements of the Securities Act for such period of time
as such Persons must comply with such requirements in order to resell the
Exchange Notes, provided that such period shall not exceed 180 days (or such
--------
longer period if extended pursuant to the last paragraph of Section 5) (the
"Applicable Period").
(f) If, immediately prior to the commencement or consummation of the
Exchange Offer, the Initial Purchasers hold any Notes acquired by them and
having the status as an unsold allotment in the initial distribution, the
Issuers, upon the request of the Initial Purchasers and simultaneously with
delivery of the Exchange Notes upon consummation of the Exchange Offer, shall
issue and deliver to the Initial Purchasers, in exchange (the "Private
Exchange") for such Notes held by the Initial Purchasers, a like principal
amount of debt securities of the Issuers that are issued pursuant to the same
indenture as the Exchange Notes and are identical to the Exchange Notes, except
for the existence of restrictions on transfer thereof under the Securities Act
and the securities laws of the several states of the United States (the "Private
Exchange Notes"). The Private Exchange Notes shall bear the same CUSIP number
as the Exchange Notes.
(g) Interest plus Liquidated Damages, if any, on the Exchange Notes
and Private Exchange Notes will accrue from the last interest payment date on
which interest plus Liquidated Damages, if any, was paid by the Issuers on the
Notes surrendered in exchange therefor or, if no interest has been paid on the
Notes, from the date of original issue.
(h) The Exchange Notes and the Private Exchange Notes may be issued
under (i) the Indenture or (ii) an indenture substantially identical to the
Indenture, which in either event will provide that the Exchange Notes will not
be subject to the transfer restrictions set forth in the Indenture, and that the
Exchange Notes, the Private Exchange Notes and the Notes will vote and consent
together on all matters as one class and that neither the Exchange Notes, the
Private Exchange Notes nor the Notes will have the right to vote or consent as a
separate class on any matter.
3. Shelf Registration
------------------
If (i) the Issuers are not required to file an Exchange Registration
Statement or to consummate the Exchange Offer because the Exchange Offer is not
permitted by applicable law or SEC policy, or (ii) any Holder of Registrable
Notes notifies (a "Shelf Notice") the Issuers in writing on or prior to the 20th
Business Day following consummation of the Exchange Offer (A) that based upon
the advice of counsel such Holder is prohibited by applicable law or SEC policy
from participating in the
-7-
<PAGE>
Exchange Offer, or (B) that based upon the advice of counsel such Holder may not
resell the Exchange Notes acquired by it in the Exchange Offer to the public
without delivering a Prospectus and that the Prospectus contained in the
Exchange Registration Statement is not appropriate or available for such resales
by such Holder, or (C) that such Holder is a Broker-Dealer and holds Registrable
Notes acquired directly from the Issuers or one of their Affiliates, then:
(a) Initial Shelf Registration. The Issuers shall promptly prepare
--------------------------
and file with the SEC a Registration Statement for an offering to be made
on a continuous basis pursuant to Rule 415 covering all such Registrable
Notes of each Holder who supplied information as required pursuant this
Section 3 (the "Initial Shelf Registration"). The Issuers shall (i) file
with the SEC the Initial Shelf Registration on or prior to the earliest to
occur of the following (the date of such occurrence being referred to
herein as the "Shelf Filing Date"): (A) the 60th day after the date on
which the Issuers reasonably determine that they are not required to file
the Exchange Registration Statement in accordance with this Agreement, (B)
the 60th day after the date on which the Issuers receive a Shelf Notice and
(C) the 120th day after the Closing Date, and (ii) use their best efforts
to cause such Initial Shelf Registration Statement to be declared effective
by the SEC on or before the 30th day after the Shelf Filing Date (the
"Shelf Effectiveness Date") and to keep the Initial Shelf Registration
continuously effective under the Securities Act until the date which is 36
months from the Shelf Effectiveness Date (subject to extension pursuant to
the last paragraph of Section 5 hereof) (the "Shelf Effectiveness Period"),
or such shorter period ending when (1) all Registrable Notes covered by the
Initial Shelf Registration have been sold in the manner set forth and as
contemplated in the Initial Shelf Registration, (2) a Subsequent Shelf
Registration covering all of the Registrable Notes has been declared
effective under the Securities Act or (3) during any period in which all
Registrable Notes may be sold pursuant to Rule 144(k) under the Securities
Act.
The Initial Shelf Registration shall be on the appropriate form
permitting registration of such Registrable Notes for resale by such
Holders in the manner or manners designated by them (including, without
limitation, one or more underwritten offerings). The Issuers shall not
permit any securities other than the Registrable Notes to be included in
the Initial Shelf Registration or any Subsequent Shelf Registration.
No Holder of Registrable Notes may include any of its Registrable
Notes in any Shelf Registration pursuant to this
-8-
<PAGE>
Agreement unless and until such Holder furnishes to the Issuers, in
writing, within 20 Business Days after receipt of a request therefor (which
request shall be given by the Issuers at the earliest practicable time),
such information as the Issuers may reasonably request for use in
connection with any Shelf Registration or Prospectus or preliminary
prospectus included therein. No Holder of Registrable Notes shall be
entitled to Liquidated Damages pursuant to Section 4 hereof unless and
until such Holder shall have used its best efforts to provide all such
reasonably requested information. Each Holder as to which any Shelf
Registration is being effected agrees to furnish promptly to the Issuers
all information to be disclosed in order to make the information previously
furnished to the Issuers by such Holder not materially misleading.
(b) Subsequent Shelf Registrations. If the Initial Shelf
------------------------------
Registration or any Subsequent Shelf Registration ceases to be effective for any
reason at any time during the Shelf Effectiveness Period (other than because of
the sale of all of the securities registered thereunder), the Issuers shall use
their best efforts to obtain the prompt withdrawal of any order suspending the
effectiveness thereof, and in any event shall within 45 days of such cessation
of effectiveness amend the Shelf Registration in a manner reasonably expected to
obtain the withdrawal of the order suspending the effectiveness thereof, or file
an additional Registration Statement pursuant to Rule 415 covering all of the
Registrable Notes (a "Subsequent Shelf Registration"). If a Subsequent Shelf
Registration is filed, the Issuers shall use their best efforts to cause the
Subsequent Shelf Registration to be declared effective as soon as practicable
after such filing and to keep such Subsequent Registration Statement
continuously effective for a period equal to the number of days in the Shelf
Effectiveness Period less the aggregate number of days during which the Initial
Shelf Registration or any Subsequent Shelf Registration was previously
continuously effective.
(c) Supplements and Amendments. The Issuers shall promptly
--------------------------
supplement and amend the Shelf Registration if required by the rules,
regulations or instructions applicable to the registration form used for such
Shelf Registration, if required by the Securities Act, or if requested by the
Holders of a majority in aggregate principal amount of the Registrable Notes
covered by such Registration Statement or by any underwriter of such Registrable
Notes.
4. Liquidated Damages
------------------
(a) The Issuers and the Initial Purchasers agree that the Holders of
Registrable Notes will suffer damages if the Issuers fail to fulfill their
obligations under Section 2 or Section 3 hereof and that ascertaining the extent
of such damages
-9-
<PAGE>
with precision would not be feasible. Accordingly, the Issuers jointly and
severally agree to pay liquidated damages in the form of additional interest on
the Notes, Exchange Notes and Private Exchange Notes held by each Holder
("Liquidated Damages"), if:
(i) any Registration Statement required by this Agreement is not
filed with the SEC on or prior to the date specified for such filing in
this Agreement,
(ii) any of such Registration Statements has not been declared
effective by the SEC on or prior to the date specified for such
effectiveness in this Agreement (the "Effectiveness Target Date"),
(iii) the Exchange Offer has not been consummated within 30 Business
Days after the Effectiveness Target Date with respect to the Exchange
Registration Statement, or
(iv) any Registration Statement required by this Agreement is filed
and declared effective but shall thereafter cease to be effective or fail
to be usable for its intended purpose without being succeeded immediately
by a post-effective amendment to such Registration Statement, or by a
Subsequent Shelf Registration, as the case may be, that cures such failure
and that is itself immediately declared effective;
(each such event in clauses (i) through (iv) above being referred to herein as a
"Registration Default"). Such additional interest comprising Liquidated Damages
shall be an amount equal to (A) with respect to the first 90-day period
immediately following the occurrence of a Registration Default, $.05 per week
per $1,000 principal amount of the Notes, Exchange Notes and Private Exchange
Notes held by such Holder for each week or portion thereof that any Registration
Default continues, plus (B) an additional $.05 per week per $1,000 in principal
----
amount of the Notes, Exchange Notes and Private Exchange Notes with respect to
each 90-day period subsequent to the first 90-day period, until all Registration
Defaults have been cured, up to an amount equal to $.40 per week per $1,000
principal amount of the Notes, Exchange Notes and Private Exchange Notes of such
Holder.
(b) The Issuers shall notify the Trustee within one Business Day
after each and every date on which a Registration Default occurs. All accrued
Liquidated Damages shall be paid by the Issuers on or before each applicable
semi-annual interest payment date to Holders of record of the Notes, Exchange
Notes and Private Exchange Notes in the same manner as interest is payable
pursuant to the terms of the Indenture or the indenture provided for in Section
2(h) hereof. Each obligation to pay Liquidated Damages shall be deemed to
accrue beginning on the day of the applicable Registration Default. Following
the cure of
-10-
<PAGE>
all Registration Defaults, the accrual of Liquidated Damages will cease until
the next Registration Default, if any.
5. Registration Procedures
-----------------------
In connection with the registration of any Registrable Notes pursuant to
Sections 2 or 3 hereof, the Issuers shall effect such registrations to permit
the sale of such Registrable Notes in accordance with the intended method or
methods of disposition thereof, and pursuant thereto the Issuers shall:
(a) Prepare and file with the SEC on or prior to the Filing Date or
Shelf Filing Date, as applicable, a Registration Statement or Registration
Statements as prescribed by Section 2 or 3, and to use their best efforts
to cause each such Registration Statement to become effective and remain
effective as provided herein, provided that, if (i) such filing is pursuant
--------
to Section 3, or (ii) a Prospectus contained in an Exchange Registration
Statement filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, before filing any Registration
Statement or Prospectus or any amendments or supplements thereto, the
Issuers shall, if requested, furnish to and afford the Holders of the
Registrable Notes and each such Participating Broker-Dealer (the "Selling
Holders"), as the case may be, covered by such Registration Statement, one
special counsel for the Selling Holders (the "Holders Counsel") and the
managing underwriters, if any, a reasonable opportunity to review copies of
all such documents (including copies of any documents to be incorporated by
reference therein and all exhibits thereto) proposed to be filed (at least
5 Business Days prior to such filing). The Issuers shall not file any
Registration Statement or Prospectus or any amendments or supplements
thereto in respect of which the Holders must be afforded an opportunity to
review prior to the filing of such document, if the Holders of a majority
in aggregate principal amount of the Registrable Notes covered by such
Registration Statement, or such Participating Broker-Dealer, as the case
may be, the Holders Counsel, or the managing underwriters, if any, shall
reasonably object.
(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Shelf Registration or Exchange Registration Statement,
as the case may be, as may be necessary to keep such Registration Statement
continuously effective for the Shelf Effectiveness Period or the Applicable
Period, as the case may be; cause the related Prospectus to be supplemented
by any required Prospectus supplement, and as so supplemented to be filed
pursuant to Rule 424 (or any similar provisions then in force) under the
Securities Act; and comply with the provisions of the
-11-
<PAGE>
Securities Act, the Exchange Act and the rules and regulations of the SEC
promulgated thereunder applicable to it with respect to the disposition of
all securities covered by such Registration Statement as so amended or in
such Prospectus as so supplemented and with respect to the subsequent
resale of any securities being sold by a Participating Broker-Dealer
covered by any such Prospectus. The Issuers shall be deemed not to have
used their best efforts to keep a Registration Statement effective during
the Applicable Period if either of them voluntarily takes any action that
would result in selling Holders of the Registrable Notes covered thereby or
Participating Broker-Dealers seeking to sell Private Exchange Notes not
being able to sell such Registrable Notes or such Private Exchange Notes
during that period unless such action is required by applicable law.
(c) If (i) a Shelf Registration is filed pursuant to Section 3, or
(ii) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act
by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, in either case of (i) or (ii) notify the selling
Holders of Registrable Notes, or each such Participating Broker-Dealer, as
the case may be, the Holders Counsel and the managing underwriters, if any,
promptly (but in any event within two Business Days), and confirm such
notice in writing, (A) when a Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to a
Registration Statement or any post-effective amendment, when the same has
become effective (including in such notice a written statement that any
Holder may, upon request, obtain, without charge, one conformed copy of
such Registration Statement or post-effective amendment including financial
statements and schedules, documents incorporated or deemed to be
incorporated by reference and exhibits), (B) of the issuance by the SEC of
any stop order suspending the effectiveness of a Registration Statement or
of any order preventing or suspending the use of any preliminary prospectus
or the initiation of any proceedings for that purpose, (C) if at any time
when a Prospectus is required by the Securities Act to be delivered in
connection with sales of the Registrable Notes the representations and
warranties of the Issuers contained in any agreement (including any
underwriting agreement) contemplated by Section 5(n) hereof cease to be
true and correct, (D) of the receipt by any of the Issuers of any
notification with respect to the suspension of the qualification or
exemption from qualification of a Registration Statement or any of the
Registrable Notes or the Exchange Notes to be sold by any Participating
Broker-Dealer for offer or sale in any jurisdiction, or the initiation or
threatening of any proceeding for such
-12-
<PAGE>
purpose, (E) of the happening of any event or any information becoming
known that makes any statement made in such Registration Statement or
related Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires the making of any changes in such Registration Statement,
Prospectus or documents so that, in the case of the Registration Statement,
it will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make
the statements therein not misleading, and that in the case of the
Prospectus, it will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading, and (F) of the Issuers' reasonable
determination that a post-effective amendment to a Registration Statement
would be appropriate.
(d) If (i) a Shelf Registration is filed pursuant to Section 3, or
(ii) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act
by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, in either case of (i) or (ii) use their best efforts
to prevent the issuance of any order suspending the effectiveness of a
Registration Statement or of any order preventing or suspending the use of
a Prospectus or suspending the qualification (or exemption from
qualification) of any of the Registrable Notes or the Exchange Notes to be
sold by any Participating Broker-Dealer, for sale in any jurisdiction, and,
if any such order is issued, to use their best efforts to obtain the
withdrawal of any such order at the earliest possible moment.
(e) If a Shelf Registration is filed pursuant to Section 3 and if
requested by the managing underwriters, if any, or the Holders of a
majority in aggregate principal amount of the Registrable Notes being sold
in connection with an underwritten offering, (i) promptly incorporate in a
prospectus supplement or post-effective amendment such information as the
managing underwriters, if any, or such Holders or counsel reasonably
request to be included therein, (ii) make all required filings of such
prospectus supplement or such post-effective amendment as soon as
practicable after the Issuers have received notification of the matters to
be incorporated in such prospectus supplement or post-effective amendment
and (iii) supplement or make amendments to such Registration Statement,
provided that the Issuers shall not be required to take actions that in the
opinion of counsel for the Issuers are in violation of applicable law.
-13-
<PAGE>
(f) If (i) a Shelf Registration is filed pursuant to Section 3, or
(ii) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act
by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period in either case of (i) or (ii), furnish to each
selling Holder of Registrable Notes and to each such Participating Broker-
Dealer who so requests and to the Holders Counsel and each managing
underwriter, if any, without charge, one conformed copy of the Registration
Statement or Registration Statements and each post-effective amendment
thereto, including financial statements and schedules, and, if requested,
all documents incorporated or deemed to be incorporated therein by
reference and all exhibits.
(g) If (i) a Shelf Registration is filed pursuant to Section 3, or
(ii) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act
by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, in either case of (i) or (ii) deliver to each
selling Holder of Registrable Notes, or each such Participating Broker-
Dealer, as the case may be, their counsel, and the underwriters, if any,
without charge, as many copies of the Prospectus or Prospectuses (including
each form of preliminary prospectus) and each amendment or supplement
thereto and any documents incorporated by reference therein as such Persons
may reasonably request, and, subject to the last paragraph of this Section
5, the Issuers hereby consent to the use of such Prospectus and each
amendment or supplement thereto by each of the selling Holders of
Registrable Notes or by each such Participating Broker-Dealer, as the case
may be, and the underwriters or agents (if any), and dealers (if any), in
connection with the offering and sale of the Registrable Notes covered by
or the sale by Participating Broker-Dealers of the Exchange Notes pursuant
to such Prospectus and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Notes or any delivery
of a Prospectus contained in the Exchange Registration Statement by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, to use their best efforts to register or qualify, and to
cooperate with the selling Holders of Registrable Notes or each such
Participating Broker-Dealer, as the case may be, the underwriters, if any,
and their respective counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of
such Registrable Notes for offer and sale under the securities or Blue Sky
laws of such jurisdictions within the United States as any selling Holder,
Participating
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<PAGE>
Broker-Dealer, or the managing underwriters reasonably request in writing
as are reasonably necessary to permit the offer and sale of such Notes in
such jurisdictions, provided that where Exchange Notes held by
--------
Participating Broker-Dealers or Registrable Notes are offered other than
through an underwritten offering, the Issuers agree to cause their counsel
to perform Blue Sky investigations and file registrations and
qualifications required to be filed pursuant to this Section 5(h); keep
each such registration or qualification (or exemption therefrom) effective
during the period such Registration Statement is required to be kept
effective and do any and all other acts or things reasonably necessary or
advisable to enable the disposition in such jurisdictions of the Exchange
Notes held by Participating Broker-Dealers or the Registrable Notes covered
by the applicable Registration Statement, provided that neither of the
--------
Issuers shall be required to qualify generally to do business in any
jurisdiction where it is not then so qualified, take any action that would
subject it to general service of process in any such jurisdiction where it
is not then so subject or subject itself to taxation in excess of a nominal
dollar amount in any such jurisdiction.
(i) If a Shelf Registration is filed pursuant to Section 3, cooperate
with the selling Holders of Registrable Notes and the managing
underwriters, if any, to facilitate the timely preparation and delivery of
certificates representing Registrable Notes to be sold, which certificates
shall not bear any restrictive legends and shall be in a form eligible for
deposit with The Depository Trust Company; and enable such Registrable
Notes to be in such denominations and registered in such names as the
managing underwriters, if any, or Holders may reasonably request.
(j) Use their best efforts to cause the Registrable Notes covered by
the Registration Statement to be registered with or approved by such other
governmental agencies or authorities, including without limitation any
applicable gaming regulators, as may be necessary to enable the seller or
sellers thereof or the underwriters, if any, to consummate the disposition
of such Registrable Notes, except as may be required solely as a
consequence of the nature of such selling Holder's business, in which case
the Issuers will cooperate in all reasonable respects with the filing of
such Registration Statement and the granting of such approvals.
(k) If (i) a Shelf Registration is filed pursuant to Section 3, or
(ii) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act
by any Participating Broker-Dealer who seeks to sell Exchange Notes
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<PAGE>
during the Applicable Period, in either case of (i) or (ii), upon the
occurrence of any event contemplated by clauses (E) or (F) of Section 5(c)
hereof, as promptly as practicable prepare and (subject to Section 5(a)
hereof) file with the SEC, at the expense of the Issuers, a supplement or
post-effective amendment to the Registration Statement or a supplement to
the related Prospectus or any document incorporated or deemed to be
incorporated therein by reference, or file any other required document so
that, as thereafter delivered to the purchasers of the Registrable Notes
being sold thereunder or to the purchasers of the Exchange Notes to whom
such Prospectus will be delivered by a Participating Broker-Dealer; any
such Prospectus will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading.
(l) Use their best efforts to cause the Registrable Notes covered by
a Registration Statement or the Exchange Notes, as the case may be, to be
rated with the appropriate rating agencies, if so requested by the Holders
of a majority in aggregate principal amount of Registrable Notes covered by
such Registration Statement or the Exchange Notes, as the case may be, or
the managing underwriters, if any.
(m) Prior to the effective date under the Securities Act of the first
Registration Statement relating to the Registrable Notes, (i) provide the
Trustee with printed certificates for the Registrable Notes in a form
eligible for deposit with The Depository Trust Company and (ii) provide a
CUSIP number for the Registrable Notes.
(n) In the event of an underwritten offering of Registrable Notes
pursuant to a Shelf Registration, enter into an underwriting agreement as
is customary in underwritten offerings of debt securities similar to the
Notes and take all such other actions as are reasonably requested by the
managing underwriters in order to expedite or facilitate the registration
or the disposition of such Registrable Notes, and in such connection, (i)
make such representations and warranties to the underwriters, with respect
to the business of the Issuers and their subsidiaries and the Registration
Statement, Prospectus and documents, if any, incorporated or deemed to be
incorporated by reference therein, in each case, as are customarily made by
issuers to underwriters in underwritten offerings of debt securities
similar to the Notes, and confirm the same if and when requested; (ii)
obtain opinions of counsel to the Issuers and updates thereof in form and
substance reasonably satisfactory to the managing underwriters, addressed
to the
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underwriters covering the matters customarily covered in opinions requested
in underwritten offerings and such other matters as may be reasonably
requested by underwriters; (iii) obtain "cold comfort" letters and updates
thereof in form and substance reasonably satisfactory to the managing
underwriters from the independent certified public accountants of the
Issuers (and, if necessary, any other independent certified public
accountants of any subsidiary of the Issuers or of any business acquired by
the Issuers for which financial statements and financial data are, or are
required to be, included in the Registration Statement), addressed to each
of the underwriters, such letters to be in customary form and covering
matters of the type customarily covered in "cold comfort" letters in
connection with underwritten offerings and such other matters as reasonably
requested by underwriters; and (iv) if an underwriting agreement is entered
into, the same shall contain indemnification provisions and procedures no
less favorable than those set forth in Section 7 hereof (or such other
provisions and procedures acceptable to Holders of a majority in aggregate
principal amount of Registrable Notes covered by such Registration
Statement and the managing underwriters or agents) with respect to all
parties to be indemnified pursuant to said Section. The above shall be
done at each closing under such underwriting agreement, or as and to the
extent required thereunder.
(o) If (i) a Shelf Registration is filed pursuant to Section 3, or
(ii) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act
by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, in either case of (i) or (ii), make available for
inspection by any selling Holder of such Registrable Notes being sold, or
each such Participating Broker-Dealer, as the case may be, any underwriter
participating in any such disposition of Registrable Notes, if any, and any
attorney, accountant or other agent retained by any such selling Holder or
each such Participating Broker-Dealer, as the case may be, or underwriter
(collectively, the "Inspectors"), at the offices where normally kept,
during reasonable business hours, all financial and other records,
pertinent organizational documents and properties of the Issuers and their
respective subsidiaries (collectively, the "Records") as shall be
reasonably necessary to enable them to exercise any applicable due
diligence responsibilities, and cause the officers, directors and employees
of the Issuers and their subsidiaries to supply all information in each
case reasonably requested by any such Inspector in connection with such
Registration Statement. Records which the Issuers determine, in good
faith, to be confidential and any Records which they notify the Inspectors
are confidential shall not
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be disclosed by the Inspectors unless (A) based upon the advice of counsel
the disclosure of such Records is necessary to avoid or correct a
misstatement or omission in such Registration Statement, (B) the release of
such Records is ordered pursuant to a subpoena or other order from a court
of competent jurisdiction or (C) the information in such Records has been
made generally available to the public other than as a result of disclosure
or failure to safeguard by such Inspector. Each selling Holder of such
Registrable Notes and each such Participating Broker-Dealer will be
required to agree that information obtained by it as a result of such
inspections shall be deemed confidential and shall not be used by it as the
basis for any market transactions in the securities of the Issuers unless
and until such information is made generally available to the public. Each
selling Holder of such Registrable Notes and each such Participating
Broker-Dealer will be required to further agree that it will, upon learning
that disclosure of such Records is sought in a court of competent
jurisdiction, give notice to the Issuers and allow the Issuers to undertake
appropriate action to prevent disclosure of the Records deemed confidential
at the Issuers' expense.
(p) Provide an indenture trustee for the Registrable Notes or the
Exchange Notes, as the case may be, and cause the Indenture or the trust
indenture provided for in Section 2(h) hereof, as the case may be, to be
qualified under the TIA not later than the effective date of the Exchange
Offer or the first Registration Statement relating to the Registrable
Notes; and in connection therewith, cooperate with the trustee under any
such indenture and the holders of the Registrable Notes, to effect such
changes to such indenture as may be required for such indenture to be so
qualified in accordance with the terms of the TIA; and execute, and use
their best efforts to cause such trustee to execute, all documents as may
be required to effect such changes, and all other forms and documents
required to be filed with the SEC to enable such indenture to be so
qualified in a timely manner.
(q) Comply with all applicable rules and regulations of the SEC and
make generally available to their security holders earnings statements
satisfying the provisions of Section 11(a) of the Securities Act and Rule
158 thereunder (or any similar rule promulgated under the Securities Act)
no later than 45 days after the end of any 12-month period (or 90 days
after the end of any 12-month period if such period is a fiscal year) (i)
commencing at the end of any fiscal quarter in which Registrable Notes are
sold to underwriters in a firm commitment or best efforts underwritten
offering and (ii) if not sold to underwriters in such an offering,
commencing on the first day of the first fiscal quarter of the Issuers
after the effective date
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<PAGE>
of a Registration Statement, which statements shall cover said 12-month
periods.
(r) Upon consummation of an Exchange Offer or a Private Exchange,
obtain an opinion of counsel to the Issuers addressed to the Trustee for
the benefit of all Holders of Registrable Notes participating in the
Exchange Offer or the Private Exchange, as the case may be, and which
includes an opinion that (i) each of the Issuers has duly authorized,
executed and delivered the Exchange Notes and Private Exchange Notes and
the related indenture, (ii) each of the Exchange Notes or the Private
Exchange Notes, as the case may be, and related indenture constitute a
legal, valid and binding obligation of the Issuers, enforceable against the
Issuers in accordance with its respective terms (with customary exceptions)
and (iii) each of the Exchange Notes or the Private Exchange Notes, as the
case may be, are entitled to the benefits the Indenture or the indenture
provided for Section 2(h) hereof.
(s) If an Exchange Offer or a Private Exchange is to be consummated,
upon delivery of the Registrable Notes by Holders to the Issuers (or to
such other Person as directed by the Issuers) in exchange for the Exchange
Notes or the Private Exchange Notes, as the case may be, the Issuers shall
mark, or cause to be marked, on such Registrable Notes that such
Registrable Notes are being cancelled in exchange for the Exchange Notes or
the Private Exchange Notes, as the case may be; in no event shall such
Registrable Notes be marked as paid or otherwise satisfied.
(t) Cooperate with each seller of Registrable Notes covered by any
Registration Statement and each underwriter, if any, participating in the
disposition of such Registrable Notes and their respective counsel in
connection with any filings required to be made with the National
Association of Securities Dealers, Inc. (the "NASD").
(u) Use their best efforts to take all other steps necessary to
effect the registration of the Registrable Notes covered by a Registration
Statement contemplated hereby.
The Issuers may require each seller of Registrable Notes or
Participating Broker-Dealer as to which any registration is being effected to
furnish to the Issuers such information regarding such seller or Participating
Broker-Dealer and the distribution of such Registrable Notes or Exchange Notes
to be sold by such Participating Broker-Dealer, as the case may be, as the
Issuers may, from time to time, reasonably request including, without
limitation, a written representation to the Issuers (which may be contained in
the letter of transmittal contemplated by the Exchange Registration Statement or
Shelf Registration, as
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<PAGE>
applicable) stating that (A) it is not an Affiliate of the Issuers, (B) the
amount of Registrable Notes held by such Holder prior to the Exchange Offer, (C)
the amount of Registrable Notes owned by such Holder to be exchanged in the
Exchange Offer and representing that such Holder is not engaged in, and does not
intend to engage in, and has no arrangement or understanding with any Person to
participate in, a distribution of the Exchange Notes to be issued and (D) it is
acquiring the Exchange Notes in its ordinary course of business. The Issuers
may exclude from such registration the Registrable Notes of any seller or
Participating Broker-Dealer who unreasonably fails to furnish such information
within 20 Business Days after receiving such request. Each Seller as to which
any Shelf Registration Statement is being effected agrees to furnish promptly to
the Issuers all information required to be disclosed in order to make the
information previously furnished to the Issuers not materially misleading.
Each Holder of Registrable Notes and each Participating Broker-Dealer
agrees by acquisition of such Registrable Notes or Exchange Notes to be sold by
such Participating Broker-Dealer, as the case may be, that, upon receipt of any
notice from the Issuers of the happening of any event of the kind described in
clauses (B), (D), (E) or (F) or Section 5(c) hereof, such Holder will forthwith
discontinue disposition of such Registrable Notes covered by such Registration
Statement or Prospectus or Exchange Notes to be sold by such Participating
Broker-Dealer, as the case may be, and dissemination of such Prospectus until
such Holder's or Broker-Dealer's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 5(k) hereof, or until it is advised
in writing (the "Advice") by the Issuers that the use of the applicable
Prospectus may be resumed, and has received copies of any amendments or
supplements thereto. In the event the Issuers shall give any such notice, each
of the Shelf Effectiveness Period and the Applicable Period shall be extended by
the number of days during such periods from and including the date of the giving
of such notice to and including the date when each seller of Registrable Notes
covered by such Registration Statement or Exchange Notes to be sold by such
Participating Broker-Dealer, as the case may be, shall have received (i) the
copies of the supplemented or amended Prospectus contemplated by Section 5(k) or
(ii) the Advice.
6. Registration Expenses
---------------------
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Issuers shall be borne by the Issuers,
whether or not the Exchange Offer or a Shelf Registration is filed or becomes
effective, including, without limitation, (i) all registration and filing fees
(including, without limitation, (A) fees with respect to filings required to be
made with the NASD in connection with an underwritten offering and (B) fees and
expenses of compliance
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with state securities or Blue Sky laws (including, without limitation,
reasonable fees and disbursements of their counsel in connection with Blue Sky
qualifications of the Registrable Notes or Exchange Notes and determination of
the eligibility of the Registrable Notes or Exchange Notes for investment under
the laws of such jurisdictions (x) where the holders of Registrable Notes are
located, in the case of the Exchange Notes, or (y) as provided in Section 5(h)
hereof, in the case of Registrable Notes or Exchange Notes to be sold by a
Participating Broker-Dealer during the Applicable Period)), (ii) printing
expenses (including, without limitation, expenses of printing certificates for
Registrable Notes or Exchange Notes in a form eligible for deposit with The
Depository Trust Company and of printing prospectuses if the printing of
prospectuses is requested by the managing underwriters, if any, or, in respect
of Registrable Notes or Exchange Notes to be sold by any Participating Broker-
Dealer during the Applicable Period, by the Holders of a majority in aggregate
principal amount of the Registrable Notes included in any Registration Statement
or Notes, as the case may be), (iii) reasonable messenger, telephone and
delivery expenses, (iv) fees and disbursements for the Issuers and reasonable
fees and disbursements of the Holders Counsel (subject to the provisions of
Section 6(b) hereof), (v) fees and all independent certified public accountants
referred to in clause (iii) of Section 5(n) (including, without limitation, the
expenses of any special audit and "cold comfort" letters required by or incident
to such performance), (vi) the fees and expenses of any "qualified independent
underwriter" or other independent appraiser participating in an offering
pursuant to Rule 2720(c) of the National Association of Securities Dealers,
Inc., (vii) rating agency fees, (viii) Securities Act liability insurance, if
the Issuers desire such insurance, (ix) fees and expenses of all other Persons
retained by the Issuers, (x) internal expenses of the Issuers (including,
without limitation, all salaries and expenses of officers and employees of the
Issuers performing legal or accounting duties), (xi) the expense of any annual
audit, (xii) the fees and expenses incurred in connection with the listing of
the securities to be registered on any securities exchange and (xiii) the
expenses relating to printing, word processing and distributing all Registration
Statements, underwriting agreements, securities sales agreements, indentures and
any other documents necessary in order to comply with this Agreement.
(b) In connection with any Shelf Registration hereunder, the Issuers
shall reimburse the Holders of the Registrable Notes being registered in such
registration for the reasonable fees and disbursements of one Holders Counsel
(in addition to one appropriate local counsel) chosen by the Holders of a
majority in aggregate principal amount of the Registrable Notes to be included
in such Registration Statement and other out-of-pocket expenses of the Holders
of Registrable Notes
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incurred in connection with the registration of the Registrable Notes.
7. Indemnification
---------------
(a) The Issuers, jointly and severally, agree to indemnify and hold
harmless each Holder of Registrable Notes and each Participating Broker-Dealer
selling Exchange Notes during the Applicable Period, the directors, officers,
employees and agents of each such Person, and each Person, if any, who controls
any such Person within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act (each a "Participant") from and against any and
all losses, claims, liabilities, expenses and damages (including any and all
investigative, legal and other expenses reasonably incurred in connection with,
and any amount paid in settlement of, any action, suit or proceeding or any
claim asserted), to which they, or any of them, may become subject under the
Securities Act, the Exchange Act or other federal or state statutory law or
regulation, at common law or otherwise, insofar as such losses, claims,
liabilities, expenses or damages arise out of or are based on any untrue
statement or alleged untrue statement of a material fact contained in any
Registration Statement or Prospectus or any amendment or supplement thereto or
any preliminary prospectus or the omission or alleged omission to state in such
document a material fact required to be stated in it or necessary to make the
statements in it not misleading, provided that (i) a Participant will not be
entitled to any such indemnification hereunder to the extent that such loss,
claim, liability, expense or damage arises from and is based on an untrue
statement or omission or alleged untrue statement or omission made in reliance
on and in conformity with information relating to such Participant furnished in
writing to the Issuers by such Participant expressly for inclusion therein and
(ii) the foregoing indemnity with respect to any untrue statement contained or
in omission from a preliminary prospectus or prospectus shall not inure to the
benefit of any Participant (or any person controlling such Participant), from
whom the person asserting any such loss, liability, claim, damage or expense
purchased any of the Notes which are the subject thereof if it is finally
judicially determined that (A) such loss, liability, claim, damage or expense
relates solely to such untrue statement of material fact contained in, or such
omission of a material fact from, such preliminary prospectus or prospectus and
such Participant failed to deliver a copy of the prospectus or any amendment or
supplement thereto to such person at or prior to the confirmation of the sale of
Notes to such person and (B) the untrue statement or omission of a material fact
contained in such preliminary prospectus or prospectus was corrected in the
prospectus or any such amendment or supplement.
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(b) Each Participant will indemnify and hold harmless the Issuers,
each Person, if any, who controls the Issuers within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act, each member of the
board of managers or directors, as applicable, of the Issuers and each officer
of the Issuers to the same extent as the foregoing indemnity from the Issuers to
each Participant, but only insofar as losses, claims, liabilities, expenses or
damages arise out of or are based on any untrue statement or omission or alleged
untrue statement or omission made in reliance on and in conformity with
information relating to such Participant furnished in writing to the Issuers by
such Participant expressly for use in any Registration Statement or Prospectus
or any amendment or supplement thereto or any preliminary prospectus. The
liability of any Participant under this paragraph shall in no event exceed the
proceeds received by such Participant from sales of Registrable Notes or
Exchange Notes, as applicable, giving rise to such obligations.
(c) Any party that proposes to assert the right to be indemnified
under this Section 7 will, promptly after receipt of notice of commencement of
any action against such party in respect of which a claim is to be made against
an indemnifying party or parties under this Section 7, notify each such
indemnifying party of the commencement of such action, enclosing a copy of all
papers served, but the omission so to notify such indemnifying party will not
relieve it from any liability that it may have to any indemnified party under
the foregoing provisions of this Section 7 unless, and only to the extent that,
such omission results in the forfeiture of substantive rights or defenses by the
indemnifying party. If any such action is brought against any indemnified party
and it notifies the indemnifying party of its commencement, the indemnifying
party will be entitled to participate in and, to the extent that it elects by
delivering written notice to the indemnified party promptly after receiving
notice of the commencement of the action from the indemnified party, jointly
with any other indemnifying party similarly notified, to assume the defense of
the action, with counsel reasonably satisfactory to the indemnified party, and
after notice from the indemnifying party to the indemnified party of its
election to assume the defense, the indemnifying party will not be liable to the
indemnified party for any legal or other expenses except as provided below and
except for the reasonable costs of investigation subsequently incurred by the
indemnified party in connection with the defense. The indemnified party will
have the right to employ its own counsel in any such action, but the fees,
expenses and other charges of such counsel will be at the expense of such
indemnified party unless (1) the employment of counsel by the indemnified party
has been authorized in writing by the indemnifying party, (2) the indemnified
party has reasonably concluded (based on advice of counsel) that there may be
legal defenses available to it that are different from or in addition to those
available to the indemnifying party or (3) the indemnifying party has not in
fact
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employed counsel to assume the defense of such action within a reasonable time
after receiving notice of the commencement of the action, in each of which cases
the reasonable fees, disbursements and other charges of counsel will be at the
expense of the indemnifying party or parties. It is understood that the
indemnifying party or parties shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees,
disbursements and other charges of more than one separate firm admitted to
practice in such jurisdiction at any one time for all such indemnified party or
parties. All such fees, disbursements and other charges will be reimbursed by
the indemnifying party promptly as they are incurred. An indemnifying party
will not be liable for any settlement of any action or claim effected without
its written consent (which consent will not be unreasonably withheld).
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in the foregoing
paragraphs of this Section 7 is applicable in accordance with its terms but for
any reason is held to be unavailable from the Issuers or any Participant, the
Issuers and each Participant will contribute to the total losses, claims,
liabilities, expenses and damages (including any investigative, legal and other
expenses reasonably incurred in connection with, and any amount paid in
settlement of, any action, suit or proceeding or any claim asserted, but after
deducting any contribution received by the Issuers from Persons other than a
Participant, such as Persons who control the Issuers within the meaning of the
Securities Act, officers of the Issuers and directors of the Issuers, who also
may be liable for contribution) to which the Issuers and each Participant may be
subject in such proportion as is appropriate to reflect the relative benefits
received by the Issuers, on the one hand, and such Participant, on the other,
and, if such allocation is not permitted by applicable law or indemnification is
not available as a result of the indemnifying party not having received notice
as provided in this Section 7, in such proportion as is appropriate to reflect
not only the relative benefits referred to above but also the relative fault of
the Issuers, on the one hand, and such Participant, on the other hand, in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Issuers, on one
hand, and each Participant, on the other hand, shall be deemed to be in the same
proportion as (i) the total proceeds from the offering of the Notes (net of
discounts but before deducting expenses) received by the issuers and (ii) the
total proceeds received by such Participant upon the sale of the Notes giving
rise to such indemnification obligation. The relative fault of the Issuers, on
the one hand, and of any Participant, on the other hand, shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission
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<PAGE>
to state a material fact relates to information supplied by the Issuers or such
Participant and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The Issuers
and each Participant agree that it would not be just and equitable if
contributions pursuant to this Section 7(d) were to be determined by pro rata
--- ----
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to herein. The amount paid or payable by
an indemnified party as a result of the loss, claim, liability, expense or
damage, or action in respect thereof, referred to above in this Section 7(d)
shall be deemed to include, for purpose of this Section 7(d), any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 7(d), a Participant shall not be required to
contribute any amount in excess of the amount by which proceeds received by such
Participant from sales of Registrable Notes exceeds the amount of any damages
that such Participant has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission, and no
Person found guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) will be entitled to contribution from any
Person who was not guilty of such fraudulent misrepresentation. For purposes of
this Section 7(d), any Person who controls a party to this Agreement within the
meaning of the Securities Act will have the same rights to contribution as that
party, and the respective officers, directors, managers, partners, members,
employees, representatives and agent of any party to this Agreement will have
the same rights to contribution as such party, subject in each case to the
provisions hereof. Any party entitled to contribution, promptly after receipt
of notice of commencement of any action against such party in respect of which a
claim for contribution may be made under this Section 7(d), will notify any such
party or parties from whom contribution may be sought, but the omission so to
notify will not relieve the party or parties from whom contribution may be
sought from any other obligation it or they may have under this Section 7(d).
No party will be liable for contribution with respect to any action or claim
settled without its written consent (which consent will not be unreasonably
withheld).
(e) The indemnity and contribution agreements contained in this
Section 7 will be in addition to any liability which the indemnifying persons
may otherwise have to the indemnified persons referred to above.
8. Rules 144 and 144A
------------------
The Issuers jointly and severally covenant that they will file the
reports required to be filed by them under the Securities Act and the Exchange
Act and the rules and regulations
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adopted by the SEC thereunder in a timely manner and, if at any time the Issuers
are not required to file such reports, they will, upon the request of any Holder
of Registrable Notes or any Participating Broker-Dealer who seeks to sell
Exchange Notes, make publicly available other information so long as necessary
to permit sales pursuant to Rule 144 and Rule 144A under the Securities Act.
The Issuers jointly and severally further covenant that they will take such
further action as any Holder of Registrable Notes may reasonably request, all to
the extent required from time to time to enable such Holder to sell Registrable
Notes without registration under the Securities Act within the limitation of the
exemptions provided by (a) Rule 144 and Rule 144A under the Securities Act, as
such Rules may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the SEC. Nothing required in this Section 8
shall require the Issuers to register any of their securities under the Exchange
Act.
9. Underwritten Registrations
--------------------------
If any of the Registrable Notes covered by any Shelf Registration are
to be sold in an underwritten offering, the investment banker or investment
bankers and manager or managers that will manage the offering will be selected
by the Holders of a majority in aggregate principal amount of such Registrable
Notes included in such offering and reasonably acceptable to the Issuers.
No Holder of Registrable Notes may participate in any underwritten
registration hereunder unless such Holder (a) agrees to sell such Holder's
Registrable Notes on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements.
10. Miscellaneous
-------------
(a) Remedies. In the event of a breach by the Issuers of any of
--------
their obligations under this Agreement, each Holder of Registrable Notes, in
addition to being entitled to exercise all rights provided herein, in the
Indenture or, in the case of the Initial Purchasers, in the Purchase Agreement
or granted by law, including recovery of damages, will be entitled to specific
performance of its rights under this Agreement. The Issuers agree that monetary
damages would not be adequate compensation for any loss incurred by reason of a
breach by them of any of the provisions of this Agreement and hereby further
agrees that, in the event of any action for specific performance in respect of
such breach, they shall waive the defense that a remedy at law would be
adequate.
-26-
<PAGE>
(b) No Inconsistent Agreements. The Issuers have not, as of the date
--------------------------
hereof, and the Issuers shall not, after the date of this Agreement, enter into
any agreement with respect to any of their securities that is inconsistent with
the rights granted to the Holders of Registrable Notes in this Agreement or
otherwise conflicts with the provisions hereof. The Issuers have not entered or
will not enter into any agreement with respect to any of their securities which
will grant to any Person piggy-back rights with respect to a Registration
Statement to be filed pursuant to the terms of this Agreement.
(c) Adjustments Affecting Registrable Notes. The Issuers shall not,
---------------------------------------
directly or indirectly, take any action with respect to the Registrable Notes as
a class that would adversely affect the ability of the Holders of Registrable
Notes to include such Registrable Notes in a registration undertaken pursuant to
this Agreement.
(d) Amendments and Waivers. The provisions of this Agreement,
----------------------
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Issuers have obtained the written consent of
Holders of at least a majority of the then outstanding aggregate principal
amount of Registrable Notes. Notwithstanding the foregoing, a waiver or consent
to depart from the provisions hereof with respect to a matter that relates
exclusively to the rights of Holders of Registrable Notes whose securities are
being sold pursuant to a Registration Statement and that does not directly or
indirectly affect, impair, limit or compromise the rights of other Holders of
Registrable Notes may be given by Holders of at least a majority in aggregate
principal amount of the Registrable Notes being sold by such Holders pursuant to
such Registration Statement, provided that the provisions of this sentence may
--------
not be amended, modified or supplemented except in accordance with the
provisions of the immediately preceding sentence.
(e) Notices. All notices and other communications (including without
-------
limitation any notices or other communications to the Trustee) provided for or
permitted hereunder shall be made in writing by hand-delivery, registered first-
class mail, next-day air courier or telecopier:
(i) if to a Holder of Registrable Notes, at the most current address
given by the Trustee to the Issuers; and
-27-
<PAGE>
(ii) if to the Issuers, at:
Eldorado Resorts LLC
Eldorado Capital Corp.
345 North Virginia Street
Reno, Nevada 89501
Telecopy No.: (702) 786-7513
Attention: Robert M. Jones
with copies to:
Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, California 90017
Telecopy No.: (213) 891-8763
Attention: Pamela B. Kelly, Esq.
and
McDonald Carano Wilson McCune
Bergin Frankovich & Hicks LLP
24 Ridge Street, 4th Floor
Reno, Nevada 89501
Telecopy No.: (702) 786-9532
Attention: John Frankovich, Esq.
All such notices and communications shall be deemed to have been duly
given when delivered by hand, if personally delivered; five Business Days after
being deposited in the postage prepaid, if mailed; one Business Day after being
timely delivered to a next-day air courier; and when receipt is acknowledged by
the addressee, if telecopied.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee under the
Indenture at the address specified in such Indenture.
(f) Successors and Assigns. This Agreement shall inure to the
----------------------
benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent Holders of Registrable Notes; provided, that, with
respect to the indemnity and contribution agreements in Section 7, each Holder
of Registrable Notes subsequent to the Initial Purchasers shall be bound by the
terms thereof if (i) such Holder elects to include Registrable Notes in a Shelf
Registration and (ii) such Holder is advised expressly by the Issuers of the
provisions contained in Section 7 and that such Holder's election to include
Registrable Notes in a Shelf Registration shall be deemed such Holder's
agreement to be bound by such provisions.
-28-
<PAGE>
(g) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS
MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(j) Severability. If any term, provision, covenant or restriction of
------------
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
(k) Entire Agreement. This Agreement, together with the Notes, the
----------------
Purchase Agreement and the Indenture, is intended by the parties as a final
expression of their agreement, and is intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein and therein.
(l) Notes Held by the Issuers or Their Affiliates. Whenever the
---------------------------------------------
consent or approval of Holders of a specified percentage of Registrable Notes is
required hereunder, Registrable Notes held by the Issuers or their affiliates
(as such term is defined in Rule 405 under the Securities Act) shall not be
counted in determining whether such consent or approval was given by the Holders
of such required percentage.
-29-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
ELDORADO RESORTS LLC
By: /s/ Donald L. Carano
-------------------------------
Donald L. Carano
Chief Executive Officer,
President and Presiding
Manager
By: /s/ Raymond J. Poncia, Jr.
-------------------------------
Raymond J. Poncia, Jr.
Representative of Hotel Casino
Management, Inc., Manager
ELDORADO CAPITAL CORP.
By: /s/ Donald L. Carano
-------------------------------
Donald L. Carano
President
By: /s/ Raymond J. Poncia, Jr.
-------------------------------
Raymond J. Poncia, Jr.
Vice President
BEAR, STEARNS & CO. INC.
By: /s/ Paul C. Yates
-------------------------------
Name: Paul C. Yates
Title: Managing Director
WASSERSTEIN PERELLA SECURITIES, INC.
By: /s/ James C. Kingsbury
-------------------------------
Name:
Title:
BA SECURITIES, INC.
By: /s/ Mark S. Dawley
-------------------------------
Name: MARK S. DAWLEY
Title SENIOR MANAGING DIRECTOR
-30-
<PAGE>
EXHIBIT 4.4
----------------------------------------------------------------
----------------------------------------------------------------
AMENDED AND RESTATED LOAN AGREEMENT
Dated as of July 31, 1996
among
ELDORADO RESORTS LLC
as Borrower,
and
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
as sole initial Bank, Issuing Bank and Administrative Agent
----------------------------------------------------------------
----------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE 1.
DEFINITIONS AND ACCOUNTING TERMS............... 1
--------------------------------
1.1 Defined Terms....................................... 1
-------------
1.2 Use of Defined Terms................................ 27
--------------------
1.3 Accounting Terms.................................... 27
----------------
1.4 Rounding............................................ 27
--------
1.5 Exhibits and Schedules.............................. 27
----------------------
1.6 Miscellaneous Terms................................. 28
-------------------
ARTICLE 2.
LOANS AND LETTERS OF CREDIT............... 29
---------------------------
2.1 Loans-General....................................... 29
-------------
2.2 Base Rate Loans..................................... 30
---------------
2.3 Eurodollar Rate Loans............................... 31
---------------------
2.4 Letters of Credit................................... 31
-----------------
2.5 Automatic Reduction of Commitment................... 35
---------------------------------
2.6 Voluntary Reduction of Commitment................... 35
---------------------------------
2.7 Administrative Agent's Right to Assume Funds
--------------------------------------------
Available for Advances.............................. 35
---------------------
2.8 Collateral.......................................... 36
----------
2.9 Senior Indebtedness................................. 36
-------------------
ARTICLE 3.
PAYMENTS AND FEES...................... 37
-----------------
3.1 Principal and Interest.............................. 37
----------------------
3.2 Annual Agency Fees.................................. 38
------------------
3.3 Facility Fees....................................... 38
-------------
3.4 Commitment Fees..................................... 38
---------------
3.5 Standby Letter of Credit Fees....................... 39
-----------------------------
3.6 Increased Commitment Costs.......................... 39
--------------------------
3.7 Eurodollar Fees and Costs........................... 39
-------------------------
3.8 Default Rate........................................ 43
------------
3.9 Computation of Interest and Fees.................... 43
--------------------------------
3.10 Non-Banking Days................................... 43
----------------
3.11 Manner and Treatment of Payments................... 44
--------------------------------
3.12 Funding Source..................................... 44
--------------
3.13 Failure to Charge Not Subsequent Waiver............ 44
---------------------------------------
3.14 Administrative Agent's Right to Assume Payments
-----------------------------------------------
Will be Made by Borrower............................ 45
------------------------
3.15 Authority to Charge Account........................ 45
---------------------------
3.16 Fee Determination Detail........................... 45
------------------------
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES............ 46
------------------------------
4.1 Existence and Qualification; Power; Compliance
----------------------------------------------
With Laws........................................... 46
---------
4.2 Authority; Compliance With Other Agreements and
-----------------------------------------------
-i-
<PAGE>
Instruments and Government Regulations............................ 46
--------------------------------------
4.3 No Governmental Approvals Required................................ 47
----------------------------------
4.4 Subsidiaries...................................................... 48
------------
4.5 Financial Statements.............................................. 48
--------------------
4.6 No Other Liabilities; No Material Adverse Effect.................. 49
------------------------------------------------
4.7 Title to and Location of Property................................. 49
---------------------------------
4.8 Real Property..................................................... 49
-------------
4.9 Intangible Assets................................................. 49
-----------------
4.10 Governmental Regulation.......................................... 49
-----------------------
4.11 Litigation....................................................... 50
----------
4.12 Binding Obligations.............................................. 50
-------------------
4.13 No Default....................................................... 50
----------
4.14 ERISA............................................................ 50
-----
4.15 Regulations G. U and X; Investment Company Act................... 50
----------------------------------------------
4.16 Disclosure....................................................... 51
----------
4.17 Tax Liability.................................................... 51
-------------
4.18 Projections...................................................... 51
-----------
4.19 Employee Matters................................................. 51
----------------
4.20 Gaming Laws...................................................... 51
-----------
4.21 Security Interests............................................... 51
------------------
4.22 Hazardous Materials.............................................. 52
-------------------
4.23 Silver Legacy.................................................... 52
-------------
4.24 Certain Leases................................................... 52
--------------
ARTICLE 5.
AFFIRMATIVE COVENANTS
---------------------
(OTHER THAN INFORMATION AND
--------------------------
REPORTING REQUIREMENTS)......................... 54
-----------------------
5.1 Payment of Taxes and Other Potent................................. 54
---------------------------------
5.2 Preservation of Existence......................................... 54
-------------------------
5.3 Maintenance of Properties......................................... 54
-------------------------
5.4 Maintenance of Insurance.......................................... 55
------------------------
5.5 Compliance With Laws.............................................. 55
--------------------
5.6 Inspection Rights................................................. 55
-----------------
5.7 Keeping of Records and Books of A................................. 55
---------------------------------
5.8 Compliance With Agreements........................................ 55
--------------------------
5.9 Use of Proceeds................................................... 56
---------------
5.10 Hazardous Materials Laws......................................... 56
------------------------
5.11 Additional Collateral............................................ 56
---------------------
5.12 New Significant Subsidiaries..................................... 57
----------------------------
ARTICLE 6.
NEGATIVE COVENANTS................................ 58
6.1 Payment of Subordinated Obligation................................ 58
---------------------------------
6.2 Disposition of property........................................... 58
-----------------------
6.3 Investments and Acquisitions...................................... 58
----------------------------
6.4 Hostile Tender Offers............................................. 59
---------------------
6.5 Distributions..................................................... 59
-------------
6.6 ERISA............................................................. 59
-----
-ii-
<PAGE>
6.7 Change in Nature of Business........................ 60
----------------------------
6.8 Liens; Negative Pledges; Sales and Leasebacks....... 60
---------------------------------------------
6.9 Indebtedness and Contingent Obligations............. 60
---------------------------------------
6.10 Transactions with Affiliates....................... 61
----------------------------
6.11 Capital Expenditures............................... 61
--------------------
6.12 Members' Equity.................................... 62
---------------
6.13 Total Debt to EBITDA Ratio......................... 62
--------------------------
6.14 Senior Debt to EBITDA Ratio........................ 62
---------------------------
6.15 Fixed Charge Ratio................................. 62
------------------
6.16 Amendments to Subordinated Obligations............. 62
--------------------------------------
ARTICLE 7.
INFORMATION AND REPORTING REQUIREMENTS....... 63
--------------------------------------
7.1 Financial and Business Information.................. 63
----------------------------------
7.2 Compliance Certificates............................. 66
-----------------------
ARTICLE 8.
CONDITIONS....................... 67
----------
8.1 Initial Advances.................................... 67
----------------
8.2 Any Increasing Advance.............................. 70
----------------------
ARTICLE 9.
EVENTS OF DEFAULT AND REMEDIES UPON EVENT OF DEFAULT..... 71
----------------------------------------------------
9.1 Events of Default................................... 71
-----------------
9.2 Remedies Upon Event of Default...................... 73
------------------------------
ARTICLE 10.
THE ADMINISTRATIVE AGENT................. 77
------------------------
10.1 Appointment and Authorization...................... 77
-----------------------------
10.2 Business Activities with the Borrower.............. 77
-------------------------------------
10.3 Proportionate Interest of the Banks in any
------------------------------------------
Collateral......................................... 77
----------
10.4 Banks' Credit Decisions............................ 78
-----------------------
10.5 Action by Administrative Agent..................... 78
------------------------------
10.6 Liability of Administrative Agent.................. 79
---------------------------------
10.7 Indemnification.................................... 81
---------------
10.8 Successor Administrative Agent..................... 81
------------------------------
10.9 Performance of Condition........................... 82
-----------------------
ARTICLE 11.
MISCELLANEOUS..................... 84
-------------
11.1 Cumulative Remedies: No Waiver..................... 84
------------------------------
11.2 Amendments; Consents............................... 84
--------------------
11.3 Costs. Expenses and Taxes.......................... 85
-------------------------
11.4 Nature of Banks' Obligations....................... 86
----------------------------
11.5 Survival of Representations and Warranties......... 86
-----------------------------------------
11.6 Notices............................................ 86
-------
11.7 Execution of Loan Documents........................ 87
---------------------------
11.8 Binding Effect: Assignment......................... 87
--------------------------
-iii-
<PAGE>
11.9 Lien on Deposits and Property in Possession of
----------------------------------------------
any Bank........................................... 90
--------
11.10 Sharing of Setoffs................................ 90
------------------
11.11 Indemnity by Borrower............................. 91
---------------------
11.12 Nonliability of the Banks......................... 92
-------------------------
11.13 No Third Parties Benefited........................ 94
--------------------------
11.14 Confidentiality................................... 94
---------------
11.15 Hazardous Materials Indemnity..................... 94
-----------------------------
11.16 Further Assurances................................ 95
------------------
11.17 Integration....................................... 96
-----------
11.18 Governing Law..................................... 96
-------------
11.19 Severability of Provisions........................ 96
--------------------------
11.20 Independent Covenants............................. 96
---------------------
11.21 Headings.......................................... 96
--------
11.22 Time of the Essence............................... 97
-------------------
11.23 Tax Withholding Exemption Certificates............ 97
---------------------------------
11.24 Arbitration Reference............................. 97
---------------------
11.25 Purported Oral Amendments......................... 98
-------------------------
Exhibits
- --------
A - Compliance Certificate
B - Commitment Assignment and Acceptance
C - Deed of Trust
D - Guaranty
E - Note
F - Opinion
G - Pricing Certificate
H - Request for Letter of Credit
I - Request for Loan
J - Security Agreement
K - Subsidiary Security Agreement
Schedules
- ---------
l.1A Eldorado Hotel Property Description
l.lB Daniel's Expansion Property Description
4.1 Ownership of Borrower
4.3 Governmental Approvals
4.4 Subsidiaries
4.7 Real Property
4.10 Governmental Regulation
4.11 Litigation
4.18 Projections
4.22 Hazardous Materials
5.4 Real Property Insurance
6.3 Investments
6.8 Existing Liens and Rights of Others
6.9 Existing Indebtedness and Contingent Obligations
6.11 Remaining Southside Capital Expenditures
iv
<PAGE>
AMENDED AND RESTATED LOAN AGREEMENT
-----------------------------------
Dated as of July 31, 1996
This AMENDED AND RESTATED LOAN AGREEMENT ("Agreement")
is entered into among Eldorado Resorts LLC, a Nevada limited liability company
("Borrower"), Bank of America National Trust and Savings Association, as sole
initial Bank, Issuing Bank and Administrative Agent. From time to time, other
lenders may become parties to this Agreement by means of a Commitment Assignment
and Acceptance executed in accordance with Section 11.8 (each such Lender and
----
Bank of America National Trust and Savings Association are collectively, the
"Banks" and individually, a "Bank"). Borrower and Bank of America National
Trust and Savings Association hereby agree with reference to the following
facts:
A. Eldorado Hotel Associates Limited Partnership, a Nevada limited
partnership (the "Eldorado Partnership"), entered into a Loan
Agreement dated as of March 25, 1994 with Bank of America National
Trust and Savings Association, as Administrative Agent and the Banks
referred to therein (the "Existing Loan Agreement").
B. As of June 28, the Eldorado Partnership and Borrower entered into an
Agreement and Plan of Merger of even date therewith, pursuant to
which the Eldorado Partnership and Borrower merged, with Borrower the
survivor.
C. Borrower entered into an Assumption Agreement dated as of July 1,
1996 pursuant to which Borrower expressly assumed the obligations of
the Eldorado Partnership under the Existing Loan Agreement and the
Loan Documents referred to therein.
D. Borrower, the Administrative Agent and the Banks desire to amend and
restate the Loan Agreement in its entirety as set forth herein.
In consideration of the foregoing and of the mutual covenants and
agreements herein contained, the parties hereto covenant and agree as follows:
ARTICLE 1.
DEFINITIONS AND ACCOUNTING TERMS
--------------------------------
1.1 Defined Terms. As used in this Agreement, the following terms shall
-------------
have the meanings set forth below :
-1-
<PAGE>
"Acquisition" means any transaction, or any series of related
-----------
transactions, by which Borrower directly or indirectly (i) acquires any going
business or all or substantially all of the assets of any firm, partnership,
joint venture, corporation or division thereof, whether through purchase of
assets, merger or otherwise, or (ii) acquires (in one transaction or as the most
recent transaction in a series of transactions) control of at least a majority
in ordinary voting power of the securities of a corporation which have ordinary
voting power for the election of directors, or (iii) acquires control of a 50%
or more ownership interest in any partnership or joint venture.
"Advance" means any Advance made or to be made by any Bank to
-------
Borrower as provided in Article 2.
---------
"Administrative Agent" means Bank of America National Trust
--------------------
and Savings Association, when acting in its capacity as the Administrative Agent
under any of the Loan Documents, and any successor Administrative Agent.
"Administrative Agent's Office" means the Administrative
-----------------------------
Agent's address as set forth on the signature pages of this Agreement, or such
other address as the Administrative Agent hereafter may designate by written
notice to Borrower and the Banks.
"Affiliate" means, as to any Person, any other Person which
---------
directly or indirectly controls, or is under common control with, or is
controlled by, such Person. As used in this definition, "control" (and the
correlative terms, "controlled by" and "under common control with") shall mean
possession, directly or indirectly, of power to direct or cause the direction of
management or policies (whether through ownership of securities or partnership
or other ownership interests, by contract or otherwise) .
"Agreement" means this Amended and Restated Loan Agreement,
---------
either as originally executed or as it may from time to time be supplemented,
modified, amended, restated or extended .
"Applicable Percentage" means, during each calendar month, the
---------------------
per annum percentage set forth below opposite the Pricing Leverage Ratio set
forth in the then most recently delivered Pricing Certificate (a) with respect
to each Base Rate Loan, in the column headed "Base Rate", (b) with respect to
each Eurodollar Rate Loan, in the column headed "Eurodollar Rate", (c) for each
Letter of Credit, in the column headed "Letters of Credit", and (d) with respect
to
-2-
<PAGE>
Commitment Fees, in the column headed "Commitment Fees":
<TABLE>
<CAPTION>
Pricing Leverage Base Eurodollar Letters Commitment
Ratio Rate Rate of Credit Fees
----- ---- ---- --------- ----
<S> <C> <C> <C> <C>
Less than 0% 1.0000% 1.0000% 0.2500%
1.50:1.00
Greater than or 0.2500% 1.2500% 1.2500% 0.3125%
equal to 1.50:1.00
but less than 2.00:1.00
Greater than or 0.5000% 1.5000% 1.5000% 0.3750%
equal to 2.00:1.00
but less than 2.50:1.00
Greater than or 0.7500% 1.7500% 1.7500% 0.4375%
equal to 2.50:1.00
but less than 3.00:1.00
Greater than or 1.0000% 2.0000% 2.0000% 0.5000%
equal to 3.00:1.00
</TABLE>
"Approved Swan Agreements" means one or more Swap Agreements
------------------------
with respect to the Indebtedness evidenced by the Notes between Borrower and one
or more of the Banks, on terms mutually acceptable to Borrower and that Bank or
Banks. Each Approved Swap Agreement shall be a Loan Document and shall be
secured by the Liens created by the Collateral Documents to the extent set forth
in Section 2.8.
---
"Arranger" means BA Securities, Inc.
--------
"Bank of America" means Bank of America National Trust and
---------------
Savings Association, its successors and assigns.
"Banking Day" means any Monday, Tuesday, Wednesday, Thursday
-----------
or Friday, other than a day on which banks are authorized or required to be
----------
closed in California, Nevada or New York.
"Base Rate" means, as of any date of determination, the
---------
greater of (a) the Reference Rate or (b) the Federal Funds Rate plus .50%.
- ------- ----
"Base Rate Advance" means an Advance made hereunder and
-----------------
designated as a Base Rate Advance in accordance with Article 2.
---------
"Base Rate Loan" means a Loan made hereunder and designated as
--------------
a Base Rate Loan in accordance with Article 2.
---------
-3-
<PAGE>
"Borrower" means Eldorado Resorts LLC, a Nevada limited
--------
liability company, and its successors and permitted assigns.
"Capital Expenditure" means any expenditure that is considered
-------------------
a capital expenditure under Generally Accepted Accounting Principles,
consistently applied, including any amount that is required to be treated as an
asset subject to a Capital Lease.
"Capital Lease" means, as to any Person, a lease of any
-------------
Property by that Person as lessee that is, or should be in accordance with
Financial Accounting Standards Board Statement No. 13, as amended from time to
time, or if such Statement is not then in effect, such other statement of
Generally Accepted Accounting Principles as may be applicable, recorded as a
"capital lease" on the balance sheet of that Person prepared in accordance with
Generally Accepted Accounting Principles.
"Cash" means, when used in connection with any Person, all
----
monetary and non-monetary items owned by that Person that are treated as cash in
accordance with Generally Accepted Accounting Principles.
"Cash Equivalents" means, when used in connection with any
----------------
Person, that Person's Investments in:
(a) Government Securities due within one year after the date of the
making of the Investment;
(b) readily marketable direct obligations of any State of the United
States of America or any political subdivision of any such State
given on the date of such investment a credit rating of at least Aa
by Moody's Investors Service, Inc. or AA by Standard & Poor's
Corporation, in each case due within one year after the date of the
making of the Investment;
(c) certificates of deposit issued by, bank deposits in, eurodollar
deposits through, bankers' acceptances of, and reverse repurchase
agreements covering Government Securities executed by, any Bank or
any other bank, savings and loan or savings bank doing business in
and incorporated under the Laws of the United States of America or
any State thereof and having on the date of such Investment combined
capital, surplus and undivided profits of at least $250,000,000, in
each case due within one
-4-
<PAGE>
year after the date of the making of the Investment;
(d) certificates of deposit issued by, bank deposits in, eurodollar
deposits through, bankers' acceptances of, and reverse repurchase
agreements covering Government Securities executed by, any branch or
office located in the United States of America of a bank
incorporated under the Laws of any jurisdiction outside the United
States of America having on the date of such Investment combined
capital, surplus and undivided profits of at least $500,000,000, in
each case due within one year after the date of the making of the
Investment; and
(e) readily marketable commercial paper of corporations doing business
in and incorporated under the Laws of the United States of America
or any State thereof given on the date of such Investment the
highest credit rating by Moody's Investors Service, Inc. and
Standard & Poor's Corporation, in each case due within 270 days
after the date of the making of the Investment.
"Cash Interest Charges" means, with respect to any Person and
---------------------
for any fiscal period, Interest Charges of that Person to the extent payable in
Cash during that period.
"Certificate of a Responsible Official" means a certificate
-------------------------------------
signed by a Responsible Official of the Person providing the certificate.
"Change in Control" means (i) the failure of Donald Carano,
-----------------
members of his immediate family, or trusts of which Donald Carano or members of
his immediate family are the sole beneficiaries, to own, directly or indirectly,
and control the power to vote, a majority of the equity ownership interests in
Borrower or (ii) the failure of Donald Carano to be actively involved in the
management of Borrower as the chief executive officer of Borrower for a period
in excess of 90 days unless, during that period, a successor chief executive
officer reasonably acceptable to the Majority Banks is appointed.
"Circus and Eldorado Joint Venture" means Circus and Eldorado
---------------------------------
Joint Venture, a Nevada general partnership which is the joint venture of ELLC
and Galleon which owns, manages and operates Silver Legacy.
"Circus and Eldorado Joint Venture Agreement" means
-------------------------------------------
-5-
<PAGE>
the final written joint venture agreement among Circus Circus Enterprises, Inc.,
Galleon, Borrower and ELLC governing the formation of the Circus and Eldorado
Joint Venture and the construction, management and operation of Silver Legacy.
"Closing Date" means March 25, 1994.
------------
"Co-Agent" means Wells Fargo Bank, N.A. In its capacity as such, the
--------
Co-Agent shall have no rights or obligations under this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended or
----
replaced and as in effect from time to time.
"Collateral" means, collectively, all of the collateral
----------
subject to the Liens, or intended to be subject to the Liens, created by the
Collateral Documents.
"Collateral Documents" means, collectively, the Security
--------------------
Agreement, the Subsidiary Security Agreement, the Deed of Trust, any deed of
trust hereafter executed with respect to the Daniel's Expansion and any other
pledge agreement, hypothecation agreement, security agreement, assignment, deed
of trust, mortgage or similar instrument executed by Borrower or by CS&Y in
favor of the Banks to secure the Obligations .
"Commission" means the Securities and Exchange Commission .
----------
"Commitment Assignment and Acceptance" means a commitment assignment
------------------------------------
and acceptance substantially in the form of Exhibit A.
---------
"Commitment Fees" means the fees referred to in Section 3.4.
--------------- ---
"Commitment" means, subject to Sections 2.5 and 2.6, $50,000,000.
---------- --- ---
As of the Restatement Date, Bank of America holds the entire Commitment.
"Compliance Certificate" means a certificate in the form of
----------------------
Exhibit B, properly completed and signed by a Senior Officer of Borrower.
- ---------
"Contingent Obligation" means, as to any Person, any (a)
---------------------
direct or indirect guarantee of Indebtedness of, or other obligation performable
by, any other Person, including any endorsement (other than for collection or
---------
deposit in the ordinary course of business), co-making or sale with recourse of
the obligations of any other Person or (b) contractual
-6-
<PAGE>
assurance (not arising solely by operation of Law) given to an obligee with
respect to the performance of an obligation by, or the financial condition of,
any other Person, whether direct, indirect or contingent, including any purchase
---------
or repurchase agreement covering such obligation or any collateral security
therefor, any agreement to provide funds (by means of loans, capital
contributions or otherwise) to such other Person, any agreement to support the
solvency or level of any balance sheet item to such other Person, or any other
arrangement of whatever nature having the effect of assuring or holding harmless
any obligee against loss with respect to any obligation of such other Person
including without limitation any "keep-well", "take-or-pay" or "through put"
agreement or arrangement. As of each date of determination, the amount of any
Contingent Obligation shall be deemed to be an amount equal to the stated or
determinable amount of the related primary obligation (unless the Contingent
Obligation is limited by its terms to a lesser amount, in which case to the
extent of such amount) or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof as determined by the Person in good
faith.
"Contractual Obligation" means, as to any Person, any
----------------------
provision of any outstanding Securities issued by that Person or of any material
agreement, instrument or undertaking to which that Person is a party or by which
it or any of its Property is bound.
"CS&Y" means CS&Y Associates, a Nevada general partnership
----
consisting of Donald L. Carano, The Sonya Carano Trust under Trust Agreement
dated January 16, 1979, The George Yori and Genevieve Yori Family Trust under
Agreement dated September 28, 1981, The Siri Family Trust, under Agreement dated
December 13, 1991, The William and Lena Carano Family Trust - Exemption Trust,
under Trust Agreement dated April 10, 1984, the William and Lena Carano Family
Trust, - Survivors Trust, under Trust Agreement dated April 10, 1984, The Caryl
Stringham Trust, under Trust Agreement dated January 28, 1992, The Lawrence Yori
Trust, under Trust Agreement dated November 2, 1992, and the Siri 1993
Irrevocable Trust, under Trust Agreement dated June 18, 1993.
"Daniels Expansion" means the proposed expansion of the
-----------------
Eldorado Hotel to be constructed on the real property described on
Schedule 1.1B, which real property is the site of the existing Daniel's Motel.
- -------------
"Debtor Relief Laws" means the Bankruptcy Code of the United
------------------
States of America, as amended from time to time, and all other applicable
liquidation, conservatorship, bankruptcy, moratorium, rearrangement,
receivership,
-7-
<PAGE>
insolvency, reorganization, or similar debtor relief Laws from
time to time in effect affecting the rights of creditors generally.
"Deed of Trust" means the Amended and Restated Deed of Trust
-------------
executed by Borrower and CS&Y covering the real property described on
Schedule 1.lA and the related improvements and fixtures used in connection with
- -------------
the Eldorado Hotel, substantially in the form of Exhibit C, either as originally
---------
executed or as the same may from time to time be supplemented, modified,
amended, renewed, extended on supplanted .
"Default" means any event that, with the giving of any
-------
applicable notice or passage of time specified in Section 9.1, or both, would be
---
an Event of Default.
"Default Rate" means the interest rate set forth in Section 3.8.
------------ ---
"Designated Deposit Account" means a deposit account to be
--------------------------
maintained by Borrower with the Administrative Agent, as from time to time
designated by Borrower by written notification to the Administrative Agent.
"Designated Eurodollar Market" means, for any Eurodollar Rate
----------------------------
Loan, the London Eurodollar Market or such other Eurodollar Market as may be
acceptable to the Administrative Agent .
"Disposition" means the sale, transfer or other disposition in
-----------
any single transaction or series of related transactions of any individual
asset, or group of related assets, of Borrower (but not of assets of ELLC or of
the Circus and Eldorado Joint Venture) that has or have at the date of the
Disposition a book value or fair market value (which shall be deemed to be equal
to the sales price for such asset or assets upon a sale to a Person that is not
an Affiliate of Borrower) of $1,000,000 on more, other than (i) the sale or
----------
other disposition of inventory in the ordinary course of business and (ii) the
sale or other disposition of equipment or other personal property that is
replaced by equipment or personal property, as the case may be, performing
substantially the same function not later than ninety (90) days after such sale
or disposition.
"Distribution" means, with respect to any membership interest,
------------
partnership interest or capital stock, or any warrant or option to acquire any
membership interest, partnership interests, capital stock or other equity
securities issued by a Person, (a) the retirement,
-8-
<PAGE>
redemption, purchase on other acquisition for value by such Person of any such
security or interest, (b) the declaration or payment by such Person of any
dividend in Cash or in Property (other than Property which is in the form of
like securities or interests of that Person) with respect to any such security
or interest, and (c) any Investment by such Person in any holder of 5% or more
of the equity securities of such Person, if a purpose of such Investment is to
avoid the characterization of the transaction between such Person and such
holder as a Distribution under clause (a) or (b) above.
"dollars" or "$" means United States dollars.
------- -
"EBITDA" means, for any period, (a) Net Income for that
------
period, plus (b) consolidated Interest Charges of Borrower and its Subsidiaries
----
for that period, plus (c) the aggregate amount of federal and state taxes on
----
measured by income of Borrower and its Subsidiaries for that period (whether or
not payable during that period), plus (d) depreciation, amortization and all
----
other non-cash expenses of Borrower and its Subsidiaries for that period, in
each case as determined in accordance with Generally Accepted Accounting
Principles.
"Eldorado Capital" means Eldorado Capital Corp., a Nevada
----------------
corporation, its successors and permitted assigns.
"Eldorado Hotel" means the Borrower's hotel and casino complex
--------------
located at 295 North Virginia Street, Reno, Nevada 89501, the adjacent parking
structure located at Sierra and Third Streets, Reno, Nevada 89501 and the
related interests in real property described in the Deed of Trust and includes
(i) the Southside Expansion and (ii) following the acquisition thereof, the
Daniel's Expansion.
"Eligible Assignee" means (a) with respect to any Bank,
-----------------
another Bank (b) with respect to any Bank, any Affiliate of that Bank and (c)
any commercial bank having a combined capital and surplus of $100,000,000 or
more that is (i) organized under the Laws of the United States of America or any
State thereof or (ii) organized under the Laws of any other country which is a
member of the Organization for Economic Cooperation and Development, or a
political subdivision of such a country, provided that (A) such bank is acting
--------
through a branch or agency located in the United States of America and (B) is
otherwise exempt from withholding of tax on interest and delivers Form 1001 or
Form 4224 pursuant to Section 11.23 at the time of any assignment pursuant to
-----
Section 11.8.
----
-9-
<PAGE>
"ELLC" means Eldorado Limited Liability Company, a Nevada
----
limited liability company, its successors and permitted assigns.
"ERISA" means the Employee Retirement Income Security Act of
-----
1974, and any regulations issued pursuant thereto, as amended or replaced and as
in effect from time to time .
"ERISA Affiliate" means, with respect to any Person, any
---------------
Person (or any trade or business, whether or not incorporated) that is under
common control with that Person within the meaning of Section 414 of the Code.
"Eurodollar Banking Day" means any Banking Day on which
----------------------
dealings in dollar deposits are conducted by and among banks in the Designated
Eurodollar Market.
"Eurodollar Base Rate" means, with respect to any Eurodollar
--------------------
Rate Loan, the interest rate per annum (determined solely by the Administrative
Agent and rounded upward to the next 1/16 of 1%) at which deposits in dollars
are of offered by Bank of America to prime banks in the Designated Eurodollar
Market at or about ll:00 a.m. local time in the Designated Eurodollar Market,
two (2) Eurodollar Banking Days before the first day of the applicable
Eurodollar Period in an aggregate amount approximately equal to the amount of
such Eurodollar Rate Loan and for a period of time comparable to the number of
days in the applicable Eurodollar Period. The determination of the Eurodollar
Base Rate by the Administrative Agent shall be conclusive in the absence of
manifest error.
"Eurodollar Lending Office" means, as to each Bank, its office
-------------------------
or branch so designated by written notice to Borrower and the Administrative
Agent as its Eurodollar Rate Lending Office. If no Eurodollar Rate Lending
Office is designated by a Bank, its Eurodollar Lending Office shall be its
office at its address for purposes of notices hereunder.
"Eurodollar Obligations" means eurocurrency liabilities, as defined
----------------------
in Regulation D.
"Eurodollar Period" means, as to each Eurodollar Rate Loan,
-----------------
the period commencing on the date specified by Borrower pursuant to
Section 2.1(b) and ending 1, 2, 3 or 6 months thereafter, as specified by
------
Borrower in the applicable Request for Loan; Provided that:
(a) The first day of any Eurodollar Period shall be a Eurodollar
Banking Day;
-10-
<PAGE>
(b) Any Eurodollar Period that would otherwise end on a day that is not
a Eurodollar Banking Day shall be extended to the next succeeding
Eurodollar Banking Day unless such Eurodollar Banking Day falls in
another calendar month, in which case such Eurodollar Period shall
end on the next preceding Eurodollar Banking Day;
(c) No Eurodollar Period shall extend beyond the Maturity Date.
"Eurodollar Rate" means, with respect to any Eurodollar Rate
---------------
Loan, the interest rate (rounded upward to the next 1/100 of 1%) determined to
be equal to the Eurodollar Base Rate divided by [1 minus the Eurodollar Reserve
------- -- -----
Percentage].
"Eurodollar Rate Advance" means an Advance made hereunder and
-----------------------
designated as a Eurodollar Rate Advance in accordance with Article 2.
---------
"Eurodollar Rate Loan" means a Loan made hereunder and
--------------------
designated as a Eurodollar Rate Loan in accordance with Article 2.
---------
"Eurodollar Reserve Percentage" means, with respect to any
-----------------------------
Eurodollar Rate Loan, the percentage applicable as of the date of determination
of the Eurodollar Base Rate representing the aggregate reserve requirements of
the Administrative Agent (disregarding any offsetting amounts that may be
available to the Administrative Agent to decrease such requirements to the
extent that such offsetting amounts arose out of transactions other than those
contemplated by this Agreement) under Regulation D and any other applicable Laws
with respect to Eurodollar Obligations in an aggregate amount equal to the
amount of such Eurodollar Rate Loan and for a time period comparable to the
number of months in the applicable Eurodollar Period. The determination by the
Administrative Agent of any applicable Eurodollar Reserve Percentage shall be
presumed connect in the absence of manifest error.
"Event of Default" shall have the meaning provided in Section 9.1.
----------------
"Federal Funds Rate" means, as of any date of determination, a
------------------
fluctuating interest rate per annum equal to the federal funds effective rate
for the previous Banking Day as quoted by the Federal Reserve Bank of New York
or, if such
-11-
<PAGE>
rate is not so published for any day which is a Banking Day, the average of the
quotations for such day on such transactions received by the Administrative
Agent from three Federal funds brokers of recognized standing selected by the
Administrative Agent.
"Fiscal Quarter" means the fiscal quarter of Borrower
--------------
consisting of a three month fiscal period ending on each March 31, June 30,
September 30 and December 31.
"Fiscal Year" means the fiscal year of Borrower consisting of
-----------
a twelve month fiscal period ending on each December 31.
"Fixed Change Ratio" means, as of the last day of each Fiscal
------------------
Quarter, the ratio of:
--------
(a) the sum of (i) EBITDA for the twelve month period ending on that
---
date plus (ii) Distributions made in Cash received by Borrower from
----
the Circus and Eldorado Joint Venture during that period; to
--
(b) the sum of (i) Cash Interest Charges payable by Borrower and its
---
Subsidiaries during that period, plus (ii) Scheduled Debt Amortization
----
for twelve month period beginning on the day following the last day of
such Fiscal Quarter (prospectively), plus (iii) 2% of the net revenues
----
of Borrower for the twelve month period ending on such date, plus (iv)
----
Distributions made by Borrower in Cash to its members during the same
period in accordance with Section 6.5, provided that any Distributions
--- --------
made in that fiscal period in excess of 50% of Net Income for that
fiscal period shall be disregarded for this purpose.
"Funded Debt" means, as of each date of determination, without
-----------
duplication, the sum of (a) all principal Indebtedness of Borrower and its
---
Subsidiaries (excluding in any event, the Circus and Eldorado Joint Venture) for
---------
borrowed money (including debt securities issued by Borrower and such
Subsidiaries) on that date, plus (b) the aggregate amount of all Capital Lease
----
Obligations of Borrower and such Subsidiaries on that date, plus (c) the
----
aggregate amount available for drawing under all letters of credit (including
the Letters of Credit) for which Borrower or any such Subsidiary is the account
party, outstanding on that date, plus (d) the aggregate amount drawn under all
----
letters of credit (including the Letters of Credit) for which Borrower or any
such Subsidiary is the account party and for which the issuer of such letters of
credit has not been reimbursed on that date.
-12-
<PAGE>
"Galleon" means Galleon, Inc., a Nevada corporation which is
-------
a wholly-owned subsidiary (directly or indirectly) of Circus Circus Enterprises,
Inc.
"Gaming Board" means, collectively, (a) the Nevada Gaming Commission,
------------
(b) the Nevada State Gaming Control Board and (c) any other Governmental Agency
that holds licensing or permit authority over gambling, gaming or casino
activities conducted by Borrower within its jurisdiction.
"Gaming Laws" means all Laws pursuant to which any Gaming Board
-----------
possesses licensing or permit authority over gambling, gaming, or casino
activities conducted by Borrower within its jurisdiction.
"Generally Accepted Accounting Principles" means, as of any date of
----------------------------------------
determination, accounting principles set forth as generally accepted in then
currently effective Statements of the Auditing Standards Board of the American
Institute of Certified Public Accountants, or if such statements are not then in
effect, accounting principles that are then approved by a significant segment of
the accounting profession in the United States of America. The term
"consistently applied," as used in connection therewith, means that the
--------------------
accounting principles applied are consistent in all material respects to those
applied at prior dates or for prior periods.
"Government Securities" means readily marketable direct full faith
---------------------
and credit obligations of the United States of America or obligations
unconditionally guaranteed by the full faith and credit of the United States of
America.
"Governmental Agency" means (a) any international, foreign, federal,
-------------------
state, county or municipal government, or political subdivision thereof, (b) any
governmental or quasi-governmental agency, authority, board, bureau, commission,
department, instrumentality or public body, (c) any court, administrative
tribunal or public utility, or (d) any arbitration tribunal or other non-
governmental authority to whose jurisdiction a Person has consented.
"Guaranty" means the continuing Guaranty of the Obligations executed
--------
by Eldorado Capital on the Restatement Date, substantially in the form of
Exhibit D, either as originally executed or as it may from time to time be
- ---------
supplemented, modified, amended, restated or extended, and as modified by any
instrument of Joinder executed by new Subsidiaries pursuant to Section 5.12.
----
13
<PAGE>
"Hazardous Materials" means substances defined as hazardous
-------------------
substances pursuant to the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, 42 USC ss.9601 et seq., or as hazardous, toxic or
pollutant pursuant to the Hazardous Materials Transportation Act, 49 USC
ss.1801, et seq., the Resource Conservation and Recovery Act, 42 USC ss.6901, et
seq., the Hazardous Waste Control Law, Chapter 459 of Nevada Revised Statutes,
or in any other applicable Hazardous Materials Law, in each case as such laws
are amended from time to time.
"Hazardous Materials Claims" means the matters described in clauses
--------------------------
(a) and (b) of Section 5.10.
- --- --- ----
"Hazardous Materials Laws" means all federal, Nevada state or local
------------------------
laws, ordinances, rules or regulations governing the disposal of Hazardous
Materials.
"Indebtedness" means, as to any Person, (a) all indebtedness of such
------------
Person for borrowed money, (b) that portion of the obligations of such Person
under Capital Leases which is properly recorded as a liability on a balance
sheet of that Person prepared in accordance with Generally Accepted Accounting
Principles, (c) any obligation of such Person that is evidenced by a promissory
note or other instrument representing an extension of credit to such Person,
whether or not for borrowed money, (d) any obligation of such Person for the
deferred purchase price of Property or services (other than trade or other
----------
accounts payable in the ordinary course of business in accordance with customary
terms), (e) any obligation of such Person that is secured by a Lien on assets of
such Person, whether or not that Person has assumed such obligation or whether
or not such obligation is non-recourse to the credit of such Person, but only to
the extent of the fair market value of the assets so subject to the Lien, (f)
obligations of such Person arising under acceptance facilities or under
facilities for the discount of accounts receivable of such Person, (g)
obligations of such Person for unreimbursed draws under letters of credit issued
for the account of such Person and (h) any obligations of such Person under a
Swap Agreement.
"Intangible Assets" means assets that are considered intangible
-----------------
assets under Generally Accepted Accounting Principles, including customer lists,
---------
goodwill, computer software and capitalized research and development costs .
"Interest Charges" means, as of the last day of any fiscal period,
----------------
the sum of (a) all interest, fees, charges and related expenses payable with
------
respect to that fiscal period
-14-
<PAGE>
to a lender in connection with borrowed money or the deferred purchase price of
assets that is treated as interest in accordance with Generally Accepted
Accounting Principles, plus (b) the portion of rent payable with respect to that
----
fiscal period under Capital Leases that should be treated as interest in
accordance with Generally Accepted Accounting Principles.
"Interest Differential" means, with respect to any prepayment of a
---------------------
Eurodollar Rate Loan on a day other than the last day of the applicable
Eurodollar Period and with respect to the failure to borrow a Eurodollar Rate
Loan on the date or in the amount specified in a Request for Loan, (a) the per
annum interest rate payable pursuant to Section 3.1(c) with respect to that
------
Eurodollar Rate Loan as of the date of the prepayment or failure to borrow,
minus (b) the Eurodollar Rate on or as near as practicable to the date of the
- -----
prepayment or failure to borrow for a Eurodollar Rate Loan commencing on such
date and ending on the last day of the applicable Eurodollar Period; provided
--------
that if the Eurodollar Rate so prescribed is equal to or within 1/8% less than
the Eurodollar Rate for the Eurodollar Rate Loan that was prepaid or not
borrowed, then 1/8 of 1% shall be subtracted from the Eurodollar Rate so
prescribed. The determination of the Interest Differential by the Administrative
Agent shall be conclusive in the absence of manifest error.
"Investment" means, when used in connection with any Person, any
----------
investment by or of that Person, whether by means of purchase or other
acquisition of capital stock or other Securities of any other Person or by means
of loan, advance, capital contribution, guaranty or other debt or equity
participation or interest, or otherwise, in any other Person, including any
---------
membership, partnership and joint venture interests of such Person in any other
Person. The amount of any Investment shall be the amount actually invested,
without adjustment for increases or decreases in the value of such Investment.
"Issuing Bank" means Bank of America.
------------
"Laws" means, collectively, all international, foreign, federal,
----
state and local statutes, treaties, rules, regulations, ordinances, codes and
administrative or judicial precedents.
"Letters of Credit" means any of the standby letters of credit issued
-----------------
by the Issuing Bank under the Commitment pursuant to Section 2.4, either as
---
originally issued or as the same may be supplemented, modified, amended,
renewed, extended or supplemented.
-15-
<PAGE>
"License Revocation" means the revocation of, or failure to renew,
------------------
any casino, gambling or gaming license issued by any Gaming Board to Borrower
that could constitute a Material Adverse Effect.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
----
assignment for security, security interest, encumbrance, lien or charge of any
kind, whether voluntarily incurred or arising by operation of Law or otherwise,
affecting any Property, including any agreement to grant any of the foregoing,
---------
any conditional sale or other title retention agreement, any lease in the nature
of a security interest, and/or the filing of or agreement to give any financing
statement under the Uniform Commercial Code or comparable Law of any
jurisdiction with respect to any Property .
"Loan" means the group of Advances made at any one time by the Banks
----
pursuant to Article 2.
---------
"Loan Documents" means, collectively, this Agreement, the Notes, the
--------------
Guaranty, each Letter of Credit, the Collateral Documents, any Request for Loan,
any Request for Letter of Credit and any other agreements of any type or nature
heretofore or hereafter executed and delivered by Borrower or any of its
Affiliates to the Administrative Agent or to any Bank in any way relating to or
in furtherance of this Agreement, including any Approved Swap Agreement, in each
---------
case either as originally executed or as the same may from time to time be
supplemented, modified, amended, restated, extended or supplanted, provided that
--------
the foregoing shall not be deemed to include any agreement evidencing the
obligations of ELLC or the Circus and Eldorado Joint Venture to a direct lender
to the Circus and Eldorado Joint Venture.
"Maintenance Capital Expenditure" means a Capital Expenditure for the
-------------------------------
maintenance, repair, restoration or refurbishment of the Eldorado Hotel, but
excluding any Capital Expenditure (including any Capital Expenditure made in
- ---------
connection with the Southside Expansion or the Daniels Expansion) which adds
permanent improvements, areas or structures to the Eldorado Hotel.
"Majority Banks" means, as of any date of determination, Banks whose
--------------
aggregate Pro Rata Share is at least 51% of the Commitment then in effect or, if
the Commitment is not then in effect, Banks holding Notes evidencing at least
51% of the aggregate Indebtedness evidenced by the Notes.
-16-
<PAGE>
"Material Adverse Effect" means any set of circumstances or events
-----------------------
which (a) has or could reasonably be expected to have any material adverse
effect whatsoever upon the validity or enforceability of any Loan Document, (b)
is or could reasonably be expected to be material and adverse to the condition
(financial or otherwise) or business operations or to the prospects of Borrower,
(c) materially impairs or could reasonably be expected to materially impair the
ability of Borrower to perform its Obligations or (d) materially impairs or
could reasonably be expected to materially impair the ability of the Banks to
enforce their legal remedies pursuant to the Loan Documents.
"Maturity Date" means July 31, 2001.
-------------
"Members' Equity" means, as of any date of determination, the members
---------------
equity of Borrower and its Subsidiaries on that date, determined in accordance
with Generally Accepted Accounting Principles, provided that there shall be
--------
excluded from Members' Equity (i) any amount attributable to membership shares
or interests that are, directly or indirectly, required to be redeemed or
repurchased by Borrower or its Subsidiaries at a specified date or upon the
occurrence of specified events or at the election of the holder thereof, and
(ii) that portion of Member's Equity which is attributable to the interests of
Recreational Enterprises, Inc. and other minority members in ELLC, minus
-----
Intangible Assets of Borrower and its Subsidiaries on that date.
"Multiemployer Plan" means any employee benefit plan of the type
------------------
described in Section 4001(a) (3) of ERISA.
"Negative Pledge" means any covenant binding on Borrower that
---------------
prohibits the creation of Liens on any Property thereof, except a covenant
------
contained in an instrument creating a Permitted Encumbrance or Permitted Right
of Others on Property that prohibits the creation of other Liens on that
Property and no other Property of Borrower.
"Net Cash Proceeds" means the gross Cash proceeds received by
-----------------
Borrower or any of its Subsidiaries upon the issuance and sale of any equity
Securities of Borrower, minus, the actual expenses of such sale paid or payable
-----
by Borrower or any of its Subsidiaries in connection with such issuance and
sale.
"Net Income" means, with respect to any fiscal period, the net after-
----------
tax income (or loss) from continuing operations before extraordinary or non-
recurring items of Borrower and its Subsidiaries for that period, excluding any
---------
-17-
<PAGE>
income (or loss) attributable to or received from the Circus and Eldorado Joint
Venture, determined in accordance with Generally Accepted Accounting Principles,
consistently applied .
"Note" means any of the promissory notes made by Borrower to a Bank
----
evidencing Advances under that Bank's Pro Rata Share, substantially in the form
of Exhibit E, either as originally executed or as the same may from time to time
---------
be supplemented, modified, amended, renewed, extended or supplanted.
"Obligations" means all present and future obligations of every kind
-----------
or nature of Borrower or any Party at any time and from time to time owed to the
Administrative Agent, the Issuing Bank or the Banks or any one or more of them
under any one or more of the Loan Documents, whether due or to become due,
matured or unmatured, liquidated or unliquidated, or contingent or
noncontingent, including obligations of performance as well as obligations of
---------
payment, and including interest that accrues after the commencement of any
---------
proceeding under any Debtor Relief Law by or against Borrower or any Affiliate
of Borrower.
"Opinion of Counsel" means the favorable written legal opinion of
------------------
Messrs. McDonald, Carano, Wilson, McCune, Bergin, Frankovich & Hicks, counsel to
Borrower, substantially in the form of Exhibit F, together with copies of all
---------
factual certificates and legal opinions upon which such counsel have relied.
"Party" means any Person other than the Administrative Agent, the
-----
Issuing Bank and the Banks, which now or hereafter is a party to any of the Loan
Documents.
"PBGC" means the Pension Benefit Guaranty Corporation at any
----
successor thereof established under ERISA.
"Pension Plan" means any "employee pension benefit plan" that is
------------
subject to Title IV of ERISA and which is maintained for employees of Borrower
or any of its ERISA Affiliates, other than a Multiemployer Plan.
----------
"Permitted Dispositions" means Dispositions of Property made during
----------------------
the term of this Agreement which have, as of each date of determination, an
aggregate book value not in excess of 5% of the consolidated total assets of
Borrower and its Subsidiaries determined, as of each such date, with reference
to Borrower's then most recent audited financial statements, provided that no
--------
Disposition of Property which is an operationally integral part of the Eldorado
Hotel shall be
-18-
<PAGE>
a treated as a Permitted Disposition without the prior written consent of all of
the Banks.
"Permitted Encumbrances" means:
----------------------
(a) inchoate Liens incident to construction or maintenance of real
property, or Liens incident to construction or maintenance of
real property, now or hereafter filed of record for which
adequate accounting reserves have been set aside and which are
being contested in good faith by appropriate proceedings and
have not proceeded to judgment, provided that, by reason of
nonpayment of the obligations secured by such Liens, no such
real property is subject to a material risk of loss or
forfeiture;
(b) Liens for taxes and assessments on real property which are not
yet past due, or Liens for taxes and assessments on real
property for which adequate reserves have been set aside and
are being contested in good faith by appropriate proceedings
and have not proceeded to judgment, provided that, by reason
--------
of nonpayment of the obligations secured by such Liens, no
such real property is subject to a material risk of loss or
forfeiture;
(c) minor defects and irregularities in title to any real property
which in the aggregate do not materially impair the fair
market value or use of the real property for the purposes for
which it is or may reasonably be expected to be held;
(d) easements, exceptions, reservations, or other agreements
granted or entered into after the date hereof for the purpose
of pipelines, conduits, cables, wire communication lines,
power lines and substations, streets, trails, walkways,
drainage, irrigation, water, and sewerage purposes, dikes,
canals, ditches, the removal of oil, gas, coal, or other
minerals, and other like purposes affecting real property
which in the aggregate do not materially burden or impair the
fair market value or use of such real property for the
purposes for which it is or may reasonably be expected to be
held;
(e) rights reserved to or vested in any Governmental Agency by Law
to control or regulate, or obligations or duties under Law to
any Governmental Agency with respect to, the use of any real
-19-
<PAGE>
property;
(f) rights reserved to or vested in any Governmental Agency by Law to
control or regulate, or obligations or duties under Law to any
Governmental Agency with respect to, any right, power, franchise,
grant, license, or permit;
(g) present or future zoning laws and ordinances or other laws and
ordinances restricting the occupancy, use, or enjoyment of real
property;
(h) statutory Liens, other than those described in clauses (a) or (b)
above, arising in the ordinary course of business with respect to
obligations which are not delinquent or are being contested in good
faith by appropriate proceedings, provided that, if delinquent,
--------
adequate reserves have been set aside with respect thereto and, by
reason of nonpayment, no Property is subject to a material risk of loss
or forfeiture;
(i) Liens consisting of pledges or deposits made in connection with
obligations under workers' compensation laws or similar legislation,
including Liens of judgments thereunder which are not currently
dischargeable;
(j) Liens consisting of pledges or deposits of Property to secure
performance in connection with operating leases made in the ordinary
course of business to which Borrower is a party as lessee, provided the
--------
aggregate value of all such pledges and deposits in connection with any
such lease does not at any time exceed 10% of the annual fixed rentals
payable under such lease;
(k) Liens consisting of deposits of Property to secure statutory
obligations of Borrower in the ordinary course of its business;
(1) Liens consisting of deposits of Property to secure (or in lieu of)
surety, appeal or customs bonds in proceedings to which Borrower is a
party in the ordinary course of its business; and
(m) Liens created by or resulting from any litigation or legal proceeding
involving Borrower in the ordinary course of its business which is
currently being contested in good faith by appropriate proceedings,
provided that adequate reserves have been
--------
-20-
<PAGE>
set aside with respect thereto, and such Liens are discharged
or stayed within 60 days of creation and no Property is
subject to a material risk of loss or forfeiture.
"Permitted Right of Others" means a Right of Others consisting
-------------------------
of (a) an interest (other than a legal or equitable co-ownership interest, an
option or right to acquire a legal or equitable co-ownership interest and any
interest of a ground lessor under a ground lease) that does not materially
impair the value or use of property for the purposes for which it is or may
reasonably be expected to be held, (b) an option or right to acquire a Lien that
would be a Permitted Encumbrance, and (c) the reversionary interest of a
landlord under a lease of Property.
"Permitted Tax Distribution" means Distributions made by
--------------------------
Borrower to the Members in an amount not to exceed the actual combined federal
and state income tax then payable in Cash (including estimated income taxes then
---------
payable) under then applicable Laws by the ultimate tax-paying individuals or
entities who are directly or indirectly owners of the Members with respect to
their respective distributive shares of the taxable income of Borrower
(including their distributive shares of any components or tax attributes
---------
thereof), assuming that such ultimate tax-paying individuals or entities had no
other taxable income, loss, deductions or other tax attributes and that any net
operating loss carryforward attributable to Borrower if it were a tax-paying
entity would be available in such Fiscal Year to such individuals or entities,
all as set forth in calculations in reasonable detail attached to a letter from
independent public accountants of recognized standing selected by Borrower and
satisfactory to the Majority Banks) furnished to the Agent not later than five
(5) days prior to any such Distribution.
"Person" means any entity, whether an individual, trustee,
------
corporation, general partnership, limited liability company, limited
partnership, joint stock company, trust, estate, unincorporated organization,
business association, tribe, firm, joint venture, Governmental Agency, or
otherwise.
"Pricing Certificate" means each Pricing Certificate, substantially
-------------------
in the form of Exhibit G, signed by a Responsible Official of Borrower and
---------
properly completed to provide all information required to be included therein.
"Pricing Leverage Ratio" means, as of the last day of each
----------------------
Fiscal Quarter, the ratio of (a) the average daily
-21-
<PAGE>
outstanding principal amount of Funded Debt for the Fiscal Quarter ended on that
date to (b) EBITDA for the twelve month fiscal period ended on that date.
"Projections" means the financial projections heretofore furnished by
-----------
Borrower to the Banks, true and correct copies of which are attached hereto as
Schedule 4.18.
- -------------
"Property" means any interest in any kind of property or asset,
--------
whether real, personal or mixed, or tangible or intangible.
"Pro Rata Share" means, with respect to each Bank, the percentage of
--------------
the Commitment held by that Bank from time to time. The Administrative Agent
shall inform the Borrower and the Banks of each change to the Pro Rata Share of
any Bank.
"Quarterly Payment Date" means each March 31, June 30, September 30,
----------------------
and December 31, commencing September 30, 1997.
"Real Property" means, collectively, the real property and
-------------
improvements described in the Deed of Trust.
"Reduction Date" means each Quarterly Payment Date beginning with the
--------------
Quarterly Payment Date occurring on September 30, 1997.
"Reference Rate" means the rate of interest publicly announced from
--------------
time to time by Bank of America in San Francisco, California, as its "Reference
Rate." The Reference Rate is a rate set by Bank of America based upon various
factors, including the Bank of America's costs and desired return, general
economic conditions and other factors, and is used as a reference point for
pricing some loans. Bank of America may price loans at, above or below the
Reference Rate. Any change in the Reference Rate shall take effect on the day
specified in the public announcement of such change.
"Regulation D" means Regulation D, as at any time amended, of the
------------
Board of Governors of the Federal Reserve System, or any other regulation in
substance substituted therefor.
"Regulation G" means Regulation G, as at any time amended, of
------------
the Board of Governors of the Federal Reserve System, or any other regulation in
substance substituted therefor.
-22-
<PAGE>
"Regulation U" means Regulation U, as at any time amended, of
------------
the Board of Governors of the Federal Reserve System, or any other regulation in
substance substituted therefor.
"Regulation X" means Regulation X, as at any time amended, of
------------
the Board of Governors of the Federal Reserve System, or any other regulation in
substance substituted therefor.
"Request for Letter of Credit" means a written request for
----------------------------
letter of credit substantially in the form of Exhibit H, together with the
---------
standard form of application for standby letters of credit, as applicable, used
by the Issuing Bank, signed by a Responsible Official of Borrower and properly
completed to provide all information required to be included therein.
"Request for Loan" means a written request for a Loan substantially
----------------
in the form of Exhibit I, signed by a Responsible Official of Borrower and
---------
properly completed to provide all information required to be included therein.
"Requirement of Law" means, as to any Person, the certificate of
------------------
organization, articles or certificate of incorporation and bylaws, the
partnership agreement and any related certificate of partnership, or other
organizational or governing documents of such Person, and any Law, or judgment,
award, decree, writ or determination of a Governmental Agency, in each case
applicable to or binding upon such Person or any of its Property or to which
such Person or any of its Property is subject.
"Responsible Official" means (a) when used with reference to a
--------------------
Person other than an individual, any officer of such Person, general partner of
such Person, corporate officer of a corporate general partner of such Person,
or, corporate officer of a corporate general partner of a partnership that is a
general partner of such Person, or any other responsible official thereof duly
acting on behalf thereof, and (b) when used with reference to a Person who is an
individual, such Person. Any document or certificate hereunder that is signed or
executed by a Responsible Official of a Person shall be conclusively presumed to
have been authorized by all necessary corporate, partnership, membership and/or
other action on the part of that Person.
"Restatement Date" means the date upon which the conditions precedent
----------------
set forth in Section 8.1 are fulfilled or waived by the Banks.
---
-23-
<PAGE>
"Right of Others" means, as to any Property in which a Person
---------------
has an interest, (a) any legal or equitable right, title or other interest
(other than a Lien) held by any other Person in or with respect to that
----------
Property, and (b) any option or right held by any other Person to acquire any
right, title or other interest in or with respect to that Property, including
---------
any option or right to acquire a Lien.
"Scheduled Debt Amortization" means, with respect to any fiscal
---------------------------
period, that portion of the principal of Funded Debt which is scheduled by its
terms to be repaid or prepaid during that period; provided that, in the case of
--------
a revolving credit facility (such as the Commitment) which will terminate or
reduce during that period, a scheduled principal payment shall be deemed to
exist only to the extent required by application of such termination or
reduction to the average daily principal amount outstanding thereunder during
the one calendar month period immediately preceding such fiscal period.
"Securities" means any capital stock, share, voting trust
----------
certificate, bonds, debentures, notes or other evidences of indebtedness,
membership interests, limited partnership interests, or any warrant, option or
other right to purchase or acquire any of the foregoing.
"Security Agreement" means the Amended and Restated Security
------------------
Agreement executed by Borrower on the Restatement Date, substantially in the
form of Exhibit J, either as originally executed or as the same may from time to
---------
time be supplemented, modified, amended, renewed, extended or supplanted.
"Senior Debt to EBITDA Ratio" means, as of the last day of each
---------------------------
Fiscal Quarter, the ratio of (a) the sum of (i) Funded Debt, plus without
--- ----
duplication, all obligations of Borrower and its Subsidiaries with respect to
Swap Agreements, plus (iii) all Contingent Obligations of Borrower and its
----
Subsidiaries with respect to indebtedness for borrowed money, minus (iii) all
-----
Subordinated Obligations, in each case as of such date, to (b) EBITDA for the
twelve month fiscal period ended on such date.
"Senior Officer" means the (a) chief executive officer, (b) chief
--------------
financial officer, (c) director of administration, or (d) general manager of the
Person designated.
"Senior Subordinated Notes" means the 10 1/2% Senior Subordinated
-------------------------
Notes due 2006 issued by Borrower and Eldorado Capital pursuant to the Indenture
dated as of July
-24-
<PAGE>
31, 1996 among Borrower, Eldorado Capital and Fleet National Bank, as Trustee,
as in effect on the Restatement Date.
"Silver Legacy" means the Silver Legacy Resort and Casino hotel
-------------
casino complex in Reno, Nevada owned by the Circus and Eldorado Joint Venture
and situated on the real property immediately adjacent to the Eldorado Hotel on
its north and northwest.
"Southside Expansion" means that portion of the Eldorado Hotel
-------------------
constructed during 1994 through 1996 commonly known as the Southside Expansion.
"Special Eurodollar Circumstance" means (a) the adoption of any Law
-------------------------------
by any Governmental Agency, central branch or comparable authority with respect
to activities in the Designated Eurodollar Market, or (b) any change in the
interpretation or administration of any existing Law by any Governmental Agency,
central bank or comparable authority charged with the interpretation or
administration thereof, or (c) compliance by any Bank or its Eurodollar Lending
Office with any request or directive (whether or not having the force of Law) of
any such Governmental Agency, central bank or comparable authority, or (d) the
existence or occurrence of circumstances affecting the Designated Eurodollar
Market generally that are beyond the reasonable control of the Banks.
"Subordinated Obligations" means the Senior Subordinated Notes and
------------------------
all other Indebtedness of Borrower hereafter approved in writing by the Banks
which is subordinated to the Obligations in a manner which is solely acceptable
to the Banks, provided that it is understood that the Banks shall be under no
--------
obligation to consent to the incurrence of Subordinated Obligations other than
the Senior Subordinated Notes.
"Subsidiary" means, as of any date of determination and with respect
----------
to any Person, any corporation, limited liability company or partnership
(whether or not, in either case, characterized as such or as a "joint venture"),
whether now existing or hereafter organized or acquired: (a) in the case of a
corporation, of which a majority of the securities having ordinary voting power
for the election of directors or other governing body (other than securities
having such power only by reason of the happening of a contingency) are at the
time beneficially owned by such Person and/or one or more Subsidiaries of such
Person, or (b) in the case of a partnership, of which such Person or a
Subsidiary of such Person is a general partner or of which a majority of the
partnership or other ownership interests are at the time
-25-
<PAGE>
beneficially owned by such Person and/or one or more of its Subsidiaries, or (c)
in the case of a limited liability or other entity, of which the majority of the
membership or other ownership interests having ordinary voting power are at the
time owned by such Person and/or one or more Subsidiaries of such Person,
provided that the Circus and Eldorado Joint Venture shall not be deemed to be a
- --------
Subsidiary of Borrower or of ELLC.
"Subsidiary Security Agreement" means the Security Agreement executed
-----------------------------
by Eldorado Capital on the Restatement Date, substantially in the form of
Exhibit K, either as originally executed or as the same may from time to time be
- ---------
supplemented, modified, amended, renewed, extended or supplanted, and as
modified by any instrument of Joinder executed by new Subsidiaries pursuant to
Section 5.12.
----
"Swap Agreements" means one or more written agreements between
---------------
Borrower and one or more financial institutions providing for "swap," "cap,"
"collar" or other interest rate protection with respect to any Indebtedness.
"Termination Event" means (a) a "reportable event" as defined in
-----------------
Section 4043 of ERISA (other than a reportable event that is not subject to the
----------
provision for 30 day notice to the PBGC), (b) the withdrawal of Borrower or any
of its ERISA Affiliates from a Pension Plan during any plan year in which it was
a "substantial employer" as defined in Section 4001(a) (2) of ERISA, (c) the
filing of a notice of intent to terminate a Pension Plan or the treatment of an
amendment to a Pension Plan as a termination thereof pursuant to Section 4041 of
ERISA, (d) the institution of proceedings to terminate a Pension Plan by the
PBGC or (e) any other event or condition which might reasonably be expected to
constitute grounds under ERISA for the termination of, or the appointment of a
trustee to administer, any Pension Plan.
"Title Company" means First American Title Insurance Company, Inc. or
-------------
such other title insurance company as may be satisfactory to Administrative
Agent.
"Total Debt to EBITDA Ratio". means, as of the last day of each
--------------------------
Fiscal Quarter, the ratio of (a) the sum of (i) Funded Debt, plus (ii) without
--- ----
duplication, all obligations of Borrower and its Subsidiaries with respect to
Swap Agreements, plus (iii) all Contingent Obligations of Borrower and its
----
Subsidiaries with respect to indebtedness for borrowed money, in each case as of
such date, to (b) EBITDA for the twelve month fiscal period ended on such date.
"type", when used with respect to any Loan or
----
-26-
<PAGE>
Advance, means the designation of whether such Loan or Advance is a
Base Rate Loan or Advance or a Eurodollar Rate Loan or Advance.
"Unused Commitment" means, as of each date of determination, the
-----------------
difference between (a) the Commitment on that date and (b) the sum of
---
(i) the principal Indebtedness then evidenced by the Notes, (ii) the
amount available for drawing under outstanding Letters of Credit, and
(iii) the aggregate amount of all unreimbursed draws with respect to
letters of credit.
1.2 Use of Defined Terms. Any defined term used in the plural shall
--------------------
refer to all members of the relevant class, and any defined term used in the
singular shall refer to any one or more of the members of the relevant class.
1.3 Accounting Terms. All accounting terms not specifically defined
----------------
in this Agreement shall be construed in conformity with, and all financial data
required to be submitted by this Agreement shall be prepared in conformity with,
Generally Accepted Accounting Principles applied on a consistent basis, except
------
as otherwise specifically prescribed herein. In the event that Generally
Accepted Accounting Principles change during the term of this Agreement such
that the financial covenants contained in Sections 6.12 through 6.15, inclusive,
---- ----
would then be calculated in a different manner or with different components,
(a) Borrower and the Banks agree to amend this Agreement in such respects as are
necessary to conform those covenants as criteria for evaluating Borrower's
financial condition to substantially the same criteria as were effective prior
to such change in Generally Accepted Accounting Principles and (b) Borrower
shall be deemed to be in compliance with the financial covenants contained in
such Sections during the 60 day period following any such change in Generally
Accepted Accounting Principles if and to the extent that Borrower would have
been in compliance therewith under Generally Accepted Accounting Principles as
in effect immediately prior to such change.
1.4 Rounding. Any financial ratios required to be maintained by
--------
Borrower pursuant to this Agreement shall be calculated by dividing the
appropriate component by the other component, carrying the result to one place
more than the number of places by which such ratio is expressed in this
Agreement and rounding the result up or down to the nearest number (with a round
up if there is no nearest number) to the number of places by which such ratio is
expressed in this Agreement.
1.5 Exhibits and Schedules. All Exhibits and Schedules to this
----------------------
Agreement, either as originally existing or as the same may from time to time be
supplemented, modified or amended, are
-27-
<PAGE>
incorporated herein by this reference. A matter disclosed on any Schedule shall
be deemed disclosed on all Schedules.
1.6 Miscellaneous Terms. The term "or" is disjunctive; the term "and"
-------------------
is conjunctive. The term "shall" is mandatory; the term "may" is permissive.
Masculine terms also apply to females; feminine terms also apply to males. The
term "including" is, by way of example and not limitation.
-28-
<PAGE>
ARTICLE 2.
LOANS AND LETTERS OF CREDIT
---------------------------
2.1 Loans-General.
-------------
(a) Subject to the terms and conditions set forth in this
Agreement, from and after the Restatement Date each Bank shall, pro rata
according to its Pro Rata Share, make Advances to Borrower under the
Commitment in such amounts as Borrower may request that do not exceed in
the aggregate at any one time outstanding the amount of that Bank's Pro
Rata Share; provided that, giving effect to the Loan of which such Advance
--------
is a part, the sum of (i) the aggregate principal amount outstanding under
---
the Notes plus (ii) the aggregate amount available for drawing under the
----
outstanding Letters of Credit plus (iii) the aggregate amount of all
----
unreimbursed draws with respect to all Letters of Credit, shall not exceed
the then applicable Commitment. Subject to the limitations set forth
herein, Borrower may borrow, repay and reborrow under this Section 2.1(a)
------
without premium or penalty.
(b) Subject to the next sentence, each Loan shall be made
pursuant to a Request for Loan which shall specify the requested (i) date
of such Loan, which shall be a Banking Day in the case of a Base Rate Loan
and a Eurodollar Banking Day in the case of a Eurodollar Rate Loan, (ii)
amount of such Loan, (iii) type of such Loan, and (iv) in the case of
Eurodollar Rate Loans, the Eurodollar Period for such Loan. Unless the
Administrative Agent has notified, in its sole and absolute discretion,
Borrower to the contrary, a loan may be requested by telephone, telecopier
or telex by a Responsible Official of Borrower. Borrower shall immediately
confirm each requested Loan by submitting a Request for Loan conforming
with the requirements of the preceding sentence to the Administrative Agent
by telecopier, with the original thereof to follow by mail. In the case of
the initial Loans to be made on the Restatement Date, the Request for Loan
to be delivered by the Borrower shall be delivered to the Administrative
Agent no later than 12:00 noon (California time), one day before the
Closing Date, and such Loans shall be Base Rate Loans only and,
notwithstanding Section 2.1(d) may be in any amount which does not exceed
------
the Commitment. The Administrative Agent will net settle Advances to be
made by Banks which are banks under the Existing Loan Agreement to fund
such initial Loans against payments to be made to those Banks in order to
refinance the Loans outstanding under the Existing Loan Agreement.
-29-
<PAGE>
(c) Promptly following receipt of a Request for Loan, the
Administrative Agent shall notify each Bank by telephone, telecopier or
telex of the date of the Loan and that Bank's Pro Rata Share of the Loan.
Not later than 12:00 noon, California time, in the case where a Base Rate
Loan is requested, and 10:00 a.m. California time, in the case where a
Eurodollar Rate Loan is requested, on the date specified for any Loan, each
Bank shall make its Pro Rata Share of the Loan in immediately available
funds available to the Administrative Agent at the Administrative Agent's
Office. Upon fulfillment of the applicable conditions set forth in Article
-------
8, all Advances shall be credited in immediately available funds to the
-
Designated Deposit Account.
(d) Unless the Majority Banks otherwise consent, each Loan under
the Commitment shall be in an integral multiple of $250,000 which is equal
to or greater than $1,000,000.
(e) The Advances made by each Bank under the Commitment shall
be evidenced by that Bank's Note.
(f) Unless the Administrative Agent otherwise consents, no
Request for Loan may be revoked by Borrower after its submission to the
Administrative Agent. In the event that the Administrative Agent consents
to the revocation of any Request for Loan submitted by the Borrower,
Borrower agrees that it shall reimburse the Administrative Agent and each
Bank for any loss, cost, damage or expense associated with any redeployment
of funds caused by such revocation.
(g) If, as of the end of the Eurodollar Period with respect to
any Eurodollar Rate Loan, Borrower has not submitted a Request for Loan or
orally requested a Base Rate Loan in accordance with Section 2.1(b), or if
------
any Request for Loan submitted by Borrower for a Eurodollar Rate Loan fails
to satisfy the notice periods specified in Section 2.3,then, in the
---
absence of notice from Borrower to the contrary, Borrower shall be deemed
to have requested a Base Rate Loan in an amount equal to the maturing
Eurodollar Rate Loan, and the Banks shall make the Advances necessary to
make such Loan notwithstanding Sections 2.1(b) and 2.2.
------ ---
2.2 Base Rate Loans. Each request by Borrower for a Base Rate Loan
---------------
shall be made pursuant to a Request for Loan or an oral request for loan
submitted in accordance with Section 2.1(b), in each case received by the
Administrative Agent, at the Administrative Agent's Office, not later than 10:00
a.m. California time, on the Banking Day immediately preceding the
-30-
<PAGE>
Banking Day upon which the requested Loan is to be made.
2.3 Eurodollar Rate Loans.
---------------------
(a) Each request by Borrower for a Eurodollar Rate Loan
shall be made pursuant to a Request for Loan or an oral request submitted
in accordance with Section 2.1 (b), in each case received by the
-------
Administrative Agent, at the Administrative Agent's Office, not later than
9:00 a.m., California time, at least three (3) Eurodollar Banking Days
before the first day of the applicable Eurodollar Period.
(b) Prior to the first day of the applicable Eurodollar
Period, the Administrative Agent shall determine the applicable Eurodollar
Rate (which determination shall be conclusive in the absence of manifest
error) and promptly shall give notice of the same to Borrower and the Banks
by telephone, telecopier or telex.
(c) Unless all of the Banks otherwise consent in writing,
no Eurodollar Rate Loan may be requested during the continuance of a
Default or Event of Default.
(d) Nothing contained herein shall require any Bank to fund
any Eurodollar Rate Advance in the Designated Eurodollar Market.
(e) Unless the Administrative Agent otherwise consents, no
more than ten Eurodollar Rate Loans shall be outstanding at any one time.
2.4 Letters of Credit.
-----------------
(a) Subject to the terms and conditions hereof, at any time
and from time to time from the Closing Date through the Maturity Date, the
Issuing Bank shall issue such Letters of Credit under the Commitment as
Borrower may request by a Request for Letter of Credit; provided that (i)
--------
giving effect to all such Letters of Credit, the sum of (A) the aggregate
---
principal amount outstanding under the Notes plus (B) the aggregate amount
----
available for drawing under the outstanding Letters of Credit plus (C) the
----
aggregate amount of all unreimbursed draws with respect to all Letters of
Credit, does not exceed the then applicable Commitment, and (ii) the
aggregate amount available for drawing under all outstanding Letters of
Credit plus the amount of all unreimbursed draws under Letters of Credit
----
shall not exceed $3,000,000. Each Letter of Credit shall be in a form
reasonably acceptable to the Issuing Bank. Unless all the Banks otherwise
consent in a writing delivered to the Administrative Agent, the terms of
the Letters of Credit shall not exceed 24 months from the
-31-
<PAGE>
date of issuance thereof, and shall not extend beyond the Maturity Date. No
Letter of Credit shall be issued except to the extent reasonably necessary in
the ordinary course of business of Borrower.
(b) Each Request for Letter of Credit shall be submitted to
the Issuing Bank, with a copy to the Administrative Agent, at least ten (10)
Banking Days prior to the date upon which the related Letter of Credit is
proposed to be issued. The Administrative Agent shall promptly notify the
Issuing Bank whether such Request for Letter of Credit, and the issuance of a
Letter of Credit pursuant thereto, conforms to the requirements of this
Agreement. Upon issuance of a Letter of Credit, the Issuing Bank shall promptly
notify the Administrative Agent, and the Administrative Agent shall promptly
notify the Banks, of the amount and terms thereof.
(c) Upon the issuance of a Letter of Credit, each Bank shall be
deemed to have purchased a pro rata participation from the Issuing Bank in an
amount equal to that Bank's Pro Rata Share, of such Letter of Credit. Without
limiting the scope and nature of each Bank's participation in any Letter of
Credit, to the extent that the Issuing Bank has not been reimbursed by Borrower
for any payment required to be made by the Issuing Bank under any Letter of
Credit, each Bank shall, pro rata according to its Pro Rata Share, reimburse the
Issuing Bank promptly upon demand for the amount of such payment through the
Administrative Agent. The obligation of each Bank to so reimburse the Issuing
Bank shall be absolute and unconditional and shall not be affected by the
occurrence of an Event of Default or any other occurrence or event. Any such
reimbursement shall not relieve or otherwise impair the obligation of Borrower
to reimburse the Issuing Bank for the amount of any payment made by the Issuing
Bank under any Letter of Credit together with interest as hereinafter provided.
(d) Borrower agrees to pay to the Issuing Bank through the
Administrative Agent an amount equal to any payment made by the Issuing Bank
with respect to each Letter of Credit within one (1) Banking Day after demand
made by the Issuing Bank therefor, together with interest on such amount from
the date of any payment made by the Issuing Bank at the Default Rate. The
principal amount of any such payment shall be used to reimburse the Issuing Bank
for the payment made by it under the Letter of Credit. Each Bank that has
reimbursed the Issuing Bank pursuant to Section 2.4(c) and for its Pro-Rata
------
Share of any payment made by the Issuing Bank under a Letter of Credit shall
thereupon acquire a pro-rata participation, to the extent of such reimbursement,
in the claim of the
-32-
<PAGE>
Issuing Bank against Borrower under this Section 2.4 (d) and shall share, in
-------
accordance with that pro-rata participation, in any payment made by Borrower
with respect to such claim.
(e) If Borrower fails to make the payment required by Section 2.4(d)
------
within the time period therein set forth, in lieu of the reimbursement to the
Issuing Bank under Section 2.4(c) the Issuing Bank may (but is not required to)
------
without notice to or the consent of Borrower, instruct the Administrative Agent
to cause Advances to be made by the Banks under the Commitment in an aggregate
amount equal to the amount paid by the Issuing Bank with respect to that Letter
of Credit and, for this purpose, the conditions precedent set forth in Article 8
---------
shall not apply. The proceeds of such Advances shall be paid to the Issuing Bank
to reimburse it for the payment made by it under the Letter of Credit. Such
Advances shall be payable upon demand and shall bear interest at the Default
Rate.
(f) The issuance of any supplement, modification, amendment, renewal,
or extension to or of any Letter of Credit shall be treated in all respects the
same as the issuance of a new Letter of Credit.
(g) The obligation of Borrower to pay to the Issuing Bank the amount
of any payment made by the Issuing Bank under any Letter of Credit shall be
absolute, unconditional, and irrevocable, subject only to performance by the
Issuing Bank of its obligations to Borrower under Nevada Revised Statutes
Section 104.5109. Without limiting the foregoing, Borrower's obligations shall
not be affected by any of the following circumstances:
(i) any lack of validity or enforceability of the Letter of
Credit, this Agreement, or any other agreement or instrument relating
thereto;
(ii) any amendment or waiver of or any consent to departure from
the Letter of Credit, this Agreement, or any other agreement or
instrument relating thereto, with the consent of Borrower;
(iii) the existence of any claim, setoff, defense, or other
rights which Borrower may have at any time against the Issuing Bank,
the Administrative Agent or any Bank, any beneficiary of the Letter of
Credit (or any persons or entities for whom any such beneficiary may be
acting) or any other Person, whether in connection with the Letter of
Credit, this Agreement, or any other agreement or instrument relating
thereto, or any unrelated transactions;
-33-
<PAGE>
(iv) any demand, statement, or any other document presented
under the Letter of Credit proving to be forged, fraudulent, invalid, or
insufficient in any respect or any statement therein being untrue or inaccurate
in any respect whatsoever so long as any such document appeared to comply with
the terms of the Letter of Credit;
(v) payment by the Issuing Bank in good faith under the Letter
of Credit against presentation of a draft or any accompanying document which
does not strictly comply with the terms of the Letter of Credit;
(vi) the existence, character, quality, quantity, condition,
packing, value or delivery of any property purported to be represented by
documents presented in connection with any Letter of Credit or for any
difference between any such property and the character, quality, quantity,
condition, or value of such property as described in such documents;
(vii) the time, place, manner, order or contents of shipments or
deliveries of property as described in documents presented in connection with
any Letter of Credit or the existence, nature and extent of any insurance
relative thereto;
(viii) the solvency or financial responsibility of any party
issuing any documents in connection with a Letter of Credit;
(ix) any failure or delay in notice of shipments or arrival of
any property;
(x) any error in the transmission of any message relating to a
Letter of Credit not caused by the Issuing Bank, or any delay or interruption in
any such message;
(xi) any error, neglect or default of any correspondent of the
Issuing Bank in connection with a Letter of Credit;
(xii) any consequence arising from acts of God, war,
insurrection, civil unrest, disturbances, labor disputes, emergency conditions
or other causes beyond the control of the Issuing Bank;
(xiii) so long as the Issuing Bank in good
-34-
<PAGE>
faith determines that the contract or document appears to
comply with the terms of the Letter of Credit, the form,
accuracy, genuineness or legal effect of any contract or
document referred to in any document submitted to the Issuing
Bank in connection with a Letter of Credit; and
(xiv) where the Issuing Bank has acted in good
faith and observed general banking usage, any other
circumstances whatsoever.
(h) The Issuing Bank shall be entitled to the protection
accorded to the Administrative Agent pursuant to Section 10.6, mutatis
-------------
mutandis.
--------
2.5 Automatic Reduction of Commitment. The Commitment shall
---------------------------------
automatically reduce by the amount of $1,562,500 on each Reduction Date.
2.6 Voluntary Reduction of Commitment. Borrower shall have the
---------------------------------
right, at any time and from time to time, without penalty or charge, upon at
least four (4) Banking Days prior written notice to the Administrative Agent, to
voluntarily, permanently and irrevocably reduce, in amounts which are integral
multiples of $2,500,000, or to terminate, the then undisbursed portion of the
Commitment, provided that (i) any such reduction or termination shall be
--------
accompanied by all accrued and unpaid commitment fees with respect to any
portion of the Commitment being reduced or terminated, and (ii) no such
reduction or termination shall affect the reduction of the Commitment as set
forth in Section 2.5.
2.7 Administrative Agent's Right to Assume Funds Available for
----------------------------------------------------------
Advances. Unless the Administrative Agent shall have been notified by any Bank
- --------
prior to the funding by the Administrative Agent of any Loan that such Bank does
not intend to make available to the Administrative Agent such Bank's Pro Rata
Share of the total amount of such Loan, the Administrative' Agent may
assume that such Bank has made such amount available to the Administrative Agent
on the date of the Loan and the Administrative Agent may, in reliance upon such
assumption, make available to Borrower a corresponding amount. If the
Administrative Agent has made funds available to Borrower based on such
assumption and such corresponding amount is not in fact made available to the
Administrative Agent by such Bank, the Administrative Agent shall be entitled to
recover such corresponding amount on demand from such Bank, which demand shall
be made in a reasonably prompt manner. If such Bank does not pay such
corresponding amount forthwith upon the Administrative Agent's demand therefor,
the Administrative Agent promptly shall notify Borrower and Borrower shall pay
such
-35-
<PAGE>
corresponding amount to the Administrative Agent. The Administrative Agent
also shall be entitled to recover from such Bank interest on such corresponding
amount in respect of each day from the date such corresponding amount was made
available by the Administrative Agent to Borrower to the date such corresponding
amount is recovered by the Administrative Agent, at a rate per annum equal to
the Federal Funds Rate. Nothing herein shall be deemed to relieve any Bank from
its obligation to fulfill its Pro Rata Share or to prejudice any rights which
the Administrative Agent or Borrower may have against any Bank as a result of
any default by such Bank hereunder.
2.8 Collateral. The Loans, together with all other Obligations,
----------
shall be secured by the Liens created by the Collateral Documents. Each Approved
Swap Agreement shall be secured by the Lien of the Collateral Documents (a) on a
pari passu basis to the extent of the Bank of America's risk assessment factor
- ----------
times the notional amount thereof, and (b) to the extent of any excess, on a
- -----
basis which is in all respects subordinated to all other Obligations.
2.9 Senior Indebtedness. The Obligations are "Designated Senior
-------------------
Debt" within the meaning for that term described in the Senior Subordinated
Notes and shall be "Senior Indebtedness" with respect to all other Subordinated
Obligations.
-36-
<PAGE>
ARTICLE 3.
PAYMENTS AND FEES
-----------------
3.1 Principal and Interest.
----------------------
(a) Interest shall be payable on the outstanding daily unpaid
principal amount of each Loan from the date thereof until payment in full is
made and shall accrue and be payable at the rates set forth herein before and
after default, before and after maturity, before and after judgment, and before
and after the commencement of any proceeding under any Debtor Relief Law, with
interest on overdue interest to bear interest at the Default Rate to the fullest
extent permitted by applicable Laws.
(b) Interest accrued on each Base Rate Loan on each Quarterly
Payment Date shall be due and payable on that Quarterly Payment Date. Except as
------
otherwise provided in Section 3.8, the unpaid principal amount of any Base Rate
---
Loan shall bear interest at a fluctuating rate per annum equal to the Base Rate
plus the Applicable Percentage for Base Rate Loans. Each change in the interest
- ----
rate hereunder shall take effect simultaneously with the corresponding change in
the Base Rate or the Applicable Percentage .
(c) Interest on each Eurodollar Rate Loan which is for a term
of three months or less shall be due and payable on the last day of the related
Eurodollar Period. Interest accrued on each other Eurodollar Rate Loan shall be
due and payable on the date which is three months after the date such Eurodollar
Rate Loan was made, every three months thereafter and, in any event, on the last
day of the related Eurodollar Period. Except as otherwise provided in
Section 3.8, the unpaid principal amount of any Eurodollar Rate Loan shall bear
---
interest at a rate per annum equal to the Eurodollar Rate for that Eurodollar
Rate Loan plus the Applicable Percentage for Eurodollar Rate Loans. While the
----
Eurodollar Rate for each Eurodollar Rate Loan shall remain fixed for the entire
related Eurodollar Period, the Applicable Percentage for each Eurodollar Rate
Loan shall change simultaneously with the corresponding change in Applicable
Percentages generally.
(d) If not sooner paid, the principal Indebtedness evidenced
by the Notes shall be payable as follows:
(i) the principal amount of each Eurodollar Rate Loan shall be
payable on the last day of the
-37-
<PAGE>
Eurodollar Period for such Loan;
(ii) the amount, if any, by which the aggregate
principal Indebtedness evidenced by the Notes plus the
----
aggregate amount available for drawing under outstanding
Letters of Credit plus the aggregate amount of all
----
unreimbursed draws with respect to Letters of Credit at any
time exceeds the Commitment shall be payable immediately; and
(iv) the principal Indebtedness evidenced by the
Notes shall in any event be payable on the Maturity Date.
(e) Subject to Section 3.7 the Notes may, at any time and from
---
time to time, voluntarily be paid or prepaid in whole or in part without premium
or penalty, provided that with respect to any voluntary prepayment of the Notes
--------
under this Section 3.1(e), (i) any partial prepayment shall be in an integral
------
multiple of $250,000 which is not less than $500,000, (ii) the Administrative
Agent shall have received written notice of any prepayment prior to 9:00 a.m.
California time one Banking Day (or, in the case of any prepayment of any
Eurodollar Rate Loan, three Eurodollar Banking Days) before the date of
prepayment, which notice shall identify the date and amount of the prepayment
and (iii) each repayment of principal shall be accompanied by payment of
interest accrued through the date of payment on the amount of principal paid.
3.2 Annual Agency Fees. On the Restatement Date and on each
------------------
anniversary of the Restatement Date, Borrower shall pay to the Administrative
Agent agency fees in the amounts set forth in a letter agreement between the
Administrative Agent and Borrower. These agency fees are fully earned as of the
date when due, are solely for the account of Administrative Agent and are non-
refundable.
3.3 Facility Fees. On the Restatement Date, Borrower shall pay
-------------
to the Administrative Agent, for the account of each Bank, a non-refundable
facility fee in amount equal to 0.25% of that Bank's allocated Pro Rata Share.
3.4 Commitment Fees. From the Restatement Date, Borrower shall
---------------
pay to the Administrative Agent, for the account of the Banks according to their
Pro Rata Shares, commitment fees equal to the product of (a) the Applicable
Percentage times (b) the average daily Unused Commitment. The commitment fees
-----
shall be payable quarterly in arrears on each Quarterly Payment Date, upon
termination of the Commitment under Section 2.6 and on the Maturity Date.
---
-38-
<PAGE>
3.5 Standby Letter of Credit Fees. Concurrently with the
-----------------------------
issuance of each Letter of Credit, Borrower shall pay standby letter of credit
fees (a) to the Issuing Bank, for the sole account of the Issuing Bank, in an
amount set forth in a letter agreement between the Issuing Bank and Borrower,
and (b) to the Administrative Agent, for the ratable account of the Banks in
accordance with their Pro Rata Shares, in an amount equal to the Applicable
Percentage times the maximum amount available for drawing under such Letter of
-----
Credit, in each case for the term of such Letter of Credit. The Administrative
Agent shall promptly make available to the Banks in immediately available funds,
pro-rata according to their Pro Rata Share, the standby letter of credit fees
which are for the account of the Banks. Borrower shall also pay transfer,
issuance, check fees and such other fees as the Issuing Bank normally charges
(not to include origination fees) in connection with standby letters of credit
and activity pursuant thereto, which fees shall be solely for the account of the
Issuing Bank.
3.6 Increased Commitment Costs. If any Bank shall have determined
--------------------------
that the introduction of any applicable law, rule, regulation or guideline
regarding capital adequacy, or any change therein or any change in the
interpretation or administration thereof by any central bank or other
Governmental Agency charged with the interpretation or administration thereof,
or compliance by that Bank (or its Eurodollar Lending Office) or any corporation
controlling that Bank, with any request, guidelines or directive regarding
capital adequacy (whether or not having the force of law) of any such central
bank or other authority, affects or would affect the amount of capital required
or expected to be maintained by that Bank or any corporation controlling that
Bank and (taking into consideration such Bank's or such corporation's policies
with respect to capital adequacy and such Bank's desired return on capital)
determines that the amount of such capital is increased as a consequence of its
obligations under this Agreement, then, upon demand of such Bank, Borrower shall
immediately pay to that Bank, from time to time as specified by that Bank,
additional amounts sufficient to compensate that Bank for such increase.
3.7 Eurodollar Fees and Costs.
-------------------------
(a) If, after the date hereof, the existence or occurrence of
any Special Eurodollar Circumstance:
(i) shall subject any Bank or its Eurodollar Lending Office
to any tax, duty or other charge or cost with respect to any
Eurodollar Rate Advance, its Note or its obligation to make
Eurodollar Rate Advances, or shall change the basis of taxation of
payments to any Bank of the principal of or
-39-
<PAGE>
interest on any Eurodollar Rate Advance or any other amounts due under
this Agreement in respect of any Eurodollar Rate Advance, its Note or
its obligation to make Eurodollar Rate Advances (except for changes in
------
any tax on the overall net income, gross income or gross receipts of
such Bank or its Eurodollar Lending Office);
(ii) shall impose, modify or deem applicable any reserve
(including, without limitation, any reserve imposed by the Board of
---------
Governors of the Federal Reserve System), special deposit or similar
requirements against assets of, deposits with or for the account of, or
credit extended by, any Bank or its Eurodollar Lending Office; or
(iii) shall impose on any Bank or its Eurodollar Lending Office
or the Designated Eurodollar Market any other condition affecting any
Eurodollar Rate Advance, its Note, its obligation to make Eurodollar
Rate Advances or this Agreement, or shall otherwise affect any of the
same;
and the result of any of the foregoing, as determined by such Bank, increases
the cost to such Bank or its Eurodollar Lending Office of making or maintaining
any Eurodollar Rate Advance or in respect of any Eurodollar Rate Advance, its
Note or its obligation to make Eurodollar Rate Advances or reduces the amount of
any sum received or receivable by such Bank or its Eurodollar Lending Office
with respect to any Eurodollar Rate Advance, its Note or its obligation to make
Eurodollar Rate Advances (assuming such Bank's Eurodollar Lending Office had
funded 100% of its Eurodollar Rate Advance in the Designated Eurodollar Market),
then, upon demand by such Bank (with a copy to the Administrative Agent),
Borrower shall pay to such Bank such additional amount or amounts as will
compensate such Bank for such increased cost or reduction (determined as though
such Bank's Eurodollar Lending Office had funded 100% of its Eurodollar Rate
Advance in the Designated Eurodollar Market). A statement of any Bank claiming
compensation under this subsection and setting forth the additional amount or
amounts to be paid to it hereunder shall be conclusive in the absence of
manifest error. Each Bank agrees to endeavor promptly to notify Borrower of any
event of which it has actual knowledge occurring after the Closing Date, which
will entitle such Bank to compensation pursuant to this Section, and agrees to
designate a different Eurodollar Lending Office promptly if such designation
will avoid the need for or reduce the amount of such compensation and will not,
in the judgment of such
-40-
<PAGE>
Bank, otherwise be disadvantageous to such Bank. If any Bank claims compensation
under this Section, Borrower may at any time, upon at least four (4) Eurodollar
Banking Days' prior notice to the Administrative Agent and such Bank and upon
payment in full of the amounts provided for in this Section through the date of
such payment plus any prepayment fee required by Section 3.7(d), pay in full the
---- ------
affected Eurodollar Rate Advances of such Bank or request that such Eurodollar
Rate Advances be converted to Base Rate Advances.
(b) If, after the date hereof, the existence or occurrence of any
Special Eurodollar Circumstance shall, in the opinion of any Bank, make it
unlawful, impossible or impracticable for such Bank or its Eurodollar Lending
Office to make, maintain or fund its portion of any Eurodollar Rate Loan, or
materially restrict the authority of such Bank to purchase or sell, or to take
deposits of, dollars in the Designated Eurodollar Market, or to determine or
charge interest rates based upon the Eurodollar Rate, and such Bank shall so
notify the Administrative Agent, then such Bank's obligation to make Eurodollar
Rate Advances shall be suspended for the duration of such illegality,
impossibility or impracticability and the Administrative Agent forthwith shall
give notice thereof to the other Banks and Borrower. Upon receipt of such
notice, the outstanding principal amount of such Bank's Eurodollar Rate
Advances, together with accrued interest thereon, automatically shall be
converted to Base Rate Advances on either (1) the last day of the Eurodollar
Period(s) applicable to such Eurodollar Rate Advances if such Bank may lawfully
continue to maintain and fund such Eurodollar Rate Advances to such day(s) or
(2) immediately if such Bank may not lawfully continue to fund and maintain such
Eurodollar Rate Advances to such day(s), provided that in such event the
--------
conversion shall not be subject to payment of a prepayment fee under
Section 3.7(d). In the event that any Bank is unable, for the reasons set forth
------
above, to make, maintain or fund its portion of any Eurodollar Rate Loan, such
Bank shall fund such amount as a Base Rate Advance for the same period of time,
and such amount shall be treated in all respects as a Base Rate Advance.
(c) If, with respect to any proposed Eurodollar Rate Loan:
(i) the Administrative Agent reasonably determines
that, by reason of circumstances affecting the Designated Eurodollar
Market generally that are beyond the reasonable control of the Banks,
deposits
-41-
<PAGE>
in dollars (in the applicable amounts) are not being offered to each of the
Banks in the Designated Eurodollar Market for the applicable Eurodollar
Period; or
(ii) the Majority Banks advise the Administrative Agent that the
Eurodollar Rate as determined by the Administrative Agent (A) does not
represent the effective pricing to such Banks for deposits in dollars in
the Designated Eurodollar Market in the relevant amount for the applicable
Eurodollar Period, or (B) will not adequately and fairly reflect the cost
to such Banks of making the applicable Eurodollar Rate Advances;
then the Administrative Agent forthwith shall give notice thereof to Borrower
and the Banks, whereupon until the Administrative Agent notifies Borrower that
the circumstances giving rise to such suspension no longer exist, the obligation
of the Banks to make any future Eurodollar Rate Advances shall be suspended. If
at the time of such notice there is then pending a Request for Loan that
specifies a Eurodollar Rate Loan, such Request for Loan shall be deemed to
specify a Base Rate Loan.
(d) Upon payment or prepayment of any Eurodollar Rate Advance, (other
than as the result of a conversion required under Section 3.7(b)), on a day
-------
other than the last day in the applicable Eurodollar Period (whether
voluntarily, involuntarily, by reason of acceleration, or otherwise), or upon
the failure of Borrower to borrow on the date or in the amount specified for a
Eurodollar Rate Loan in any Request for Loan, Borrower shall pay to the
appropriate Bank a prepayment fee or failure to borrow fee, as the case may be,
calculated as follows (and determined as though 100% of the Eurodollar Rate
Advance had been funded in the Designated Eurodollar Market):
(i) principal amount of the Eurodollar Rate Advance, times
-----
[number of days between the date of prepayment and the last day in the
applicable Eurodollar Period], divided by 360, times the applicable
---------- -----
Interest Differential; plus
----
(ii) all actual out-of-pocket expenses (other than those taken
into account in the calculation of the Interest Differential) incurred by
the Bank (excluding allocations of any expense internal to that Bank) and
---------
reasonably attributable to such payment or prepayment;
-42-
<PAGE>
provided that no prepayment fee or failure to borrow fee shall be payable
--------
(and no credit or rebate shall be required) if the product of the foregoing
formula is not a positive number. Each Bank's determination of the amount
of any prepayment fee or failure to borrow fee payable under this Section
3.7(d) shall be based upon the Administrative Agent's determination of the
-----
applicable Interest Differential but shall otherwise be conclusive in the
absence of manifest error.
3.8 Default Rate. Upon the occurrence of any Event of Default, the
------------
outstanding principal amount of the Loans shall, at the option of the Majority
Banks, thereafter bear interest at a fluctuating interest rate per annum at all
times equal to the sum of the Base Rate plus the Applicable Percentage for Base
----
Rate Loans plus 2% per annum, to the fullest extent permitted by applicable
----
Laws. Accrued and unpaid interest on past due amounts (including, without
---------
limitation, interest on past due interest) shall be compounded quarterly, on the
last day of each calendar quarter, to the fullest extent permitted by applicable
Laws.
3.9 Computation of Interest and Fees. Computation of interest on
--------------------------------
Base Rate Loans shall be calculated on the basis of a year of 365 or 366 days,
as the case may be, and the actual number of days elapsed. Computation of
interest on Eurodollar Rate Loans and on fees under this Agreement shall be
calculated on the basis of a year of 360 days and the actual number of days
elapsed. Borrower acknowledges that such latter calculation method will result
in a higher yield to the Banks than a method based on a year of 365 or 366 days.
Any Loan that is repaid on the same day on which it is made shall bear interest
for one day. For the purpose of complying with Nevada Revised Statutes Section
99.050, Borrower hereby declares that it understands that to the extent
principal sums are advanced by the Banks for the purpose of funding the payments
of interest due on each Quarterly Payment Date, as set forth in this Article 3
---------
or in any other obligation owing by Borrower to Administrative Agent or to the
Banks under any Loan Document, a compounding of interest results, which
compounding is agreed to by Borrower as part of the terms of this Agreement and
of the Notes.
3.10 Non-Banking Days. If any payment to be made by Borrower or any
----------------
other Party under any Loan Document shall come due on a day other than a Banking
Day, payment shall instead be considered due on the next succeeding Banking Day
and the extension of time shall be reflected in computing interest.
-43-
<PAGE>
3.11 Manner and Treatment of Payments.
--------------------------------
(a) Each payment hereunder or on the Notes or under any other
Loan Document shall be made to the Administrative Agent for the account of
each of the Banks or the Administrative Agent, as the case may be, in
immediately available funds not later than 11:00 a.m., California time, on
the day of payment (which must be a Banking Day). Each such payment shall
be made to the Administrative Agent at the Administrative Agent's Office.
All payments received after 11:00 a.m., California time, on any particular
Banking Day, shall be deemed received on the next succeeding Banking Day.
The amount of all payments received by the Administrative Agent for the
account of each Bank shall be promptly paid (and, in any event, on the same
Banking Day when deemed received) by the Administrative Agent to that Bank
in immediately available funds. All payments shall be made in lawful money
of the United States of America.
(b) Each payment or prepayment on account of any Loan shall be
made and applied pro rata according to the outstanding Advances made by
each Bank comprising such Loan.
(c) Each Bank shall use its best efforts to keep a record of
Advances made by it and payments received by it with respect to each of its
Note and such record shall be presumptive evidence of the amounts owing.
Notwithstanding the foregoing sentence, no Bank shall be liable to any
Party for any failure to keep such a record, and no such failure shall
affect the amount of the Obligations hereunder.
3.12 Funding Source. Nothing in this Agreement shall be deemed to
--------------
obligate any Bank to obtain the funds for any Loan or Advance in any particular
place or manner or to constitute a representation by any Bank that it has
obtained or will obtain the funds for any Loan or Advance in any particular
place or manner.
3.13 Failure to Charge Not Subsequent Waiver. Any decision by the
---------------------------------------
Administrative Agent or any Bank not to require payment of any interest
(including interest at the Default Rate), fee, cost or other amount payable
---------
under any Loan Document, or to calculate any amount payable by a particular
method, on any occasion shall in no way limit or be deemed a waiver of the
Administrative Agent's or such Bank's right to require full payment of any
interest (including interest at the Default Rate), fee, cost or other amount
---------
payable under any Loan Document, or to calculate an amount payable by another
method,
-44-
<PAGE>
on any other or subsequent occasion.
3.14 Administrative Agent's Right to Assume Payments Will be Made by
---------------------------------------------------------------
Borrower. Unless the Administrative Agent shall have been notified by Borrower
- --------
prior to the date on which any payment to be made by Borrower hereunder is due
that Borrower does not intend to remit such payment, the Administrative Agent
may, in its discretion, assume that Borrower has remitted such payment when so
due and the Administrative Agent may, in its discretion and in reliance upon
such assumption, make available to each Bank on such payment date an amount
equal to such Bank's share of such assumed payment. If Borrower has not in fact
remitted such payment to the Administrative Agent, each Bank shall forthwith on
demand repay to the Administrative Agent the amount of such assumed payment made
available to such Bank, together with interest thereon in respect of each day
from and including the date such amount was made available by the Administrative
Agent to such Bank to the date such amount is repaid to the Administrative Agent
at the Federal Funds Rate.
3.15 Authority to Charge Account. Borrower hereby authorizes Bank of
---------------------------
America to charge the Designated Deposit Account, or any other demand deposit
account maintained by Borrower with Bank of America, in such amounts as may from
time to time be necessary to cause timely payment of principal, interest, fees
and other charges payable by Borrower under the Loan Documents. Nothing herein
shall obligate Bank of America to charge the Designated Deposit Account, or any
other account, in this manner or to charge any account at a time when there are
not sufficient good funds in such account.
3.16 Fee Determination Detail. The Administrative Agent, and any
------------------------
Bank, shall provide reasonable detail to Borrower regarding the manner in which
the amount of any payment to the Banks, or that Bank, under Article 3 has been
---------
determined.
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<PAGE>
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES
------------------------------
Borrower represents and warrants to the Banks that:
4.1 Existence and Qualification; Power; Compliance With Laws.
--------------------------------------------------------
Borrower is a limited liability company duly formed, validly existing and in
good standing under the Laws of the State of Nevada. Borrower is duly qualified
to transact business, and is in good standing, in Nevada and each other
jurisdiction in which the conduct of its business or the ownership or leasing of
its Properties makes such qualification or registration necessary, except where
------
the failure so to qualify or register and to be in good standing would not
constitute a Material Adverse Effect. Borrower has all requisite power and
authority to conduct its business, to own and lease its Properties and to
execute and deliver each Loan Document to which it is a Party and to perform the
Obligations to be performed by it. As of the Restatement Date, the chief
executive offices of Borrower are located in Reno, Nevada. The chief executive
off ices of Borrower are located at the address set forth for notices in the
signature pages to this Agreement. All outstanding membership shares of Borrower
are duly authorized, validly issued, fully paid and issued in compliance with
all applicable state and federal securities Laws, Gaming Laws and other Laws.
Schedule 4.1 accurately describes the Persons owning membership interests in
- ------------
Borrower, and the nature and extent of the interests held by each such Person,
and there are not other holders of equity interests in Borrower. Except as set
forth on Schedule 4.1, no Person holds any option, warrant or other right to
------------
acquire any equity interests in Borrower. Borrower is in compliance with all
Laws and other legal requirements applicable to its business, has obtained all
authorizations, consents, approvals, orders, licenses and-permits from, and have
accomplished all filings, registrations and qualifications with, or obtained
exemptions from any of the foregoing from, any Governmental Agency that are
necessary for the transaction of its businesses, except where the failure so to
-------
comply, file, register, qualify or obtain exemptions does not constitute a
Material Adverse Effect.
4.2 Authority; Compliance With Other Agreements and Instruments and
---------------------------------------------------------------
Government Regulations. The execution, delivery and performance by Borrower and
- ----------------------
its Subsidiaries of the Loan Documents and the execution of the Loan Documents
have been duly authorized by all necessary limited liability company and
corporate action, and do not:
(a) require any consent or approval not here-
-46-
<PAGE>
tofore obtained of any member, director, stockholder, security holder or
creditor of such Party;
(b) violate or conflict with any provision of such Party's
limited liability company agreement, charter, partnership agreement,
articles of incorporation or bylaws, as applicable;
(c) result in or require the creation or imposition of any Lien
or Right of Others (other than pursuant to the Collateral Documents) upon
or with respect to any Property now owned or leased or hereafter acquired
by such Party;
(d) violate any Requirement of Law, including any Gaming Law,
applicable to such Party;
(e) constitute a "transfer of an interest" or an "obligation
incurred" that is avoidable by a trustee under Section 548 of the
Bankruptcy Code of 1978, as amended, or constitute a "fraudulent
conveyance," "fraudulent obligation" or "fraudulent transfer" within the
meanings of the Uniform Fraudulent Conveyances Act or Uniform Fraudulent
Transfer Act, as enacted in any applicable jurisdiction;
(f) result in a breach of or default under, or would, with the
giving of notice or the lapse of time or both, constitute a breach of or
default under, or cause or permit the acceleration of any obligation owed
under, any indenture or loan or credit agreement or any other Contractual
Obligation to which such Party is a party or by which such Party or any of
its Property is bound or affected;
and Borrower and its Subsidiaries are not in violation of, or default under, any
Requirement of Law or Contractual Obligation, or any indenture, loan or credit
agreement described in Section 4.2(f), in any respect that constitutes a
------
Material Adverse Effect.
4.3 No Governmental Approvals Required. Except as set forth in
----------------------------------- ------
Schedule 4.3, no authorization, consent, approval, order, license or permit
- ------------
from, or filing, registration or qualification with, any Governmental Agency is
required to authorize or permit under applicable Laws the execution, delivery
and performance by Borrower and its Subsidiaries of the Loan Documents. All
authorizations from, or filings with, any Governmental Agency described in
Schedule 4.3 will be accomplished as of the Restatement Date.
- ------------
-47-
<PAGE>
4.4 Subsidiaries.
------------
(i) Schedule 4.4 hereto correctly sets forth the names, form of
------------
legal entity, number of shares of capital stock issued and outstanding,
number of shares owned by Borrower or a Subsidiary of Borrower (specifying
such owner) and jurisdictions of organization of all Subsidiaries of
Borrower. Except as described in Schedule 4.4, Borrower does not own any
------------
capital stock, equity interest or debt security which is convertible, or
exchangeable, for capital stock or equity interests in any Person.
(ii) Each Subsidiary of Borrower is duly formed, validly existing
and in good standing under the Laws of its jurisdiction of organization, is
duly qualified to do business as a foreign organization and is in good
standing as such in each jurisdiction in which the conduct of its business
or the ownership or leasing of its Properties makes such qualification
necessary (except where the failure to be so duly qualified and in good
------
standing does not constitute a Material Adverse Effect), and has all
requisite power and authority to conduct its business and to own and lease
its Properties.
(iii) Each Subsidiary of Borrower is in compliance with all Laws
and other requirements applicable to its business and has obtained all
authorizations, consents, approvals, orders, licenses, and permits from,
and each such Subsidiary has accomplished all filings, registrations, and
qualifications with, or obtained exemptions from any of the foregoing from,
any Governmental Agency that are necessary for the transaction of its
business, except where the failure to be in such compliance, obtain such
------
authorizations, consents, approvals, orders, licenses, and permits,
accomplish such filings, registrations, and qualifications, or obtain such
exemptions, does not constitute a Material Adverse Effect.
4.5 Financial Statements. Borrower has furnished to the Banks (a)
--------------------
the audited financial statements of Borrower as at December 31, 1992 and for the
fiscal year then ended, (b) the unaudited financial statements of Borrower as at
September 30, 1993 and for the nine month fiscal period then ended. The
financial statements described above fairly present the financial condition and
the results of operations of Borrower as at such dates and for such periods in
accordance with Generally Accepted Accounting Principles consistently applied,
except (x) as otherwise specifically described in the notes to any such
- ------
financial statements and (y) in the case of the financial
-48-
<PAGE>
statements described in clause (b) above, for any requirement for footnote
---
disclosures.
4.6 No Other Liabilities: No Material Adverse Effect. As of the
------------------------------------------------
Restatement Date, Borrower and its Subsidiaries do not have any material
liability or material contingent liability not reflected or disclosed in the
financial statements described in Section 4.5(b) or the notes to the financial
-----
statements described in Section 4.5(a). There has been no event or circumstance
------
occur that constitutes a Material Adverse Effect since December 31, 1995 or the
Restatement Date.
4.7 Title to and Location of Property. As of the Restatement Date,
---------------------------------
Borrower and its Subsidiaries have good and valid title to all the Property
reflected in the financial statements described in Section 4.5(b) other than
------ -----
immaterial items of Property subsequently sold or disposed of in the ordinary
course of business, free and clear of all Liens and Rights of Others, other than
as set forth in Schedule 6.8.
------------
4.8 Real Property. Schedule 4.7 sets forth a summary description of
-------------- ------------
all real property owned by Borrower and its Subsidiaries, and of all real
property leasehold estates held by Borrower and its Subsidiaries, which summary
is accurate and complete in all material respects. Except as set forth in
Schedule 4.7, the leases creating such real property leasehold estates are in
- ------------
full force and effect and create a valid leasehold estate on the terms of such
lease, Borrower and its Subsidiaries are not in default or breach of any thereof
and, to the best knowledge of Borrower, no other party thereto is in default or
breach thereof. The copies of such real property leases heretofore furnished to
the Administrative Agent are true copies and there are no amendments thereto
copies of which have not been furnished to the Administrative Agent.
4.9 Intangible Assets. Borrower and its Subsidiaries own, or possess
-----------------
the right to use to the extent necessary in their business, all trademarks,
trade names, copyrights, patents, patent rights, computer software, licenses and
other Intangible Assets that are used in the conduct of their business as now
operated and which are material to the condition (financial or otherwise),
business or operations of Borrower, and no such Intangible Asset, to the best
knowledge of Borrower, conflicts with the valid trademark, trade name,
copyright, patent, patent right or Intangible Asset of any other Person to the
extent that such conflict constitutes a Material Adverse Effect.
4.10 Governmental Regulation. Except as specifically described in
-----------------------
Schedule 4.10, Borrower and its Subsidiaries are not subject to regulation under
- -------------
any Law limiting or regulating
-49-
<PAGE>
its ability to incur Indebtedness for money borrowed.
4.11 Litigation. Except for (a) any matter fully covered (subject to
---------- ------
applicable deductibles and retentions) by insurance and with respect to which
the insurance carrier has not denied coverage, nor issued any denial of claim,
nor any other statement that the claim is in excess of coverage, (b) any matter,
or series of related matters, not fully covered by insurance (subject to
applicable deductibles and retentions) involving a claim against Borrower and
its Subsidiaries which is, in the reasonable opinion of their independent legal
counsel, in an amount less than $1,000,000, and (c) matters set forth in
Schedule 4.11, as of the Restatement Date there are no actions, suits,
- -------------
proceedings or investigations pending as to which Borrower or its Subsidiaries
has been served or have received notice or, to the best knowledge of Borrower,
threatened against or affecting Borrower or its Subsidiaries or their Property
before any Governmental Agency. Except for matters set forth in Schedule 4.11,
------ -------------
as of the Restatement Date there is no reasonable basis for any action, suit,
proceeding or investigation against or affecting Borrower, its Subsidiaries or
any of their Property before any Governmental Agency which would constitute a
Material Adverse Effect.
4.12 Binding Obligations. Each of the Loan Documents will, when
-------------------
executed and delivered by Borrower and its Subsidiaries, constitute the legal,
valid and binding obligation of such Party, enforceable against such Party in
accordance with its terms, except as enforcement may be limited by Debtor Relief
------
Laws or equitable principles relating to the granting of specific performance
and other equitable remedies as a matter of judicial discretion.
4.13 No Default. No event has occurred and is continuing that is a
----------
Default or an Event of Default.
4.14 ERISA. As of the Restatement Date neither Borrower nor any
-----
ERISA Affiliate maintains, contributes to or is required to contribute to any
"employee pension benefit plan" that is subject to Title IV of ERISA.
4.15 Regulations G, U and X; Investment Company Act. No part of the
----------------------------------------------
proceeds of any Loan or other extension of credit hereunder will be used to
purchase or carry, or to extend credit to others for the purpose of purchasing
or carrying, any "margin stock" (as such term is defined in Regulations G, U and
X) in violation of Regulations G, U and X. Borrower and its Subsidiaries are
not engaged principally, or as one of their important activities, in the
business of extending credit for the purpose of purchasing or carrying any such
"margin stock." Borrower and its Subsidiaries are not required to be registered
-50-
<PAGE>
as an "investment company" under the Investment Company Act of 1940.
4.16 Disclosure. No written statement made by a Responsible Official
----------
of Borrower to the Administrative Agent or any Bank in connection with this
Agreement, or in connection with any Loan, contains any untrue statement of a
material fact or omits a material fact necessary in order to make the statement
made not misleading in light of all the circumstances existing at the date the
statement was made. There is no fact known to Borrower (other than matters of a
general economic nature or matters generally applicable to businesses of the
types engaged in by Borrower) which would constitute a Material Adverse Effect
that has not been disclosed in writing to the Administrative Agent and the
Banks.
4.17 Tax Liability. Borrower and its Subsidiaries have filed all
-------------
material tax returns which are required to be filed, and have paid, or made
provision for the payment of, all taxes with respect to the periods, Property or
transactions covered by said returns, or pursuant to any assessment received by
Borrower or its Subsidiaries, except such taxes, if any, as are being contested
------
in good faith by appropriate proceedings and as to which adequate reserves have
been established and maintained.
4.18 Projections. As of the Restatement Date, to the best knowledge
-----------
of Borrower, the assumptions( set forth in the Projections are reasonable and
consistent with each other and with all facts known to Borrower and no material
assumption is omitted as a basis for the Projections, and the Projections are
reasonably based on such assumptions. Nothing in this Section shall be
construed as a representation or covenant that the Projections in fact will be
achieved.
4.19 Employee Matters. There is no strike or work stoppage in
----------------
existence or threatened involving Borrower or its Subsidiaries that would
constitute a Material Adverse Effect.
4.20 Gaming Laws. Borrower and each of its Affiliates are in
-----------
compliance with all Gaming Laws that are applicable to them, except for any
------
violations that would not constitute a Material Adverse Effect.
4.21 Security Interests. Upon the execution and delivery of the
------------------
Security Agreement and the Subsidiary Security Agreement, such agreements will
create valid first priority security interests in the Collateral described
therein securing the Obligations (subject only to then existing Permitted
Encumbrances, Permitted Rights of Others and matters disclosed in Schedule 6.8
------------
and to such qualifications and exceptions as are
-51-
<PAGE>
contained in the Uniform Commercial Code with respect to the priority of
security interests perfected by means other than the filing of a financing
statement or with respect to the creation of security interests in Property to
which Division 9 of said Code does not apply) and all action necessary to
perfect the security interests so created, other than filing of the UCC-1
financing statements delivered to the Administrative Agent pursuant to Section
8.1 and with the appropriate Governmental Agency have been taken and completed.
- ---
Upon the execution and delivery of the Deed of Trust (and any deed of trust
hereafter delivered with respect to the Daniels Expansion), such deeds of trust
will create valid Liens in the Collateral described therein securing the
Obligations (subject only to Permitted Encumbrances, Permitted Rights of Others
and matters described in Schedule 6.8) and all action necessary to perfect the
------------
Lien so created, other than recordation thereof with the appropriate
Governmental Agency, will have been taken and completed.
4.22 Hazardous Materials. Except as specifically described in
-------------------
Schedule 4.22, neither Borrower or its Subsidiaries nor, to the best knowledge
- -------------
of Borrower, any predecessor in title or any third person at any time occupying
or present on the Real Property at any time, has disposed of, discharged,
released or threatened the release of any material amount of Hazardous Materials
on, from or under such real property in any manner that violates any Hazardous
Materials Law. Except as specifically described in Schedule 4.22,. to the best
-------------
knowledge of Borrower no condition exists that violates any Hazardous Material
Law affecting the Real Property except for such violations that would not
individually or in the aggregate have a Material Adverse Effect. Except as
specifically described in Schedule 4.22, the Real Property and each portion
-------------
thereof is not and has not been utilized by Borrower or its Subsidiaries as a
site for the manufacture of any Hazardous Materials and is in compliance in all
material respects with all Hazardous Materials Laws. To the extent that any
Hazardous Materials have been, or are, used, generated or stored by Borrower or
its Subsidiaries on any Real Property, or transported to or from such Real
Property by Borrower or its Subsidiaries, such use, generation, storage and
transportation have been and are, in compliance in all material respects with
all Hazardous Materials Laws.
4.23 Silver Legacy. None of the creditors of the Circus and Eldorado
-------------
Joint Venture, Galleon or ELLC has any recourse to Borrower or its Subsidiaries,
other than recourse to ELLC.
- -----
4.24 Certain Leases. The Certificate of a Responsible Official of
--------------
Borrower and CS&Y dated as of March 25, 1994 and delivered to the Administrative
Agent certifying that the attached copy of the Lease dated July 21, 1972, as
amended,
-52-
<PAGE>
between Borrower and CS&Y is true, correct and complete, remains accurate as of
the Restatement Date. Borrower is in possession of all of the Real Property
underlying the Eldorado Hotel and Casino and has not entered into any lease with
respect to any material portion of the Real Property, except for that portion of
the Real Property covered by the leases and subleases (the "Leases") described
on the Lessor Estoppel Certificate delivered in connection with the Original
Loan Agreement. To the best of Borrower's knowledge, there are no defaults
presently existing or continuing under any of the terms and provisions of any of
the Leases referred to in this Section.
-53-
<PAGE>
ARTICLE 5.
AFFIRMATIVE COVENANTS
---------------------
(OTHER THAN INFORMATION AND
--------------------------
REPORTING REQUIREMENTS)
----------------------
So long as any Advance remains unpaid, or any other Obligation remains
unpaid or unperformed, or any portion of the Commitment remains in force,
Borrower shall, and shall cause each of its Subsidiaries to, unless the
Administrative Agent (with the approval of the Majority Banks) otherwise
consents:
5.1 Payment of Taxes and Other Potential Liens. Pay and discharge
------------------------------------------
promptly all taxes, assessments and governmental charges or levies imposed upon
Borrower and its Subsidiaries or their Property or any part thereof, upon its
income or profits or any part thereof or upon any right or interest of the
Administrative Agent or any Bank under any Loan Document, except that Borrower
------
and its Subsidiaries shall not be required to pay or cause to be paid (a) any
income or gross receipts tax or any other tax on or measured by income generally
applicable to banks, and (b) any tax, assessment, charge or levy that is not yet
delinquent, or is being contested in good faith by appropriate proceedings, so
long as Borrower has established and maintained adequate reserves for the
payment of the same and by reason of such nonpayment and contest no material
item or portion of Property of Borrower or its Subsidiaries is in jeopardy of
being seized, levied upon or forfeited.
5.2 Preservation of Existence. Preserve and maintain its existence
-------------------------
in Nevada and all authorizations, rights, franchises, privileges, consents,
approvals, orders, licenses, permits, or registrations from any Governmental
Agency that are necessary for the transaction of its business, and qualify and
remain qualified to transact business in each jurisdiction in which such
qualification is necessary in view of its business or the ownership or leasing
of its Properties except where the failure to preserve and maintain any such
------
authorizations, rights, franchises, privileges, consents, approvals, orders,
licenses, permits or registrations or to so qualify or remain qualified would
not constitute a Material Adverse Effect.
5.3 Maintenance of Properties. Maintain, preserve and protect all of
-------------------------
its depreciable Properties in good order and condition, subject to wear and tear
in the ordinary course of business, and not permit any waste of its Properties,
except that the failure to maintain, preserve and protect a particular item of
- ------
depreciable Property that is not of significant value, either intrinsically or
to the operations of the Eldorado Hotel or of Borrower and its Subsidiaries
shall not constitute a
-54-
<PAGE>
violation of this covenant.
5.4 Maintenance of Insurance. Maintain liability, casualty and other
------------------------
insurance (subject to customary deductibles and retention) with responsible
insurance companies in such amounts and against such risks as is carried by
responsible companies engaged in similar businesses and owning similar assets in
the general areas in which Borrower and its Subsidiaries operate and, in any
event, (a) public liability insurance with limits of not less than $75,000,000
per occurrence (subject to deductibles or self-insurance retentions not in
excess of $500,000 per occurrence) and (b) such insurance with respect to the
Real Property as is maintained as of the Restatement Date as described in
Schedule 5.4.
- ------------
5.5 Compliance With Laws. Comply with all Requirements of Laws
--------------------
noncompliance with which would constitute a Material Adverse Effect, except that
------
Borrower and its Subsidiaries need not comply with a Requirement of Law then
being contested by it in good faith by appropriate proceedings.
5.6 Inspection Rights. Upon reasonable notice, at any time during
-----------------
regular business hours and as often as requested (but not so as to materially
interfere with the business of Borrower and its Subsidiaries), permit the
Administrative Agent or any Bank, or any authorized employee, agent or
representative thereof, to examine, audit and make copies and abstracts from the
records and books of account of, and to visit and inspect the Properties of,
Borrower and its Subsidiaries and to discuss the affairs, finances and accounts
of Borrower and its Subsidiaries with any of its officers, key employees,
accountants, customers or vendors, and, upon request, furnish promptly to the
Administrative Agent or any Bank true copies of all financial information made
available to the senior management of Borrower and its Subsidiaries.
5.7 Keeping of Records and Books of Account. Keep adequate records
---------------------------------------
and books of account reflecting all financial transactions in conformity with
Generally Accepted Accounting Principles and in material conformity with all
applicable requirements of any Governmental Agency having regulatory
jurisdiction over Borrower and its Subsidiaries.
5.8 Compliance With Agreements. Promptly and fully comply with all
--------------------------
Contractual Obligations under all material agreements, indentures, leases and/or
instruments to which it is a party, whether such material agreements,
indentures, leases or instruments are with a Bank or another Person, except that
------
Borrower and its Subsidiaries need not comply with Contractual Obligations under
any such agreements, indentures, leases or instruments then being contested by
it in good faith by
-55-
<PAGE>
appropriate proceedings or if the failure to comply with such agreements,
indentures, leases or instruments does not constitute a Material Adverse Effect.
5.9 Use of Proceeds. Use the proceeds of the Loans and Letters of
---------------
Credit, (a) for completion of anticipated remaining Southside Capital
Expenditures described on Schedule 6.11, (b) to purchase the land for the
-------------
Daniels Expansion and, subject to Section 6.11, to construct the proposed room
----
tower to be located there and related enhancements to the parking garage, (c)
for working capital and general business purposes.
5.10 Hazardous Materials Laws. Keep and maintain the Real Property
------------------------
and each portion thereof in compliance in all material respects with all
Hazardous Materials Laws and promptly advise Administrative Agent in writing of
(a) any and all enforcement, cleanup, removal or other governmental or
regulatory actions instituted, completed or threatened in writing pursuant to
any applicable Hazardous Materials Laws,
(b) any and all claims made or threatened in writing by any third party against
Borrower or any of its Subsidiaries or the Real Property relating to damage,
contribution, cost recovery, compensation, loss or injury resulting from any
Hazardous Materials and (c) discovery by any Senior Officer of Borrower or its
Subsidiaries of any occurrence or condition on any real property adjoining or in
the vicinity of the Real Property that could reasonably be expected to cause the
Real Property or any part thereof to be subject to any restrictions on the
ownership, occupancy, transferability or use of the Real Property under any
Hazardous Materials Laws.
5.11 Additional Collateral. Execute and deliver to the Banks deeds
---------------------
of trust or leasehold deeds of trust, as appropriate, containing restrictions
and granting Liens in a manner similar to the Deed of Trust and in any event
reasonably acceptable to the Majority Banks, with respect to each fee and
leasehold interest in real property acquired by Borrower or any of its
Subsidiaries, including without limitation the Daniels Expansion (but, in the
case of real property or leasehold interests other than the Daniels Expansion,
only if such real property or any improvements thereon are then, or subsequently
become, an operationally integral part of the Eldorado Hotel), and cause the
issuance of policies of title insurance reasonably acceptable to the
Administrative Agent with respect thereto. In connection therewith, Borrower
shall provide to the Administrative Agent, at Borrower's sole expense, any and
all environmental reviews and other assurances as the Administrative Agent may
reasonably request. Without limitation on the foregoing, the deed of trust
delivered by Borrower with respect to the Daniels Expansion shall be delivered
substantially concurrently with the acquisition by Borrower of the Daniels
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<PAGE>
Expansion, and shall contain customary provisions which will render the same a
"Construction Deed of Trust" within the meaning of the Nevada Revised Statutes.
The policy of title insurance delivered with respect thereto shall be in the
amount of $75,000,000, but shall contain a pro tanto reduction clause with
--- -----
respect to the policy of title insurance described in Section 8.1.
---
5.12 New Significant Subsidiaries. Cause each of its Subsidiaries
----------------------------
(other than ELLC) which hereafter becomes a Significant Subsidiary (within the
meaning of Article 1, Rule 1-02 of Regulation S-X, promulgated under the
Securities Act of 1933, as in effect on the date hereof) to execute and deliver
to the Administrative Agent an instrument of joinder of the Subsidiary Guaranty
and the Subsidiary Security Agreement.
-57-
<PAGE>
ARTICLE 6.
NEGATIVE COVENANTS
------------------
So long as any Advance remains unpaid, or any other Obligation remains
unpaid or unperformed, or any portion of the Commitment remains in force,
Borrower shall not, and shall not permit any of its Subsidiaries to, unless the
Administrative Agent (with the approval of the Majority Banks) otherwise
consents:
6.1 Payment of Subordinated Obligations. Pay any (a) principal
-----------------------------------
(including sinking fund payments) or any other amount (other than scheduled
--------- ----- ----
interest payments) with respect to any Subordinated Obligation, or purchase or
redeem (or offer to purchase or redeem) any Subordinated Obligation, or deposit
any monies, securities or other Property with any trustee or other Person to
provide assurance that the principal or any portion thereof of any Subordinated
Obligation will be paid when due or otherwise to provide for the defeasance of
any Subordinated Obligation or (b) scheduled interest on any Subordinated
Obligation unless the payment thereof is then permitted pursuant to the terms of
------
the Indenture governing such Subordinated Obligation;
6.2 Disposition of Property. Make any Disposition of its Property,
-----------------------
whether now owned or hereafter acquired, except for Permitted Dispositions made
------
when no Default or Event of Default exists.
6.3 Investments and Acquisitions. Make any Acquisition or enter into
----------------------------
any agreement to make any Acquisition, or make or suffer to exist any
Investment, except:
------
(a) Investments consisting of Cash Equivalents;;
(b) Borrower's investments in ELLC and the
Circus and Eldorado Joint Venture existing as of the
Restatement Date, provided that Borrower may convert its
--------
Investment of $23,000,000 of Indebtedness of ELLC to
Borrower to equity in ELLC;
(c) Investments existing on the Restatement Date and disclosed in
Schedule 6.3;
------------
(d) Investments consisting of loans and advances to employees for
travel and relocation expenses in the ordinary course of business; and
(e) other Acquisitions and Investments made when
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<PAGE>
no Default or Event of Default exists which do not exceed $5,000,000 in the
aggregate in any Fiscal Year, provided that, giving effect to the making of
--------
any such Investment, the aggregate principal amount of Investments
consisting of direct or indirect loans or advances to Persons who are
officers, directors or Affiliates of Borrower or its Subsidiaries does not
exceed $5,000,000 at any time.
6.4 Hostile Tender Offers. Make any offer to purchase or acquire, or
---------------------
consummate a purchase or acquisition of, 5% or more of the capital stock of any
corporation or other business entity if the board of directors or management of
such corporation or business entity has notified Borrower that it opposes such
offer or purchase.
6.5 Distributions. Make any Distribution, whether from capital,
-------------
income or otherwise, and whether in Cash or other Property, if (a) any Default
under the covenants contained in Sections 6.12, 6.13, 6.14 or 6.15 has occurred
---- ---- ---- ----
and remains continuing or would, giving pro forma effect to the making of such
Distribution, occur as of the next date upon which compliance with such
covenants is tested, or (b) any other Event of Default has then occurred and
remains continuing or if the making of such Distribution would result in the
occurrence of a Default or an Event of Default, provided that Borrower shall be
--------
entitled to make Permitted Tax Distributions for so long as no Event of Default
of the types described in Sections 9.1(a) which has resulted in an acceleration
------
or 9.1(j) occurs.
------
6.6 ERISA.
-----
(a) At any time, permit any Pension Plan which is maintained by
Borrower or its ERISA Affiliates or to which Borrower or itS ERISA
Affiliates is obligated to contribute on behalf of its employees, in such
case if to do so would constitute a Material Adverse Effect, to:
(i) engage in any non-exempt "prohibited transaction",
as such term is defined in Section 4975 of the Code;
(ii) incur any material "accumulated funding deficiency",
as that term is defined in Section 302 of ERISA; or
(iii) suffer a Termination Event to occur which may
reasonably be expected to result in liability of Borrower or any of
its ERISA Affiliate to the Pension Plan or to the PBGC or the
imposition of a Lien on the Property of Borrower or any of its ERISA
Affiliates pursuant to Section 4068 of ERISA.
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<PAGE>
(b) Fail, upon a Responsible Official of Borrower becoming aware
thereof, promptly to notify the Administrative Agent of the occurrence of
any "reportable event" (as defined in Section 4043 of ERISA) or of any non-
exempt "prohibited transaction" (as defined in Section 4975 of the Code)
with respect to any Pension Plan which is maintained by Borrower or to
which Borrower is obligated to contribute on behalf of its employees or any
trust created thereunder.
(c) At any time, permit any Pension Plan which is maintained by
Borrower or to which Borrower is obligated to contribute on behalf of its
employees to fail to comply with ERISA or other applicable Laws in any
respect that would result in a Material Adverse Effect.
6.7 Change in Nature of Business. Make any material change in the
----------------------------
nature of the business of Borrower and its Subsidiaries as at present conducted.
6.8 Liens; Negative Pledges; Sales and Leasebacks. Create, incur,
---------------------------------------------
assume or suffer to exist any Lien or Right of Others of any nature upon or with
respect to any of its Property, whether now owned or hereafter acquired; or
suffer to exist any Negative Pledge with respect to any of its Property; or
engage in any sale and leaseback transaction with respect to any of its
Property; except:
------
(a) Permitted Encumbrances and Permitted Rights of Others;
(b) Liens and Negative Pledges in favor of the Administrative
Agent or the Banks under the Loan Documents;
(c) Existing Liens disclosed in Schedule 6.8; provided that the
------------ --------
obligations secured thereby are not increased;
(d) Existing Rights of Others and Negative Pledges disclosed in
Schedule 6.8; and
------------
(e) Liens securing Indebtedness permitted by Section 6.9(e) which
-----
qualify as "purchase money security interests" as defined in Section 9107
of the Nevada Uniform Commercial Code, and Negative Pledges with respect to
the assets purchased with the proceeds of such Indebtedness that benefit
the creditor holding such Indebtedness.
6.9 Indebtedness and Contingent Obligations. Create, incur, assume
---------------------------------------
or suffer to exist any Indebtedness or Contingent
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<PAGE>
Obligation, except:
------
(a) Existing Indebtedness and Contingent Obligations disclosed
on Schedule 6.9;
------------
(b) Indebtedness and Contingent Obligations in favor of the Banks
or the Administrative Agent under the Loan Documents;
(c) Indebtedness and Contingent Obligations consisting of
Approved Swap Agreements;
(d) the Indebtedness evidenced by the Senior Subordinated Notes
in an aggregate principal amount not to exceed $100,000,000 at any time;
and
(e) Indebtedness and Contingent Obligations not otherwise
permitted by this Section in an aggregate outstanding principal amount
which does not exceed $10,000,000 at any time.
6.10 Transactions with Affiliates. Enter into any transaction of any
----------------------------
kind with any Affiliate of Borrower other than transactions on terms at least as
----------
favorable to Borrower as would be the case in an arm's-length transaction
between unrelated parties of equal bargaining power, the terms of which are
disclosed to the Banks in writing (except that the terms of Investments
permitted by 6.2(e) consisting of loans and advances to officers, directors and
------
employees need not be so disclosed).
6.11 Capital Expenditures.
--------------------
(a) Make any Maintenance Capital Expenditure in any Fiscal Year,
or commit to make any Maintenance Capital Expenditure in any Fiscal Year,
which, when added to the Maintenance Capital Expenditures theretofore made
or committed to be made in that Fiscal Year would exceed $6,500,000; or
(b) Make any other Capital Expenditure in any Fiscal Year, or
commit to make any such Capital Expenditure in any Fiscal Year other than:
----- ----
(i) Remaining scheduled expenditures for completion of Southside
amenities described on Schedule 6.11 in an aggregate amount not
-------------
to exceed $22,000,000;
(ii) to acquire the real property underlying the Daniels Expansion for
a purchase price not in excess of $5,000,000 of which not more
than $3,000,000 may be a note to the sellers thereof
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<PAGE>
and to construct the proposed tower to be located on the Daniels
Expansion and related parking enhancements for not more than an
additional $40,000,000; and
(iii) Up to $10,000,000 in each fiscal year for other Capital
Expenditures (other than Maintenance Capital Expenditures).
6.12 Members' Equity. Permit Members' Equity, as of the last day of
---------------
any Fiscal Quarter, to be less than the sum of (a) $70,000,000, plus (b) 30% of
--- ----
Net Income for each Fiscal Quarter having then ended since the Restatement Date
(without reduction for any net loss having occurred in any such Fiscal Quarter),
plus (c) 75% of any Net Cash Proceeds received by Borrower or its Subsidiaries
- ----
since the Restatement Date.
6.13 Total Debt to EBITDA Ratio. Permit the Total Debt to EBITDA
--------------------------
Ratio to exceed 4.00 to 1.00 as of the last day of any Fiscal Quarter.
6.14 Senior Debt to EBITDA Ratio. Permit the Senior Debt to EBITDA
---------------------------
Ratio to exceed 2.00 to 1.00 as of the last day of any Fiscal Quarter.
6.15 Fixed Charge Ratio. Permit the Fixed Charge Ratio, as of the
------------------
last day of any Fiscal Quarter, to be less than 1.25:1.00.
6.16 Amendments to Subordinated Obligations. Amend or modify any
--------------------------------------
term or provision of any indenture, agreement or instrument evidencing or
governing any Subordinated Obligation in any respect that will or may adversely
affect the interests of the Banks.
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ARTICLE 7.
INFORMATION AND REPORTING REQUIREMENTS
--------------------------------------
7.1 Financial and Business Information. So long as any Advance
----------------------------------
remains unpaid, or any other Obligation remains unpaid or unperformed, or any
portion of the Commitment remains in force, Borrower shall, unless the
Administrative Agent (with the approval of the Majority Banks) otherwise
consents, deliver to the Administrative Agent and the Banks, at Borrower's sole
expense:
(a) As soon as practicable, and in any event within 45 days after
the end of each Fiscal Quarter (other than the fourth Fiscal Quarter in any
Fiscal Year), (i) the consolidated and consolidating balance sheets of
Borrower as at the end of such Fiscal Quarter, and (ii) consolidated and
consolidating statements of income and cash flow of Borrower for such
Fiscal Quarter and for the portion of the Fiscal Year ended with such
Fiscal Quarter, all in reasonable detail. Such financial statements shall
be certified by a Senior Officer of Borrower as fairly presenting the
financial condition, results of operations and changes in financial
position or cash flows of Borrower and its Subsidiaries in accordance with
Generally Accepted Accounting Principles (other than any requirement for
footnote disclosures) consistently applied, as at such date and for such
periods, subject only to normal year-end accruals and audit adjustments;
(b) As soon as practicable, and in any event within 120 days
after the end of each Fiscal Year, (i) the consolidated and consolidating
balance sheets of Borrower and its Subsidiaries as at the end of such
Fiscal Year, (ii) consolidated and consolidating statements of income of
Borrower and its Subsidiaries for such Fiscal Year, and (iii) consolidated
and consolidating statements of cash flow of Borrower and its Subsidiaries
for such Fiscal Year, all in reasonable detail. Such financial statements
shall be prepared in accordance with Generally Accepted Accounting
Principles, consistently applied (except for any inconsistency concurred
with by Borrower's independent public accountants), and such balance sheet
and statements shall be accompanied by a report and opinion of Arthur
Andersen & Co. or other independent public accountants of recognized
standing selected by Borrower and reasonably satisfactory to the Majority
Banks, which report shall be based on an audit conducted in accordance with
generally accepted auditing standards as at such date, and which opinion
shall be an unqualified opinion without additional
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explanatory or non-standard wording which the Majority Banks determine is
unacceptable;
(c) Concurrently with the delivery of the financial statements
referred to in Sections 7.1(a) and 7.1(b), a written discussion and analysis of
----- ------
the financial condition and results of operations of Borrower and its
Subsidiaries in reasonable detail, including in the case of any such report
---------
delivered in connection with the financial statements referred to in Section
7.1(b), an explanation of any material variance from operational results or
- ------
balance sheet items contained in projections previously delivered to the Banks;
(d) Not sooner than one month following the end of each Fiscal
Quarter, but not later than 45 days following the end of each Fiscal Quarter, a
Pricing Certificate as of the last day of such Fiscal Quarter;
(e) As soon as practicable, and in any event within 60 days after the
commencement of each Fiscal Year, projected financial statements by Fiscal Year
for each of the four Fiscal Years immediately subsequent to that Fiscal Year,
including, in each case, projected balance sheets, statements of income and
- ---------
statements of cash flow of Borrower and its Subsidiaries, all in reasonable
detail and in any event to include (i) projected Distributions to be made to the
members of Borrower and (ii) projected Capital Expenditures;
(f) Promptly after the same are available, copies of the Nevada
"Regulation 6.090 Report" and Nevada "6-A Report" and copies of any written
communication to Borrower or any of its Subsidiaries from any Gaming Board
relating to a License Revocation with respect to Borrower or any of its
Subsidiaries;
(g) Promptly after request by any Bank, copies of any detailed audit
reports or recommendations submitted to Borrower and its Subsidiaries by
independent accountants in connection with the accounts or books of Borrower and
its Subsidiaries, or any audit of Borrower or its Subsidiaries;
(h) Promptly after request by any Bank, copies of any other specific
report or other document that was filed by Borrower or any of its Subsidiaries
with any Governmental Agency;
(i) Promptly after the same are available, a copy of the Form 5500
series report of each Pension Plan
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maintained by Borrower or its Subsidiaries as filed with the Internal Revenue
Service for each Fiscal Year;
(j) Promptly upon a Senior Officer of Borrower becoming aware, and in
any event within ten Banking Days after becoming aware, of the occurrence of any
(i) "reportable event" (as such term is defined in Section 4043 of ERISA) or
(ii) "prohibited transaction" (as such term is defined in Section 406 of ERISA
or Section 4975 of the Code) in connection with any Pension Plan or any trust
created thereunder, written notice specifying the nature thereof and specifying
what action Borrower and its Subsidiaries are taking or proposes to take with
respect thereto, and, when known, any action taken by the Internal Revenue
Service with respect thereto;
(k) As soon as practicable, and in any event within five Banking Days
after a Senior Officer of Borrower becomes aware of the existence of any
condition or event which constitutes a Default or Event of Default, written
notice specifying the nature and period of existence thereof and specifying what
action Borrower and its Subsidiaries are taking or propose to take with respect
thereto;
(1) Promptly upon a Senior Officer of Borrower becoming aware that (i)
any Person has commenced a legal proceeding with respect to a claim against
Borrower or its Subsidiaries that is, in the reasonable opinion of their
independent legal counsel, $1,000,000 or more in excess of the amount thereof
that is fully covered by insurance (subject to applicable deductibles and
retentions), (ii) any creditor or lessor under a written credit agreement with
respect to Indebtedness in excess of $1,000,000 or lease involving unpaid rent
in excess of $1,000,000 has asserted a default thereunder on the part of
Borrower or its Subsidiaries, (iii) any Person commenced a legal proceeding with
respect to a claim against Borrower or its Subsidiaries under a contract that is
not a credit agreement or material lease in excess of $1,000,000, (iv) any labor
union has notified Borrower or its Subsidiaries of its intent to strike Borrower
or its Subsidiaries on a date certain, which strike could reasonably be expected
to have a Material Adverse Effect, or (v) any other event or circumstance occurs
or exists (other than matters of a general economic nature) that would
constitute a Material Adverse Effect, in each case a written notice describing
the pertinent facts relating thereto and what action Borrower and its
Subsidiaries are taking or proposes to take with respect thereto; and
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(m) Such other data and information regarding the Borrower and
its Subsidiaries and their businesses as from time to time may be
reasonably requested by the Administrative Agent or the Majority Banks.
7.2 Compliance Certificates. So long as any Advance remains unpaid,
-----------------------
or any other Obligation remains unpaid or unperformed, or any portion of the
Commitment remains outstanding, Borrower shall, unless the Majority Banks
otherwise consent, deliver to the Administrative Agent, at Borrower's sole
expense, concurrently with the financial statements required pursuant to
Sections 7.1(a), and 7.1(b), a Compliance Certificate signed by the chief
------ ------
financial officer, chief executive officer or director of administration of
Borrower.
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<PAGE>
ARTICLE 8.
CONDITIONS
----------
8.1 Initial Advances. The obligation of each Bank to make the
----------------
initial Advance to be made by it, and the obligation of the Issuing Bank to
issue the initial Letter of Credit, is subject to the following conditions
precedent, each of which shall be satisfied prior to the making of the initial
Advances (unless the Majority Banks, in their sole and absolute discretion,
shall agree otherwise):
(a) The Administrative Agent shall have received all of the
following, each of which shall be originals unless otherwise specified,
each properly executed by a Responsible Official of each party thereto,
each dated as of the Restatement Date and each in form and substance
satisfactory to the Administrative Agent and its legal counsel (unless
otherwise specified or, in the case of the date of any of the following,
unless the Administrative Agent otherwise agrees or directs):
(i) executed counterparts of this Agreement, sufficient in
number for distribution to the Banks and Borrower;
(ii) Notes executed by Borrower in favor of each Bank, each
in a Principal amount equal to that Bank's Pro Rata Share of the
Commitment;
(iii) with respect to Borrower and its Subsidiaries, such
documentation as the Administrative Agent may reasonably require to
establish the due organization, valid existence and good standing of
the Borrower and its Subsidiaries, their qualification to engage in
business in each jurisdiction in which they are engaged in business or
required to be so qualified, their authority to execute, deliver and
perform any Loan Documents to which each is a Party, and the identity,
authority and capacity of each Responsible Official thereof authorized
to act on its behalf, organizational documents and amendments thereto,
including, without limitation, certified copies of limited liability
---------
company agreements and amendments thereto, articles of incorporation
and amendments thereto, and amendments thereto, bylaws and amendments
thereto, certificates of good standing and/or qualification to engage
in business, tax clearance certificates, certificates of corporate
resolutions, incumbency certificates, Certificates of
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<PAGE>
Responsible Officials, and the like;
(iv) the Security Agreement executed by Borrower, together with
sufficient copies of financing statements on Form UCC-1 (including such fixture
filings as may be appropriate) for filing in every jurisdiction in which
Borrower owns Property;
(v) the Amended and Restated Deed of Trust executed and acknowledged
by Borrower and CS&Y in form acceptable for recordation with the appropriate
Governmental Agency;
(vi) assurance from the Title Company that it is committed to cause
the Amended and Restated Deed of Trust to be recorded and, upon recordation
thereof, to re-issue through First American Title Insurance Company the ALTA
1970 form lenders title insurance policy issued on the Closing Date in the
amount of $75,000,000, and having reinsurance issued by title companies and in
amounts acceptable to the Agent showing the Deed of Trust as the "insured
mortgage" and insuring the validity and priority of the Lien of the Deed of
Trust with respect to the Eldorado Hotel, subject only to such exceptions as may
be acceptable to Administrative Agent; and
(vii) evidence that the Title Company has obtained the commitment of
insurers acceptable to the Administrative Agent to provide appropriate
reinsurance with rights of direct access with respect to the policy of title
insurance referred to in the preceding paragraph;
(viii) an Amended and Restated Assignment of Rents and Revenues and
an Assignment of Subleases and Rents with respect to the Eldorado Hotel, in form
and substance satisfactory to the Administrative Agent;
(ix) an Amended and Restated Assignment of Equipment Leases and an
Equipment Lease Estoppel Certificate with respect to leased equipment used on
the Real Property, in form and substance satisfactory to the Administrative
Agent;
(x) the Guaranty and Subsidiary Security Agreement executed by
Eldorado Capital, together with any and all related uniform commercial code
financing statements requested by the Administrative Agent;
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<PAGE>
(xi) the Opinion of Counsel;
(xii) a Certificate of a Responsible Official signed by a
Senior Officer of Borrower certifying that the conditions specified in
Sections 8.1(c), 8.1(d) and 8.1(e) have been satisfied;
------ ------ ------
(xiii) written consents to the execution and delivery by
Borrower of the Loan Documents and to the transactions contemplated thereby
executed by the required members of the executive committee of Borrower;
(xiv) evidence that insurance, of the types and in the amounts
specified in the Loan Documents, is maintained in force by Borrower,
together with an executed form 438 BFU with respect thereto;
(xv) evidence that all actions necessary or, in the opinion of
the Administrative Agent or the Banks, desirable to perfect and protect the
Liens of the Collateral Documents have been taken;
(xvi) a completed Pricing Certificate;
(xvii) a certified copy of each of the Senior Subordinated Notes
and each of the material instruments, documents agreements executed by
Borrower, Eldorado Capital and their Affiliates in connection therewith;
(xviii) a certified copy of the Circus and Eldorado Joint
Venture Agreement; and
(xix) such other assurances, certificates, documents, consents
or opinions as the Administrative Agent reasonably may require.
(b) The fees payable on the Restatement Date pursuant to Article 3
---------
shall be paid concurrently.
(c) The representations and warranties of Borrower contained in
Article 4 shall be true and correct.
- ---------
(d) Borrower and any other Parties shall be in compliance with all the
terms and provisions of the Loan Documents, and no Default or Event of Default
shall have occurred and be continuing.
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<PAGE>
(e) Borrower shall have received the net cash proceeds of Senior
Subordinated Notes in an amount which is not less than $96,000,000, and all
the provisions of the Senior Subordinated Notes (including without
limitation the subordination provisions thereof) and all related
transactions, shall be solely acceptable to the Banks;
8.2 Any Increasing Advance. In addition to any applicable conditions
----------------------
precedent set forth elsewhere in this Article 8, and after giving effect to the
---------
requested Advances, the obligation of each Bank to make any Advance which would
increase the principal amount outstanding under the Notes, and the obligation of
the Issuing Bank to issue each Letter of Credit, is subject to the following
conditions precedent (un1ess the Majority Banks, in their sole and absolute
discretion, agree otherwise):
(a) except as disclosed by Borrower and approved in writing by
the Majority Banks, the representations and warranties contained in Article
-------
4 (other than Sections 4.5 (first sentence), 4.6, 4.7, 4.11, and 4.18)
- ----- ---- --- --- --- ---- ---
shall be true and correct on and as of the date of the Advance as though
made on that date;
(b) other than matters described in Schedule 4.11 or not required
-------------
as of the Restatement Date to be therein described, there shall not be then
pending or threatened any action, suit, proceeding or investigation against
or affecting Borrower, its Subsidiaries or any of their Property before any
Governmental Agency that constitutes a Material Adverse Effect;
(c) no Default or Event of Default shall then exist;
(d) the Administrative Agent shall have timely received a Request
for Loan in compliance with Article 2 (or telephonic or other request for
---------
loan referred to in the second sentence of Section 2.1(b), if applicable)
------
in compliance with Article 2, or the Issuing Bank and the Administrative
---------
Agent shall have timely received a Request for Letter of Credit in
compliance with Article 2, as applicable; and
---------
(e) the Administrative Agent shall have received, in form and
substance reasonably satisfactory to the Administrative Agent, such other
assurances, certificates, documents or consents related to the foregoing as
the Administrative Agent reasonably may require.
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ARTICLE 9.
EVENTS OF DEFAULT AND REMEDIES UPON EVENT OF DEFAULT
----------------------------------------------------
9.1 Events of Default. The existence or occurrence of any one or
-----------------
more of the following events, whatever the reason therefor and under any
circumstances whatsoever, shall constitute an Event of Default:
(a) Borrower fails to pay any principal or interest on any of
the Notes, or any portion thereof, when due; or
(b) Borrower fails to pay any fees payable under Article 3, or
---------
any portion thereof, any other fee or amount payable to the Banks under any
Loan Document, or any portion thereof, within three (3) Banking Days after
demand therefor; or
(c) Any failure to comply with Section 7.1(k) that is materially
------
adverse to the interests of the Administrative Agent or the Banks; or
(d) Borrower fails to perform or observe any of the covenants
contained in Sections 6.1, 6.2, 6.3, 6.4, 6.5, 6.8, 6.5, 6.11, 6.12, 6.13,
--- --- --- --- --- --- --- ---- ---- ----
6.14, 6.15 or 6.16; or
----- ---- ----
(e) Borrower or any other Party fails to perform or observe any
other covenant or agreement contained in any Loan Document on its part to
be performed or observed within thirty (30) days after the giving of notice
by the Administrative Agent at the request of the Majority Banks of such
Default; or
(f) Any representation or warranty made in any Loan Document, or
in any certificate delivered pursuant to any Loan Document, proves to have
been incorrect when made or reaffirmed in any respect that is materially
adverse to the interests of the Administrative Agent or the Banks; or
(g) Borrower or any of its Subsidiaries (i) fails to pay the
principal, or any principal installment, of any present or future
indebtedness for borrowed money of $1,000,000 or more, or any guaranty of
present or future indebtedness for borrowed money of $1,000,000 or more, on
its part to be paid, when due (or within any stated grace period), whether
at the stated maturity, upon acceleration, by reason of required prepayment
or otherwise or (ii) fails to perform or observe any other term, covenant or
agreement on its part to be performed or
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<PAGE>
observed, or suffers any event to occur, in connection with any present or
future indebtedness for borrowed money of $1,000,000 or more, or of any guaranty
of present or future indebtedness for borrowed money of $1,000,000 or more, if
as a result of such failure or sufferance any holder or holders thereof (Or an
agent or trustee on its or their behalf) has the right to declare such
indebtedness due before the date on which it otherwise would become due; or
(h) Any Loan Document, at any time after its execution and delivery
and for any reason other than the agreement of the Banks or satisfaction in full
of all the Obligations, ceases to be in full force and effect or is declared by
a court of competent jurisdiction to be null and void, invalid or unenforceable
in any respect which, in any such event in the reasonable opinion of the
Majority Banks, is materially adverse to the interests of the Banks; or any
Party thereto denies that it has any or further liability or obligation under
any Loan Document, or purports to revoke, terminate or rescind same; or
(i) A judgment against Borrower or any of its Subsidiaries is entered
for the payment of money in excess of $500,000 and, absent procurement of a stay
of execution, such judgment remains unbonded or unsatisfied for thirty (30)
calendar days after the date of entry of judgment, or in any event later than
five (5) days prior to the date of any proposed sale thereunder; or
(j) Borrower or any of its Subsidiaries institutes or consents to any
proceeding under a Debtor Relief Law relating to it or to all or any part of its
Property; or is unable or admits in writing its inability to pay its debts as
they mature, or makes an assignment for the benefit it of creditors; or applies
for or consents to the appointment of any receiver, trustee, custodian,
conservator, liquidator, rehabilitator or similar officer for it or for all or
any part of its Property; or any receiver, trustee, custodian, conservator,
liquidator, rehabilitator or similar officer is appointed without the
application or consent of Borrower or such Subsidiary and the appointment
continues undischarged or unstayed for sixty (60) calendar days; or any
proceeding under a Debtor Relief Law relating to Borrower or any of its
Subsidiaries or to all or any part of its Property is instituted without the
consent of Borrower or such Subsidiary and continues undismissed or unstayed for
sixty (60) calendar days; or any judgment, writ, warrant of attachment or
execution or similar process is issued or levied against all or any material
part of the Property of Borrower and its Subsidiaries and is not released,
vacated or fully bonded
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within sixty (60) calendar days after its issue or levy; or
(k) The occurrence of a Termination Event with respect to any
Pension Plan if the aggregate liability of Borrower and its ERISA
Affiliates under ERISA as a result thereof exceeds $5,000,000; or the
complete or partial withdrawal by Borrower or any of its ERISA Affiliates
from any Multiemployer Plan if the aggregate liability of Borrower and its
ERISA affiliates as a result thereof exceeds $5,000,000; or
(1) The occurrence of an Event Of Default (as such term is or may
hereafter be specifically defined in any other Loan Document) under any
other Loan Document; or
(m) The occurrence of any Change in Control; or
(n) The occurrence of any License Revocation; or
(o) Any event occurs which gives the holder or holders of any
Subordinated Obligation (or an agent or trustee on its or their behalf) the
right to declare such Subordinated Obligation due before the date on which
it otherwise would become due, or the right to require the issuer thereof
to redeem or purchase, or offer to redeem or purchase, all or any portion
of any Subordinated Obligation; or the trustee for, or any holder of, a
Subordinated Obligation breaches any subordination provision applicable to
such Subordinated Obligation; or
(p) A final judgment is entered by a court of competent
jurisdiction that any Subordinated Obligation is not subordinated in
accordance with its terms to the Obligations.
9.2 Remedies Upon Event of Default. Without limiting any other
------------------------------
rights or remedies of the Administrative Agent or the Banks provided for
elsewhere in this Agreement, or the Loan Documents, or by applicable Law, or in
equity, or otherwise:
(a) Upon the occurrence, and during the continuance, of any Event
of Default other than an Event of Default described in Section 9.1(j):
------
(i) the commitment to make Advances and issue Letters of
Credit and all other obligations of the Administrative Agent, the
Issuing Bank and the Banks and all rights of Borrower and any other
Parties under the Loan Documents shall be suspended without notice to
or demand upon Borrower, which are expressly waived by Borrower,
except that the Majority Banks
------
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<PAGE>
(or, in the case of any Event of Default which arises under a provision of
the Loan Documents the amendment of which requires the consent of all the
Banks under Section 11.2, all of the Banks) may waive the Event of Default
----
or, without waiving, determine, upon terms and conditions satisfactory to
such Banks, to reinstate the Commitment and make further Advances and issue
further Letters of Credit, which waiver or determination shall apply
equally to, and shall be binding upon, all the Banks;
(ii) the Issuing Bank may, with the approval of the
Administrative Agent on behalf of the Majority Banks, demand immediate
payment by Borrower of an amount equal to the aggregate amount of all
outstanding Letters of Credit to be held by the Issuing Bank as cash
collateral for the Obligations in non-interest bearing accounts with the
Issuing Bank; and
(iii) the Majority Banks may request the Administrative Agent
to, and the Administrative Agent thereupon shall, terminate the Commitment
and declare all or any part of the unpaid principal of all Notes, all
interest accrued and unpaid thereon and all other amounts payable under the
Loan Documents to be forthwith due and payable, whereupon the same shall
become and be forthwith due and payable, without protest, presentment,
notice of dishonor, demand or further notice of any kind, all of which are
expressly waived by Borrower.
(b) Upon the occurrence of any Event of Default described in Section
9.1(j):
- ------
(i) the commitment to make Advances and issue Letters of Credit
and all other obligations of the Administrative Agent, the Issuing Bank and
the Banks and all rights of Borrower and any other Parties under the Loan
Documents shall terminate without notice to or demand upon Borrower, which
are expressly waived by Borrower, except that all the Banks may waive the
------
Event of Default or, without waiving, determine, upon terms and conditions
satisfactory to all the Banks, to reinstate the Commitment, make further
Advances and issue further Letters of Credit;
(ii) an amount equal to the aggregate amount available for
drawing under outstanding Letters of Credit shall forthwith become due and
payable to the Issuing Bank without protest, presentment, notice
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of dishonor demand or further notice of any kind, all of which are waived
by Borrower; and
(iii) the unpaid principal of all Notes, all interest accrued
and unpaid thereon and all other amounts payable under the Loan Documents
shall be forthwith due and payable, without protest, presentment, notice of
dishonor, demand or further notice of any kind, all of which are expressly
waived by Borrower.
(c) Upon the occurrence of any Event of Default, the Administrative
Agent (but only with the consent of the Majority Banks), without notice to
(except as expressly provided for in any Loan Document) or demand upon Borrower,
- -------
which are expressly waived by Borrower (except as to notices expressly provided
------
for in any Loan Document), may proceed in accordance with applicable Laws (but
only with the consent of the Majority Banks) to protect, exercise and enforce
their rights and remedies under the Loan Documents (including the Collateral
Documents) against Borrower and any other Party and such other rights and
remedies as are provided by Law or equity.
(d) The order and manner in which the Banks' rights and remedies are
to be exercised shall be determined by the Majority Banks in their sole
discretion, and all payments received by the Administrative Agent and the Banks,
or any of them, shall be applied first to the costs and expenses (including
attorneys' fees and disbursements payable pursuant to Section 11.3) of the
Administrative Agent, acting as Administrative Agent, and of the Banks, and
thereafter paid pro rata to the Banks in the same proportions that the aggregate
Obligations owed to each Bank under the Loan Documents bear to the aggregate
Obligations owed under the Loan Documents to all the Banks, without priority or
preference among the Banks. Regardless of how each Bank may treat payments for
the purpose of its own accounting, for the purpose of computing Borrower's
Obligations hereunder and under the Notes, payments shall be applied first, to
-----
the costs and expenses of the Administrative Agent, acting as the Administrative
Agent, and the Banks, as set forth above, second, to the payment of accrued and
------
unpaid interest due under any Loan Documents to and including the date of such
application (ratably, and without duplication, according to the accrued and
unpaid interest due under each of the Loan Documents), and third, to the payment
-----
of all other amounts (including principal and fees) then owing to the
Administrative Agent or the Banks under the Loan Documents. No application of
payments will cure any Event of Default, or prevent acceleration, or
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<PAGE>
continued acceleration, of amounts payable under the Loan Documents, or prevent
the exercise, or continued exercise, of rights or remedies of the Banks
hereunder or thereunder or at law or in equity.
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<PAGE>
ARTICLE 10.
THE ADMINISTRATIVE AGENT
------------------------
10.1 Appointment and Authorization. Each Bank hereby irrevocably
-----------------------------
appoints and authorizes the Administrative Agent to take such action as agent on
its behalf and to exercise such powers under the Loan Documents as are delegated
to the Administrative Agent by the terms thereof or are reasonably incidental,
as determined by the Administrative Agent, thereto. This appointment and
authorization is intended solely for the purpose of facilitating the servicing
of the Loans and does not constitute appointment of the Administrative Agent as
trustee for any Bank or as representative of any Bank for any other purpose and,
except as specifically set forth in the Loan Documents to the contrary, the
- ------
Administrative Agent shall take such action and exercise such powers only in an
administrative and ministerial capacity. The Administrative Agent is the agent
of the Banks only and does not assume any agency relationship with Borrower,
express or implied.
10.2 Business Activities with the Borrower. Bank of America (and
-------------------------------------
each successor Administrative Agent) has the same rights and powers under the
Loan Documents as any other Bank and may exercise the same as though it was not
the Administrative Agent, and the term "Bank" or "Banks" includes Bank of
America in its individual capacity. Each Bank (including Bank of America and
each successor Administrative Agent) and its Affiliates may accept deposits
from, lend money to and generally engage in any kind of banking, trust or other
business with Borrower or any Affiliate of Borrower. Bank of America may engage
in these activities in the same manner as the other Banks as if it was not the
Administrative Agent and without any duty to account therefor to the Banks. Bank
of America (and each successor Administrative Agent) need not account to any
other Bank for any monies received by it for reimbursement of its costs and
expenses as Administrative Agent here under, or for any monies received by it in
its capacity as a Bank hereunder. The Administrative Agent shall not be deemed
to hold a fiduciary relationship with any Bank and no implied covenants,
functions, responsibilities, duties, obligations or liabilities shall be read
into this Agreement or otherwise exist against the Administrative Agent.
10.3 Proportionate Interest of the Banks in any Collateral. The
-----------------------------------------------------
Administrative Agent, on behalf of all the Banks, shall hold in accordance with
the Loan Documents all items of any collateral or interests therein received
or held by the Administrative Agent. Subject to the Administrative Agent's and
the Banks' rights to reimbursement for their costs and
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expenses hereunder (including attorneys' fees and disbursements and other
---------
professional services), each Bank shall have an interest in any collateral or
interests therein in the same proportions that the aggregate Obligations owed
such Bank under the Loan Documents (other than an Approved Swap Agreement) bear
to the aggregate Obligations owed under the Loan Documents to all the Banks,
without priority or preference among the Banks. Any obligation owed to a Bank
under an Approved Swap Agreement shall rank par passu with the Obligations
--- -----
under the Loan Documents up to an amount equal to the risk assessment factor
then generally utilized by the Administrative Agent in assessing similar
interest rate protection agreements times the national amount of Indebtedness
-----
covered by that Approved Swap Agreement, and shall be subordinate to the
Obligations under other Loan Documents to the extent of any excess over such
amount.
10.4 Banks' Credit Decisions. Each Bank agrees that it has,
-----------------------
independently and without reliance upon the Administrative Agent, any other Bank
or the directors, officers, agents, employees or attorneys of the Administrative
Agent or of any other Bank, and instead in reliance upon information supplied to
it by or on behalf of Borrower and upon such other information as it has deemed
appropriate, made its own independent credit analysis and decision to enter into
this Agreement. Each Bank also agrees that it shall, independently and without
reliance upon the Administrative Agent, any other Bank or the directors,
officers, agents, employees or attorneys of the Administrative Agent or of any
other Bank, continue to make its own independent credit analyses and decisions
in acting or not acting under the Loan Documents.
10.5 Action by Administrative Agent.
------------------------------
(a) The Administrative Agent may assume that no Default has
occurred and is continuing, unless the Administrative Agent has received
notice from Borrower stating the nature of the Default or has received
notice from a Bank stating the nature of the Default and that such Bank
considers the Default to have occurred and to be continuing.
(b) The Administrative Agent has only those obligations under the
Loan Documents as are expressly set forth therein.
(c) Except for any obligation expressly set forth in the Loan
------
Documents and as long as the Administrative Agent may assume that no Event
of Default has occurred and is continuing, the Administrative Agent may,
but shall not be required to, exercise its discretion to act or not act,
except that the Administrative Agent
------
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<PAGE>
shall be required to act or not act upon the instructions of the Majority
Banks (or of all the Banks, to the extent required by Section 11.2) and
----
those instructions shall be binding upon the Administrative Agent and all
the Banks, provided that the Administrative Agent shall not be required to
--------
act or not act if to do so would be contrary to any Loan Document or to
applicable Law or would result, in the reasonable judgment of the
Administrative Agent, in substantial risk of liability to the
Administrative Agent.
(d) If the Administrative Agent has received a notice specified
in clause (a), the Administrative Agent shall give notice thereof to the
Banks and shall act or not act upon the instructions of the Majority Banks
(or of all the Banks, to the extent required by Section 11.2), provided
---- --------
that the Administrative Agent shall not be required to act or not act if to
do so would be contrary to any Loan Document or to applicable Law or would
result, in the reasonable judgment of the Administrative Agent, in
substantial risk of liability to the Administrative Agent, and except that
------
if the Majority Banks (or all the Banks, if required under Section 11.2)
----
fail, for five (5) Banking Days after the receipt of notice from the
Administrative Agent, to instruct the Administrative Agent, then the
Administrative Agent, in its sole discretion, may act or not act as it
deems advisable for the protection of the interests of the Banks, until
such time as it receives such a notice from the Majority Banks.
(e) The Administrative Agent shall have no liability to any Bank
for acting as instructed by the Majority Banks, or for refraining from
acting, if so instructed by the Majority Bank (or, in each case, all the
Banks, if required under Section 11.2), notwithstanding any other provision
hereof. ----
10.6 Liability of Administrative Agent. Neither the Administrative
---------------------------------
Agent nor any of its directors, officers, agents, employees or attorneys shall
be liable for any action taken or not taken by them under or in connection with
the Loan Documents, except for their own gross negligence or willful misconduct.
------
Without limitation on the foregoing, the Administrative Agent and its directors,
officers, agents, employees and attorneys:
(a) May treat the payee of any Note as the holder thereof until
the Administrative Agent receives notice of the assignment or transfer
thereof, in form satisfactory to the Administrative Agent, signed by the
payee, and may treat each Bank as the owner of that Bank's interest in the
Obligations for all purposes of this
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<PAGE>
Agreement until the Administrative Agent receives notice of the
assignment or transfer thereof, in form satisfactory to the Administrative
Agent, signed by that Bank.
(b) May consult with legal counsel (including in-house legal counsel),
---------
accountants (including in-house accountants) and other professionals or experts
---------
selected by it, or with legal counsel, accountants or other professionals or
experts for Borrower and its Subsidiaries or the Banks, and shall not be liable
for any action taken or not taken by it in good faith in accordance with any
advice of such legal counsel, accountants or other professionals or experts.
(c) Shall not be responsible to any Bank for any statement, warranty
or representation made in any of the Loan Documents or in any notice,
certificate, report, request or other statement (written or oral) given or made
in connection with any of the Loan Documents.
(d) Except to the extent expressly set forth in the Loan Documents,
------
shall have no duty to ask or inquire as to the performance or observance by
Borrower or its Affiliates of any of the terms, conditions or covenants of any
of the Loan Documents or to inspect any collateral or the Property, books or
records of Borrower or its Affiliates.
(e) Will not be responsible to any Bank for the due execution,
legality, validity, enforceability, genuineness, effectiveness, sufficiency or
value of any Loan Document, any other instrument or writing furnished pursuant
thereto or in connection therewith, or any collateral.
(f) Will not incur any liability by acting or not acting in reliance
upon any Loan Document, notice, consent, certificate, statement, request or
other instrument or writing believed by it to be genuine and signed or sent by
the proper party or parties.
(g) Will not incur any liability for any arithmetical error in
computing any amount paid or payable by the Borrower or any Affiliate thereof or
paid or payable to or received or receivable from any Bank under any Loan
Document, including, without limitation, principal, interest, commitment fees,
---------
Advances and other amounts; provided that, promptly upon discovery of such an
--------
error in computation, the Administrative Agent, the Banks and (to the extent
applicable) Borrower and/or its Affiliates shall make such adjustments as are
necessary to correct such
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<PAGE>
error and to restore the parties to the position that they would have
occupied had the error not occurred.
10.7 Indemnification. Each Bank shall, ratably in accordance with
---------------
its Pro Rata Share, indemnify and hold the Administrative Agent and its
directors, officers, agents, employees and attorneys harmless against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever
(including, without limitation, attorneys' fees and disbursements) that may be
---------
imposed on, incurred by or asserted against it or them in any way relating to or
arising out of the Loan Documents (other than losses incurred by reason of the
failure of Borrower and its Subsidiaries to pay the indebtedness represented by
the Notes) or any action taken or not taken by it as Administrative Agent
thereunder, except such as result from its own gross negligence or willful
------
misconduct. Without limitation on the foregoing, each Bank shall reimburse the
Administrative Agent upon demand for that Bank's ratable share of any cost or
expense incurred by the Administrative Agent in connection with the negotiation,
preparation, execution, delivery, amendment, waiver, restructuring,
reorganization (including a bankruptcy reorganization), enforcement or attempted
---------
enforcement of the Loan Documents, to the extent that Borrower or any other
Party is required by Section 11.3 to pay that cost or expense but fails to do so
----
upon demand. Nothing in this Section shall entitle the Administrative Agent to
recover any amount from the Banks if and to the extent that such amount has
theretofore been recovered from Borrower, and the Administrative Agent shall
promptly refund amounts recovered from Borrower to Banks which have reimbursed
expenses under this Section.
10.8 Successor Administrative Agent. The Administrative Agent may,
------------------------------
and at the request of the Majority Banks shall, resign as Administrative Agent
(i) upon 30 days' notice to the Borrower and the Banks or (ii) if the
Administrative Agent determines that for it to continue as Administrative Agent
would result in a conflict of interest affecting the Administrative Agent, or
would create an unacceptable risk of significant liability of the Administrative
Agent to a third party, or would otherwise be inadvisable under prevailing
standards of banking prudence, at any time, and effective immediately upon
written notice to Borrower and the Banks. If the Administrative Agent so
resigns, (a) the Majority Banks shall appoint a successor Administrative Agent,
who must be from among the Banks and be reasonably acceptable to Borrower,
provided that any resigning Administrative Agent shall be entitled to appoint a
- --------
successor Administrative Agent from among the Banks, subject to acceptance of
appointment by that successor Administrative Agent, if the Majority Banks have
not
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<PAGE>
appointed a successor Administrative Agent within thirty (30) days after the
date the resigning Administrative Agent gave notice of resignation; (b) upon a
successor's acceptance of appointment as Administrative Agent, the successor
will thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the resigning Administrative Agent or the removed
Administrative Agent; and (c) upon the effectiveness of any resignation, the
resigning Administrative Agent thereupon will be discharged from its duties and
obligations thereafter arising under the Loan Documents other than obligations
arising as a result of any action or inaction of the resigning Administrative
Agent prior to the effectiveness of such resignation. Upon any resignation of
the Bank of America (or any successor Administrative Agent) as Administrative
Agent, Bank of America (or such successor) shall be deemed to have concurrently
resigned as Issuing Bank.
10.9 Performance of Conditions. For the purpose of determining
-------------------------
fulfillment by Borrower and its Subsidiaries of conditions precedent specified
in Article 8, each Bank shall be deemed to have consented to, and approved or
---------
accepted, or to be satisfied with each document or other matter sent by the
Administrative Agent to such Bank for consent, approval, acceptance or
satisfaction, or required under Article 8 to be consented to, or approved by or
---------
acceptable or satisfactory to, that Bank, unless an officer of the
Administrative Agent who is responsible for the transactions contemplated by the
Loan Documents shall have received written notice from that Bank prior to the
making of the requested Loan or the issuance of the requested Letter of Credit
specifying its objection thereto and either (i) such objection shall not have
been withdrawn by written notice to the Administrative Agent or (ii) in the case
of any condition to the making of a Loan, that Bank shall not have made
available to the Administrative Agent that Bank's Pro Rata Share of such Loan.
10.10 Collateral Matters.
------------------
(a) The Administrative Agent is authorized by each Bank, without the
necessity of any notice to or further consent from any Bank, and without
the obligation to take any such action, to take any action with respect to
any Collateral or any Collateral Document which may from time to time be
necessary to perfect and maintain perfected the Liens of the Collateral
Documents.
(b) The Banks irrevocably authorize the Administrative Agent, at its option
and in its discretion, to release any Lien granted to or held by the
Administrative Agent upon any Collateral (i) upon termination of the
Commitment and the payment in full of all Loans and all other Obligations
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<PAGE>
payable under this Agreement and under the other Loan Documents; (ii)
constituting Property of Borrower or its Affiliates which is sold,
transferred or otherwise disposed of in connection with any transaction not
prohibited by this Agreement; (iii) constituting Property leased to
Borrower or its Subsidiaries under a lease which has expired or been
terminated in a transaction not prohibited by this Agreement or which will
concurrently expire and which has not been and is not intended by Borrower
or its Subsidiaries to be, renewed or extended; (iv) consisting of an
instrument, if the Indebtedness evidenced thereby has been paid in full; or
(v) if approved or consented to by those of the Banks required by Section
11.2. Upon request by the Administrative Agent, the Banks will confirm in
----
writing the Administrative Agent's authority to release particular types or
items of Collateral pursuant to this Section.
10.11 No Obligations of Borrower. Nothing contained in this
--------------------------
Article 10 shall be deemed to impose upon Borrower any obligation in respect of
- ----------
the due and punctual performance by the Administrative Agent of its obligations
to the Banks under any provision of this Agreement, and Borrower shall have no
liability to the Administrative Agent or any of the Banks in respect of any
failure by the Administrative Agent or any Bank to perform any of its
obligations to the Administrative Agent or the Banks under this Agreement.
Without limiting the generality of the foregoing, where any provision of this
Agreement relating to the payment of any amounts due and owing under the Loan
Documents provides that such payments shall be made by Borrower to the
Administrative Agent for the account of the Banks, Borrower's obligations to the
Banks in respect of such payments shall be deemed to be satisfied upon the
making of such payments to the Administrative Agent in the manner provided by
this Agreement.
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<PAGE>
ARTICLE 11.
MISCELLANEOUS
-------------
11.1 Cumulative Remedies; No Waiver. The rights, powers, privileges
------------------------------
and remedies of the Administrative Agent, the Issuing Bank and the Banks
provided herein or in any Note or other Loan Document are cumulative and not
exclusive of any right, power, privilege or remedy provided by Law or equity.
No failure or delay on the part of the Administrative Agent, the Issuing Bank
or any Bank in exercising any right, power, privilege or remedy may be, or may
be deemed to be, a waiver thereof; nor may any single or partial exercise of any
right, power, privilege or remedy preclude any other or further exercise of the
same or any other right, power, privilege or remedy. The terms and conditions
of Article 8 hereof are inserted for the sole benefit of the Administrative
---------
Agent, the Issuing Bank and the Banks; the same may be waived in whole or in
part, with or without terms or conditions, in respect of any Loan or Letter of
Credit without prejudicing the Administrative Agent's, the Issuing Bank's or the
Banks' rights to assert them in whole or in part in respect of any other Loan or
Letter of Credit.
11.2 Amendments; Consents. No amendment, modification, supplement,
--------------------
extension, termination or waiver of any provision of this Agreement or any other
Loan Document, no approval or consent thereunder, and no consent to any
departure by Borrower or any other Party therefrom, may in any event be
effective unless in writing signed by the Administrative Agent with the approval
in writing of the Majority Banks (and, in the case of amendments, modifications
or supplements of or to any Loan Document to which Borrower is a Party, the
approval in writing of Borrower), and then only in the specific instance and for
the specific purpose given; and, without the approval in writing of all the
Banks, no amendment, modification, supplement, termination, waiver or consent
may be effective:
(a) To amend or modify the principal of, or the amount of
principal, principal prepayments or the rate of interest payable on, any
Note, or the amount of the Commitment or of any commitment fee payable to
any Bank, or any other fee or amount payable to any Bank under the Loan
Documents;
(b) To postpone any date fixed for any payment of principal of,
prepayment of principal of or any installment of interest on, any Note or
any installment of any commitment fee, or to extend the term of the
Commitment, or to release any Collateral (except as specifically provided
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<PAGE>
for in any Loan Document);
(c) To amend or modify the provisions of the definition of
"Majority Banks", Articles 9 or 10; or this Section 11.2;
-------------- ---------------- ----
(d) To amend or modify any provision of this Agreement in a
manner which materially and adversely affects the Issuing Bank without the
written consent of the Issuing Bank; or
(e) To amend or modify any provision of this Agreement that
expressly requires the consent or approval of all the Banks.
Any amendment, modification, supplement, termination, waiver or consent pursuant
to this Section 11.2 shall apply equally to, and shall be binding upon, all the
----
Banks, the Issuing Bank and the Administrative Agent.
11.3 Costs, Expenses and Taxes. Borrower shall pay on demand the
-------------------------
reasonable costs and expenses of the Administrative Agent and the Arranger in
connection with the negotiation, preparation, execution and delivery of the Loan
Documents, and of the Administrative Agent, the Issuing Bank and the Banks in
connection with the amendment, waiver, refinancing, restructuring,
reorganization (including a bankruptcy reorganization) and enforcement or
---------
attempted enforcement of the Loan Documents, and any matter related thereto,
including, without limitation, filing fees, recording fees, title insurance
- ---------
fees, appraisal fees, search fees and other out-of-pocket expenses and the
reasonable fees and out-of-pocket expenses of any legal counsel (including the
allocated fees and all disbursements and other expenses of any internal legal
counsel), independent public accountants and other outside experts retained by
the Administrative Agent or any Bank, and including, without limitation, any
---------
costs, expenses or fees incurred or suffered by the Administrative Agent or any
Bank in connection with or during the course of any bankruptcy or insolvency
proceedings of Borrower; provided that (a) Administrative Agent and the Banks
--------
shall, in connection with any such amendment, waiver, refinancing,
restructuring, reorganization, enforcement or attempted enforcement of the Loan
Documents shall use their best efforts to avoid duplicative efforts by legal
counsel on behalf of Administrative Agent and one or more Banks, and (b) in the
event that Borrower is the prevailing party in any proceeding referred to above
(other than any proceeding commenced or maintained after any bankruptcy or
insolvency proceeding with respect to Borrower), Borrower shall be entitled to
reimbursement of its reasonable attorneys fees and costs. Borrower shall pay any
and all documentary and other taxes
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<PAGE>
(other than income or gross receipts taxes generally applicable to banks) and
all costs, expenses, fees and charges payable or determined to be payable in
connection with the filing or recording of this Agreement, any other Loan
Document or any other instrument or writing to be delivered hereunder or
thereunder, or in connection with any transaction pursuant hereto or thereto,
and shall reimburse, hold harmless and indemnify the Administrative Agent and
the Banks from and against any and all loss, liability or legal or other expense
with respect to or resulting from any delay in paying or failure to pay any tax,
cost, expense, fee or charge or that any of them may suffer or incur by reason
of the failure of any Party to perform any of its Obligations. Any amount
payable to the Administrative Agent or any Bank under this Section shall bear
interest at the Default Rate from the second Banking Day of a demand for
payment.
11.4 Nature of Banks' Obligations. The obligations of the Banks
----------------------------
hereunder are several and not joint or joint and several. Nothing contained in
this Agreement or any other Loan Document and no action taken by the
Administrative Agent or the Banks or any of them pursuant hereto or thereto may,
or may be deemed to, make the Banks a partnership, an association, a joint
venture or other entity, either among themselves or with the Borrower or any
Affiliate of the Borrower. Each Bank's obligation to make any Advance pursuant
hereto is several and not joint or joint and several. A default by any Bank
will not increase the percentage of the Commitment attributable to any other
Bank. Any Bank not in default may, if it desires, assume in such proportion as
the nondefaulting Banks agree the obligations of any Bank in default, but is not
obligated to do so. The Administrative Agent agrees that it will use its best
efforts either to induce the other Banks to assume the obligations of a Bank in
default or to obtain another Bank, reasonably satisfactory to Borrower, to
replace such a Bank in default.
11.5 Survival of Representations and Warranties. All representations
------------------------------------------
and warranties contained herein or in any other Loan Document, or in any
certificate or other writing delivered by or on behalf of any one or more of the
Parties to any Loan Document, will survive the making of the Loans hereunder and
the execution and delivery of the Notes, and have been or will be relied upon by
the Administrative Agent and each Bank, notwithstanding any investigation made
by the Administrative Agent or any Bank or on their behalf.
11.6 Notices. Except as otherwise expressly provided in the Loan
------- ------
Documents: (a) All notices, requests, demands, directions and other
communications provided for hereunder or under any other Loan Document must be
in writing and
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<PAGE>
must be mailed, telegraphed, telecopied, delivered or sent by telex or cable to
the appropriate party at the address set forth on the signature pages of this
Agreement or other applicable Loan Document or, as to any party to any Loan
Document, at any other address as may be designated by it in a written notice
sent to all other parties to such Loan Document in accordance with this Section;
and (b) Any notice, request, demand direction or other communication given by
telegram, telecopier, telex or cable must be confirmed within 48 hours by letter
mailed or delivered to the appropriate party at its respective address. Except
------
as otherwise expressly provided in any Loan Document, if any notice, request,
demand, direction or other communication required or permitted by any Loan
Document is given by mail it will be effective on the earlier of receipt or the
third Banking Day after deposit in the United States mail with first class or
airmail postage prepaid; if given by telegraph or cable, when delivered to the
telegraph company with charges prepaid; if given by telex or telecopier, when
sent; or if given by personal delivery, when delivered. Notices given by the
Borrower under Articles 2 and 3 shall be deemed given on actual receipt by the
---------- -
Administrative Agent.
11.7 Execution of Loan Documents. Unless the Administrative Agent
---------------------------
otherwise specifies with respect to any Loan Document, this Agreement and any
other Loan Document may be executed in any number of counterparts and any party
hereto or thereto may execute any counterpart, each of which when executed and
delivered will be deemed to be an original and all of which counterparts of this
Agreement or any other Loan Document, as the case may be, when taken together
will be deemed to be but one and the same instrument. The execution of this
Agreement or any other Loan Document by any party hereto or thereto will not
become effective until counterparts hereof or thereof, as the case may be, have
been executed by all the parties hereto or thereto.
11.8 Binding Effect; Assignment.
--------------------------
(a) This Agreement and the other Loan Documents shall be binding
upon and shall inure to the benefit of the parties hereto and thereto and
their respective successors and assigns, except that Borrower and/or its
------
Affiliates may not assign their rights hereunder or thereunder or any
interest herein or therein without the prior written consent of all the
Banks. Any assignment by the Borrower or its Affiliates without the prior
written consent of the Banks shall be void, provided that no Person other
--------
than the Banks shall have any rights under this sentence. Each Bank
represents that it is not acquiring its Note with a view to the
distribution thereof within the meaning of the Securities Act of 1933, as
amended (subject to any
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<PAGE>
requirement that disposition of its Note must be within the control of such
Bank). Any Bank may at any time pledge its Note or any other instrument
evidencing its rights as a Bank under this Agreement to a Federal Reserve Bank,
but no such pledge shall release that Bank from its obligations hereunder or
grant to such Federal Reserve Bank the rights of a Bank hereunder absent
foreclosure of such pledge.
(b) From time to time following the Restatement Date each Bank may
assign to one or more Eligible Assignees all or any portion of its Pro Rata
Share; provided that (i) such Eligible Assignee, if not then a Bank or an
--------
Affiliate of the assigning Bank, shall be approved by each of the Administrative
Agent (which approval shall not be unreasonably withheld or delayed) and
Borrower (which approval shall not be unreasonably withheld or delayed or, if an
Event of Default has occurred and remains continuing, required), (ii) such
assignment shall be evidenced by a Commitment Assignment and Acceptance, a copy
of which shall be furnished to the Administrative Agent, (iii) except in the
case of an assignment to an Affiliate of the assigning Bank, to another Bank or
of the entire remaining Commitment of the assigning Bank, the assignment shall
be of a Pro Rata Share not less than $5,000,000, and (iv) the effective date of
any such assignment shall be as specified in the Commitment Assignment and
Acceptance, but not earlier than the date which is five (5) Banking Days after
the date the Administrative Agent has received the Commitment Assignment and
Acceptance. Upon the effective date of such Commitment Assignment and
Acceptance, the Eligible Assignee named therein shall be a Bank for all purposes
of this Agreement, with the Pro Rata Share set forth therein and, to the extent
of such Pro Rata Share, the assigning Bank shall be released from its further
obligations under this Agreement. Borrower agrees that it shall execute and
deliver (against delivery by the assigning Bank to Borrower of its Note) to such
assignee Bank, a Note evidencing that assignee Bank's Pro Rata Share, and to the
assigning Bank, a Note evidencing the remaining balance Pro Rata Share retained
by the assigning Bank.
(c) By executing and delivering a Commitment Assignment and Accep-
tance, the Eligible Assignee thereunder acknowledges and agrees that: (i) other
than the representation and warranty that it is the legal and beneficial owner
of the Pro Rata Share being assigned thereby free and clear of any adverse
claim, the assigning Bank has made no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with this
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<PAGE>
Agreement or the execution, legality, validity, enforceability, genuineness or
sufficiency of this Agreement or any other Loan Document; (ii) the assigning
Bank has made no representation or warranty and assumes no responsibility with
respect to the financial condition of Borrower or the performance by Borrower of
the Obligations; (iii) it has received a copy of this Agreement, together with
copies of the most recent financial statements delivered pursuant to Section 7.1
-----------
and such other documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into such Commitment Assignment
and Acceptance; (iv) it will, independently and without reliance upon the
Administrative Agent or any Bank and based on such documents and information as
it shall deem appropriate at the time, continue to make its own credit decisions
in taking or not taking action under this Agreement; (v) it appoints and
authorizes the Administrative Agent to take such action and to exercise such
powers under this Agreement as are delegated to the Administrative Agent by this
Agreement; and (vi) it will perform in accordance with their terms all of the
obligations which by the terms of this Agreement are required to be performed by
it as a Bank.
(d) The Administrative Agent shall maintain at the Administrative
Agent's Office a copy of each Commitment Assignment and Acceptance delivered to
it. After receipt of a completed Commitment Assignment and Acceptance executed
by any Bank and an Eligible Assignee, and receipt of an assignment fee of $2,000
from such Eligible Assignee, Administrative Agent shall provide notice thereof
to Borrower and the Banks.
(e) Each Bank may grant participations from time to time in a portion
of its Pro Rata Share to one or more banks or other financial institutions
(including another Bank); provided; however, that (i) such Bank's obligations
--------- -------- -------
under this Agreement shall remain unchanged, (ii) such Bank shall remain solely
responsible to the other parties hereto for the performance of such obligations,
(iii) the participating banks or other financial institutions shall not be a
Bank hereunder for any purpose except, if the participation agreement so
------
provides, for the purposes of Sections 3.6, 3.7, 11.11 and 11.25, (iv) Borrower,
--- --- ----- -----
the Administrative Agent, the Issuing Bank and the other Banks shall continue to
deal solely and directly with such Bank in connection with such Bank's rights
and obligations under this Agreement, (v) the participation interest shall be
expressed as a percentage of the granting Bank's Pro Rata Share as they then
exist and shall not restrict an increase in the Commitment, or in the granting
Bank's Pro Rata
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<PAGE>
Share, so long as the amount of the participation interest is not affected
thereby and (vi) the consent of the holder of such participation interest
shall not be required for amendments or waivers of provisions of the Loan
Documents other than those which (A) extend the Maturity Date, any
----------
Reduction Date or any date upon which any payment of any principal, fees or
interest are due to the Banks, (B) reduce any installment of principal due
with respect to the Notes, the rate of interest on the Notes, or any fee
payable to the Banks, (C) reduce the amount of any installment of principal
due under the Notes, or (D) release any material portion of the Collateral.
(f) Notwithstanding anything in this Section to the contrary, the
rights of the Banks to make assignments of, and grant participations in,
their Pro Rata Shares of the Commitment shall be subject to the approval of
any Gaming Board, to the extent required by applicable Gaming Laws.
11.9 Lien on Deposits and Property in Possession of any Bank. As
-------------------------------------------------------
security for the prompt payment and performance of all Obligations, Borrower
hereby grants to the Administrative Agent; the Issuing Bank and the Banks and
each of them a Lien on and a security interest in all its right, title, and
interest in and to any and all deposit accounts now or hereafter maintained with
the Administrative Agent, the Issuing Bank or any Bank and in and to any and all
of its Property and the proceeds thereof now or hereafter in the possession of
the Administrative Agent, the Issuing Bank or any Bank. If an Event of Default
has occurred and is continuing, any Bank (but only with the consent of the
Majority Banks) may, to the extent permitted by applicable Laws, exercise its
rights under Article 9 of the Uniform Commercial Code and other applicable Laws
and apply any funds in any deposit account maintained with it by Borrower and/or
any Property of Borrower in its possession against the Obligations.
11.10 Sharing of Setoffs. Each Bank severally agrees that if it,
------------------
through the exercise of any right of setoff, banker's lien or counterclaim
against Borrower or its Subsidiaries, or otherwise, receives payment of the
Obligations held by it that is ratably more than any other Bank, through any
means, receives in payment of the Obligations held by that Bank, then; (a) The
Bank exercising the right of setoff, banker's lien or counterclaim or otherwise
receiving such payment shall notify the Administrative Agent and thereafter
shall purchase, and shall be deemed to have simultaneously purchased, from the
other Bank a participation in the Obligations held by the other Bank and shall
pay to the other Bank a purchase price in an amount so that the share of the
Obligations held by each Bank
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<PAGE>
after the exercise of the right of setoff, banker's lien or counterclaim or
receipt of payment shall be in the same proportion that existed prior to the
exercise of the right of setoff, banker's lien or counterclaim or receipt of
payment; and (b) Such other adjustments and purchases of participations shall be
made from time to time as shall be equitable to ensure that all of the Banks
share any payment obtained in respect of the obligations ratably in accordance
with each Bank's share of the obligations immediately prior to, and without
taking into account, the payment; provided that, if all or any portion of a
--------
disproportionate payment obtained as a result of the exercise of the right of
setoff, banker's lien, counterclaim or otherwise is thereafter recovered from
the purchasing Bank by Borrower or its Subsidiaries or any Person claiming
through or succeeding to the rights of Borrower or its Subsidiaries, the
purchase of a participation shall be rescinded and the purchase price thereof
shall be restored to the extent of the recovery. Each Bank that purchases a
participation in the Obligations pursuant to this Section shall from and after
the purchase have the right to give all notices, requests, demands, directions
and other communications under this Agreement with respect to the portion of the
obligations purchased to the same extent as though the purchasing Bank were the
original owner of the Obligations purchased. Borrower expressly consents to the
foregoing arrangements and agrees that any Bank holding a participation in an
Obligation so purchased may exercise any and all rights of setoff, banker's lien
or counterclaim with respect to the participation as fully as if the Bank were
the original owner of the obligation purchased; provided, however, that each
--------
Bank agrees that it shall not exercise any right of setoff, banker's lien or
counterclaim without first obtaining the consent of the Majority Banks.
11.11 Indemnity by Borrower. Borrower agrees to indemnify, save and
---------------------
hold harmless the Administrative Agent, the Issuing Bank, the Arranger, the Co-
Agent and each Bank and their Affiliates, directors, officers, agents, attorneys
and employees (collectively the "Indemnitees") from and against: (a) any and
-----------
all claims, demands, actions or causes of action that are asserted against any
Indemnitee by any Person (other than the Administrative Agent, the Issuing Bank,
the Arranger, the Co-Agent or a Bank) if the claim, demand, action or cause of
action directly or indirectly relates to a claim, demand, action or cause of
action that such Person asserts or may assert against Borrower, any Affiliate of
Borrower or any officer, director or shareholder of Borrower; (b) any and all
claims, demands, actions or causes of action if the claim, demand, action or
cause of action arises out of or relates to the Commitment, the use or
contemplated use of proceeds of any Loan, the relationship of Borrower and the
Banks under this Agreement or any transaction contemplated by this Agreement,
including
- ---------
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<PAGE>
without limitation any claim, demand, action or cause of action arising out of
or related to the Southside Expansion or the Daniels Expansion; (c) any
administrative or investigative proceeding by any Governmental Agency arising
out of or related to a claim, demand, action or cause of action described in
clauses (a) or (b) above; and (d) any and all liabilities, losses, costs or
expenses (including attorneys' fees and disbursements and other professional
---------
services) that any Indemnitee suffers or incurs as a result of the assertion of
any foregoing claim, demand, action or cause of action; provided that no
--------
Indemnitee shall be entitled to indemnification for any loss caused by its own
gross negligence or willful misconduct. If any claim, demand, action or cause of
action is asserted against any Indemnitee, such Indemnitee shall promptly notify
Borrower, but the failure to so promptly notify Borrower shall not affect
Borrower's obligations under this Section unless such failure materially
prejudices Borrower's right to participate in the contest of such claim, demand,
action or cause of action, as hereinafter provided. Each Indemnitee may, and if
requested by Borrower in writing shall, in good faith contest the validity,
applicability and amount of such claim, demand, action or cause of action with
counsel selected by such Indemnitee and reasonably acceptable to Borrower, and
shall permit Borrower to participate in such contest. Any Indemnitee that
proposes to settle or compromise any claim or proceeding for which Borrower may
be liable for payment of indemnity hereunder shall give Borrower written notice
of the terms of such proposed settlement or compromise reasonably in advance of
settling or compromising such claim or proceeding and shall obtain Borrower's
prior consent, which consent shall not unreasonably be withheld. Each
Indemnitee is authorized to employ counsel in enforcing its rights hereunder and
in defending any claim, demand, action or cause of action covered by this
Section; provided that each Indemnitee shall endeavor, but shall not be
--------
obligated, in connection with any matter covered by this Section which also
involves other Indemnitees, to use reasonable efforts to avoid unnecessary
duplication of effort by counsel for all Indemnitees. Any obligation or
liability of Borrower to any Indemnitee under this Section shall survive the
expiration or termination of this Agreement and the repayment of all Loans and
the payment and performance of all other Obligations owed to the Banks;
provided, however, that such obligations or liabilities shall not, from and
- --------
after the date on which the Notes are fully paid and the Commitment is
terminated, be deemed Obligations for any purpose under the Loan Documents.
11.12 Nonliability of the Banks. Borrower acknowledges and agrees
-------------------------
that;
(a) Any inspections of any Property of Borrower made by or
through the Administrative Agent, the Arranger,
-92-
<PAGE>
the Issuing Bank or the Banks are for purposes of administration of the Loan
Documents only and Borrower is not entitled to rely upon the same;
(b) By accepting or approving anything required to be observed,
performed, fulfilled or given to the Administrative Agent, the Issuing Bank or
the Banks pursuant to the Loan Documents, neither the Administrative Agent, the
Issuing Bank nor the Banks shall be deemed to have warranted or represented the
sufficiency, legality, effectiveness or legal effect of the same, or of any
term, provision or condition thereof, and such acceptance or approval thereof
shall not constitute a warranty or representation to anyone with respect thereto
by the Administrative Agent, the Issuing Bank or the Banks;
(c) The relationship between Borrower and the Administrative Agent,
the Issuing Bank and the Banks is, and shall at all times remain, solely that of
a borrower and lenders; neither the Administrative Agent, the Issuing Bank nor
the Banks shall under any circumstance be construed to be partners or joint
venturers of Borrower or its Affiliates; neither the Administrative Agent, the
Issuing Bank nor the Banks shall under any circumstance be deemed to be in a
relationship of confidence or trust or a fiduciary relationship with Borrower or
its Affiliates, or to owe any fiduciary duty to Borrower or its Affiliates;
neither the Administrative Agent, the Issuing Bank nor the Banks undertake or
assume any responsibility or duty to Borrower or its Affiliates to select,
review, inspect, supervise, pass judgment upon or inform Borrower or its
Affiliates of any matter in connection with their Property or the operations of
Borrower or its Affiliates; Borrower and its Affiliates shall rely entirely upon
their own judgment with respect to such matters; and any review, inspection,
supervision, exercise of judgment or supply of information undertaken or assumed
by the Administrative Agent, the Issuing Bank or the Banks in connection with
such matters is solely for the protection of the Administrative Agent, the
Issuing Bank and the Banks and neither Borrower nor any other Person is entitled
to rely thereon; and
(d) The Administrative Agent, the Issuing Bank and the Banks shall not
be responsible or liable to any Person for any loss, damage, liability or claim
of any kind relating to injury or death to Persons or damage to Property or
other loss, damage, liability or claim caused by the actions, inaction or
negligence of Borrower and/or its Affiliates and Borrower hereby indemnifies and
holds the Administrative Agent, the Issuing Bank and the Banks
-93-
<PAGE>
harmless from any such loss, damage, liability or claim.
11.13 No Third Parties Benefited. This Agreement is made for the
--------------------------
purpose of defining and setting forth certain obligations, rights and duties of
Borrower, the Administrative Agent, the Issuing Bank and the Banks in connection
with the Loans and Letters of Credit, and is made for the sole benefit of
Borrower, the Administrative Agent and the Banks, and the Administrative Agent's
and the Banks' successors and assigns. Except as provided in Sections 3.3, 11.8,
------ --- ----
11.11, and 11.25 no other Person shall have any rights of any nature hereunder
- ----- -----
or by reason hereof.
11.14 Confidentiality. Each Bank, the Issuing Bank and Administrative
---------------
Agent agrees to hold any confidential information that it may receive from
Borrower pursuant to this Agreement in confidence, except for disclosure: (a) To
------
other Banks; (b) To legal counsel, accountants and other professional advisors
to Borrower or any Bank; (c) To regulatory officials having jurisdiction over
that Bank; (d) As required by Law or legal process (provided that in the event
---------
any Bank is so required to disclose any such confidential information, such Bank
shall endeavor promptly to notify Borrower, so that Borrower may seek a
protective order or other appropriate remedy) or in connection with any legal
proceeding to which that Bank and Borrower are adverse parties; (e) To another
financial institution in connection with a disposition or proposed disposition
to that financial institution of all or part of that Bank's interests hereunder
or a participation interest in its Note, provided that such disclosure is made
subject to an appropriate confidentiality agreement on terms substantially
similar to this Section; and (f) To prospective purchasers of any Collateral in
connection with any disposition thereof, provided that such disclosure is made
subject to an appropriate confidentiality agreement on terms substantially
similar to this Section. For purposes of the foregoing, "confidential
information" shall mean all information respecting Borrower, other than (i)
----------
information previously filed with any Governmental Agency and available to the
public, (ii) information previously published in any public medium from a source
other than, directly or indirectly, that Bank, and (iii) information previously
disclosed by Borrower to any Person not associated with Borrower without a
written confidentiality agreement. Nothing in this Section shall be construed to
create or give rise to any fiduciary duty on the part of the Administrative
Agent, the Issuing Bank or the Banks to Borrower.
11.15 Hazardous Materials Indemnity. Borrower hereby agrees to
-----------------------------
indemnify, hold harmless and defend (by counsel reasonably satisfactory to the
Administrative Agent) each of the Administrative Agent, the Issuing Bank, the
Banks and their
-94-
<PAGE>
respective directors, officers, employees, agents, successors and assigns from
and against any and all claims, losses, damages, liabilities, fines, penalties,
charges, administrative and judicial proceedings and orders, judgments, remedial
action requirements, enforcement actions of any kind, and all costs and expenses
incurred in connection therewith (including but not limited to reasonable
attorneys' fees and expenses to the extent that the defense of any such action
has not been assumed by Borrower), arising directly or indirectly, in whole or
in part, out of (i) the presence on or under the Real Property of any Hazardous
Materials, or any releases or discharges of any Hazardous Materials on, under or
from the Real Property and (ii) any activity carried on or undertaken on or off
the Real Property by Borrower or any of its predecessors in title, whether prior
to or during the term of this Agreement, and whether by Borrower or any
predecessor in title or any employees, agents, contractors or subcontractors of
Borrower or any predecessor in title, or any third persons at any time occupying
or present on the Real Property, in connection with the handling, treatment,
removal, storage, decontamination, clean-up, transport or disposal of any
Hazardous Materials at any time located or present on or under the Real
Property. The foregoing indemnity shall further apply to any residual
contamination on or under the Real Property, or affecting any natural resources,
and to any contamination of any property or natural resources arising in
connection with the generation, use, handling, storage, transport or disposal of
any such Hazardous Materials, and irrespective of whether any of such activities
were or will be undertaken in accordance with applicable Laws, but the foregoing
indemnity shall not apply to (I) Hazardous Materials on the Real Property, the
presence of which is caused by the Administrative Agent, the Issuing Bank or the
Banks or (ii) activities carried on or undertaken by the Administrative Agent,
the Issuing Bank or the Banks, in each case subsequent to its or their entry
into the Real Property pursuant to foreclosure under the Deed of Trust (but only
to the extent that the same are not attributable to the Borrower). Borrower
hereby acknowledges and agrees that, notwithstanding any other provision of this
Agreement or any of the other Loan Documents to the contrary, the obligations of
Borrower under this Section shall be unlimited personal corporate obligations of
Borrower and shall not be secured by any Deed of Trust on the Real Property.
---
Borrower acknowledges that the Banks' appraisal of the Real Property is such
that the Banks are not willing to accept the consequences of inclusion of the
obligations under this Section among the obligations secured by any Deed of
Trust and that the Banks would not enter into this Agreement and the
transactions contemplated hereby but for the personal corporate liability
undertaken by Borrower for such obligations.
11.16 Further Assurances. Borrower shall (and shall
------------------
-95-
<PAGE>
cause its Subsidiaries to), at its sole expense and without expense to the
Banks, the Issuing Bank or the Administrative Agent, do, execute and deliver
such further acts and documents as any Bank or the Administrative Agent from
time to time reasonably requires for the assuring and confirming unto the Banks,
the Issuing Bank or the Administrative Agent of the rights hereby created or
intended now or hereafter so to be, or for carrying out the intention or
facilitating the performance of the terms of any Loan Document.
11.17 Integration. This Agreement, together with the other Loan
-----------
Documents, comprises the complete and integrated agreement of the parties on the
subject matter hereof and supersedes all prior agreements, written or oral, on
the subject matter hereof, provided that Borrower and the Administrative Agent
--------
have entered into a letter agreement of even date herewith regarding certain of
the Schedules delivered in connection with this Agreement and the Deed of Trust.
In the event of any conflict between the provisions of this Agreement and those
of any other Loan Document, the provisions of this Agreement shall control and
govern; provided that the inclusion of supplemental rights or remedies in favor
--------
of the Administrative Agent, the Issuing Bank or the Banks in any other Loan
Document shall not be deemed a conflict with this Agreement. Each Loan Document
was drafted with the joint participation of the respective parties thereto and
shall be construed neither against nor in favor of any party, but rather in
accordance with the fair meaning thereof.
11.18 Governing Law. Except to the extent otherwise expressly
------------- ------
provided therein, each Loan Document shall be governed by, and construed and
enforced in accordance with, the local Laws of Nevada.
11.19 Severability of Provisions. Any provision in any Loan Document
--------------------------
that is held to be inoperative, unenforceable or invalid as to any party or in
any jurisdiction shall, as to that party or jurisdiction, be inoperative,
unenforceable or invalid without affecting the remaining provisions or the
operation, enforceability or validity of that provision as to any other party or
in any other jurisdiction, and to this end the provisions of all Loan Documents
are declared to be severable.
11.20 Independent Covenants. Each covenant in Articles 5, 6 and 7 is
--------------------- ---------- - -
independent of the other covenants in those Articles; the breach of any such
covenant shall not be excused by the fact that the circumstances underlying such
breach would be permitted by another such covenant.
11.21 Headings. Article and Section headings in this
--------
-96-
<PAGE>
Agreement and the other Loan Documents are included for convenience of reference
only and are not part of this Agreement or the other Loan Documents for any
other purpose.
11.22 Time of the Essence. Time is of the essence of the Loan
-------------------
Documents.
11.23 Tax Withholding Exemption Certificates. On or before the
--------------------------------------
Restatement Date, each Bank which is organized outside the United States of
America shall deliver to Borrower. a properly completed and duly executed
Internal Revenue Service Form 4224 or Form 1001 and any other certificate or
statement required by applicable Laws to establish that payments due to such
Bank under the Loan Documents are (a) not subject to withholding under the Code
because such payments are effectively connected with the conduct of a trade or
business in the United States of America or (b) totally exempt from United
States tax under the provisions of an applicable tax treaty.
11.24 Arbitration Reference.
---------------------
(a) Mandatory Arbitration. Any controversy or claim between or
---------------------
among the parties, including but not limited to those arising out of or
relating to this Agreement or any agreements or instruments relating hereto
or delivered in connection herewith and any claim based on or arising from
an alleged tort, shall at the request of any party be determined by
arbitration. The arbitration shall be conducted in accordance with the
United States Arbitration Act (Title 9, U.S. Code), notwithstanding any
choice of law provision in this Agreement, and under the Commercial Rules
of the American Arbitration Association ("AAA"). The arbitrators shall give
effect to statutes of limitation in determining any claim. Any controversy
concerning whether an issue is arbitrable shall be determined by the
arbitrators. Judgment upon the arbitration award may be entered in any
court having jurisdiction. The institution and maintenance of an action
for judicial relief or pursuit of a provisional or ancillary remedy shall
not constitute a waiver of the right of any party, including the plaintiff,
to submit the controversy or claim to arbitration if any other party
contests such action for judicial relief.
(b) Real Property Collateral. Notwithstanding the provisions of
------------------------
subparagraph (a), no controversy or claim shall be submitted to arbitration
without the consent of xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx,
obligation to the Administrative Agent, the Issuing Bank or any Bank which
is secured by real property collateral.
-97-
<PAGE>
(c) Provisional Remedies. Self-Help and Foreclosure. No
-----------------------------------------------
provision of this section shall limit the right of any party to this
Agreement to exercise self-help remedies such as setoff, to foreclose
against or sell any real or personal property collateral or security or to
obtain provisional or ancillary remedies from a court of competent
jurisdiction before, after, or during the pendency of any arbitration or
other proceeding. The exercise of a remedy does not waive the right of
either party to resort to arbitration or reference. At the Majority Banks'
option, foreclosure under a deed of trust or mortgage may be accomplished
either by exercise of power of sale under the deed of trust or mortgage or
by judicial foreclosure.
11.25 Purported Oral Amendments. BORROWER AND THE BANKS EXPRESSLY
-------------------------
ACKNOWLEDGES THAT THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS MAY ONLY BE
AMENDED OR MODIFIED, OR THE PROVISIONS HEREOF OR THEREOF WAIVED OR SUPPLEMENTED,
BY AN INSTRUMENT IN WRITING THAT COMPLIES WITH SECTION 11.2. BORROWER AGREES
----
THAT IT WILL NOT RELY ON ANY COURSE OF DEALING, COURSE OF PERFORMANCE, OR ORAL
OR WRITTEN STATEMENTS BY ANY REPRESENTATIVE OF ADMINISTRATIVE AGENT, THE ISSUING
BANK OR ANY BANK THAT DOES NOT COMPLY WITH SECTION 11.2 TO EFFECT AN AMENDMENT,
----
MODIFICATION, WAIVER OR SUPPLEMENT TO THE AGREEMENT OF THE OTHER LOAN DOCUMENTS.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
BORROWER:
ELDORADO RESORTS LLC, a Nevada limited liability
company
By: /s/ Donald L. Carano
-----------------------------
Donald L. Carano, Chief Executive
Officer
Address for Notices:
Eldorado Resorts LLC
295 North Virginia Street
Reno, Nevada 89501
Telephone: (702} 786-5700
Telecopier; (702) 348-7513
-98-
<PAGE>
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as a Bank, as
Issuing Bank and as Administrative
Agent
By:/s/ Scott Faber
---------------------------------
Scott Faber, Vice President
Address:
Entertainment and Media Group
555 South Flower Street, 10th Floor
Los Angeles, California 90071
Attn: Scott Faber, Vice President
Telecopier; 213/228 2641
Telephone: 213/228 2768
with a copy to:
Bank of America National Trust and
Savings Association
Entertainment and Media Group 5777
555 South Flower Street, 10th Floor
Los Angeles, California 90071
Attn: William S. Newby,
Managing Director
Telecopier: 213/228 3145
Telephone: 213/228 2438
-99-
<PAGE>
[Exhibit A]
COMPLIANCE CERTIFICATE
----------------------
TO: BANK OF AMERICA NATIONAL TRUST AMD SAVINGS ASSOCIATION, as Administrative
Agent
Reference is made to the Amended and Restated Loan Agreement dated as of
July 31, 1996, between ELDORADO RESORTS LLC, a Nevada limited liability
company ("Borrower") and BANK OF AMERICA NATIONAL TRUST AMD SAVINGS ASSOCIATION,
as Administrative Agent and sole initial Bank (the "Loan Agreement"). Terms
defined in the Loan Agreement and not otherwise defined in this Compliance
Certificate ("Certificate") shall have the meanings defined for them in the Loan
Agreement. This Certificate is delivered in accordance with Section 7.2 of the
---
Loan Agreement, and shows computations evidencing compliance with the covenants
set forth in Sections 6.11 through 6.15 of the Loan Agreement as of the last day
---- ----
of Borrower's Fiscal Quarter ended ___________________, 199__ (the "Test Date").
Maintenance Capital Expenditures (Section 6.11(a)).
- --------------------------------
As of the Test Date, Maintenance
Capital Expenditures made or committed
to be made by Borrower during the
portion of Borrower's Fiscal Year
19 ___ ended on the Test Date were $
--------------
Maximum permitted Annual Maintenance
Capital Expenditures $6,500,000
Other Capital Expenditures (Section 6.11(b)).
- --------------------------
As of the Test Date, Capital Expenditures
which do not qualify as Maintenance
Capital Expenditures made or committed
to be made by Borrower during the
portion of Borrower's Fiscal Year
19 ___ ended on the Test Date were $
--------------
-1-
<PAGE>
These Capital Expenditures
are detailed as follows:
Capital Expenditures for completion
of Southside amenities described on
Schedule 6.11
-------------
$
-------------------------------
Capital Expenditures to acquire the
real property underlying the Daniels
Expansion
$
-------------------------------
Capital Expenditures to construct the
tower located on the Daniels Expansion
and related parking enhancements
$
-------------------------------
Other Capital Expenditures (other than
Maintenance Capital Expenditures)
$
-------------------------------
Members' Equity (Section 6.12).
- ---------------
As of the Test Date, Members' Equity was
calculated as follows:
Members' Equity of Borrower on the
Test Date, determined in accordance
with Generally Accepted Accounting
Principles $
----------------
minus any amount attributable to
-----
membership shares or interests
that are, directly or indirectly,
required to be redeemed or
repurchased by Borrower at a
specified date or upon the
occurrence of specified events
or at the election of the holder
thereof ($ )
----------------
-2-
<PAGE>
minus that portion of Member's Equity
-----
which is attributable to the interests
of Recreational Enterprises, Inc. and
other minority members in ELLC ($ )
-------------
minus Intangible Assets ($ )
----- -------------
Members' Equity as of Test Date $
---------------
As of the Test Date, the minimum required Members' Equity was calculated as
follows:
Restatement Date Members Equity $70,000,000
plus 30% of Net Income for
----
each Fiscal Quarter having ended
on the Test Date since the
Restatement Date (without reduction
for any net loss having occurred
in any such Fiscal Quarter) $
-------------
plus 75% of any Net Cash Proceeds
----
received by Borrower or its
Subsidiaries since the Restatement
Date. $
-------------
Minimum Required Tangible Net Worth
as of the Test Date $
-------------
Total Debt to EBITDA Ratio. (Section 6.13)
- --------------------------
As of the Test Date, the maximum permitted Total Debt to EBITDA Ratio was
4.00:1.00. As of the Test Date, the actual Total Debt to EBITDA Ratio was
___:1.00, calculated as follows:
The Ratio of the sum of:
---
Funded Debt as of the Test Date
(components shown below) $
-------------
Indebtedness for borrowed money
(excludes Circus and
Eldorado Joint Venture) $
-------------
-3-
<PAGE>
Capital Lease obligations $______________
letters of credit $________________
Unreimbursed Draws $_____________
plus obligations under Swap Agreements $______________
----
plus all Contingent Obligations
----
of Borrower and its Subsidiaries
with respect to indebtedness for
borrowed money, as the Test Date $______________
Numerator = Total Debt $______________
to EBITDA for the twelve month fiscal period ended on the Test Date,
--
calculated as follows:
Net Income for that period $________________
plus consolidated Interest
----
Charges of Borrower and its
Subsidiaries for that period $_______________
plus the aggregate amount of
----
federal and state taxes on or
measured by income of Borrower
and its Subsidiaries for that
period (whether or not payable
during that period) $________________
plus depreciation, amortization
----
and all other non-cash expenses
of Borrower and its Subsidiaries
for that period $________________
Denominator = EBITDA = $_______________
Senior Debt to EBITDA Ratio. (Section 6.13)
- ---------------------------
As of the Test Date, the maximum permitted Senior Debt to EBITDA Ratio
was 2.00:1.00. As of the Test Date, the actual Senior Debt to EBITDA Ratio
was____:1.00, calculated as follows:
-4-
<PAGE>
The Ratio of the difference between:
----------
Total Debt as of the Test Date
(as set forth above) $
------------------
minus Subordinated Obligations ($ )
----- ---------------
Numerator = Total Debt $
--------------
to EBITDA for the twelve month fiscal
--
period ended on the Test Date
(as set forth above) $
-------------------
Fixed Charge Ratio. (Section 6.15)
- ------------------
As of the Test Date, the minimum Fixed Charge Ratio was :1.00. As of the
----
Test Date, the actual Fixed Charge Ratio was :1.00, calculated
------------
as follows:
The ratio of the sum of:
---
EBITDA for the twelve month period
ending on the Test Date (as set forth
above) $
-----------------
plus Distributions made in Cash
----
received by Borrower from the
Circus and Eldorado Joint Venture
during that period $
----------------
Numerator = $
------------------
to the sum of:
-- ---
Cash Interest Charges payable by Borrower
and its Subsidiaries during that period $
-----------------
plus Scheduled Debt Amortization
----
for the twelve month fiscal period
beginning on the next day following
the Test Date $
-----------------
-5-
<PAGE>
plus 2% of the net revenues of Borrower
----
for the twelve month period ending on
the Test Date $_________________
plus Distributions made by Borrower
----
in Cash to its members during the same
period in accordance with Section 6.5,
---
net of Distributions made in
------
that fiscal period in excess of 50% of
Net Income $_________________
Denominator = $____________________
A review of the activities of Borrower during the fiscal period
covered by the attached financial statements has been made under my supervision
with a view to determining whether during such fiscal period Borrower performed
and observed all of its Obligations under the Loan Documents. Except as
described in an attached document or in an earlier Certificate, to the best of
my knowledge, as of the date of this Compliance Certificate there is no Default
or Event of Default.
To the best of my knowledge, except as described in an earlier
Compliance Certificate, no Material Adverse Effect has occurred since the date
of the most recent Compliance Certificate delivered to the Banks.
Dated:________________, 19__
By
-------------------------------
-------------------------------
Printed Name and Title
-6-
<PAGE>
[Exhibit B]
COMMITMENT ASSIGNMENT AND ACCEPTANCE AGREEMENT
----------------------------------------------
THIS COMMITMENT ASSIGNMENT AND ACCEPTANCE AGREEMENT ("Agreement") dated
as of ________________________, 19__ is made with reference to that certain
Amended and Restated Loan Agreement dated as of July 31, 1996 among Eldorado
Resorts LLC, a Nevada limited liability company ("Borrower"), the Banks therein
named and Bank of America National Trust and Savings Association, as
Administrative Agent for itself and for the Banks (as amended as of the date
hereof, the "Loan Agreement") and is entered into between the "Assignor"
described below, in its capacity as a Bank under the Loan Agreement, and the
"Assignee" described below. Assignor and Assignee hereby represent, warrant and
agree as follows:
1. Definitions. Capitalized terms defined in the Loan Agreement
-----------
are used herein with the meanings set forth for such terms in the Loan
Agreement. As used in this Agreement, the following capitalized terms shall have
the meanings set forth below:
"Assignee" means _________________________.
--------
"Assigned Pro-Rata Share" means _____% of the Commitment of the Banks
-----------------------
under the Loan Agreement, being equal to $________________________.
"Assignor" means ________________________.
--------
"Effective Date" means _____________, the effective date of this
Agreement determined in accordance with Section 11.8 of the Loan
----
Agreement.
2. Representations and Warranties of the Assignor. The Assignor
----------------------------------------------
represents and warrants as follows:
a. As of the date hereof, the Pro-Rata Share of the Assignor
is ____% of the Commitment (without giving effect to assignments thereof which
have not yet become effective). The Assignor is the legal and beneficial owner
of the Assigned Pro-Rata Share and the Assigned Pro-Rata Share is free and clear
of any adverse claim.
b. The outstanding principal balance of Advances made by
Assignor is $_______________. The aggregate effective face amount of the
Assignor's Pro-Rata Share of all outstanding Letters of Credit is $___________.
-1-
<PAGE>
c. The Assignor has full power and authority, and has taken
all action necessary to execute and deliver this Agreement and any and all other
documents required or permitted to be executed or delivered by it in connection
with this Agreement and to fulfill its obligations under, and to consummate the
transactions contemplated by, this Agreement, and no governmental authorizations
or other authorizations are required in connection therewith;
d. This Agreement constitutes the legal, valid and binding
obligation of the Assignor.
Assignor makes no representation or warranty and assumes no responsibility with
respect to the financial condition of Borrower or the performance by Borrower of
the Obligations, and assumes no responsibility with respect to any statements,
warranties or representations made or in connection with the Loan Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of the Loan Agreement or any Loan Document other than as expressly set
forth above.
3. Representations and Warranties of the Assignee. The Assignee
----------------------------------------------
hereby represents and warrants to the Assignor as follows:
(a) The Assignee has full power and authority, and has taken all
action necessary to execute and deliver this Agreement, and any and all other
documents required or permitted to be executed or delivered by it in connection
with this agreement and to fulfill its obligations under, and to consummate the
transactions contemplated by, this Agreement, and no governmental authorizations
or other authorizations are required in connection therewith;
(b) This Agreement constitutes the legal, valid and binding
obligation of the Assignee;
(c) The Assignee has independently and without reliance upon the
Assignor and based on such information as the Assignee has deemed appropriate,
made its own credit analysis and decision to enter into this Agreement. Assignee
will, independently and without reliance upon the Administrative Agent or any
Bank, and based upon such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under the Loan Agreement;
(d) The Assignee is an "Eligible Assignee" within the meaning of
the Loan Agreement;
(e) The Assignee has received a copy of the Loan Agreement,
together with copies of the most recent financial statements delivered pursuant
to Section 7.1 of the Loan Agreement; and
---
(f) If Assignee is organized under the Laws of a jurisdiction
outside the United States of America, attached hereto are the forms prescribed
by the Code
-2-
<PAGE>
certifying Assignee's exemption from United States withholding taxes with
respect to all payments to be made to Assignee under the Loan Agreement.
4. Assignment. On the terms set forth herein, Assignor, as of
----------
Effective Date, hereby irrevocably sells, assigns and transfers to the Assignee
all of the rights and obligations of the Assignor under the Loan Agreement, the
other Loan Documents and Assignor's Note, in each case to the extent of the
Assigned Pro-Rata Share, and the Assignee irrevocably accepts such assignment of
rights and assumes such obligations from the Assignor on such terms and as of
the Effective Date. As of the Effective Date, Assignee shall have the rights and
obligations of a "Bank" under the Loan Documents, except to the extent of any
arrangements with respect to payments referred to in Section 5 hereof. Assignee
-
hereby appoints and authorizes the Administrative Agent to exercise such powers
under the Loan Agreement as are delegate to the Administrative Agent by Article
10 of the Loan Agreement.
- --
5. Payment. On the Effective Date, Assignee shall pay to the
-------
Assignor, in immediately available funds, an amount equal to the purchase price,
as agreed between the Assignor and Assignee, of the Assigned Pro-Rata Share.
The Assignor and the Assignee have entered into a letter agreement, of even
date herewith, which sets forth their agreement with respect to the amount of
interest, fees, and other payments with respect to the Assigned Pro-Rata Share
which are to be retained by the Assignor.
The Assignor and the Assignee hereby agree that if either receives any
payment of interest, principal, fees or any other amount under the Loan
Agreement, their respective Note and other Loan Documents which is for the
account of the other, it shall hold the same in trust for such party to the
extent of such party's interest therein and shall promptly pay the same to such
party.
6. Principal, Interest, Fees, etc. Any principal that would be
------------------------------
payable and any interest, fees and other amounts that would accrue from and
after the Effective Date to or for the account of the Assignor pursuant to the
Loan Agreement and the Note shall be payable to or for the account of the
Assignor and the Assignee, in accordance with their respective interests as
adjusted pursuant to this Agreement.
7. Notes. The Assignor and the Assignee shall make appropriate
-----
arrangements with the Borrower concurrently with the execution and delivery
hereof so that a replacement Note is issued to the Assignor and a new Note is
issued to the Assignee, in each case in principal amounts reflecting their Pro
Rata Share of the Commitment or their outstanding Advances (as adjusted pursuant
to this Agreement).
8. Further Assurances. Concurrently with the execution of this
------------------
Agreement, Assignor shall execute two counterpart original Requests for
Registration, in the form of Exhibit A to this Agreement, to be forwarded to the
Administrative Agent. The Assignor and the Assignee further agree to execute
and deliver such other instruments, and take such other action, as either party
may reasonably request
-3-
<PAGE>
in connection with the transactions contemplated by this Agreement, and Assignor
specifically agrees to cause the delivery of (i) two original counterparts of
this Agreement and (ii) the Requests for Registration, to the Administrative
Agent for the purpose of registration of Assignee as a "Bank" pursuant to
Section 11.8 of the Loan Agreement.
----
9. GOVERNING LAW. THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACTUAL
-------------
OBLIGATION UNDER, AND SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEVADA. FOR ANY DISPUTE ARISING IN
CONNECTION WITH THIS AGREEMENT, THE ASSIGNEE HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEVADA.
10. Notices. All communications among the parties or notices in
-------
connection herewith shall be in writing, hand delivered or sent by registered
airmail, postage prepaid, or by telex, telegram or cable, addressed to the
appropriate party at its address set forth on the signature pages hereof. All
such communications and notices shall be effective upon receipt.
11. Binding Effect. This Agreement shall be binding upon and inure to
--------------
the benefit of the parties and their respective successors and assigns;
provided, however, that Assignee shall not assign its rights or obligations
without the prior written consent of the Assignor and any purported assignment,
absent such consent, shall be void.
12. Interpretation. The headings of the various sections hereof are
--------------
for convenience of reference only and shall not affect the meaning or
construction of any provision hereof.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officials, officers or agents
thereunto duly authorized as of the date first above written.
"Assignor"
-------------------------------
By:
----------------------------
Title:
-------------------------
Address:
-----------------------
-------------------------------
-------------------------------
Attn:
--------------------------
-------------------------------
Telephone:
---------------------
Telecopier:
--------------------
"Assignee"
-------------------------------
By:
----------------------------
Title:
-------------------------
Address:
-----------------------
-------------------------------
-------------------------------
Attn:
--------------------------
-------------------------------
Telephone:
---------------------
Telecopier:
--------------------
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<PAGE>
Exhibit A to Commitment Assignment and Acceptance Agreement
REQUEST FOR REGISTRATION
------------------------
TO: BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as Administrative Agent, and to
ELDORADO RESORTS LLC
THIS REQUEST FOR REGISTRATION OF ASSIGNEE is made as of the date of
the enclosed Commitment Assignment and Acceptance Agreement with reference
to that certain Loan Agreement, dated as of _________________, 1996 among
Eldorado Resorts LLC, a Nevada limited liability company, the Banks therein
named, and Bank of America National Trust and Savings Association, as
Administrative Agent for itself and for the Banks (as amended as of the
date hereof, the "Loan Agreement").
Assignor and Assignee hereby request that the Administrative Agent
register Assignee as a Bank pursuant to Section 11.8 of the Loan
----
Agreement effective as of the Effective Date described in the enclosed
Commitment Assignment and Acceptance and, in connection with this request
certify to the Administrative Agent that:
A. Assignee is an "Eligible Assignee" within the meaning of
that term set forth in the Loan Agreement; and
B. Schedule A to the enclosed Commitment Assignment and
Acceptance Agreement sets forth the correct Assigned Pro-Rata Share
of the Assignee.
Enclosed with this Request are:
(i) two counterpart originals of the Commitment Assignment
and Acceptance;
(ii) the original Note of Borrower in favor of Assignor; and
(iii) Assignee's check payable to the Administrative Agent
for the $2000 recordation fee required by Section 11.8(d) of the Loan
-------
Agreement.
Assignor and Assignee hereby jointly request that the Administrative Agent
cause Borrower to issue replacement Notes, dated as of the Closing Date,
pursuant to Section 11.8 of the Loan Agreement in favor of Assignor in the
----
principal amount of the remainder of its Pro-Rata Share and in favor of the
Assignee in the amount of the Assigned Pro-Rata Share.
-1-
<PAGE>
IN WITNESS WHEREOF, Assignor and Assignee have executed this Request for
Registration by their duly authorized officers as of this ___ day of __________,
19__.
"Assignor"
-----------------------------------
By:
--------------------------------
(Printed/Typed Name of Officer)
"Assignee"
-----------------------------------
By:
--------------------------------
(Printed/Typed Name of Officer)
-2-
<PAGE>
CONSENT OF THE ADMINISTRATIVE AGENT AND BORROWER
------------------------------------------------
TO: The Assignor and Assignee referred to in the above Request for
Registration
When countersigned by both Borrower and the Administrative Agent below,
this document shall certify that:
1. If the consent of Borrower or the Administrative Agent is
required to such assignment, Borrower has consented, pursuant to the terms of
the Loan Documents, to the assignment by Assignor to Assignee of the Assigned
Pro-Rata Share.
2. The Adminstrative Agent has registered Assignee as a Bank under
the Loan Agreement, effective as of the Effective Date described above, with a
Pro-Rata Share corresponding to the Assigned Pro-Rata Share and has adjusted the
registered Pro-Rata Share of Assignor to reflect the assignment of the Assigned
Pro-Rata Share.
Approved:
ELDORADO RESORTS LLC BANK OF AMERICA NATIONAL
TRUST AND SAVINGS
ASSOCIATION, as Administrative
Agent
By: By:
---------------------- ----------------------
Title: Title:
------------------- -------------------
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<PAGE>
EXHIBIT C
Recording requested by, and
when recorded return to:
Sheppard, Mullin, Richter & Hampton LLP
333 South Hope Street, 48th Floor
Los Angeles, California 90071
Attention: William M. Scott IV, Esquire
INSTRUCTIONS TO COUNTY RECORDER:
Index this document as
(1) a deed of trust and
(2) a fixture filing
- --------------------------------------------------------------------------------
AMENDED AND RESTATED DEED OF TRUST, ASSIGNMENT OF RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
This Amended and Restated Deed of Trust, Assignment of Rents, Security
Agreement and Fixture Filing ("Deed of Trust"), dated as of __________, 1996,
is executed by Eldorado Resorts LLC, a Nevada limited liability company, trustor
("Trustor") and C.S.& Y. Associates, a general partnership, additional trustor
("Additional Trustor"), in favor of First American Title Company of Nevada, as
trustee ("Trustee"), for the benefit of BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Administrative Agent for the Banks party to the Loan
Agreement described below, as beneficiary ("Beneficiary"), whose address is 555
South Flower Street, 10th Floor, Los Angeles, California 90017 Attn: Scott
Faber.
RECITALS
--------
A. On or about March 25, 1994 Eldorado Hotel Associates Limited
Partnership, a Nevada limited partnership (the "Predecessor Partnership") and
Additional Trustor executed and delivered a Deed of Trust, Assignment of Rents,
Security Agreement and Fixture Filing dated as of March 25, 1994 in favor of
Beneficiary (the "Original Deed of Trust") for the purpose inter alia, of
----- ----
securing the obligations of the Predecessor Partnership under a Loan Agreement
of even date therewith among the Predecessor Partnership, the Banks therein
named and Beneficiary, as Administrative Agent (the "Original Loan Agreement).
-1-
<PAGE>
B. Pursuant to an Agreement and Plan of Merger dated as of June 28,
1996 between the Predecessor Partnership and Eldorado Resorts LLC, the
Predecessor Partnership and Eldorado Resorts LLC were merged, with Eldorado
Resorts LLC the Survivor.
C. Pursuant to an Assumption Agreement dated July 1, 1996 between
Eldorado Resorts LLC and Beneficiary, Eldorado Resorts LLC (the Trustor
hereunder) expressly assumed the obligations of the Predecessor Partnership
under the Original Loan Agreement and the other Loan Documents referred to
therein, including without limitation the Original Deed of Trust. The
Assumption Agreement has been recorded in the official records of Washoe County,
Nevada, on July ___, 1996 as Instrument 2012495.
D. Trustor is entering into an Amended and Restated Loan Agreement
dated as of July 31, 1996 with Beneficiary, as Administrative Agent and sole
Bank (the "Loan Agreement") which shall amend and restate the Original Loan
Agreement in its entirety.
E. It is a condition precedent to the extension of credit
facilities under the Loan Agreement that this Deed of Trust be executed to amend
and restate the Original Deed of Trust.
NOW, THEREFORE, FOR GOOD AND VALUABLE CONSIDERATION, including the
indebtedness herein recited and the trust herein created, the receipt and
adequacy of which are hereby amend and restated the original Deed of Trust and
hereby acknowledged, Trustor and Additional Trustor hereby amend and restate the
original Deed of Trust and hereby irrevocably GRANT, BARGAIN, SELL, TRANSFER,
SET OVER, CONVEY AND ASSIGN to Trustee, IN TRUST, WITH POWER OF SALE, for the
benefit and security of Beneficiary, under and subject to the terms and
conditions hereinafter set forth, all rights, titles, interests, estates,
powers and privileges that Trustor and Additional Trustor now have or may
hereafter acquire in or to the Collateral which consists of Real Estate or Real
Property and grant a security interest to Beneficiary under Article 9 of the
Uniform Commercial Code - Secured Transactions, as enacted in the State of
Nevada, in the Collateral which consists of Personal Property, however, it is
specifically provided that any interest which is granted in the Rents, defined
by Section 1.1 below, shall be subordinate to the absolute assignment which is
granted under Article III of this Deed of Trust.
-2-
<PAGE>
FOR THE PURPOSE OF SECURING:
(a) the payment of the Loans and all indebtedness evidenced by, and the
performance of each and every obligation, covenant and agreement of Trustor
contained in (i) that certain Amended and Restated Loan Agreement (as defined
above, the "Loan Agreement") of even date herewith among Trustor and Beneficiary
and the Banks (the "Loan Agreement"), other than those liabilities contained in
the indemnity in favor of Beneficiary set forth in Section 11.15 of the Loan
-----
Agreement entitled "Hazardous Materials Indemnity", which indemnity shall be and
is unsecured and is not subject to the lien of this Deed of Trust on the
Premises; (ii) the "Loan Documents" referred to in the Loan Agreement (except to
the extent that such Loan Documents recite that they are not secured hereby);
(iii) those certain Notes in the aggregate face amount of $50,000,000, made by
Trustor payable to the order of the Banks that are party to the Loan Agreement
(the "Notes") and any renewal, extension, substitution or modification thereof,
together with interest on such indebtedness according to the terms of the Notes;
and (iv) the reimbursement obligations of trustor with respect to each Letter of
Credit issued under the Loan Agreement pursuant to a subfacility providing for
the issuance of not more than $3,000,000 in such Letter of Credit at any time
outstanding;
(b) the payment by Trustor of all sums advanced by or on behalf of
Trustee or Beneficiary to protect the Collateral, with interest thereon as
provided herein;
(c) the performance by Trustor of each and every obligation, covenant
and agreement of Trustor contained herein;
(d) the payment by Trustor of all other sums, with interest thereon,
which may hereafter be loaned to Trustor, or its successors or assigns, by
Beneficiary, or its successors or assigns, when evidenced by a promissory note
or notes or other document(s) reciting that they are secured by this Deed of
Trust;
(e) the performance by Trustor of every obligation, covenant and
agreement of Trustor contained in any agreement now or hereafter executed by
Trustor which recites that the obligations thereunder are secured by this Deed
of Trust;
(f) the payment by Trustor of all sums, with interest thereon as herein
provided, that may become due
-3-
<PAGE>
and payable to or for the benefit of Beneficiary or Trustee pursuant to
the terms of this Deed of Trust;
(g) The expenses and costs incurred or paid by Beneficiary
in the preservation and enforcement of the rights and remedies of
Beneficiary and the duties and liabilities of Trustor hereunder,
including, but not by way of limitation, attorneys' fees, court costs,
witness fees, expert witness fees, collection costs, and costs and
expenses paid by Beneficiary in performing for Trustor's account any
obligation of said Trustor; and
(h) the performance of each and every obligation of Trustor
now or hereafter arising out of or pertaining to any extensions,
modifications, renewals or replacements of or substitutions for any of
the documents and instruments described in clauses (a) through (g)
above.
As used above, the following terms have the meanings set forth after
each:
"Groundlease" means that certain Lease dated July 21, 1972 between
-----------
Additional Trustor, as lessor, and Trustor, as lessee, as amended by an
Addendum dated March 20, 1973, an Amendment to Lease dated January 1,
1978, an Amendment to Lease dated January 31, 1985 and a Third Amendment
to Lease dated December 24, 1987, as in effect on the date hereof.
Beneficiary agrees that, promptly following the submission of
any written request by Trustor or Additional Trustor (with such requests limited
to not more by each of Trustor and Additional Trustor than one in any calendar
month, unless more frequent requests are provided for by applicable law),
Beneficiary shall deliver a statement to Trustor and/or Additional Trustor, as
appropriate, setting forth the amount of the principal indebtedness evidenced by
the Notes, provided that Beneficiary shall have no liability for, and the
--------
security of this Deed of Trust shall not be affected by, any failure to respond
to any such request or any error in any response.
TO PROTECT THE PREMISES AND THE SECURITY GRANTED BY THIS DEED OF
TRUST, TRUSTOR HEREBY COVENANTS AND AGREES AS FOLLOWS:
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<PAGE>
ARTICLE 1.
DEFINITIONS
1.1 Collateral. For purposes of this Deed of Trust, the term
----------
"Collateral" means and includes all of the following:
(a) Real Estate. All of the real property which is particularly
-----------
described by Exhibit "A", attached hereto and incorporated by reference
herein (hereinafter the "Land"), easements, hereditaments, rights of way,
privileges, liberties, appendages and appurtenances now or hereafter
belonging in anywise appertaining to the Land ( including, without
limitation, all rights relating to storm and sanitary sewer, water, gas,
electric, railway and telephone services); all gas, oil, minerals, coals and
other substances of any kind or character underlying the Land to the extent
owned by Trustor and/or Additional Trustor; all estate, claim, demand, right,
title or interest of the Trustor and/or Additional Trustor in and to any
street, road, highway, or alley (vacated or otherwise) adjoining the Land or
any part thereof; all strips and gores belonging, adjacent or pertaining to
the Land to the extent of Trustor's and/or Additional Trustor's right, title
or interest therein; and any after-acquired title to any of the foregoing
(all of the foregoing is herein referred to collectively as the "Real
Estate");
(b) Improvements and Fixtures. All of Trustor's and/or
-------------------------
Additional Trustor's right, title and interest in and to all buildings,
structures, replacements, furnishings, fixtures, fittings and other
improvements and property of every kind and character now or hereafter owned
or leased by the Trustor and/or Additional Trustor, and located or erected on
the Real Estate, together with all buildings or construction materials,
equipment, appliances, machinery, plant equipment, fittings, apparatus,
fixtures and other articles of any kind or nature whatsoever now or hereafter
owned or leased by the Trustor and/or Additional Trustor and found on,
affixed to or attached to the Real Estate, including (without limitation) all
motors, boilers, engines and devices for the operation of pumps, and all
heating, electrical, lighting, power, plumbing, air conditioning,
refrigeration and ventilation equipment (all of the foregoing is herein
referred to collectively as the "Improvements");
(c) Personal Property. All gaming devices and associated
-----------------
equipment, building materials, goods, construction material, appliances
(including stoves, refrigerators, water fountains and coolers, fans, heaters,
-5-
<PAGE>
incinerators, compactors, dishwashers, clothes washers and dryers, water heaters
and similar equipment), supplies, blinds, window shades, carpeting, floor
coverings, elevators, office equipment, growing plants, fire sprinklers and
alarms, control devices, equipment (including motor vehicles and all window
cleaning, building cleaning, swimming pool, recreational, monitoring, garbage,
air conditioning, pest control and other equipment) tools, furnishings,
furniture, light fixtures, non-structural additions to the Real Estate, and all
other tangible property of any kind or character now or hereafter owned by the
Trustor and/or Additional Trustor and used or useful in connection with the
Real Estate, any construction undertaken on the Real Estate or any trade,
business or other activity (whether or not engaged in for profit) for which the
Real Estate is used, the maintenance of the Real Estate or the convenience of
any guests, licensees or invitees of the Trustor and/or Additional Trustor, all
regardless of whether located on the Real Estate or located elsewhere for
purposes of fabrication, storage or otherwise (all of the foregoing is herein
referred to collectively as the "Goods");
(d) Intangibles. All option rights, purchase contracts, and books and
-----------
records of the Trustor and/or Additional Trustor relating to the Real Estate or
the Improvements, and all contract rights of the Trustor and/or Additional
Trustor with respect to the operation and/or maintenance of the Real Estate or
the Improvements (all of the foregoing is herein referred to collectively as the
"Intangibles");
(e) Rents. All rents, issues, profits, royalties, avails, and other
-----
benefits derived or owned by the Trustor and/or Additional Trustor or
indirectly from the Real Estate or the Improvements or any business activity
conducted thereon (all of the foregoing is herein collectively called the
"Rents");
(f) Leases. All rights of the Trustor and/or Additional Trustor under
------
all leases, licenses, occupancy agreements, concessions or other arrangements,
whether written or oral, whereby any person, other than the Trustor, agrees to
pay money or any consideration for the use, possession or occupancy of, or any
estate in, the Real Estate or the Improvements or any part thereof, and all
rents, income, profits, benefits, avails, advantages and claims against
guarantors under any thereof (all of the foregoing is herein referred to
collectively as the "Leases"). The Leases include, but are not necessarily
limited that certain Lease executed by the State of Nevada, acting by and
through its Department of Highways,
-6-
<PAGE>
as Lessor, and Trustor, as Lessee, recorded October 3, 1978 in the Official
Records of Washoe County, Nevada, as Document No. 561788; and
(g) All the estate, interest, right, title, other claim or demand,
both law in and in equity, including claims or demands with respect to the
proceeds of insurance in effect with respect thereto, which Trustor and/or
Additional Trustor now has or may hereafter acquire in the Premises, and any
and all awards made for the taking by eminent domain, or by any proceeding
or purchase in lieu thereof, of the whole or any part of the Collateral,
including without limitation any award resulting from a change of grade of
streets and any award for severance damages.
(h) Other Property. All other property or rights of the Trustor
--------------
and/or Additional Trustor of any kind or character related to the Real
Estate or the Improvements, including, without limitation, goodwill,
trademarks, servicemarks, tradenames, accounts, instruments, chattel paper,
money and any general intangibles not specifically included in the
Intangibles and all proceeds (including insurance proceeds, but subject to
the limitations on the use of such proceeds set forth herein) and products
of any of the foregoing (all of the foregoing is herein referred to
collectively as the "Other Property"). (All of the Real Estate, the
Improvements, the Leases and any other property which is real property under
applicable law, is sometimes referred to collectively herein as the
"Premises" and is sometimes referred to collectively herein as the "Real
Property", all of the goods, intangibles and other property which is
personal property under applicable law is sometimes collectively referred to
herein as the "Personal Property".)
1.2 Notes. All capitalized terms used herein and not otherwise defined
-----
herein shall have the meanings ascribed to the same in the Loan Agreement.
ARTICLE 2.
COVENANTS AND AGREEMENTS OF TRUSTOR
2.1 Payment of Secured Obligations. Trustor shall pay when due the
------------------------------
principal, interest, premium, if any, and all other amounts due to Beneficiary
as provided in the Loan Agreement and the Notes; the principal of and interest
on any amount advanced in the future and secured by this Deed of Trust; and the
principal of and interest on any other amount secured by this Deed of Trust and
all charges, fees and other amounts as provided in the Loan Agreement.
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<PAGE>
2.2 Maintenance, Repair, Alterations. Trustor shall maintain and
--------------------------------
preserve the Collateral in good condition and repair and in a prudent and
businesslike manner; Trustor, except upon the prior written consent of
Beneficiary, shall not remove, demolish or substantially alter any of the
Improvements, other than to make repairs in the ordinary course of business of a
non-structural nature which serve to preserve or increase the value of the
Premises; Trustor shall complete promptly and in a good and workmanlike manner
any Improvement which may be now or hereafter constructed on the Premises and
promptly restore in like manner any Improvement which may be damaged or
destroyed thereon from any cause whatsoever, and pay when due all claims for
labor performed and materials furnished therefor; Trustor shall comply with all
laws, ordinances, rules, regulations, covenants, conditions, restrictions and
orders of any governmental authority now or hereafter affecting the conduct or
operation of Trustor's business or the Collateral or any part thereof or
requiring any alteration or improvement to be made thereon; Trustor shall not
commit, suffer or permit any act to be done in, upon or to the Collateral or any
part thereof in violation of any such laws, ordinances, rules, regulations or
orders, or any covenant, condition or restriction now or hereafter affecting the
Premises; Trustor shall not commit or permit any waste or deterioration of the
Collateral, and shall keep and maintain abutting grounds, sidewalks, roads,
parking and landscape areas in good and neat order and repair; Trustor shall not
take (or fail to take) any action, which if taken (or not so taken) would
increase in any way the risk of fire or other hazard occurring to or affecting
the Premises or which otherwise would impair the security of Beneficiary in the
Collateral; Trustor shall comply with the provisions of all leases, if any,
constituting a portion of the Collateral; Trustor shall not abandon the
Collateral or any portion thereof or leave the Premises unprotected, unguarded,
vacant or deserted; except as otherwise expressly permitted under the Loan
Agreement and except for Permitted Encumbrances, Trustor shall not initiate,
join in or consent to any change in any zoning ordinance, general plan, specific
plan, private restrictive covenant or other public or private restriction
limiting the uses which may be made of the Premises by Trustor or by the owner
thereof without the prior written consent of Beneficiary; Trustor shall secure
and maintain in full force all permits necessary for the use, occupancy and
operation of the Collateral; except as otherwise prohibited or restricted by the
Loan Documents, or any of them, Trustor shall do any and all other acts which
may be reasonably necessary to protect or preserve the value of the Collateral
and the rights of Trustee and Beneficiary with respect thereto.
Trustor and Additional Trustor hereby agree that Beneficiary may conduct
from time to time, through
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<PAGE>
representatives of its own choice, on-site inspections and observations of (1)
the maintenance and repair of the Collateral, including a review of all
maintenance and repair programs and practices and all reports and records,
including the records of expenditures, relating thereto, and (2) such other
facilities, practices and records of Trustor relating to the Premises as
Beneficiary deems to be necessary or appropriate in order to monitor Trustor's
compliance with the provisions of this Section.
2.3 Required Insurance.
------------------
2.3.1 Trustor shall at all times provide, maintain, keep in full
force and effect or cause to be provided, maintained, and kept in full force and
effect, at no expense to Trustee or Beneficiary, policies of insurance in form,
amounts and with companies required by the Loan Agreement.
2.3.2 All policies of insurance required by the terms of this Deed
of Trust shall have attached thereto a lender's loss payable endorsement for the
benefit of Beneficiary and shall name Beneficiary as an additional insured, all
in such form and substance as required by the Loan Agreement.
2.3.3 Trustor shall also provide from time to time at the written
request of Beneficiary satisfactory evidence of the insurable value of the
Premises. Such evidence may be in the form of an insurance appraisal or
valuation report prepared by an insurance company, agent or broker, professional
appraiser, architect, engineer or contractor reasonably approved by Beneficiary.
Trustor shall bear the cost, if any, of such insurance appraisal or valuation
report. Trustor shall not be required to deliver such evidence of insurable
value more often than once in any two calendar year period.
2.4 Delivery of Policies, Payment of Premiums. At Beneficiary's option,
-----------------------------------------
Trustor shall furnish Beneficiary with an original of all policies of insurance
required under Section 2.3 and/or a certificate of insurance for each required
---
policy setting forth the coverage, the limits of liability, the deductibles, if
any, the name of the carrier, the policy number, and the period of coverage,
which certificates shall be executed by authorized officials of the companies
issuing such insurance, or by agents or attorneys-in-fact authorized to issue
said certificates (in which event each such certificate shall be accompanied by
a notarized affidavit, agency agreement or power of attorney evidencing the
authority of the signatory to issue such certificate on behalf of the insurer
named therein). If Beneficiary consents, Trustor may provide any of
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<PAGE>
the required insurance through blanket policies carried by Trustor and covering
more than one location, or by policies procured by a tenant or other party
holding under Trustor; provided, however, all such policies shall be in form,
substance and amounts and issued by companies reasonably satisfactory to
Beneficiary. As soon as practicable, but in any event prior to the expiration of
each required policy, Trustor shall deliver to Beneficiary evidence satisfactory
to Beneficiary of the payment of premium and the renewal or replacement of such
policy continuing insurance in form as required by this Deed of Trust. All such
policies shall contain a provision that, notwithstanding any contrary agreement
between Trustor and the insurance company, such policies will not be cancelled,
allowed to lapse without renewal, surrendered or materially amended (which term
shall include any reduction in the scope or limits of coverage) without at least
thirty (30) days' prior written notice to Beneficiary. If Trustor fails to
provide, maintain, keep in force or deliver to Beneficiary the policies of
insurance required by this Deed of Trust or by any of the Loan Documents,
Beneficiary may (but shall have no obligation to ) procure such insurance, or
single interest insurance for such risks covering Beneficiary's interests, and
Trustor shall pay all premiums therefor promptly upon demand by Beneficiary;
and until such payment is made by Trustor, the amount of all such premiums,
together with interest thereon at the Default Rate, as that term is defined
under the Loan Agreement, shall be secured by this Deed of Trust.
2.5 Casualties. Trustor shall give prompt written notice to Benenficiary
----------
upon the occurrence of any casualty to or in connection with the Collateral or
any part thereof, whether or not covered by insurance. In the event of such
casualty (which, in the case of casualties occurring prior to the occurrence of
an Event of Default, are in excess of $250,000 and thereafter, all casualties of
any size or amount), the gross insurance proceeds less all expenses (including
attorney's fees) incurred in the collection of such proceeds shall, subject to
the provisions of the Loan Agreement, be payable to Beneficiary, and Trustor and
Additional Trustor hereby authorize and direct any affected insurance company to
make payment of such proceeds in such case directly to Beneficiary. If Trustor
and/or Additional Trustor receive any proceeds of insurance resulting from such
casualty, Trustor and/or Additional Trustor shall promptly pay over such
proceeds to Beneficiary. Beneficiary is hereby authorized and empowered by
Trustor and Additional Trustor at Beneficiary's option and in Beneficiary's sole
discretion, as attorney-in-fact for Trustor and Additional Trustor, to make
proof of loss, to appear in and prosecute any action arising from any policy or
policies of insurance, and upon the occurrence of an Event of Default hereunder
the Loan Agreement, to settle,
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<PAGE>
adjust or compromise any claim for loss, damage or destruction under any policy
or policies of insurance. Trustor and Additional Trustor shall not settle,
adjust or compromise any claim for loss, damage or destruction of the Collateral
or any part thereof under any policy or policies of insurance without the prior
written consent of Beneficiary to such settlement, adjustment or compromise
(which consent shall not be unreasonably withheld). In the event of any damage
to or destruction of the Premises, all insurance proceeds shall be applied in
accordance with the terms of the Loan Agreement. Except as provided in the Loan
Agreement, nothing herein contained shall be deemed to excuse Trustor from
repairing or maintaining the Collateral as provided in Section 2.2 hereof or
---
restoring all damage or destruction to the Collateral, regardless of whether or
not there are insurance proceeds available to Trustor or whether any such
proceeds are sufficient in amount, and the application or release by Beneficiary
of any insurance proceeds shall not cure or waive any default or notice under
this Deed of Trust or invalidate any act done pursuant to such notice.
2.6 Assignment of Policies Upon Foreclosure. In the event of
---------------------------------------
foreclosure of this Deed of Trust or other transfer of title or assignment of
the Collateral in extinguishment, in whole or in part. of the debt secured
hereby, all right, title and interest or Trustor and Additional Trustor in and
to all policies of insurance required by Section 2.3 hereof and any unearned
---
premiums paid thereon shall, without further act, be assigned to and shall inure
to the benefit of and pass to the successor in interest to Trustor and
Additional Trustor or the purchaser or grantee of the Collateral, and Trustor
and Additional Trustor hereby appoint Beneficiary their lawful attorney-in-fact
to execute an assignment thereof and any other document necessary to effect such
transfer.
2.7 Indemnification; Subrogation; Waiver of Offset.
----------------------------------------------
2.7.1. If Beneficiary is made a party to any litigation concerning
this Deed of Trust, any of the Loan Documents, the Collateral or any part
thereof or interest therein, or the occupancy of the Premises by Trustor or any
tenant of Trustor, then Trustor shall indemnify, defend and hold Beneficiary
harmless from all liability to any third party by reason of said litigation,
including all reasonable attorney's fees and expenses incurred by Beneficiary as
a result of any such litigation, whether or not such litigation is prosecuted to
judgment. Beneficiary may employ an attorney or attorneys to protect its rights
hereunder, and in the event of such employment, Trustor shall pay Beneficiary
reasonable attorneys' fees and expenses incurred by such Beneficiary, whether or
not an action is actually commenced against Trustor by reason of its breach.
Neither this para-
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<PAGE>
graph nor any other provision of this Deed of Trust shall be deemed to include
or create any obligation or liability of Trustor to Beneficiary which
constitutes an obligation or liability of Trustor to Beneficiary under the
indemnity in favor of Beneficiary set forth in Section 11.15 of the Loan
-----
Agreement entitled "Hazardous Materials Indemnity", which indemnity shall be and
is unsecured and is not subject to the lien of this Deed of Trust on the
Premises.
2.7.2 Trustor and Additional Trustor waive any and all right to claim
or recover against Beneficiary, its officers, employees, agents and
representatives, for loss of or damage to Trustor and/or Additional Trustor, the
Collateral, Trustor's and/or Additional Trustor's property or the property of
others under Trustor's and/or Additional Trustor's control from any cause
insured against or required to be insured against by the provisions of this Deed
of Trust; provided, however, that this waiver of subrogation shall not be
effective with respect to any policy of insurance permitted or required by this
Deed of Trust if (i) such policy prohibits such waiver of subrogation, or if
coverage thereunder would be reduced as a result of such waiver of subrogation
and (ii) Trustor is unable to obtain from a carrier issuing such insurance a
policy that, by special endorsement or otherwise, permits such a waiver of
subrogation.
2.7.3 Except as otherwise specifically provided herein, all amounts
payable by Trustor pursuant to this Deed of Trust shall be paid without notice,
demand, counterclaim, setoff, deduction or defense and without abatement,
suspension, deferment, diminution or reduction, and the obligations and
liabilities of Trustor hereunder shall in no way be released, discharged or
otherwise affected (except as expressly provided herein) by reason of: (i) any
damage to or destruction of or any condemnation or similar taking of the
Collateral or any-part thereof; (ii) any restriction or prevention of or
interference by any third party with any use of the Collateral or any part
thereof; (iii) any title defect or encumbrance or any eviction from the
Premises or any part thereof by title paramount or otherwise; (iv) any
bankruptcy, insolvency, reorganization, composition, adjustment, dissolution,
liquidation or other like proceeding relating to Beneficiary, or any action
taken with respect to this Deed of Trust by any trustee or receiver of
Beneficiary, or by any court, in any such proceeding; (v) any claim which
Trustor has or might have against Beneficiary; (vi) any default or failure on
the part of Beneficiary to perform or comply with any of the terms hereof or of
any other agreement with Trustor; or (vii) any other occurrence whatsoever,
whether similar or dissimilar to the foregoing; whether or not Trustor shall
have notice or knowledge of any of the foregoing. Except as expressly provided
herein, Trustor waives all rights now or hereafter
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<PAGE>
conferred by statute or otherwise to any abatement, suspension, deferment,
diminution or reduction of any sum secured hereby and payable by Trustor.
2.8 Taxes and Impositions.
---------------------
2.8.1 Subject to Trustor's rights to contest provided in
the Loan Agreement, Trustor shall pay, or cause to be paid at least ten (10)
days prior to delinquency, all real property taxes and assessments, general and
special, and all other taxes and assessments of any kind or nature whatsoever,
including without limitation non-governmental levies or assessments such as
maintenance charges, levies or charges resulting from covenants, conditions and
restrictions affecting the Collateral, which are assessed or imposed upon the
Collateral, or upon Trustor as owner or operator of the Premises, or become due
and payable, and which create, may create or appear to create a lien upon the
Collateral, or any part thereof, or upon any personal property, equipment or
other facility used in the operation or maintenance thereof (all the above
collectively hereinafter referred to as "Impositions"); provided, however, that
if, by law, any such Imposition is payable, or may at the option of the taxpayer
be paid, in installments, Trustor may pay the same or cause it to be paid,
together with any accrued interest on the unpaid balance of such Imposition, in
installments as the same become due and before any fine, penalty, interest or
cost may be added thereto for the nonpayment of any such installment and
interest.
2.8.2 Subject to Trustor's rights to contest provided in
the Loan Agreement, if at any time after the date hereof there shall be assessed
or imposed (i) a tax or assessment on the Collateral in lieu of or in addition
to the Impositions payable by Trustor pursuant to paragraph 2.8.1 hereof, or
(ii) a license fee, tax or assessment imposed on Beneficiary and measured by or
based in whole or in part upon the amount of the outstanding obligations secured
hereby, then all such taxes, assessments or fees shall be deemed to be included
within the term "Impositions" as defined in paragraph 2.8.1 hereof, and Trustor
shall pay and discharge the same as herein provided with respect to the payment
of Impositions. If Trustor fails to pay such Impositions prior to delinquency,
Beneficiary may at its option declare all obligations secured hereby together
with all accrued interest thereon, immediately due and payable. Anything to the
contrary herein notwithstanding, Trustor shall have no obligation to pay any
franchise, estate, inheritance, income, excess profits or similar tax levied on
Beneficiary or on the obligations secured hereby.
2.8.3 Subject to Trustor's rights to contest provided in
the Loan Agreement, and upon request by
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<PAGE>
Beneficiary, Trustor shall deliver to Beneficiary, within thirty (30) days after
the date upon which any such Imposition is due and payable by Trustor or as soon
thereafter as the same becomes available, official receipts of the appropriate
taxing authority, or other proof satisfactory to Beneficiary, evidencing the
payment thereof.
2.9 Utilities. Trustor shall promptly pay all gas,
---------
electricity, water, sewer and other utility charges which are incurred for the
benefit of the Collateral or which may become a lien against the Collateral and
all other assessments and other charges of a similar nature, public or private,
relating to the Collateral or any portion thereof, regardless of whether or not
any such charge is or may become a lien thereon.
2.10 Defense of Actions and Costs. Trustor, at no cost or
----------------------------
expense to Beneficiary or Trustee, shall appear in and defend any action or
proceeding purporting to affect the security hereof, the other Loan Documents,
any additional or other security for the obligations secured hereby, the
interest of Beneficiary, or the rights, powers or duties of Beneficiary or
Trustee hereunder. If Beneficiary and Trustee, or either of them, elects to
become a party to such action or proceeding, or is made a party thereto or to
any other action or proceeding, of whatever kind or nature, concerning the Loan
Agreement, this Deed of Trust, any of the Loan Documents, the Collateral or any
part thereof or interest therein, or the occupancy thereof, Trustor shall
indemnify, defend and hold Trustee and Beneficiary harmless from all liability,
damage, cost and expense incurred by Trustee and Beneficiary, or either of them,
by reason of said action or proceeding (including, without limitation, Trustee's
fees and expenses, the fees of attorneys for Trustee and for Beneficiary, and
other expenses, of whatever kind or nature, incurred by Trustee or Beneficiary,
or either of them, as a result of such action or proceeding), whether or not
such action or proceeding is prosecuted to judgment or decision. Immediately
upon demand therefor by Trustee or Beneficiary, Trustor shall pay thereto an
amount equal to Trustor's liability to such person under this section, together
with interest thereon from date of expenditure at the Default Rate; and until
paid, such sums shall be secured hereby.
2.11 Actions by Beneficiary to Preserve Collateral.
---------------------------------------------
If Trustor fails to make any payment or to do any act as and in the manner
provided in any of the Loan Documents, Beneficiary, and Trustee, and each of
them, each in its own discretion, without obligation so to do, without releasing
Trustor from any obligation, upon notice reasonable under the circumstances
(which notice may be written or oral), may make or do the same in such manner
and to such extent as either may reasonably deem necessary to protect the
security hereof. In connection
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<PAGE>
therewith (without limiting their general and other powers, whether conferred
herein, in another Loan Document or by law), Beneficiary and Trustee, and each
of them, each shall have and are hereby given the right, but not the obligation:
(i) to enter upon the Premises and take possession of the Collateral; (ii) to
make additions, alterations, repairs and improvements to the Collateral which
they or either of them may consider necessary or proper to keep the Collateral
in good condition and repair; (iii) to appear and participate in any action or
proceeding affecting or which may affect the security hereof or the rights or
powers of Beneficiary or Trustee; (iv) to pay, purchase, contest or compromise
any encumbrance, claim, charge, lien or debt which in the judgment of either may
affect or appears to affect the security of this Deed of Trust or to be prior or
superior hereto; and (v) in exercising such powers, to pay necessary expenses,
including employment of counsel or other necessary or desirable consultants.
Trustor shall, immediately upon demand therefor by Beneficiary, pay to
Beneficiary an amount equal to all costs and expenses incurred by it in
connection with the exercise by Beneficiary of the foregoing rights, including,
without limitation, costs of evidence of title, court costs, appraisals, surveys
and receiver's, Trustee's and attorneys' fees, costs and expenses (including,
without limitation, the fees and expenses of attorneys for Trustee), whether or
not an action is actually commenced in connection therewith, together with
interest thereon from the date of such expenditures until Beneficiary has been
repaid such amount at the Default Rate and, until paid, said sums shall be
secured hereby.
2.12 Transfer of Collateral by Trustor and/or Additional
---------------------------------------------------
Trustor. Except as otherwise provided in the Loan Agreement, Trustor shall not
- -------
sell, assign, encumber, lease as a whole or otherwise transfer or convey all or
any part of the Premises or any interest therein without the prior written
consent of Beneficiary, except for transfers or conveyances of personal property
in the ordinary course of business and otherwise permitted by the Loan
Agreement. with the prior written consent of Beneficiary (which consent shall
not be unreasonably withheld or delayed, or in any event withheld for a reason
other than the financial status of the proposed transferee or the fact that such
transferee or its affiliates has previously defaulted in any material respect in
any obligation owed to Beneficiary or any of the Banks) Additional Trustor may
sell, assign, convey or otherwise transfer its all or any part of the Premises
or any interest therein to any financially responsible person or entity,
provided that in any event (i) each sale, assignment, conveyance or transfer is
made expressly subject to this Deed of Trust, (ii) such sale, assignment,
conveyance or transfer complies with all applicable laws and regulations,
including those promulgated by any applicable gaming authorities, and (iii)
Additional Trustor
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<PAGE>
shall not enter into any transaction calling for the granting of a lien or other
encumbrance on the Premises or any portion thereof (as opposed to an outright
sale or conveyance) unless the holder of such lien or encumbrance has entered
into a subordination of such lien or encumbrance in favor of Beneficiary which
is in form and substance satisfactory to Beneficiary. Notwithstanding the
foregoing, without obtaining the prior written consent of Beneficiary, the
partners, shareholders or other constituent members of Additional Trustor shall
have the right to sell, transfer or otherwise convey their partnership interests
shares or other equity ownership interests in Additional Trustor.
2.13 Survival of Warranties. Trustor shall ful1y and
----------------------
faithfully satisfy and perform the obligations of Trustor contained in the Loan
Documents, each agreement of Trustor and Additional Trustor incorporated by
reference therein or herein and each agreement the performance of which is
secured hereby, and any modification or amendment thereof. All representations,
warranties and covenants of Trustor contained in any such agreement between
Trustor and Beneficiary shall survive the execution and delivery hereof and
shall remain continuing obligations, warranties and representations of Trustor
during any time when any portion of the obligations secured hereby remain
outstanding.
2.14 Condemnation and Other Awards. Immediately upon its
-----------------------------
obtaining knowledge of the institution or the threatened institution of any
proceeding for the condemnation or other taking for public or quasi-public use
of the Collateral or any part thereof, or if the same be taken or damaged by
reason of any public improvement or condemnation proceeding, or in any other
manner, or should Trustor and/or Additional Trustor receive any notice or other
information regarding such proceeding, action, taking or damage, Trustor and
Additional Trustor shall promptly notify Trustee and Beneficiary of such fact.
Trustor shall then, if requested by Beneficiary, file or defend its rights
thereunder and prosecute the same with due diligence to its final disposition
and shall cause any award or settlement to be paid over to Beneficiary for
disposition pursuant to the terms of this Deed of Trust. Subject to the Loan
Agreement, at Beneficiary's option, Beneficiary or Trustor may be the nominal
party in such proceeding but in any event Beneficiary shall be entitled, without
regard to the adequacy of its security, to participate in and to control the
same and to be represented therein by counsel of its choice, and Trustor will
deliver, or cause to be delivered, to Beneficiary such instruments as may be
requested by it from time to time to permit such participation. If the
Collateral or any part thereof is taken or diminished in value, or if a consent
settlement is entered, by or under threat of such proceeding, all compensation,
awards, damages, rights of
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<PAGE>
action, proceeds and settlements payable to Trustor and/or Additional Trustor by
virtue of its interest in the Collateral shall be and hereby are assigned,
transferred and set over unto Beneficiary to be held by it, in trust, subject to
the lien and security interest of this Deed of Trust. All such proceeds shall be
first applied to reimburse Trustee and Beneficiary for all costs and expenses,
including reasonable attorneys' fees, incurred in connection with the collection
of such award or settlement. The balance of such award or settlement shall be
applied in accordance with the terms of the Loan Agreement. Application or
release of such proceeds as provided herein shall not cure or waive any default
or notice of default hereunder or invalidate any act done pursuant to such
notice.
2.15 Additional Security. No other security now existing, or
-------------------
hereafter taken, to secure the obligations secured hereby nor the liability of
any maker, surety, guarantor or endorser with respect to such obligations, or
any of them, shall be impaired or affected by the execution of this Deed of
Trust; and all additional security shall be taken, considered and held as
cumulative. The taking of additional security, execution of partial releases of
the security, or any extension of the time of payment of the indebtedness shall
not diminish the force, effect or lien of this Deed of Trust and shall not
affect or impair the liability of any maker, surety, guarantor or endorser for
the payment of said indebtedness. In the event Beneficiary at any time holds
additional security for any of the obligations secured hereby, it may enforce
the sale thereof or otherwise realize upon the same, at its option, either
before, concurrently, or after a sale is made hereunder.
2.16 Inspections. Beneficiary, Trustee and the agents,
-----------
representatives or workers of each of them, are authorized, upon notice
reasonable under the circumstances (which may be written or oral), to enter at
any reasonable time upon or in any part of the Premises for the purpose of
inspecting the same and for the purpose of performing any of the acts it is
authorized to perform hereunder or under the terms of any of the Loan Documents.
Neither Beneficiary nor Trustee shall, during the course of any such inspection,
unreasonably interfere with the construction of any work or improvement then
under construction.
2.17 Liens. Trustor shall pay and promptly discharge, at
-----
Trustor's cost and expense, all liens, encumbrances and charges upon the
Collateral, or any part thereof or interest therein other than Permitted
Encumbrances; provided that the existence of any mechanic's, laborer's,
materialman's, supplier's or vendor's lien or right thereto shall not constitute
a violation of this Section if payment is not yet due under the contract which
is the foundation thereof and if such contract does not postpone payment for
more than
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<PAGE>
forty-five (45) days after the performance thereof. Nothing contained herein
shall prohibit Trustor from exercising any right or rights Trustor may have
under the Loan Agreement to contest any such lien. Subject to Trustor's right to
contest any such lien as aforesaid, if Trustor shall fail to remove and
discharge any such lien, encumbrance or charge, then in addition to any other
right or remedy of Beneficiary, Beneficiary may, but shall not be obligated to,
discharge the same, without inquiring into the validity of such lien,
encumbrance or charge nor into the existence of any defense or offset thereto,
either by paying the amount claimed to be due, or by procuring the discharge of
such lien, encumbrance or charge by depositing in a court a bond or the amount
claimed or otherwise giving security for such claim, or in such manner as is or
may be prescribed by law. Trustor shall, immediately upon demand therefor by
Beneficiary, pay to Beneficiary an amount equal to all costs and expenses
incurred by Beneficiary in connection with the exercise by Beneficiary of the
foregoing right to discharge any such lien, encumbrance or charge, together with
interest thereon from the date of such expenditure at the Default Rate, and
until paid, such sums shall be secured hereby.
2.18 Beneficiary's Powers. Without affecting the liability of
--------------------
any other person liable for the payment of any obligation herein mentioned, and
without affecting the lien or charge of this Deed of Trust upon any portion of
the Collateral not then or therefore released as security for the full amount of
all unpaid obligations, Beneficiary may, from time to time and without notice
(i) release any person so liable, (ii) extend the maturity or alter any of the
terms of any such obligation (provided, however, that the consent of Trustor
shall be required with respect to the extension or alteration of any unpaid
obligation of Trustor to Beneficiary), (iii) grant other indulgences, (iv)
release or reconvey, or cause to be released or reconveyed at any time at
Beneficiary's option. any parcel, portion or all of the Collateral, (v) take or
release any other or additional security for any obligation herein mentioned, or
(vi) make compositions or other arrangements with debtors in relation thereto.
By accepting payment or performance of any obligation secured by this Deed of
Trust after the payment or performance thereof is due or after the filing of a
notice of default and election to sell, Beneficiary shall not have thereby
waived its right to require prompt payment or performance, when due, of all
other obligations secured hereby, or to declare a default for failure so to pay
or perform, or to proceed with the sale under any notice of default and election
to sell therefore given by Beneficiary, or with respect to any unpaid balance of
the indebtedness secured hereby. The acceptance by Beneficiary of any sum in an
amount less than the sum then due shall not constitute a waiver of the
obligation of Trustor to pay the entire sum then due.
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<PAGE>
Trustor's failure to pay the entire sum then due shall continue to be a
default, notwithstanding the acceptance of partial payment, and, until the
entire sum then due shall have been paid, Beneficiary or Trustee shall at all
times be entitled to declare a default and to exercise all the remedies herein
conferred, and the right to proceed with a sale under any notice of default and
election to sell shall in no way be impaired, whether or not such amounts are
received prior or subsequent to such notice. No delay or omission of Trustee or
Beneficiary in the exercise of any right or power hereunder shall impair such
right or power or any other right or power nor shall the same be construed to be
a waiver of any default or any acquiescence therein.
2.19 Other Instruments. Subject to Trustor's right to contest
-----------------
as provided in the Loan Agreement, Trustor shall punctually pay all amounts due
and payable, and shall promptly and faithfully perform or observe each and every
other obligation or condition to be performed or observed under, each deed of
trust, mortgage or other lien or encumbrance, lease, sublease, declaration,
covenant, condition, restriction, license, order or other instrument or
agreement which affects or appears to affect the Collateral, whether at law or
in equity.
ARTICLE 3.
ASSIGNMENT OF RENTS, ISSUES AND PROFITS
3.1 Assignment of Rents. Issues and Profits. Trustor and
---------------------------------------
Additional Trustor hereby absolutely and irrevocably assign and transfer to
Beneficiary all of their right, title and interest in and to all rents, issues,
profits, royalties, income and other proceeds and similar benefits derived from
the Collateral (collectively, the "Rents"), and hereby give to and confer upon
Beneficiary the right, power and authority to collect such Rents. Trustor and
Additional Trustor irrevocably appoint Beneficiary their true and lawful
attorney-in-fact, at the option of Beneficiary, at any time and from time to
time, upon the occurrence of an Event of Default, to demand, receive and enforce
payment, to give receipts, releases and satisfactions, and to sue, in its name
or in the name of Trustor and Additional Trustor, for all Rents, and apply the
same to the obligations secured hereby; provided, however, Trustor and
Additional Trustor shall have the right to collect Rents (but not more than one
month in advance unless the written approval of Beneficiary has first been
obtained), and to retain and enjoy the same, so long as an Event of Default
shall not have occurred hereunder and be continuing. The assignment of the Rents
in this Article 3 is intended to be an absolute assignment from Trustor and
Additional Trustor to Beneficiary and not merely the passing of a security
interest.
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<PAGE>
3.2 Collection Upon Default. Upon the occurrence of an
-----------------------
Event of Default hereunder, Beneficiary may, at any time without notice, either
in person, by agent or by a receiver appointed by a court, and without regard to
the adequacy of any security for the obligations hereby secured, enter upon and
take possession of the Collateral, or any part thereof, and, with or without
taking possession of the Collateral or any part thereof, in its own name sue for
or otherwise collect such Rents (including those past due and unpaid, and all
prepaid Rents and all other monies which may have been or may hereafter be
deposited with Trustor by any lessee or tenant of Trustor to secure the payment
of any Rent or for any services thereafter to be rendered by Trustor for any
other obligation of any tenant to Trustor arising under any lease, and Trust
agrees that, upon the occurrence of any Event of Default hereunder, Trustor
shall promptly deliver all Rents and other monies to Beneficiary), and
Beneficiary may apply the same, less costs and expenses of operation and
collection, including, without limitation, reasonable attorneys' fees, whether
or not suit is brought or prosecuted to judgment, upon any indebtedness or
obligation of Trustor secured hereby, and in such order as Beneficiary may
determine notwithstanding that said indebtedness or the performance of said
obligation may not then be due. The collection of Rents, or the entering upon
and taking possession of the collateral, or the application thereof as
aforesaid, shall not cure or waive any default or notice of default hereunder or
invalidate any act done in response to such default or pursuant to such notice
of default or be deemed or construed to make Beneficiary a mortgagee-in-
possession of the Collateral or any portion thereof.
3.3 Further Assignments. Upon demand of Beneficiary, Trustor
-------------------
shall, from time to time hereafter, execute and deliver to Beneficiary
recordable assignments of Trustor's interest in any or all leases, subleases,
contracts, rights, licenses and permits now or hereafter affecting the
Collateral or any portion thereof. Such assignments shall be made by instruments
in form and substance satisfactory to Beneficiary; provided, however, that no
such assignment shall be construed as imposing upon Beneficiary any obligation
with respect thereto. Beneficiary may, at its option, exercise its rights
hereunder or under any such specific assignment and such exercise shall not
constitute a waiver of any right hereunder or under any such specific
assignment.
Trustor and Additional Trustor by execution of this Deed of
Trust unconditionally covenant and agree that this Deed of Trust shall be an
encumbrance lien against the Collateral senior and paramount to all right, title
and interest of Trustor and Additional Trustor now owned or hereafter acquired
as set forth in that certain Lease wherein Additional Trustor is Lessor and
Trustor is Lessee dated July 21, 1972, as amended
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<PAGE>
by Addendum to Lease dated March 20, 1973, as further amended by Amendment to
Lease dated January 1, 1978, as further amended by amendment to Lease dated
January 31, 1985, and as further amended by Third Amendment to Lease dated
December 24, 1987, together with all further and subsequent amendments relating
thereto, including, but not limited to, all rights of reverted therein
contained.
ARTICLE 4.
REMEDIES UPON DEFAULT
4.1 Events of Default. Any of the following events shall be
-----------------
deemed an event of default ("Event of Default") hereunder:
4.1.1 Trustor shall fail to pay any amount owing under
this Deed of Trust or any of the Notes when due; or
4.1.2 Trustor shall fail to observe or perform any other
obligation contained in this Deed of Trust, and such failure is not cured within
30 days after Beneficiary gives Trustor notice of such failure; or
4.1.3 The occurrence of an "Event of Default" under the
Loan Agreement; or
4.1.4 A default under any other document or agreement
secured hereby, subject to any applicable cure period.
4.2 Acceleration Upon Default; Additional Remedies. Upon the
----------------------------------------------
occurrence of an Event of Default, Beneficiary may, at its option, declare all
indebtedness and obligations secured hereby to be immediately due and payable
without anyone presentment, demand, protest or further notice of any kind; and
whether or not Beneficiary exercises said option, Beneficiary may:
4.2.1 Either in person or by agent, with or without
bringing any action or proceeding, or by a receiver appointed by a court and
without regard to the adequacy of its security, enter upon and take possession
of the Collateral, or any part thereof, in its own name or in the name of
Trustee, and do any act which it deems necessary or desirable to preserve the
value, marketability or rentability of the Collateral, or part thereof or
interest therein, increase the income therefrom or protect the security hereof
and, with or without taking possession of the Collateral, sue for or otherwise
collect the Rents, including those past due and unpaid, and apply the same, less
costs and expenses of operation and collection including without limitation
attorneys'
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fees, upon any indebtedness secured hereby, all in such order as Beneficiary may
determine. The entering upon the Premises and taking possession of the
Collateral, the collection of such Rents and the application thereof as
aforesaid, shall not cure or waive any default or notice of default hereunder or
invalidate any act done in response to such default or pursuant to such notice
of default and, notwithstanding the continuance in possession by Trustee,
Beneficiary or a receiver of all or any portion of the Premises or the
collection, receipt and application of any of the Rents, the Trustee or
Beneficiary shall be entitled to exercise every right provided for in any of the
Loan Documents or by law upon occurrence of any Event of Default, including the
right to exercise the power of sale.
4.2.2 Commence an action to foreclose this Deed of Trust
as a mortgage, appoint a receiver, or specifically enforce any of the covenants
hereof;
4.2.3 Deliver to Trustee a written declaration of default
and demand for sale, and a written notice of default and election to cause
Trustor's interest in the Collateral to be sold, which notice the Trustee or
Beneficiary shall cause to be duly filed for record in the official Records of
the County in which the Collateral is located; or
4.2.4 Exercise all other rights and remedies provided
herein, in any Loan Document or other document or agreement now or hereafter
securing all or any portion of the obligations secured hereby, or provided by
law.
4.3 Foreclosure By Power of Sale.
----------------------------
4.3.1 Upon the occurrence of an Event of Default as
defined by section 4.1 hereof, then Trustee, its successors and assigns, on
---
demand by Beneficiary, shall sell the real property in order to accomplish the
objects of this Trust in the manner set forth by Subsections 4.3.2 through 4.3.5
below.
4.3.2 Upon receipt of notice from Beneficiary, Trustee
shall cause to be recorded, published and delivered to Trustor and Additional
Trustor such Notice of Default and Election to Sell as is then required by
Chapter 107 of the Nevada Revised Statutes. Trustee shall, without demand on
Trustor or Additional Trustor, after lapse of such time as may then be required
by law and after recordation of such Notice of Default and Election to Sell
first give notice of the time and place of such sale, in the manner provided by
the laws of the State of Nevada for the sale of real property under execution,
and may from time to time postpone such sale by such advertisement as it may
deem reasonable, or without further advertisement, by proclamation made to the
persons assembled at
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the time and place previously appointed and advertised for such sale, and on the
day of sale so advertised, or to which such sale may have been postponed, the
Trustee may sell the property so advertised, at public auction, at the time and
place specified in the notice, either in the county in which the property, or
any part thereof, to be sold, is situated, or at the principal office of the
Trustee located in Washoe County, in its discretion, to the highest cash bidder.
The Beneficiary or the holder or holders of the Notes and Loan Agreement secured
hereby may bid and purchase at such sale. Beneficiary may, after recording the
Notice of Default and Election to Sell, give or withdraw the same or any
proceedings thereunder, and shall thereupon be restored to their former position
and have and enjoy the same rights as though such notice had not been recorded
after Notice of Sale having been given as required by law, sell the Real
Property at the time and place of sale fixed by it in said Notice of Sale,
either as a whole, or in separate lots or parcels or items and in such order as
Beneficiary may direct Trustee so to do, at public auction to the highest bidder
for cash in lawful money of the United States payable at the time of sale.
Trustee shall deliver to such purchaser or purchasers thereof its good and
sufficient deed or deeds conveying the property so sold, but without any
covenant or warranty, express or implied. The recitals in such deed of any
matter or fact shall be conclusive proof of the truthfulness thereof. Any
person, including, without limitation, Trustor, Additional Trustor, Trustee or
Beneficiary, may purchase at such sale, and Trustor hereby covenants to warrant
and defend the title of such purchaser or purchasers.
4.3.3 After deducting all costs, fees and expenses of
Beneficiary and Trustee, including costs of evidence of title in connection with
sale, Beneficiary shall apply the proceeds of sale in the following priority, to
payment of (i) first, all amounts expended under the terms hereof, not then
repaid, with accrued interest at the Default Rate; (ii) second, all other
amounts then secured hereby; and (iii) the remainder, if any, to the person or
persons legally entitled thereto.
4.3.4 In the event of a sale of the Premises conveyed or
transferred in trust, or any part thereof, and the execution of a deed or deeds
therefor under such trust, the recital therein of default, and of the recording
notice of breach and election of sale, and of the elapsing of the 3-month
period, and of the giving of notice of sale, and of a demand by Beneficiary that
such sale should be made, shall be conclusive proof of such default, recording,
election, elapsing of time, and of the due giving of such notice and that the
sale was regularly and validly made on due and proper demand by Beneficiary; and
any such deed or deeds with such recitals
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<PAGE>
therein shall be effectual and conclusive against Trustor and Additional
Trustor, its successors and assigns, and all other persons; and the receipt for
the purchase money recited or contained in any deed executed to the purchaser as
aforesaid shall be sufficient discharge to such purchaser from all obligation to
see to the property application of the purchase money, according to the trusts
aforesaid.
4.3.5 A sale of less than the whole of the Real Property
or any defective or irregular sale made hereunder shall not exhaust the power of
sale provided for herein; and subsequent sales may be made hereunder until all
obligations secured hereby have been satisfied, or the entire Collateral sold,
without defect or irregularity.
4.4 Uniform Commercial Code Remedies. Upon the occurrence of
--------------------------------
an Event of Default, Beneficiary shall have all rights and remedies made
available to a secured party under the Uniform Commercial Code. In addition to
those rights and remedies which are generally made available to a secured party
under the Uniform Commercial Code, Beneficiary shall have the following:
(a) Beneficiary may notify the Trustor and/or Additional
Trustor, under any account which is included within the Personal
Property, to make payment under such account directly to Beneficiary.
(b) Beneficiary may require Trustor and/or Additional
Trustor to assemble the Personal Property and to make it available to
Beneficiary at the location of the Real Property, provided that
--------
Additional Trustor shall have the obligation to assemble only that
portion of the Personal Property, if any, which is its own property.
Trustor, Additional Trustor and Beneficiary agree that such location
shall be deemed to be reasonably convenient to each of them.
(c) Any other remedy provided by this Deed of Trust, with
respect to the Personal Property, which is authorized or permitted
under the Uniform Commercial Code.
Without limiting the generality of the foregoing, to the extent that this Deed
of Trust covers both real and personal property, Beneficiary may, in the sole
discretion of Beneficiary, either alternatively, concurrently, or consecutively
in any order:
(d) Proceed as to both the real and personal property in
accordance with Beneficiary's rights and remedies in respect to the
Real Property; or
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<PAGE>
(e) Proceed as to the Real Property in accordance
with Beneficiary's rights and remedies in respect to the real property
and proceed as to the personal property in accordance with
Beneficiary's rights and remedies in respect to the personal property.
Beneficiary may, in the sole discretion of Beneficiary,
appoint Trustee as the agent of Beneficiary for the purpose of disposition of
the Personal Property in accordance with the UCC.
If Beneficiary should elect to proceed as to both the Real
Property and Personal Property collateral in accordance with Beneficiary's
rights and remedies in respect to real property:
(a) All the Real Property and all the Personal
Property may be sold, in the manner and at the time and place provided
in this Deed of Trust and security Agreement, in one lot, or in
separate lots consisting of any combination or combinations of Real and
Personal Property, as the Beneficiary may elect, in the sole discretion
of Beneficiary,
(b) Trustor and Additional Trustor acknowledge and
agree that a disposition of the Personal Property Collateral in
accordance with Beneficiary's rights and remedies in respect to Real
Property, as hereinafter provided, is a commercially reasonable
disposition of the Collateral.
4.5 Appointment of Receiver. If an Event of Default in this
-----------------------
Deed of Trust shall have occurred and be continuing, Beneficiary, as a matter of
right and without notice to Trustor or Additional Trustor or anyone claiming
under Trustor, and without regard to the then value of the Collateral or the
interest of Trustor therein, shall have the right to apply to any court having
jurisdiction to appoint a receiver or receivers of the Collateral, in a manner
consistent with applicable law. Any such receiver or receivers shall have all
the usual powers and duties of receivers in like or similar cases and all the
powers and duties of Beneficiary in case of entry as provided herein and shall
continue as Beneficiary in case of entry as provided herein and shall continue
as such and exercise all such powers until the date of confirmation of sale of
the Collateral unless such receivership is sooner terminated.
4.6 Application of Funds After Default. Except as otherwise
----------------------------------
herein provided, upon the occurrence of an Event of Default hereunder,
Beneficiary may, but shall be under no obligation to, at any time without
notice, apply any or all
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<PAGE>
sums or amounts received and held by Beneficiary to pay insurance premiums,
Impositions, or either of them, or as rents or income of the Premises, or as
insurance or condemnation proceeds, and all other sums or amounts received by
Beneficiary from or on account of Trustor or Additional Trustor or the Premises,
or otherwise, upon any indebtedness or obligation of the Trustor secured hereby,
in such manner and order as Beneficiary may elect, notwithstanding that said
indebtedness of the performance of said obligation may not yet be due. The
receipt, use or application of any such sum or amount shall not be construed to
affect the maturity of any indebtedness secured by this Deed of Trust, or any of
the rights or powers of Beneficiary or Trustee under the terms of the Loan
Documents, or any of the obligations of Trustor or any guarantor under the Loan
Documents; or to cure or waive any default or notice of default under any of the
Loan Documents; or to invalidate any act of Trustee or Beneficiary.
4.7 Costs of Enforcement. If any Event of Default occurs,
--------------------
Beneficiary and Trustee, and each of them, may employ an attorney or attorneys
to protect their rights hereunder. Trustor promises to pay to Beneficiary, on
demand, the fees and expenses of such attorneys and all other costs of enforcing
the obligations secured hereby, including, without limitation, recording fees,
the expense of a trustee's sale guarantee, Trustee's fees and expenses,
receivers' fees and expenses, and all other expenses, of whatever kind or
nature, incurred by Beneficiary and Trustee, and each of them, in connection
with the enforcement of the obligations secured hereby, whether or not such
enforcement includes the filing of a lawsuit. Until paid, such sums shall be
secured hereby and shall bear interest, from date of expenditure, at the Default
Rate.
4.8 Remedies Not Exclusive. Trustee and Beneficiary, and
----------------------
each of them, shall be entitled to enforce payment and performance of any
indebtedness or obligation secured hereby and to exercise all rights and powers
under this Deed of Trust or under any Loan Document or other agreement or any
law now or hereafter in force, notwithstanding some or all of the said
indebtedness and obligations secured hereby may now or hereafter be otherwise
secured, whether by guaranty, mortgage, deed of trust, pledge, lien, assignment
or otherwise. Neither the acceptance of this Deed of Trust nor its enforcement
whether by court action or pursuant to the power of sale or other powers herein
contained, shall prejudice or in any manner affect Trustee's or Beneficiary's
right to realize upon or enforce any other security now or hereafter held by
Trustee or Beneficiary, it being agreed that Trustee and Beneficiary, and each
of them, shall be entitled to enforce this Deed of Trust and any other security
for the obligation hereby secured now or hereafter held by Beneficiary or
Trustee in such order and manner as they may in their absolute discretion
determine.
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<PAGE>
No remedy herein conferred upon or reserved to Trustee or Beneficiary is
intended to be exclusive of any other remedy herein, or granted to Beneficiary
under any other agreement, or by law provided or permitted, but each shall be
cumulative and shall be in addition to every other remedy given hereunder, or
granted to Beneficiary under any other agreement, or now or hereafter existing
at law or in equity or by statute. Every power or remedy given by any of the
Loan Documents to the Trustee or Beneficiary or to which either of them may be
otherwise entitled may be exercised, concurrently or independently, from time to
time and as often as may be deemed expedient by the Trustee or Beneficiary, and
either of them may pursue inconsistent remedies. Trustor and Additional Trustor
may be joined in any action brought by Beneficiary to foreclose under or
otherwise enforce this Deed of Trust.
4.9 Deficiency. Trustor agrees to pay any deficiency arising
----------
from any cause after application of the proceeds of the sale of the Collateral.
Additional Trustor shall have the right to cure any default hereunder within the
times and in the manner set forth herein and in the Loan Documents, but shall
not be liable for any deficiency arising hereunder.
4.10 Request for Notice. Trustor and Additional Trustor
------------------
hereby request that a copy of any notice of default and that a copy of any
notice of sale hereunder be mailed to them at 345 North Virginia Street, Reno,
Nevada 89501.
ARTICLE 5.
MISCELLANEOUS
5.1 Amendments. This instrument cannot be waived, changed,
----------
discharged or terminated orally, but only by an instrument in writing signed by
the party against whom enforcement of any waiver, change, discharge or
termination is sought. A copy of said instrument shall be sent by said party to
all other parties in the manner specified below.
5.2 Trustor Waiver of Rights. Trustor and Additional Trustor
------------------------
waive, to the extent permitted by law, (i) the benefit of all laws now existing
or that may hereafter be enacted providing for any appraisement before sale of
any portion of the Collateral, and, whether now existing or hereafter arising or
created, (ii) all rights of valuation, appraisement, stay of execution, notice
of election to mature or declare due the whole of the secured indebtedness and
marshaling in the event of foreclosure of the liens hereby created, and (iii)
all rights and remedies which Trustor and Additional Trustor may have or be able
to assert by reason of the laws of the State of Nevada pertaining to the rights
and remedies of sureties.
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<PAGE>
5.3 Rights of Beneficiary. Additional Trustor authorizes
---------------------
Beneficiary to perform any or all of the following acts at any time in its sole
discretion, all without notice to Additional Trustor and without affecting
Additional Trustor's obligations under this Deed of Trust, and except to the
extent otherwise expressly set forth in this Deed of Trust:
(a) Beneficiary may alter any terms of the Loan Documents,
including renewing, compromising, extending or accelerating, or
otherwise changing the time for payment of, or increasing or decreasing
the rate of interest on, the Loans or Letters of Credit referred to in
the Loan Agreement.
(b) Beneficiary may take and hold security for the Loan
Documents, accept additional or substituted security for either, and
subordinate, exchange, enforce, waive, release, compromise, fail to
perfect and sell or otherwise dispose of any such security.
(c) Beneficiary may direct the order and manner of any sale
of all or any part of any security now or later to be held for the Loan
Documents, and Beneficiary may also bid at any such sale.
(d) Beneficiary may apply any payments or recoveries from
Trustor, Additional Trustor or any other source, and any proceeds of
any security, to Trustor's obligations under the Loan Documents in such
manner, order and priority as Beneficiary may elect, whether or not
those obligations are guarantied by this Deed of Trust or secured at
the time of the application.
(e) Beneficiary may release Trustor of its liability under
the Loan Documents or any part of it.
(f) Beneficiary may substitute, add or release any one or
more guarantors or endorsers.
(g) In addition to that contemplated by the Loan Documents,
Beneficiary may extend other credit to Trustor, and may take and hold
security for the credit so extended, all without affecting Additional
Trustor's liability under this Deed of Trust.
Additional Trustor expressly agrees that until all obligations and indebtedness
of Trustor under the Loan Documents are paid and performed in full and each and
every term, covenant and condition of this Deed of Trust is fully performed,
Additional Trustor shall not be released by or because of:
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<PAGE>
(h) Any act or event which might otherwise discharge, reduce,
limit or modify Additional Trustor's obligations under this Deed of
Trust;
(i) Any waiver, extension, modification, forbearance, delay
or other act or omission of Beneficiary, or its failure to proceed
promptly or otherwise as against Trustor, Additional Trustor or any
security;
(j) Any action, omission or circumstance which might increase
the likelihood that Additional Trustor may be called upon to perform
under this Deed of Trust or which might affect the rights or remedies
of Additional Trustor as against Trustor; or
(k) Any dealings occurring at any time between Trustor and
Beneficiary, whether relating to the Loan Documents or otherwise.
Additional Trustor hereby expressly waives and surrenders any defense
to its liability under this Deed of Trust based upon any of the foregoing acts,
omissions, agreements, waivers or matters. It is the purpose and intent of this
Deed of Trust that the obligations of Additional Trustor under it shall be
absolute and unconditional under any and all circumstances.
5.4 Additional Trustor's Waivers. Additional Trustor waives:
----------------------------
(a) All statutes of limitations as a defense to any action or
proceeding brought against Additional Trustor by Beneficiary, to the
fullest extent permitted by law;
(b) Any right it may have to require Beneficiary to proceed
against Trustor, proceed against or exhaust any security held from
Trustor, or pursue any other remedy in Beneficiary's power to pursue;
(c) Any defense based on any claim that Additional Trustor's
obligations exceed or are more burdensome than those of Trustor;
(d) Any defense based on: (i) any legal disability of
Trustor, (ii) any release, discharge, modification, impairment or
limitation of the liability of Trustor to Beneficiary from any cause,
whether consented to by Beneficiary or arising by operation of law or
from any bankruptcy or other voluntary or involuntary proceeding, in or
out of court, for the adjustment of debtor-creditor relationships
("Insolvency Proceeding") and (iii) any rejection or disaffirmance of
the Loan Documents, or any
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<PAGE>
part of it, or any security held for it, in any such Insolvency
Proceeding;
(e) Any defense based on any action taken or omitted by
Beneficiary in any Insolvency Proceeding involving Trustor, including
any election to have Beneficiary's claim allowed as being secured,
partially secured or unsecured, any extension of credit by Beneficiary
to Trustor in any Insolvency Proceeding, and the taking and holding by
Beneficiary of any security for any such extension of credit;
(f) All presentments, demands for performance, notices of
nonperformance, protests, notices of protest, notices of dishonor,
notices of acceptance of this Deed of Trust and of the existence,
creation, or incurring of new or additional indebtedness, and demands
and notices of every kind except for any demand or notice by
Beneficiary to Additional Trustor expressly provided for herein; and
(g) Any defense based on or arising out of any defense that
Trustor may have to the payment or performance of the Loan Documents.
5.5 Waivers of subrogation and Other Rights. Upon a default by
---------------------------------------
Trustor, Beneficiary in its sole discretion, without prior notice to or consent
of Additional Trustor, may elect to: (i) foreclose either judicially or
nonjudicially against any real or personal property security it may hold for the
Loan Documents, (ii) accept a transfer of any such security in lieu of
foreclosure, (iii) compromise or adjust the obligations under the Loan Documents
or any part of thereof or make any other accommodation with Trustor or
Additional Trustor, or (iv) exercise any other remedy against Trustor or any
security. No such action by Beneficiary shall release or limit the liability of
Additional Trustor, who shall remain liable under this Deed of Trust after the
action, even if the effect of the action is to deprive Additional Trustor of any
subrogation rights, rights of indemnity, or other rights to collect
reimbursement from Trustor for any sums paid to Beneficiary, whether contractual
or arising by operation of law or otherwise. Additional Trustor expressly agrees
that under no circumstances shall it be deemed to have any right, title,
interest or claim in or to any real or personal property to be held by
Beneficiary or any third party after any foreclosure or transfer in lieu of
foreclosure of any security for the Loan Documents.
5.6 Revival and Reinstatement. If Beneficiary is required to
-------------------------
pay, return or restore to Trustor or any other person any amounts previously
paid with respect to the Loan Documents because of any Insolvency Proceeding of
Trustor, any
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<PAGE>
stop notice or any other reason, the obligations of Additional Trustor shall be
reinstated and revived and the rights of Beneficiary shall continue with regard
to such amounts, all as though they had never been paid.
5.7 Information Regarding Trustor and the Property. Before
----------------------------------------------
signing this Deed of Trust, Additional Trustor investigated the financial
condition and business operations of Trustor, the present and former condition,
uses and ownership of the Real Property, and such other matters as Additional
Trustor deemed appropriate to assure itself of Trustor's ability to discharge
its obligations under the Loan Documents. Additional Trustor assumes full
responsibility for that due diligence, as well as for keeping informed of all
matters which may affect Trustor's ability to pay and perform its obligations to
Beneficiary. Beneficiary has no duty to disclose to Additional Trustor any
information which Beneficiary may have or receive about Trustor's financial
condition or business operations, the condition or uses of the Real Property, or
any other circumstances bearing on Trustor's ability to perform.
5.8 Prepayments of Rents. Subject to the absolute assignment
--------------------
of Rents set forth in Article III, for so long as the license set forth therein
is in effect, Additional Trustor is not prohibited from receiving any payments
required to be paid by Trustor to Additional Trustor under the Groundlease,
provided that (i) no such payment shall be made more that one month prior to the
- --------
date when due and (ii) any payment made in violation of clause (i) shall be held
in trust by Additional Trustor for the benefit of Beneficiary.
5.9 Statements by Trustor. Trustor and Additional Trustor
---------------------
shall, within ten (10) days after notice thereof from Beneficiary, deliver to
Beneficiary a written statement setting forth the amounts then unpaid and
secured by this Deed of Trust and stating whether any offset or defense exists
against such amounts.
5.10 Beneficiary Statements. For any statement or accounting
----------------------
requested by Trustor or Additional Trustor or any other person or for any other
document or instrument furnished to Trustor by Beneficiary, Beneficiary may
charge the maximum amount permitted by law at the time of the request therefor,
or if there be no such maximum, then in accordance with Beneficiary's customary
charges therefor or the actual cost to Beneficiary therefor, whichever is
greater.
5.11 Reconveyance by Trustee. Upon written request of
-----------------------
Beneficiary stating that all sums and obligations secured hereby have been paid
and fully performed, and upon surrender by Beneficiary of this Deed of Trust and
the Note to Trustee for cancellation and retention and upon payment by Trustor
of
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<PAGE>
Trustee's fees and the costs and expenses of executing and recording any
requested reconveyance, Trustee shall reconvey to Trustor and Additional
Trustor, or to the person or persons legally entitled thereto, without warranty,
any portion of the Real Property then held hereunder. The recitals in any such
reconveyance of any matter or fact shall be conclusive proof of the truthfulness
thereof. The grantee in any such reconveyance may be described as "the person or
persons legally entitled thereto."
5.12 Notices. Whenever Beneficiary, Trustor, Additional
-------
Trustor or Trustee shall desire to give or serve any notice, demand, request or
other communication with respect to this Deed of Trust, each such notice,
demand, request or other communication shall be in writing (except as otherwise
expressly permitted herein) and shall be delivered by personal service or mailed
by United States mail, as certified mail, postage prepaid, return receipt
requested, addressed to the addressee at its address set forth on Exhibit B,
affixed hereto and by this reference incorporated herein and made a part hereof.
Any party may at any time change its address for such notices by delivering or
mailing to the other parties hereto, as aforesaid, a notice of such change.
Except as otherwise provided herein; if any notice, request or other
communication is given by certified mail as aforesaid, it shall be effective on
the third day after the same is deposited in the United States mails, postage
prepaid; or if given by personal delivery, when delivered (provided, however,
that nonreceipt of any notice, request or other communication as a result of a
change of address of which the sending party was not notified or as the result
of a refusal to accept delivery shall be deemed receipt of such notice, request
or other communication).
5.13 Acceptance by Trustee. Trustee accepts this Trust when
---------------------
this Deed of Trust, duly executed and acknowledged, is made a public record as
provided by law.
5.14 Captions. The captions or headings at the beginning of
--------
Articles, Sections and Subsections hereof are for the convenience of the
parties, are not a part of this Deed of Trust, and shall not be used in
construing it.
5.15 Invalidity of Certain Provisions. Every provision of
--------------------------------
this Deed of Trust is intended to be severable. In the event any term or
provision hereof is declared to be illegal, invalid or unenforceable for any
reason whatsoever by a court of competent jurisdiction, such illegality,
invalidity or unenforceability shall not affect the balance of the terms and
provisions hereof, which terms and provisions shall remain binding and
enforceable. If the lien of this Deed of Trust is invalid or unenforceable as to
any part of the debt, or if the lien is invalid or unenforceable as to any part
of the
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<PAGE>
Collateral, the unsecured or partially secured portion of the debt shall
be completely paid prior to the payment of the remaining and secured or
partially secured portion of the debt, and all payments made on the debt,
whether voluntary or under foreclosure or other enforcement action or procedure,
shall be considered to have been first paid on and applied to the full payment
of that portion of the debt which is not secured or fully secured by the lien of
this Deed of Trust.
5.16 Subrogation. To the extent that proceeds of the Notes
-----------
are used, either directly or indirectly, to pay any outstanding lien, charge or
prior encumbrance against the Collateral, Beneficiary shall be subrogated to any
and all rights and liens held by any owner or holder of such outstanding liens,
charges and prior encumbrances, irrespective of whether said liens, charges or
encumbrances are released.
5.17 Mandatory Arbitration. Any controversy or claim by
---------------------
Trustor or Additional Trustor, including but not limited to those arising out of
or relating to this Deed of Trust and any claim based on or arising from an
alleged tort, shall at the request of Beneficiary be determined by arbitration.
The arbitration shall be conducted in accordance with the United States
Arbitration Act (Title 9, U.S. Code), notwithstanding any choice of law
provision in this Agreement, and under the Commercial Rules of the American
Arbitration Association ("AAA"). The arbitrators shall give effect to statutes
of limitation in determining any claim. Any controversy concerning whether an
issue is arbitrable shall be determined by the arbitrators. Judgment upon the
arbitration award may be entered in any court having jurisdiction. The
institution and maintenance of an action for judicial relief or pursuit of a
provisional or ancillary remedy shall not constitute a waiver of the right of
any party, including the plaintiff, to submit the controversy or claim to
arbitration if any other party contests such action for judicial relief.
5.18 Governing Law. This Deed of Trust shall be governed by
-------------
and construed in accordance with the laws of the State of Nevada.
5.19 Statute of Limitations. Except insofar as now or
----------------------
hereafter prohibited by law, the right to plead, use or assert any statute of
limitations as a plea or defense or bar of any kind, or for any purpose, to any
debt, demand or obligation secured or to be secured hereby, or to any complaint
or other pleading or proceeding filed, instituted or maintained for the purpose
of enforcing this Deed of Trust or any rights hereunder, is hereby waived by
Trustor.
5.20 Interpretation. In this Deed of Trust the singular shall
--------------
include the plural and the masculine shall
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<PAGE>
include the feminine and neuter and vice versa, if the context so requires; and
the word "person" shall include corporation, partnership or other form of
association.
5.21 Trust Irrevocable; Not Offset. The trust created hereby
-----------------------------
is irrevocable by Trustor and Additional Trustor. No offset or claim that
Trustor and/or Additional Trustor now or may in the future have against
Beneficiary shall relieve Trustor and/or Additional Trustor from paying the
indebtedness or performing any other obligation contained herein or secured
hereby.
5.22 Corrections. Trustor and Additional Trustor shall, upon
-----------
request of Beneficiary, promptly correct any defect, error or omission which may
be discovered in the contents hereof or in the execution or acknowledgment
hereof, and will execute, acknowledge and deliver such further instruments and
do such further acts as may be necessary or as may be reasonably requested by
Beneficiary to carry out more effectively the purposes hereof, to subject to the
lien and security interest hereby created any of Trustor's properties, rights or
interest covered or intended to be covered hereby, or to perfect and maintain
such lien and security interest.
5.23 Further Assurances. Trustor, Additional Trustor,
------------------
Beneficiary and Trustee agree to do or cause to be done such further acts and
things and to execute and deliver or to caused to be executed and delivered such
additional assignments, agreements, powers and instruments, as any of them may
reasonably require or deem advisable to keep valid and effective the charges and
lien hereof, to carry into effect the purposes of this Deed of Trust or to
better assure and confirm unto any of them their rights, powers and remedies
hereunder; and, upon request by Beneficiary, shall supply evidence of
fulfillment of each of the covenants herein contained concerning which a request
for such evidence has been made.
5.24 Execution of Instruments by Trustee. At any time, and
-----------------------------------
from time to time, without liability therefor and without notice, upon written
request of Beneficiary and presentation of this Deed of Trust and the Agreement
secured hereby for endorsement, and without affecting the personal liability of
any person for payment of the indebtedness or the performance of any other
obligation secured hereby or the effect of this Deed of Trust upon the remainder
of said Collateral, Trustee may (i) reconvene any part of the Real Property,
(ii) consent in writing to the making of any map or plat thereof, (iii) join in
granting any easement thereon, or (iv) join in any extension agreement,
agreement subordinating the lien or charge hereof, or other agreement or
instrument relating hereto or to the Collateral or any portion thereof.
-34-
<PAGE>
5.25 Appointment of Successor Trustee. Trustee or any
--------------------------------
successor acting hereunder may resign and thereupon be discharged of the trusts
hereunder upon thirty (30) days' written notice to Beneficiary. Regardless of
whether such resignation occurs, Beneficiary may, from time to time, substitute
a successor or successors to any Trustee named herein or acting hereunder in
accordance with any statutory procedure for such substitution; or if
Beneficiary, in its sole discretion, so elects, Beneficiary may substitute such
successor or successors by recording, in the office of the recorder of the
county or counties where the Property is situated, an instrument executed by
Beneficiary, and containing the name of the original Trustor, Additional
Trustor, Trustee and Beneficiary hereunder, the book and page where this Deed of
Trust is recorded and the name and address of the new Trustee, which instrument
shall be conclusive proof of proper substitution of such successor Trustee or
Trustees, who shall, without conveyance from the predecessor Trustee, succeed to
all its title, estate, rights, powers and duties hereunder.
5.26 Successors and Assigns. This Deed of Trust applies
----------------------
to, inures to the benefit of and binds all parties hereto, their heirs,
legatees, devisees, administrators, executors, successors and assigns, except
that the provisions of Section 5.29 are personal to Additional Trustor and its
general partners, and may not be assigned. Any assignment in violation of this
Section shall be void.
5.27 Fixture Filing. This deed of trust is being
--------------
recorded as a fixture filing and covers goods which are, and goods which become,
fixtures on the Premises.
5.28 Limitation on Maturity. Notwithstanding any other
----------------------
provision of this Deed of Trust to the contrary, Beneficiary shall not enter
into any agreement providing for an extension of the maturity of the Notes to a
date which is later than June 30, 2027.
5.29 No Personal Obligations of Additional Trustor. It is
---------------------------------------------
agreed that neither Additional Trustor, nor any partners, shareholders,
directors, officers, employees, trustees, beneficiaries, or successors and
assigns of Additional Trustor as the owners of the fee interest in Parcel 2
shall have any personal liability with respect to this Deed of Trust or the
obligations secured hereby. As against Additional Trustor and such partners,
shareholders, directors, officers, employees, trustees, beneficiaries,
successors and assigns, Beneficiary's recourse under this Deed of Trust shall be
limited to the Real Estate, the Real Property and the Personal Property (if any
is owned by Additional Trustor) described herein, provided, however, that the
-------- -------
foregoing provisions of this paragraph shall not (a) constitute a waiver of any
obligation evidenced by this
-35-
<PAGE>
Deed of Trust, (b) limit the right of Beneficiary to name Additional Trustor as
a party defendant in any action or suit for judicial foreclosure and sale under
this Deed of Trust so long as no judgment in the nature of a deficiency judgment
shall be enforced against Additional Trustor except to the extent of such Real
Estate, Real Property or Personal Property, (c) constitute a waiver by
Beneficiary of any rights to reimbursement for actual, or out-of-pocket, losses,
costs or expenses, or any other remedy at law or equity, against Additional
Trustor by reason of (i) fraudulent acts or omissions of Additional Trustor, or
(ii) willful misapplication by Additional Trustor of any insurance proceeds,
condemnation awards or tenant security deposits, or of any rental or other
income required by this Deed of Trust to be paid to the Beneficiary, or (d) in
any manner limit the recourse of Beneficiary to Trustor.
5.30 Reconveyances. By acceptance of this Deed of Trust,
-------------
Beneficiary agrees that, prior to the date upon which the principal obligations
evidenced by the Notes are due (whether at the final maturity thereof or by
acceleration), it shall not release or reconvey all or any material portion of
the real property described on Exhibit A as Parcels 1 or 3, without the prior
written consent of Trustor and Additional Trustor. Without the prior written
consent of Additional Trustor, Trustor shall not request or receive any release
or reconveyance of any portion of Parcels 1 or 3, unless Parcel 2 is also
released or reconveyed.
5.31 The Groundlease. Trustor and Additional Trustor
---------------
represent and warrant that the Groundlease has not been amended since March 25,
1994, and agree that the Beneficiary shall be entitled to continue to rely upon
the Ground Lessor Estoppel Certificate dated as March 25, 1994 and delivered in
connection with the Original Loan Agreement.
IN WITNESS WHEREOF, Trustor and Additional Trustor have caused
this Deed of Trust to be executed by their duly authorized representatives as of
the day and year first above written.
"Trustor":
ELDORADO RESORTS LLC,
a Nevada limited liability company
By________________________________________
Donald L. Carano, Chief Executive Officer
-36-
<PAGE>
"Additional Trustor"
C.S.&Y. ASSOCIATES
a Nevada General Partnership
By
-------------------------------------------
Donald L. Carano, individually and as
Trustee of The Sonya Carano Trust under
Agreement dated January 16, 1979
General Partner
By
-------------------------------------------
George E. Yori, as Co-Trustee of The George
Yori and Genevieve Yori Family Trust under
Agreement dated September 28, 1981
General Partner
By
-------------------------------------------
Genevieve K. Yori, as Co-Trustee of The
George Yori and Genevieve Yori Family Trust
under Agreement dated September 28, 1991
General Partner
By
-------------------------------------------
George L. Siri, as Co-Trustee of The Siri
Family Trust, under Agreement dated
December 13, 1991
General Partner
By
-------------------------------------------
Susan B. Siri, as Co-Trustee of The Siri
Family Trust, under Agreement dated
December 13, 1991
General Partner
By
-------------------------------------------
Lena Carano, as Trustee of The William and
Lena Carano Family Trust - Exemption Trust,
under Trust Agreement dated April 10, 1984
General Partner
-37-
<PAGE>
By
-------------------------------------------
Lena Carano, as Trustee of The William and
Lena Carano Family Trust - Survivors Trust,
under Trust Agreement dated April 10, 1984
General Partner
By
-------------------------------------------
Caryl Stringham, as Trustee of The Caryl
Stringham Trust, under Trust Agreement
dated January 28, 1992
General Partner
By
-------------------------------------------
Lawrence Yori, as Trustee of The Lawrence
Yori Trust, under Trust Agreement dated
November 2, 1992
General Partner
By
-------------------------------------------
Daniel E. Siri, as Co-Trustee of The Siri
1993 Irrevocable Trust, under Trust
Agreement dated June 18, 1992
General Partner
By
-------------------------------------------
Jeffrey L. Siri, as Co-Trustee of The Siri
1993 Irrevocable Trust, under Trust
Agreement dated June 18, 1992
General Partner
By
-------------------------------------------
Sally Dennison-Steinhauser, as Co-Trustee
of The Siri 1993 Irrevocable Trust, under
Trust Agreement dated June 18, 1992
General Partner
-38-
<PAGE>
STATE OF NEVADA )
) ss.
COUNTY OF ___________________________________)
On_____________________, 1996, personally appeared before me, a
Notary Public,________________________, personally known (or proved) to me to
be the person whose name is subscribed to the above instrument who acknowledged
that __he executed the instrument.
- ----------------------------------------
Notary Public
STATE OF NEVADA )
) ss.
COUNTY OF____________________________________)
On______________________, 1996, personally appeared before me, a
Notary Public,_________________________, personally known (or proved) to me to
be the person whose name is subscribed to the above instrument who acknowledged
that __he executed the instrument.
- -----------------------------------------
Notary Public
STATE OF NEVADA )
) ss.
COUNTY OF____________________________________)
On____________________________, 1996, personally appeared before
me, a Notary Public,_________________________, personally known (or proved) to
me to be the person whose name is subscribed to the above instrument who
acknowledged that __he executed the instrument.
- -----------------------------------------
Notary Public
-39-
<PAGE>
STATE OF NEVADA )
) ss.
COUNTY OF____________________________________)
On____________________________, 1996, personally appeared before
me, a Notary Public,_________________________, personally known (or proved) to
me to be the person whose name is subscribed to the above instrument who
acknowledged that __he executed the instrument.
- -----------------------------------------
Notary Public
STATE OF NEVADA )
) ss.
COUNTY OF____________________________________)
On____________________________,1996, personally appeared before
me, a Notary Public,________________________ , personally known (or proved) to
me to be the person whose name is subscribed to the above instrument who
acknowledged that __he executed the instrument.
- -----------------------------------------
Notary Public
STATE OF NEVADA )
) ss.
COUNTY OF____________________________________)
On___________________________ , 1996, personally appeared before
me, a Notary Public,________________________ , personally known (or proved) to
me to be the person whose name is subscribed to the above instrument who
acknowledged that __he executed the instrument.
- -----------------------------------------
Notary Public
-40-
<PAGE>
STATE OF NEVADA )
) ss.
COUNTY OF____________________________________)
On___________________________ , 1996, personally appeared before
me, a Notary Public,________________________ , personally known (or proved) to
me to be the person whose name is subscribed to the above instrument who
acknowledged that __he executed the instrument.
- -----------------------------------------
Notary Public
STATE OF NEVADA )
) ss.
COUNTY OF WASHOE_____________________________)
On____________________________, 1996, personally appeared before
me, a Notary Public,________________________ , personally known (or proved) to
me to be the person whose name is subscribed to the above instrument who
acknowledged that __he executed the instrument.
- -----------------------------------------
Notary Public
STATE OF NEVADA )
) ss.
COUNTY OF WASHOE_____________________________)
On this ____ day of _________, in the year 1996, before me
______________, a notary public in and for said state, personally appeared
____________________, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person whose name is subscribed to this
instrument, and acknowledged that she executed it.
- -----------------------------------------
Notary Public
-41-
<PAGE>
STATE OF NEVADA )
) ss.
COUNTY OF____________________________________)
On____________________________, 1996, personally appeared before
me, a Notary Public,_________________________, personally known (or proved) to
me to be the person whose name is subscribed to the above instrument who
acknowledged that __he executed the instrument.
- -----------------------------------------
Notary Public
STATE OF NEVADA )
) ss.
COUNTY OF____________________________________)
On____________________________, 1996, personally appeared before
me, a Notary Public,________________________ , personally known (or proved) to
me to be the person whose name is subscribed to the above instrument who
acknowledged that __he executed the instrument.
- -----------------------------------------
Notary Public
STATE OF NEVADA )
) ss.
COUNTY OF____________________________________)
On____________________________, 1996, personally appeared before
me, a Notary Public,_________________________, personally known (or proved) to
me to be the person whose name is subscribed to the above instrument who
acknowledged that __he executed the instrument.
- -----------------------------------------
Notary Public
-42-
<PAGE>
STATE OF NEVADA )
) ss.
COUNTY OF____________________________________)
On____________________________, 1996, personally appeared before
me, a Notary Public,_________________________, personally known (or proved) to
me to be the person whose name is subscribed to the above instrument who
acknowledged that __he executed the instrument.
- -----------------------------------------
Notary Public
STATE OF NEVADA )
) ss.
COUNTY OF____________________________________)
On____________________________, 1996, personally appeared before
me, a Notary Public,_________________________, personally known (or proved) to
me to be the person whose name is subscribed to the above instrument who
acknowledged that __he executed the instrument.
- -----------------------------------------
Notary Public
-43-
<PAGE>
EXHIBIT A
---------
-44-
<PAGE>
EXHIBIT B
---------
Notice Addresses
If to Beneficiary:
- -----------------
Bank of America National Trust and Savings Association, as
Administrative Agent
555 South Flower Street, 10th Floor
Los Angeles, California 90017
Attention: Scott Faber, Vice President
If to Trustor:
- -------------
Eldorado Resorts LLC
295 North Virginia Street
Reno, Nevada 89501
Attention: Robert Jones, Chief Financial Officer
with a copy to Additional Trustor
If to Additional Trustor:
- ------------------------
C.S.& Y. Associates
c/o Daniel E. Siri
7 Rita Way
Orinda, California 94563
with a copy to:
C.S.& Y. Associates
c/o Jeffrey L. Siri
45 Scattergun Court
Reno, Nevada 89509
-45-
<PAGE>
[EXHIBIT D]
GUARANTY
--------
This Guaranty dated as of______________ , 1996, is made by
ELDORADO CAPITAL CORP., a Nevada corporation ("Guarantor") in favor of Bank of
America National Trust and Savings Association, as Administrative Agent for the
benefit of the Banks that are party to the Loan Agreement referred to below from
time to time (collectively with the Banks, "Lender"), with reference to the
following facts:
RECITALS
--------
A. Pursuant to the Amended and Restated Loan Agreement
dated as of July 31, 1996 among Eldorado Resorts LLC, a Nevada limited liability
corporation ("Borrower") and Bank of America National Trust and Savings
Association, as Administrative Agent and sole initial Bank (as it may hereafter
be amended, extended, renewed, supplemented, or otherwise modified from time to
time, being the "Loan Agreement"), certain credit facilities are being made
available to Borrower.
B. As a condition to the availability of such credit
facilities, Guarantor is required to enter into this Guaranty and to guaranty
the Guarantied Obligations as hereinafter provided.
C. Guarantor expects to realize direct and indirect
benefits as the result of the availability of the aforementioned credit
facilities to Borrower.
AGREEMENT
---------
NOW, THEREFORE, in order to induce Lender to continue to
extend the aforementioned credit facilities, and for other good and valuable
consideration, the receipt and adequacy of which hereby are acknowledged,
Guarantor hereby represents, warrants, covenants, agrees and guaranties as
follows:
1. Definitions. This Guaranty is the Guaranty referred to
-----------
in the Loan Agreement and is one of the Loan Documents. Terms defined in the
Loan Agreement and not otherwise defined in this Guaranty shall have the
meanings given those terms in the Loan Agreement when used herein and such
definitions are incorporated herein as though set forth in full. In addition, as
used herein, the following terms shall have the meanings respectively set forth
after each:
-1-
<PAGE>
"Guarantied Obligations" means all Obligations of Borrower or
----------------------
any Party at any time and from time to time owed to Lender
under the Loan Agreement and the other Loan Documents, whether
due or to become due, matured or unmatured, liquidated or
unliquidated, or contingent or noncontingent, including
---------
obligations of performance as well as obligations of payment,
and including interest that accrues after the commencement of
---------
any bankruptcy or insolvency proceeding by or against
Borrower, Guarantor or any other Person.
"Lender" means the Administrative Agent (acting as the
------
Administrative Agent and/or on behalf of the Banks), and the
Banks, and each of them, and any one or more of them. Subject
to the terms of the Loan Agreement, any right, remedy,
privilege or power of Lender may be exercised by the
Administrative Agent, or by the Majority Banks, or by any Bank
acting with the consent of the Majority Banks.
"Guaranty" means this Guaranty, and any extensions,
--------
modifications, renewals, restatements, reaffirmations,
supplements or amendments hereof.
2. Guaranty of Guarantied Obligations. Guarantor hereby
----------------------------------
irrevocably, unconditionally guaranties and promises to pay and perform on
demand the Guarantied Obligations and each and every one of them, including all
---------
amendments, modifications, supplements, renewals or extensions of any of them,
whether such amendments, modifications, supplements, renewals or extensions are
evidenced by new or additional instruments, documents or agreements or change
the rate of interest on any Guarantied Obligation or the security therefor, or
otherwise.
3. Nature of Guaranty. This Guaranty is irrevocable and
------------------
continuing in nature and relates to any Guarantied Obligations now existing or
hereafter arising. This Guaranty is a guaranty of prompt and punctual payment
and performance and is not merely a guaranty of collection.
4. Relationship to Other Agreements. Nothing herein shall
--------------------------------
in any way modify or limit the effect of terms or conditions set forth in any
other document, instrument or agreement executed by Guarantor or in connection
with the Guarantied Obligations, but each and every term and condition hereof
shall be in addition thereto. All provisions contained in the Loan Agreement or
any other Loan Document that apply to
-2-
<PAGE>
Loan Documents generally are fully applicable to this Guaranty and are
incorporated herein by this reference.
5. Subordination of Indebtedness of Borrower to Guarantor to the
-------------------------------------------------------------
Guarantied Obligations. Guarantor agrees that:
- ----------------------
(a) Any indebtedness of Borrower now or hereafter owed to
Guarantor hereby is subordinated to the Guarantied Obligations.
(b) If Lender so requests, upon the occurrence and during the
continuance of any Event of Default, any such indebtedness of Borrower now
or hereafter owed to Guarantor shall be collected, enforced and received by
Guarantor as trustee for Lender and shall be paid over to Lender in kind on
account of the Guarantied Obligations, but without reducing or affecting in
any manner the obligations of Guarantor under the other provisions of this
Guaranty.
(c) Should Guarantor fail to collect or enforce any such
indebtedness of Borrower now or hereafter owed to Guarantor and pay the
proceeds thereof to Lender in accordance with Section 5(b) hereof, Lender
---
as Guarantor's attorney-in-fact may do such acts and sign such documents in
Guarantor's name as Lender considers necessary or desirable to effect such
collection, enforcement and/or payment.
6. Statutes of Limitations and Other Laws. Until the Guarantied
--------------------------------------
Obligations shall have been paid and performed in full, all the rights,
privileges, powers and remedies granted to Lender hereunder shall continue to
exist and may be exercised by Lender at any time and from time to time
irrespective of the fact that any of the Guarantied Obligations may have become
barred by any statute of limitations. Guarantor expressly waives the benefit of
any and all statutes of limitation, and any and all Laws providing for exemption
of property from execution or for evaluation and appraisal upon foreclosure, to
the maximum extent permitted by applicable Laws.
7. Waivers and Consents. Guarantor acknowledges that the obligations
--------------------
undertaken herein involve the guaranty of obligations of Persons other than
Guarantor and, in full recognition of that fact, consents and agrees that Lender
may, at any time and from time to time, without notice or demand, and without
affecting the enforceability or continuing effectiveness hereof: (a)
supplement, modify, amend, extend, renew, accelerate or otherwise change the
time for payment or the terms of the Guarantied Obligations or any part thereof,
-3-
<PAGE>
including any increase or decrease of the rate(s) of interest thereon;
- ---------
(b) supplement, modify, amend or waive, or enter into or give any agreement,
approval or consent with respect to, the Guarantied Obligations or any part
thereof, or any of the Loan Documents to which Guarantor is not a party or any
additional security or guaranties, or any condition, covenant, default, remedy,
right, representation or term thereof or thereunder; (c) accept new or
additional instruments, documents or agreements in exchange for or relative to
any of the Loan Documents or the Guarantied Obligations or any part thereof;
(d) accept partial payments on the Guarantied Obligations; (e) receive and hold
additional security or guaranties the Guarantied Obligations or any part
thereof; (f) release, reconvey, terminate, waive, abandon, fail to perfect,
subordinate, exchange, substitute, transfer and/or enforce any security or
guaranties, and apply any security and direct the order or manner of sale
thereof as Lender in its sole and absolute discretion may determine; (g) release
any Person from any personal liability with respect to the Guarantied
Obligations or any part thereof; (h) settle, release on terms satisfactory to
Lender or by operation of applicable Laws or otherwise liquidate or enforce any
Guarantied Obligations and any security or guaranty therefor in any manner,
consent to the transfer of any security and bid and purchase at any sale; and/or
(i) consent to the merger, change or any other restructuring or termination of
the corporate existence of Borrower, Guarantor or any other Person, and
correspondingly restructure the Guarantied Obligations, and any such merger,
change, restructuring or termination shall not affect the liability of Guarantor
or the continuing effectiveness hereof, or the enforceability hereof with
respect to all or any part of the Guarantied Obligations.
Upon the occurrence and during the continuance of any Event of
Default, Lender may enforce this Guaranty independently as to Guarantor and
independently of any other remedy or security Lender at any time may have or
hold in connection with the Guarantied Obligations. Guarantor expressly waives
any right to require Lender to marshal assets in favor of Borrower, and agrees
that Lender may proceed against Borrower, or upon or against any security or
remedy, before proceeding to enforce this Guaranty, in such order as it shall
determine in its sole and absolute discretion. Lender may file a separate
action or actions against Borrower and/or Guarantor without respect to whether
action is brought or prosecuted with respect to any security or against any
other Person, or whether any other Person is joined in any such action or
actions. Guarantor agrees that Lender and Borrower and any Affiliates of
Borrower may deal with each other in connection with the Guarantied Obligations
or otherwise, or alter any contracts or agreements now or hereafter existing
between any of them, in any manner whatsoever, all without in any way altering
or affecting the security of this Guaranty. Lender's rights
-4-
<PAGE>
hereunder shall be reinstated and revived, and the enforceability of this
Guaranty shall continue, with respect to any amount at any time paid on account
of the Guarantied Obligations which thereafter shall be required to be restored
or returned by Lender upon the bankruptcy, insolvency or reorganization of
Borrower or any other Person, or otherwise, all as though such amount had not
been paid. The rights of Lender created or granted herein and the
enforceability of this Guaranty with respect to Guarantor at all times shall
remain effective to guaranty the full amount of all the Guarantied Obligations
even though the Guarantied Obligations, or any part thereof, or any security or
guaranty therefor, may be or hereafter may become invalid or otherwise
unenforceable as against Borrower or any other guarantor or surety and whether
or not Borrower shall have any personal liability with respect thereto.
Guarantor expressly waives any and all defenses now or hereafter arising or
asserted by reason of (a) any disability or other defense of Borrower with
respect to the Guarantied Obligations, (b) the unenforceability or invalidity of
any security or guaranty for the Guarantied Obligations or the lack of
perfection or continuing perfection or failure of priority of any security for
the Guarantied Obligations, (c) the cessation for any cause whatsoever of the
liability of Borrower (other than by reason of the full payment and performance
of all Guarantied Obligations), (d) any failure of Lender to marshal assets in
favor of Borrower or any other person, (e) except as otherwise provided in this
Guaranty, any failure of Lender to give notice of sale or other disposition of
Collateral to Guarantor or any other Person or any defect in any notice that may
be given in connection with any sale or disposition of Collateral, (f) any
failure of Lender to comply with applicable Laws in connection with the sale or
other disposition of any Collateral or other security for any Guarantied
Obligation, including without limitation, any failure of Lender to conduct a
commercially reasonable sale or other disposition of any Collateral or other
security for any Guarantied Obligation, (g) any act or omission of Lender or
others that directly or indirectly results in or aids the discharge or release
of Borrower or the Guarantied Obligations or any security or guaranty therefor
by operation of law or otherwise, (h) any Law which provides that the obligation
of a surety or guarantor must neither be larger in amount nor in other respects
more burdensome than that of the principal or which reduces a surety's or
guarantor's obligation in proportion to the principal obligation, (i) any
failure of Lender to file or enforce a claim in any bankruptcy or other
proceeding with respect to any Person, (j) the election by Lender, in any
bankruptcy proceeding of any Person, of the application or non-application of
Section llll(b)(2) of the United States Bankruptcy Code, (k) any extension of
credit or the grant of any Lien under Section 364 of the United States
Bankruptcy Code, (1) any use of cash collateral under
-5-
<PAGE>
Section 363 of the United States Bankruptcy Code, (m) any agreement or
stipulation with respect to the provision of adequate protection in any
bankruptcy proceeding of any Person, (n) the avoidance of any Lien in favor of
Lender for any reason, (o) any bankruptcy, insolvency, reorganization,
arrangement, readjustment of debt, liquidation or dissolution proceeding
commenced by or against any Person, including any discharge of, or bar or stay
---------
against collecting, all or any of the Guarantied Obligations (or any interest
thereon) in or as a result of any such proceeding, (p) to the extent permitted
in paragraph 40.495(4) of the Nevada Revised Statutes ("NRS"), the benefits of
the one-action rule under NRS Section 40.430, or (q) any action taken by Lender
that is authorized by this Section or any other provision of any Loan Document.
Guarantor expressly waives all setoffs and counterclaims and all presentments,
demands for payment or performance, notices of nonpayment or nonperformance,
protests, notices of protest, notices of dishonor and all other notices or
demands of any kind or nature whatsoever with respect to the Guarantied
Obligations, and all notices of acceptance of this Guaranty or of the existence,
creation or incurrence of new or additional Guarantied Obligations.
8. Condition of Borrower and its Subsidiaries. Guarantor represents
------------------------------------------
and warrants to Lender that Guarantor has established adequate means of
obtaining from Borrower and its Subsidiaries, on a continuing basis, financial
and other information pertaining to the businesses, operations and condition
(financial and otherwise) of Borrower and its Subsidiaries and their Properties,
and Guarantor now is and hereafter will be completely familiar with the
businesses, operations and condition (financial and otherwise) of Borrower and
its Subsidiaries and their Properties. Guarantor hereby expressly waives and
relinquishes any duty on the part of Lender (should any such duty exist) to
disclose to Guarantor any matter, fact or thing related to the businesses,
operations or condition (financial or otherwise) of Borrower or its Subsidiaries
or their Properties, whether now known or hereafter known by Lender during the
life of this Guaranty. With respect to any of the Guarantied Obligations,
Lender need not inquire into the powers of Borrower or any Subsidiaries thereof
or the officers or employees acting or purporting to act on their behalf, and
all Guarantied Obligations made or created in good faith reliance upon the
professed exercise of such powers shall be secured hereby.
9. Liens on Real Property. In the event that all or any part of the
----------------------
Guarantied Obligations at any time are secured by any one or more deeds of trust
or mortgages or other instruments creating or granting Liens on any interests in
real Property, Guarantor authorizes Lender, upon the occurrence of and during
the continuance of any Event of Default, at its sole
-6-
<PAGE>
option, without notice or demand and without affecting any Guarantied
Obligations of Guarantor, the enforceability of this Guaranty, or the validity
or enforceability of any Liens of Lender on any Collateral, to foreclose any or
all of such deeds of trust or mortgages or other instruments by judicial or
nonjudicial sale. Guarantor expressly waives any defenses to the enforcement of
this Guaranty or any rights of Lender created or granted hereby or to the
recovery by Lender against Borrower, Guarantor or any other Person liable
therefor of any deficiency after a judicial or nonjudicial foreclosure or sale,
even though such a foreclosure or sale may impair the subrogation rights of
Guarantor or may preclude Guarantor from obtaining reimbursement or contribution
from Borrower. Guarantor expressly waives any defenses or benefits that may be
derived from NRS Section 40.430 and judicial decisions relating thereto, any
provision of Nevada Law which is comparable to California Code of Civil
Procedure (S)(S) 580a, 580b, 580d or 726, or comparable provisions of the Laws
of any other jurisdiction, and all other suretyship defenses it otherwise might
or would have under Nevada Law or other applicable Law. Guarantor expressly
waives any right to receive notice of any judicial or nonjudicial foreclosure or
sale of any real Property or interest therein subject to any such deeds of trust
or mortgages or other instruments and Guarantor's or any other Person's failure
to receive any such notice shall not impair or affect Guarantor's Obligations or
the enforceability of this Guaranty or any rights of Lender created or granted
hereby.
10. Waive of Rights of Subrogation.
-------------------------------
Notwithstanding anything to the contrary elsewhere contained herein or in any
other Loan Document to which Guarantor is a Party, Guarantor hereby expressly
waives with respect to Borrower and its successors and assigns (including any
---------
surety) and any other Person which is directly or indirectly a creditor of
Borrower or any surety for Borrower, any and all rights at Law or in equity to
subrogation, to reimbursement, to exoneration, to contribution, to setoff or to
any other rights that could accrue to a surety against a principal, to a
guarantor against a maker or obligor, to an accommodation party against the
party accommodated, or to a holder or transferee against a maker, and which
Guarantor may have or hereafter acquire against Borrower or any other such
Person in connection with or as a result of Guarantor's execution, delivery
and/or performance of this Guaranty or any other Loan Document to which
Guarantor is a party. Guarantor agrees that it shall not have or assert any such
rights against Borrower or its successors and assigns or any other Person
(including any surety) which is directly or indirectly a creditor of Borrower or
---------
any surety for Borrower, either directly or as an attempted setoff to any action
commenced against Guarantor by Borrower (as borrower or in any other capacity),
Lender or any other such Person. Guarantor hereby acknowledges and agrees that
-7-
<PAGE>
this waiver is intended to benefit Borrower and Lender and shall not limit or
otherwise affect Guarantor's liability hereunder, under any other Loan Document
to which Guarantor is a party, or the enforceability hereof or thereof.
11. Understandings With Respect to Waivers and Consents. Guarantor
---------------------------------------------------
warrants and agrees that each of the waivers and consents set forth herein are
made with full knowledge of their significance and consequences, with the
understanding that events giving rise to any defense or right waived may
diminish, destroy or otherwise adversely affect rights which Guarantor otherwise
may have against Borrower, Lender or others, or against any Collateral, and
that, under the circumstances, the waivers and consents herein given are
reasonable and not contrary to public policy or Law. Guarantor acknowledges that
it has either consulted with legal counsel regarding the effect of this Guaranty
and the waivers and consents set forth herein, or has made an informed decision
not to do so. If this Guaranty or any of the waivers or consents herein are
determined to be unenforceable under or in violation of applicable Law, this
Guaranty and such waivers and consents shall be effective to the maximum extent
permitted by Law.
12. Representations and Warranties. Guarantor hereby makes each and
------------------------------
every representation and warranty applicable to Guarantor set forth in Article 4
---------
of the Loan Agreement as if set forth in full herein.
13. Costs and Expenses. Guarantor agrees to pay to Lender all costs
------------------
and expenses (including, without limitation, reasonable attorneys' fees and
---------
disbursements) incurred by Lender in the enforcement or attempted enforcement of
this Guaranty, whether or not an action is filed in connection therewith, and in
connection with any waiver or amendment of any term or provision hereof. All
advances, charges, costs and expenses, including reasonable attorneys' fees and
---------
disbursements (including the reasonably allocated cost of legal counsel employed
by Lender), incurred or paid by Lender in exercising any right, privilege, power
or remedy conferred by this Guaranty, or in the enforcement or attempted
enforcement thereof, shall be subject hereto and shall become a part of the
Guarantied Obligations and shall be paid to Lender by Guarantor, immediately
upon demand, together with interest thereon at the rate(s) provided for under
the Loan Agreement.
14. Construction of this Guaranty. This Guaranty is intended to give
-----------------------------
rise to absolute and unconditional obligations on the part of Guarantor; hence,
--------------------------
in any construction hereof, notwithstanding any provision of any Loan Document
--------------------------------------------------
to the contrary, this Guaranty shall be construed strictly in favor of Lender in
- ---------------
order to accomplish its stated purpose.
-8-
<PAGE>
15. Liability. Notwithstanding anything to the contrary elsewhere
---------
contained herein or in any Loan Document to which Guarantor is a Party, the
aggregate liability of Guarantor hereunder for payment and performance of the
Guarantied Obligations shall not exceed an amount which, in the aggregate, is
$1.00 less than that amount which if so paid or performed would constitute or
result in a "fraudulent transfer", "fraudulent conveyance", or terms of similar
import, under applicable state or federal Law, including without limitation,
Section 548 of the United States Bankruptcy Code. The liability of Guarantor
hereunder is independent of any other guaranties at any time in effect with
respect to all or any part of the Guarantied Obligations, and Guarantor's
liability hereunder may be enforced regardless of the existence of any such
guaranties. Any termination by or release of any guarantor in whole or in part
shall not affect the continuing liability of Guarantor hereunder, and no notice
of any such termination or release shall be required. The execution hereof by
Guarantor is not founded upon an expectation or understanding that there will be
any other guarantor of the Guarantied Obligations.
16. WAIVER OF JURY TRIAL. GUARANTOR AND LENDER EXPRESSLY WAIVE THEIR
--------------------
RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS GUARANTY, THE LOAN
AGREEMENT, THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY
OF THE PARTIES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER NOW EXISTING OR
HEREAFTER ARISING AND WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR
OTHERWISE. GUARANTOR AND LENDER AGREE THAT ANY SUCH CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING
THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL
BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR
OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR
ENFORCEABILITY OF THIS GUARANTY, THE LOAN AGREEMENT OR THE OTHER LOAN DOCUMENTS
OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS GUARANTY, THE LOAN
AGREEMENT AND THE OTHER LOAN DOCUMENTS. ANY PARTY HERETO MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
-9-
<PAGE>
17. THIS GUARANTY SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEVADA WITHOUT REFERENCE
TO THE CONFLICT OF LAWS OR CHOICE OF LAW PRINCIPLES THEREOF.
IN WITNESS WHEREOF, Guarantor has executed this Guaranty by its duly
authorized officer as of the date first written above.
"Guarantor"
ELDORADO CAPITAL CORP.,
a Nevada corporation
By:_______________________
Title: ___________________
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<PAGE>
[EXHIBIT E]
NOTE
----
$50,000,000 July 31, 1996
Reno, Nevada
FOR VALUE RECEIVED, the undersigned promises to pay to the order of
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION (the "Bank") the
principal amount of FIFTY MILLION and 00/100 DOLLARS ($50,000,000) in
consideration of Advances made by Bank pursuant to the Commitment under the Loan
Agreement hereinafter described, payable as hereinafter set forth. The
undersigned promises to pay interest on the principal amount hereof remaining
unpaid from time to time from the date of each Loan hereunder until the date of
payment in full, payable as hereinafter set forth.
Reference is made to the Amended and Restated Loan Agreement dated as
of July 31, 1996 among the undersigned, as Borrower, the Banks therein named,
and Bank of America National Trust and Savings Association, as Administrative
Agent for itself and for the Banks (the "Loan Agreement"). Terms defined in the
Loan Agreement and not otherwise defined herein are used herein with the
meanings defined for those terms in the Loan Agreement. This is one of the Notes
referred to in the Loan Agreement, and any holder hereof is entitled to all of
the rights, remedies, benefits and privileges provided for in the Loan Agreement
as originally executed or as it may from time to time be supplemented, modified
or amended. The Loan Agreement, among other things, contains provisions for
acceleration of the maturity hereof upon the happening of certain stated events
upon the terms and conditions therein specified.
The principal indebtedness evidenced by this Note shall be payable
as provided in the Loan Agreement and in any event on the Maturity Date.
Interest shall be payable on the outstanding daily unpaid principal
amount of each Loan hereunder from the date thereof until payment in full and
shall accrue and be payable at the rates and on the dates set forth in the Loan
Agreement both before and after default and before and after maturity and
judgment, with interest on overdue interest to bear interest at the Default
Rate, to the fullest extent permitted by applicable Law.
The amount of each payment hereunder shall be made to the
Administrative Agent at the Administrative Agent's Office for the account of the
Bank, in lawful money of the United States of America and in immediately
available funds not later than 11:00 a.m., California time, on the day of
payment (which
-1-
<PAGE>
must be a Banking Day). All payments received after 11:00 a.m., California time,
on any Banking Day, shall be deemed received on the next succeeding Banking Day.
The Bank shall use its best efforts to keep a record of Advances made by it and
payments of principal with respect to this Note, and such record shall be
presumptive evidence of the principal amount owing under this Note.
The undersigned hereby promises to pay all costs and expenses of any
holder hereof incurred in collecting the undersigned's obligations hereunder or
in enforcing or attempting to enforce any of any holder's rights hereunder,
including reasonable attorneys' fees and disbursements, whether or not an action
is filed in connection therewith, subject however to the provisions of Section
11.3 of the Loan Agreement.
- ----
The undersigned hereby waives presentment, demand for payment,
dishonor, notice of dishonor, protest, notice of protest and any other notice or
formality, to the fullest extent permitted by applicable Laws, except as
------
otherwise provided in any Loan Document.
THIS NOTE SHALL BE DELIVERED TO AND ACCEPTED BY THE BANK, OR BY THE
ADMINISTRATIVE AGENT ON THE BANK'S BEHALF, IN THE STATE OF NEVADA, AND SHALL BE
GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LOCAL LAWS
THEREOF.
ELDORADO RESORTS LLC PARTNERSHIP, a
Nevada limited liability company
By: _____________________________
Donald L. Carano, Chief Executive
Officer
-2-
<PAGE>
LOANS AND PAYMENTS OF PRINCIPAL
- --------------------------------------------------------------------------------
Amount of Amount of Unpaid Notation
Date Loans Principal Paid Principal Made by
Balance
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-3-
<PAGE>
[Exhibit G]
PRICING CERTIFICATE
To: Bank of America National Trust and Savings Association, as
Administrative Agent
This Certificate is delivered with reference to that certain Amended
and Restated loan Agreement dated as of July 31, 1996 among Eldorado Resorts
LLC, a Nevada limited liability company, the Banks therein named, and Bank of
America National Trust and Savings Association, as Administrative Agent for
itself and for the Banks (the "Loan Agreement"). Capitalized terms used herein
are used with the meanings set forth in the loan Agreement, as amended as of the
date of this Pricing Certificate.
The undersigned Senior Officer of Borrower hereby certifies that, as
of the last day of the Fiscal Quarter ended ________________ (the "Subject
Fiscal Quarter"), the Pricing Leverage Ratio was :1.00. The Pricing Leverage
Ratio as of the last day of the Subject Fiscal Quarter was calculated as the
ratio of:
(a) the average daily outstanding principal
amount of Funded Debt for the
Subject Fiscal Quarter; to
$________________________
(b) Consolidated EBITDA for the twelve month
fiscal period ended on the last day
of the Subject Fiscal Quarter.
$________________________
IN WITNESS WHEREOF, this Pricing Certificate has been executed as of the date
set forth below.
ELDORADO RESORTS LIC
By:________________________________
___________________________________
[Printed Name and Title of Officer]
Dated:_____________________________
-1-
<PAGE>
[Exhibit H]
REQUEST FOR LETTER OF CREDIT
----------------------------
This REQUEST FOR LETTER OF CREDIT is executed and delivered by Eldorado
Resorts LLC, a Nevada limited liability company ("Borrower") to Bank of America
National Trust and Savings Association, as Administrative Agent, pursuant to the
Amended and Restated Loan Agreement (the "Agreement") dated as of July 31, 1996,
entered into by Borrower and Bank of America National Trust and Savings Associ-
ation, as Administrative Agent and sole initial Bank. Any terms used herein and
not defined herein shall have the meanings defined in the Agreement.
Borrower hereby requests that the Issuing Bank issue a Letter of Credit
for the account of Borrower pursuant to the Agreement, as follows:
Face Amount of Letter of Credit: $___________.
Date of Issuance: _______________, 19__.
Beneficiary under Letter of Credit:
Name: -------------------------------
Address:
--------------------------
--------------------------
--------------------------
Expire Date: _______________, 19__
In connection with the Letter of Credit requested herein, Borrower
hereby represents, warrants and certifies to the Banks that, as of the date of
the Letter of Credit requested herein:
(i) except as disclosed by Borrower and approved in writing
by the Majority Banks, the representations and warranties contained in
Article 4 (other than Sections 4.5 (first sentence), 4.6, 4.7, 4.11 and
--------- ----- ---- --- --- --- ----
4.18) are true and correct on and as of the date hereof;
----
(ii) other than matters described in Schedule 4.11 or not
-------------
required as of the Closing Date to be therein described, there shall not be
then pending or threatened any action, suit, proceeding or investigation
against or affecting Borrower or any of its Property before any
Governmental Agency that constitutes a Material Adverse Effect;
-1-
<PAGE>
(iii) no Default or Event of Default exists.
This Request for Letter of Credit is executed on _______ 19__, by a
Responsible Official of Borrower, on behalf of Borrower. The undersigned, in
such capacity, hereby certifies each and every matter contained herein to be
true and correct.
ELDORADO RESORTS LLC
By: _________________________
Title: _________________________
-2-
<PAGE>
[Exhibit I]
REQUEST FOR LOAN
----------------
This REQUEST FOR LOAN is executed and delivered by Eldorado Resorts
LLC, a Nevada limited liability company ("Borrower") to Bank of America National
Trust and Savings Association, as Administrative Agent, pursuant to the Amended
and Restated Loan Agreement (the "Agreement") dated as of July 31, 1996, entered
into by Borrower and Bank of America National Trust and Savings Association, as
the Administrative Agent and sole initial Bank. Any terms used herein and not
defined herein shall have the meanings defined in the Agreement.
Borrower hereby requests that the Banks make a Loan for the account of
Borrower pursuant to the Agreement, as follows:
A. Amount of Loan: $_________________.
B. Date of Loan: ______________, 19__.
C. Type of Loan (check one box only):
[___] Base Rate Loan.
[___] Eurodollar Loan with a ____-day
Eurodollar Rate Period.
In connection with the Loan requested herein, Borrower hereby
represents, warrants and certifies to the Banks that, as of the date of the Loan
requested herein:
(i) except as disclosed by Borrower and approved in writing
by the Majority Banks, the representations and warranties contained in
Article 4 (other than Sections 4.5 (first sentence), 4.6, 4.7, 4.11 and
--------- ----- ---- --- --- --- ----
4.18) are true and correct on and as of the date hereof;
----
(ii) other than matters described in Schedule 4.11 or not
-------------
required as of the Closing Date to be therein described, there shall
not be then pending or threatened any action, suit, proceeding or
investigation against or affecting Borrower or any of its Property
before any Governmental Agency that constitutes a Material Adverse
Effect;
(iii) no Default or Event of Default exists.
This Request for Loan is executed on _______, 19__, by a Responsible
Official of Borrower, on behalf of Borrower. The
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<PAGE>
undersigned, in such capacity, hereby certifies each and every matter contained
herein to be true and correct.
ELDORADO RESORTS LLC, a Nevada
limited liability company
By:
-------------------------
Title:
-----------------------
-2-
<PAGE>
[Exhibit J]
AMENDED AND RESTATED SECURITY AGREEMENT
---------------------------------------
This AMENDED AND RESTATED SECURITY AGREEMENT ("Agreement"), dated as of
July 31, 1996, is made by ELDORADO RESORTS LLC, a Nevada limited liability
company, as Grantor, in favor of BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, a national banking association, as the Administrative Agent and
sole initial Bank under the Amended and Restated Loan Agreement hereafter
referred to, and in favor of each of the Banks which may hereafter become a
party thereto, collectively as Secured Party, with reference to the following
facts:
RECITALS
--------
A. Grantor has entered into an Amended and Restated Loan Agreement of
even date herewith among Grantor and Bank of America National Trust and Savings
Association, as Administrative Agent and sole initial Bank (as it may from time
to time be amended, restated, extended, renewed, modified or supplemented, the
"Loan Agreement"). This Agreement is the Security Agreement referred to in the
Loan Agreement and is one of the "Loan Documents" referred to in the Loan
Agreement.
B. Pursuant to the Loan Documents of even date the Banks are making
certain credit facilities available to Grantor.
C. As a condition of the availability of such credit facilities,
Grantor is required to enter into this Agreement to amend and restate the
Security Agreement referred to in the Existing Loan Agreement and to grant
security interests to Secured Party as herein provided.
AGREEMENT
---------
NOW, THEREFORE, in order to induce Secured Party to extend the
aforementioned credit facilities, and for other good and valuable consideration,
the receipt and adequacy of which hereby is acknowledged, Grantor hereby
represents, warrants, covenants, agrees, assigns and grants as follows:
1. Definitions. Terms defined in the Loan Agreement and not
-----------
otherwise defined in this Agreement shall have the meanings defined for those
terms in the Loan Agreement. Terms defined in the Uniform Commercial Code and
not otherwise defined in this Agreement or in the Loan Agreement shall have the
meanings defined for those terms in the Nevada Commercial Code. In addition, as
used in this Agreement, the following terms shall have the meanings respectively
set forth after each:
-1-
<PAGE>
"Agreement" means this Security Agreement, and any extensions,
---------
modifications, renewals, restatements, supplements or amendments hereof.
"Collateral" means and includes all present and future right, title and
----------
interest of Grantor in or to any Property or assets whatsoever, and all rights
and powers of Grantor to transfer any interest in or to any Property or assets
whatsoever, including, without limitation, any and all of the following
---------
Property:
(a) All present and future accounts, accounts receivable,
agreements, contracts, leases, contract rights, rights to payment,
instruments, documents, chattel paper, security agreements, guaranties,
undertakings, surety bonds, insurance policies, notes and drafts, and all
forms of obligations owing to Grantor or in which Grantor may have any
interest, however created or arising;
(b) All present and future general intangibles, all tax refunds
of every kind and nature to which Grantor now or hereafter may become
entitled, however arising, all other refunds, and all deposits, goodwill,
choses in action, trade secrets, computer programs, software, customer
lists, trademarks, trade names, service marks, patents, licenses,
copyrights, technology, processes, proprietary information and insurance
proceeds;
(c) All present and future deposit accounts of Grantor,
including, without limitation, any demand, time, savings, passbook or like
---------
account maintained by Grantor with any bank, savings and loan association,
credit union or like organization, and all money, Cash and Cash Equivalents
of Grantor, whether or not deposited in any such deposit account;
(d) All present and future books and records, including, without
---------
limitation, books of account and ledgers of every kind and nature, all
electronically recorded data relating to Grantor or its business, all
receptacles and containers for such records, and all files and
correspondence;
(e) All present and future goods, including, without limitation,
---------
all consumer goods, farm products, inventory, equipment, gaming devices and
associated equipment as defined in Nevada Revised Statutes Chapter 463,
machinery, tools, molds, dies, furniture, furnishings, fixtures, trade
fixtures, motor vehicles and all other goods used in connection with or in
the conduct of Grantor's business;
(f) All present and future inventory and merchandise, including,
---------
without limitation, all present and future goods held for sale or lease or
to be furnished under a contract of service, all raw materials, work in
process and finished goods, all packing materials, supplies
-2-
<PAGE>
and containers relating to or used in connection with any of the foregoing, and
all bills of lading, warehouse receipts or documents of title relating to any of
the foregoing;
(g) All present and future stocks, bonds, debentures, securities,
subscription rights, options, warrants, puts, calls, certificates, partnership
interests, joint venture interests, Investments and/or brokerage accounts and
all rights, preferences, privileges, dividends, distributions, redemption
payments, or liquidation payments with respect thereto;
(h) All present and future accessions, appurtenances, components,
repairs, repair parts, spare parts, replacements, substitutions, additions,
issue and/or improvements to or of or with respect to any of the foregoing;
(i) All other tangible and intangible Property of Grantor;
(j) All rights, remedies, powers and/or privileges of Grantor with
respect to any of the foregoing; and
(k) Any and all proceeds and products of any of the foregoing,
including, without limitation, all money, accounts, general intangibles, deposit
accounts, documents, instruments, chattel paper, goods, insurance proceeds, and
any other tangible or intangible property received upon the sale or disposition
of any of the foregoing.
"Secured Obligations" means any and all present and future Obligations
-------------------
of any type or nature of Grantor arising under or relating to the loan Documents
or any one or more of them, whether due or to become due, matured or unmatured,
liquidated or unliquidated, or contingent or noncontingent, including
---------
Obligations of performance as well as Obligations of payment, and including
---------
interest that accrues after the commencement of any bankruptcy or insolvency
proceeding by or against Grantor.
"Secured Party" means the Administrative Agent, as collateral agent for
-------------
the ratable benefit of the Banks. All rights of the Secured Party under this
Agreement shall be exercised by the Administrative Agent, acting with the
consent of the Banks or Majority Banks to the extent required by the Loan
Agreement.
2. Further Assurances. At any time and from time to time at the request of
------------------
Secured Party, Grantor shall execute and deliver to Secured Party all such
financing statements and other instruments and documents in form and substance
satisfactory to Secured Party as shall be necessary or desirable to fully
perfect, when filed and/or recorded, Secured Party's security interests granted
pursuant to Section 3 of this Agreement. At any time and from time to time,
Secured Party shall be
-3-
<PAGE>
entitled to file and/or record any or all such financing statements, instruments
and documents held by it, and any or all such further financing statements,
documents and instruments, and to take all such other actions, as Secured Party
may deem appropriate to perfect and to maintain perfected the security interests
granted in Section 3 of this Agreement. Before and after the occurrence of any
Event of Default, at Secured Party's request, Grantor shall execute all such
further financing statements, instruments and documents, and shall do all such
further acts and things, as may be deemed necessary or desirable by Secured
Party to create and perfect, and to continue and preserve, an indefeasible
security interest in the Collateral in favor of Secured Party, or the priority
thereof. With respect to any Collateral consisting of certificated securities,
instruments, documents, certificates of title or the like, as to which Secured
Party's security interest need be perfected by, or the priority thereof need be
assured by, possession of such Collateral, Grantor will upon demand of Secured
Party deliver possession of same in pledge to Secured Party. With respect to any
Collateral consisting of securities, instruments, partnership or joint venture
interests or the like, Grantor hereby consents and agrees that the issuers of,
or obligors on, any such Collateral, or any registrar or transfer agent or
trustee for any such Collateral, shall be entitled to accept the provisions of
this Agreement as conclusive evidence of the right of Secured Party to effect
any transfer or exercise any right hereunder or with respect to any such
Collateral, notwithstanding any other notice or direction to the contrary
heretofore or hereafter given by Grantor or any other Person to such issuers or
such obligors or to any such registrar or transfer agent or trustee.
3. Security Agreement. For valuable consideration, Grantor hereby
------------------
assigns and pledges to Secured Party, and grants to Secured Party a security
interest in, all presently existing and hereafter acquired Collateral, as
security for the timely payment and performance of the Secured Obligations, and
each of them. This Agreement is a continuing and irrevocable agreement and all
the rights, powers, privileges and remedies hereunder shall apply to any and all
Secured Obligations, including those arising under successive transactions which
shall either continue the Secured Obligations, increase or decrease them, or
from time to time create new Secured Obligations after all or any prior Secured
Obligations have been satisfied, and notwithstanding the bankruptcy of Grantor
or any other Person or any other event or proceeding affecting any Person.
4. Grantor's Representations. Warranties and Agreements. Except as
---------------------------------------------------- ------
otherwise disclosed to Secured Party in writing concurrently herewith, Grantor
represents, warrants and agrees that: (a) Grantor will pay, prior to
delinquency, all taxes, charges, Liens and assessments against the Collateral,
except such as are expressly permitted by the Loan Agreement or are timely
- ------
contested in good faith, and upon its failure to pay or so contest such taxes,
charges, Liens and assessments, Secured Party at its option may pay any of them,
and Secured Party shall be the sole judge of the legality or validity thereof
and the amount necessary to discharge the same; (b) the Collateral will not be
used for any unlawful purpose or in violation of any Law, regulation or
ordinance, nor used in any way that will void or impair any insurance required
to be carried in connection therewith; (c) Grantor will, to the extent
consistent with good business practice, keep the Collateral in reasonably good
-4-
<PAGE>
repair, working order and condition, and from time to time make all needful and
proper repairs, renewals, replacements, additions and improvements thereto and,
as appropriate and applicable, will otherwise deal with the Collateral in all
such ways as are considered good practice by owners of like Property; (d)
Grantor will take all reasonable steps to preserve and protect the Collateral;
(e) Grantor will maintain, with responsible insurance companies, insurance
covering the Collateral against such insurable losses as is required by the Loan
Agreement and as is consistent with sound business practice, and will cause
Secured Party to be designated as an additional insured and loss payee with
respect to such insurance, will obtain the written agreement of the insurers
that such insurance shall not be cancelled, terminated or materially modified to
the detriment of Secured Party without at least 30 days prior written notice to
Secured Party, and will furnish copies of such insurance policies or
certificates to Secured Party promptly upon request therefor; and (f) Grantor
will promptly notify Secured Party in writing in the event of any substantial or
material damage to the Collateral from any source whatsoever, and, except for
------
the disposition of collections and other proceeds of the Collateral permitted by
Section 6 hereof, Grantor will not remove or permit to be removed any part of
the Collateral from its place of business without the prior written consent of
Secured Party, except for such items of the Collateral as are removed in the
------
ordinary course of business or in connection with any transaction or disposition
otherwise permitted by the Loan Documents.
5. Secured Party's Rights Re Collateral. At any time (whether or not an
------------------------------------
Event of Default has occurred), without notice or demand and at the expense of
Grantor, Secured Party may, to the extent it may be necessary or desirable to
protect the security hereunder, but Secured Party shall not be obligated to: (a)
enter upon any premises on which Collateral is situated and examine the same or
(b) perform any obligation of Grantor under this Agreement or any obligation of
any other Person under the Loan Documents. At any time and from time to time, at
the expense of Grantor, Secured Party may, to the extent it may be necessary or
desirable to protect the security hereunder, but Secured Party shall not be
obligated to: (i) notify obligors on the Collateral that the Collateral has
been assigned to Secured Party; (ii) at any time and from time to time request
from obligors on the Collateral, in the name of Grantor or in the name of
Secured Party, information concerning the Collateral and the amounts owing
thereon; and (iii) cause the Collateral to be registered in the name of Secured
Party, as legal owner. Grantor shall maintain books and records pertaining to
the Collateral in such detail, form and scope as Secured Party shall reasonably
require consistent with Secured Party's interests hereunder. Grantor shall at
any time at Secured Party's request mark the Collateral and/or Grantor's ledger
cards, books of account and other records relating to the Collateral with
appropriate notations satisfactory to Secured Party disclosing that they are
subject to Secured Party's security interests. Secured Party shall at all
reasonable times on reasonable notice have full access to and the right to audit
any and all of Grantor's books and records pertaining to the Collateral, and to
confirm and verify the value of the Collateral and to do whatever else Secured
Party reasonably may deem necessary or desirable to protect its interests;
provided, however, that any such action which involves communicating with
- -------- -------
customers of Grantor shall be carried out by Secured Party through Grantor's
independent auditors unless Secured Party shall
-5-
<PAGE>
then have the right directly to notify obligors on the Collateral as provided in
Section 9. Secured Party shall be under no duty or obligation whatsoever to take
any action to preserve any rights of or against any prior or other parties in
connection with the Collateral, to exercise any voting rights or managerial
rights with respect to any Collateral, whether or not an Event of Default shall
have occurred, or to make or give any presentments, demands for performance,
notices of non-performance, protests, notices of protests, notices of dishonor
or notices of any other nature whatsoever in connection with the Collateral or
the Secured Obligations. Secured Party shall be under no duty or obligation
whatsoever to take any action to protect or preserve the Collateral or any
rights of Grantor therein, or to make collections or enforce payment thereon, or
to participate in any foreclosure or other proceeding in connection therewith.
6. Collections on the Collateral. Except as otherwise provided in any
----------------------------- ------
Loan Document, Grantor shall have the right to use and to continue to make
collections on and receive dividends and other proceeds of all of the Collateral
in the ordinary course of business so long as no Event of Default shall have
occurred and be continuing. Upon the occurrence and during the continuance of an
Event of Default, at the option of Secured Party, except as prohibited by
applicable Law Grantor's right to make collections on and receive dividends and
other proceeds of the Collateral and to use or dispose of such collections and
proceeds shall terminate, and any and all dividends, proceeds and collections,
including all partial or total prepayments, then held or thereafter received on
or on account of the Collateral will be held or received by Grantor in trust for
Secured Party and immediately delivered in kind to Secured Party. Any remittance
received by Grantor from any Person shall be presumed to relate to the
Collateral and to be subject to Secured Party's security interests. Upon the
occurrence and during the continuance of an Event of Default, Secured Party
shall have the right at all times to receive, receipt for, endorse, assign,
deposit and deliver, in the name of Secured Party or in the name of Grantor, any
and all checks, notes, drafts and other instruments for the payment of money
constituting proceeds of or otherwise relating to the Collateral; and Grantor
hereby authorizes Secured Party to affix, by facsimile signature or otherwise,
the general or special endorsement of it, in such manner as Secured Party shall
deem advisable, to any such instrument in the event the same has been delivered
to or obtained by Secured Party without appropriate endorsement, and Secured
Party and any collecting bank are hereby authorized to consider such endorsement
to be a sufficient, valid and effective endorsement by Grantor, to the same
extent as though it were manually executed by the duly authorized officer of
Grantor, regardless of by whom or under what circumstances or by what authority
such facsimile signature or other endorsement actually is affixed, without duty
of inquiry or responsibility as to such matters, and Grantor hereby expressly
waives demand, presentment, protest and notice of protest or dishonor and all
other notices of every kind and nature with respect to any such instrument.
7. Possession of Collateral by Secured Party. All the Collateral now,
-----------------------------------------
heretofore or hereafter delivered to Secured Party shall be held by Secured
Party in its possession, custody and control. Any or all of the Collateral
delivered to Secured Party may be held in an interest bearing or noninterest
bearing account, in
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<PAGE>
Secured Party's sole and absolute discretion, and Secured Party may, in its
discretion, apply any such interest to payment of the Secured Obligations.
Nothing herein shall obligate Secured Party to invest any Collateral or obtain
any particular return thereon. Upon the occurrence and during the continuance of
an Event of Default, whenever any of the Collateral is in Secured Party's
possession, custody or control, Secured Party may use, operate and consume the
Collateral, whether for the purpose of preserving and/or protecting the
Collateral, or for the purpose of performing any of Grantor's obligations with
respect thereto, or otherwise. Secured Party may at any time deliver or
redeliver the Collateral or any part thereof to Grantor, and the receipt of any
of the same by Grantor shall be complete and full acquittance for the
Collateral so delivered, and Secured Party thereafter shall be discharged from
any liability or responsibility therefor. So long as Secured Party exercises
reasonable care with respect to any Collateral in its possession, custody or
control, Secured Party shall have no liability for any loss of or damage to such
Collateral, and in no event shall Secured Party have liability for any
diminution in value of Collateral occasioned by economic or market conditions or
events. Secured Party shall be deemed to have exercised reasonable care within
the meaning of the preceding sentence if the Collateral in the possession,
custody or control of Secured Party is accorded treatment substantially equal to
that which Secured Party accords its own property, it being understood that
Secured Party shall not have any responsibility for (a) ascertaining or taking
action with respect to calls, conversions, exchanges, maturities, tenders or
other matters relating to any Collateral, whether or not Secured Party has or is
deemed to have knowledge of such matters, or (b) taking any necessary steps to
preserve rights against any Person with respect to any Collateral.
8. Events of Default. There shall be an Event of Default hereunder upon
-----------------
the occurrence and during the continuance of an Event of Default under the Loan
Agreement.
9. Rights Upon Event of Default. Upon the occurrence and during the
----------------------------
continuance of an Event of Default, Secured Party shall have, in any
jurisdiction where enforcement hereof is sought, in addition to all other rights
and remedies that Secured Party may have under applicable Law or in equity or
under this Agreement (including, without limitation, all rights set forth in
---------
Section 6 hereof) or under any other Loan Document, all rights and remedies of a
secured party under the Uniform Commercial Code as enacted in any jurisdiction,
and, in addition, the following rights and remedies, all of which may be
exercised with or without notice to Grantor and without affecting the
Obligations of Grantor hereunder or under any other Loan Document, or the
enforceability of the Liens and security interests created hereby: (a) to
foreclose the Liens and security interests created hereunder or under any other
agreement relating to any Collateral by any available judicial procedure or
without judicial process; (b) to enter any premises where any Collateral may be
located for the purpose of securing, protecting, inventorying, appraising,
inspecting, repairing, preserving, storing, preparing, processing, taking
possession of or removing the same; (c) to sell, assign, lease or otherwise
dispose of any Collateral or any part thereof, either at public or private sale
or at any broker's board, in lot or in bulk, for cash, on credit or otherwise,
with or without representations or warranties and upon such terms as shall be
acceptable to Secured Party; (d) to notify obligors on the Collateral
-7-
<PAGE>
that the Collateral has been assigned to Secured Party and that all payments
thereon are to be made directly and exclusively to Secured Party; (e) to collect
by legal proceedings or otherwise all dividends, distributions, interest,
principal or other sums now or hereafter payable upon or on account of the
Collateral; (f) to enter into any extension, reorganization, deposit, merger or
consolidation agreement, or any other agreement relating to or affecting the
Collateral, and in connection therewith Secured Party may deposit or surrender
control of the Collateral and/or accept other Property in exchange for the
Collateral; (g) to settle, compromise or release, on terms acceptable to Secured
Party, in whole or in part, any amounts owing on the Collateral and/or any
disputes with respect thereto; (h) to extend the time of payment, make
allowances and adjustments and issue credits in connection with the Collateral
in the name of Secured Party or in the name of Grantor; (i) to enforce payment
and prosecute any action or proceeding with respect to any or all of the
Collateral and take or bring, in the name of Secured Party or in the name of
Grantor, any and all steps, actions, suits or proceedings deemed by Secured
Party necessary or desirable to effect collection of or to realize upon the
Collateral, including any judicial or nonjudicial foreclosure thereof or
---------
thereon, and Grantor specifically consents to any nonjudicial foreclosure of any
or all of the Collateral or any other action taken by Secured Party which may
release any obligor from personal liability on any of the Collateral, and
Grantor waives any right not expressly provided for in this Agreement to receive
notice of any public or private judicial or nonjudicial sale or foreclosure of
any security or any of the Collateral; and any money or other property received
by Secured Party in exchange for or on account of the Collateral, whether
representing collections or proceeds of Collateral, and whether resulting from
voluntary payments or foreclosure proceedings or other legal action taken by
Secured Party or Grantor may be applied by Secured Party without notice to
Grantor to the Secured Obligations in such order and manner as Secured Party in
its sole discretion shall determine; (j) to insure, process and preserve the
Collateral; (k) to exercise all rights, remedies, powers or privileges provided
under any of the Loan Documents; (1) to remove, from any premises where the same
may be located, the Collateral and any and all documents, instruments, files and
records, and any receptacles and cabinets containing the same, relating to the
Collateral, and Secured Party may, at the cost and expense of Grantor, use such
of its supplies, equipment, facilities and space at its places of business as
may be necessary or appropriate to properly administer, process, store, control,
prepare for sale or disposition and/or sell or dispose of the Collateral or to
properly administer and control the handling of collections and realizations
thereon, and Secured Party shall be deemed to have a rent-free tenancy of any
premises of Grantor for such purposes and for such periods of time as reasonably
required by Secured Party; (m) to receive, open and dispose of all mail
addressed to Grantor and notify postal authorities to change the address for
delivery thereof to such address as Secured Party may designate; provided that
--------
Secured Party agrees that it will promptly deliver over to Grantor such opened
mail as does not relate to the Collateral; and (n) to exercise all other rights,
powers, privileges and remedies of an owner of the Collateral; all at Secured
Party's sole option and as Secured Party in its sole discretion may deem
advisable. Grantor will, at Secured Party's request, assemble the Collateral and
make it available to Secured Party at places which Secured Party may designate,
whether at the premises of Grantor or elsewhere, and will make available to
Secured Party, free of cost, all premises, equipment and
-8-
<PAGE>
facilities of Grantor for the purpose of Secured Party's taking possession of
the Collateral or storing same or removing or putting the Collateral in salable
form or selling or disposing of same.
Upon the occurrence and during the continuance of an Event of Default,
Secured Party also shall have the right, without notice or demand, either in
person, by agent or by a receiver to be appointed by a court, and without regard
to the adequacy of any security for the Secured Obligations, to take possession
of the Collateral or any part thereof and to collect and receive the rents,
issues, profits, income and proceeds thereof. Taking possession of the
Collateral shall not cure or waive any Event of Default or notice thereof or
invalidate any act done pursuant to such notice. The rights, remedies and powers
of any receiver appointed by a court shall be as ordered by said court.
Any public or private sale or other disposition of the Collateral may be
held at any office of Secured Party, or at Grantor's place of business, or at
any other place permitted by applicable Law, and without the necessity of the
Collateral's being within the view of prospective purchasers. Secured Party may
direct the order and manner of sale of the Collateral, or portions thereof, as
it in its sole and absolute discretion may determine, and Grantor expressly
waives any right to direct the order and manner of sale of any Collateral.
Secured Party or any Person on Secured Party's behalf may bid and purchase at
any such sale or other disposition. The net cash proceeds resulting from the
collection, liquidation, sale, lease or other disposition of the Collateral
shall be applied, first, to the expenses (including reasonable attorneys' fees
and disbursements) of retaking, holding, storing, processing and preparing for
sale or lease, selling, leasing, collecting, liquidating and the like, and then
to the satisfaction of the Secured Obligations in such order as shall be
determined by Secured Party in its sole and absolute discretion. Grantor and any
other Person then obligated therefor shall pay to Secured Party on demand any
deficiency with regard thereto which may remain after such sale, disposition,
collection or liquidation of the Collateral.
Unless the Collateral is perishable or threatens to decline speedily in
value or is of a type customarily sold on a recognized market, Secured Party
will send or otherwise make available to Grantor reasonable notice of the time
and place of any public sale thereof or of the time on or after which any
private sale thereof is to be made. The requirement of sending reasonable notice
conclusively shall be met if such notice is mailed, first class mail, postage
prepaid, to Grantor at its address set forth in the Loan Agreement, or delivered
or otherwise sent to Grantor, at least five (5) days before the date of the
sale. Grantor expressly waives any right to receive notice of any public or
private sale of any Collateral or other security for the Secured Obligations
except as expressly provided for in this paragraph.
- ------
With respect to any Collateral consisting of securities, partnership
interests, joint venture interests, Investments or the like, and whether or not
any of such Collateral has been effectively registered under the Securities Act
of 1933 or other applicable Laws, Secured Party may, in its sole and absolute
discretion, sell all or any part of such Collateral at private sale in such
manner and under such circum-
-9-
<PAGE>
stances as Secured Party may deem necessary or advisable in order that the sale
may be lawfully conducted. Without limiting the foregoing, Secured Party may
(i) approach and negotiate with a limited number of potential purchasers, and
(ii) restrict the prospective bidders or purchasers to persons who will
represent and agree that they are purchasing such Collateral for their own
account for investment and not with a view to the distribution or resale
thereof. In the event that any such Collateral is sold at private sale, Grantor
agrees that if such Collateral is sold for a price which Secured Party in good
faith believes to be reasonable under the circumstances then existing, then (a)
the sale shall be deemed to be commercially reasonable in all respects, (b)
Grantor shall not be entitled to a credit against the Secured Obligations in an
amount in excess of the purchase price, and (c) Secured Party shall not incur
any liability or responsibility to Grantor in connection therewith,
notwithstanding the possibility that a substantially higher price might have
been realized at a public sale. Grantor recognizes that a ready market may not
exist for such Collateral if it is not regularly traded on a recognized
securities exchange, and that a sale by Secured Party of any such Collateral for
an amount substantially less than a pro rata share of the fair market value of
the issuer's assets minus liabilities may be commercially reasonable in view of
the difficulties that may be encountered in attempting to sell a large amount of
such Collateral or Collateral that is privately traded.
Upon consummation of any sale of Collateral hereunder, Secured Party
shall have the right to assign, transfer and deliver to the purchaser or
purchasers thereof the Collateral so sold. Each such purchaser at any such sale
shall hold the Collateral so sold absolutely free from any claim or right upon
the part of Grantor or any other Person except a third party lienholder
permitted under the Loan Documents, and Grantor hereby waives (to the extent
permitted by applicable Laws) all rights of redemption, stay and appraisal which
it now has or may at any time in the future have under any rule of Law or
statute now existing or hereafter enacted. If the sale of all or any part of the
Collateral is made on credit or for future delivery, Secured Party shall not be
required to apply any portion of the sale price to the Secured Obligations until
such amount actually is received by Secured Party, and any Collateral so sold
may be retained by Secured Party until the sale price is paid in full by the
purchaser or purchasers thereof. Secured Party shall not incur any liability in
case any such purchaser or purchasers shall fall to pay for the Collateral so
sold, and, in case of any such failure, the Collateral may be sold again.
10. Voting Rights: Dividends: etc. With respect to any Collateral
-----------------------------
consisting of securities, partnership interests, joint venture interests,
Investments or the like (referred to collectively and individually in this
Section 10 and in Section 11 as the "Investment Collateral"), so long as no
---------------------
Event of Default occurs and remains continuing:
10.1 Voting Rights. Grantor shall be entitled to exercise any and
-------------
all voting and other consensual rights pertaining to the Investment Collateral,
or any part thereof, for any purpose not inconsistent with the terms of this
Agreement, the Loan Agreement, or the other Loan Documents; provided, however,
-------- -------
that Grantor
-10-
<PAGE>
shall not exercise, or shall refrain from exercising, any such right if it would
result in a Default.
10.2 Dividend and Distribution Rights. Except as otherwise
--------------------------------
provided in any loan Document, Grantor shall be entitled to receive and to
retain and use any and all dividends or distributions paid in respect of the
Investment Collateral; provided, however, that any and all such dividends or
-------- -------
distributions received in the form of capital stock, certificated securities,
warrants, options or rights to acquire capital stock or certificated securities
forthwith shall be, and the certificates representing such capital stock or
certificated securities, if any, forthwith shall be delivered to Secured Party
to hold as pledged Collateral and shall, if received by Grantor, be received in
trust for the benefit of Secured Party, be segregated from the other Property of
Grantor, and forthwith be delivered to Secured Party as pledged Collateral in
the same form as so received (with any necessary endorsements).
11. Rights During Event of Default. With respect to any Investment
------------------------------
Collateral, so long as an Event of Default has occurred and is continuing:
11.1 Voting. Dividend. and Distribution Rights. At the option of
-----------------------------------------
Secured Party, all rights of Grantor to exercise the voting and other consensual
rights which it would otherwise be entitled to exercise pursuant to Section 10.1
above, and to receive the dividends and distributions which it would otherwise
be authorized to receive and retain pursuant to Section 10.2 above, shall cease,
and all such rights thereupon shall become vested in Secured Party which
thereupon shall have the sole right to exercise such voting and other consensual
rights and to receive and to hold as pledged Collateral such dividends and
distributions.
11.2 Dividends and Distributions Held in Trust. All dividends and
-----------------------------------------
other distributions which are received by Grantor contrary to the provisions of
this Agreement shall be received in trust for the benefit of Secured Party,
shall be segregated from other funds of Grantor, and forthwith shall be paid
over to Secured Party as pledged Collateral in the same form as so received
(with any necessary endorsements).
11.3 Irrevocable Proxy. Grantor does hereby revoke all previous
-----------------
proxies with regard to the Investment Collateral and appoint Secured Party as
its proxyholder to attend and vote at any and all meetings of the shareholders
or other equity holders of the Persons that issued the Investment Collateral and
any adjournments thereof, held on or after the date of the giving of this proxy
and prior to the termination of this proxy, and to execute any and all written
consents of shareholders or equity holders of such Persons executed on or after
the date of the giving of this proxy and prior to the termination of this proxy,
with the same effect as if Grantor had personally attended the meetings or had
personally voted its shares or other interests or had personally signed the
written consents; provided, however, that the proxyholder shall have rights
-------- -------
hereunder only upon the occurrence and during the continuance of an Event of
Default. Grantor hereby authorizes Secured Party to substitute another Person as
the proxyholder and, upon the occurrence and during the continuance of any Event
of Default, hereby authorizes the proxyholder to file this
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<PAGE>
proxy and any substitution instrument with the secretary or other appropriate
official of the appropriate Person. This proxy is coupled with an interest and
is irrevocable until such time as all Secured Obligations have been paid and
performed in full.
12. Attorney-in-Fact. Grantor hereby irrevocably nominates and appoints
----------------
Secured Party as its attorney-in-fact for the following purposes: (a) to do all
acts and things which Secured Party may deem necessary or advisable to perfect
and continue perfected the security interests created by this Agreement and,
upon the occurrence and during the continuance of an Event of Default, to
preserve, process, develop, maintain and protect the Collateral; (b) upon the
occurrence and during the continuance of an Event of Default, to do any and
every act which Grantor is obligated to do under this Agreement, at the expense
of the Grantor so obligated and without any obligation to do so; (c) to prepare,
sign, file and/or record, for Grantor, in the name of the Grantor, any financing
statement, application for registration, or like paper, and to take any other
action deemed by Secured Party necessary or desirable in order to perfect or
maintain perfected the security interests granted hereby; and (d) upon the
occurrence and during the continuance of an Event of Default, to execute any and
all papers and instruments and do all other things necessary or desirable to
preserve and protect the Collateral and to protect Secured Party's security
interests therein; provided, however, that Secured Party shall be under no
-------- -------
obligation whatsoever to take any of the foregoing actions, and, absent bad
faith or actual malice, Secured Party shall have no liability or responsibility
for any act taken or omission with respect thereto.
13. Costs and Expenses. Grantor agrees to pay to Secured Party all
------------------
costs and expenses (including, without limitation, reasonable attorneys' fees
---------
and disbursements) incurred by Secured Party in the enforcement or attempted
enforcement of this Agreement, whether or not an action is filed in connection
therewith, and in connection with any waiver or amendment of any term or
provision hereof. All advances, charges, costs and expenses, including
---------
reasonable attorneys' fees and disbursements, incurred or paid by Secured Party
in exercising any right, privilege, power or remedy conferred by this Agreement
(including, without limitation, the right to perform any Secured Obligation of
---------
Grantor under the Loan Documents), or in the enforcement or attempted
enforcement thereof, shall be secured hereby and shall become a part of the
Secured Obligations and shall be paid to Secured Party by Grantor, immediately
upon demand, together with interest thereon at the Default Rate.
14. Statute of Limitations and Other Laws. Until the Secured
-------------------------------------
Obligations shall have been paid and performed in full, the power of sale and
all other rights, privileges, powers and remedies granted to Secured Party
hereunder shall continue to exist and may be exercised by Secured Party at any
time and from time to time irrespective of the fact that any of the Secured
Obligations may have become barred by any statute of limitations. Grantor
expressly waives the benefit of any and all statutes of limitation, and any and
all Laws providing for exemption of property from execution or for valuation and
appraisal upon foreclosure, to the maximum extent permitted by applicable Law.
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<PAGE>
15. Other Agreements. Nothing herein shall in any way modify or limit
----------------
the effect of terms or conditions set forth in any other security or other
agreement executed by Grantor or in connection with the Secured Obligations, but
each and every term and condition hereof shall be in addition thereto. All
provisions contained in the Loan Agreement or any other Loan Document that apply
to Loan Documents generally are fully applicable to this Agreement and are
incorporated herein by this reference.
16. Understandings With Respect to Waivers and Consents. Grantor
---------------------------------------------------
warrants and agrees that each of the waivers and consents set forth herein are
made after consultation with legal counsel and with full knowledge of their
significance and consequences, with the understanding that events giving rise to
any defense or right waived may diminish, destroy or otherwise adversely affect
rights which Grantor otherwise may have against Secured Party or others, or
against Collateral, and that, under the circumstances, the waivers and consents
herein given are reasonable and not contrary to public policy or Law. If any of
the waivers or consents herein are determined to be contrary to any applicable
Law or public policy, such waivers and consents shall be effective to the
maximum extent permitted by Law.
17. Release of Grantor. This Agreement and all Secured Obligations of
------------------
Grantor hereunder shall be released when all Secured Obligations have been paid
in full in cash or otherwise performed in full and when no portion of the
Commitments remain outstanding. Upon such release of Grantor's Secured
Obligations hereunder, Secured Party shall return any pledged Collateral to
Grantor, or to the Person or Persons legally entitled thereto, and shall
endorse, execute, deliver, record and file all instruments and documents, and do
all other acts and things, reasonably required for the return of the Collateral
to Grantor, or to the Person or Persons legally entitled thereto, and to
evidence or document the release of Secured Party's interests arising under this
Agreement, all as reasonably requested by, and at the sole expense of, Grantor.
IN WITNESS WHEREOF, Grantor has executed this Agreement by its duly
authorized officers as of the date first written above.
"Grantor"
ELDORADO RESORTS LLC
By:______________________________________
Donald L. Carano, Chief Executive Officer
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<PAGE>
[Exhibit K]
SECURITY AGREEMENT
------------------
This SECURITY AGREEMENT ("Agreement"), dated as of July 31, 1996, is
made by ELDORADO CAPITAL CORP., a Nevada corporation, as Grantor, in favor of
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, a national banking
association, as the Administrative Agent and sole initial Bank under the Amended
and Restated Loan Agreement hereafter referred to, and in favor of each of the
Banks which may hereafter become a party thereto, collectively as Secured Party,
with reference to the following facts:
RECITALS
--------
A. Grantor has guaranteed the obligations of ELDORADO RESORTS LLC
("Borrower") pursuant to an Amended and Restated Loan Agreement of even date
herewith among Borrower and Bank of America National Trust and Savings
Association, as Administrative Agent and sole initial Bank (as it may from time
to time be amended, restated, extended, renewed, modified or supplemented, the
"Loan Agreement"). This Agreement is the Security Agreement referred to in the
Loan Agreement and is one of the "Loan Documents" referred to in the Loan
Agreement.
B. Pursuant to the Loan Documents of even date the Banks are making
certain credit facilities available to Borrower.
C. As a condition of the availability of such credit facilities,
Grantor is required to enter into this Agreement and to grant security interests
to Secured Party as herein provided.
D. Grantor expects to realize direct and indirect benefits from the
execution of this Agreement
AGREEMENT
---------
NOW, THEREFORE, in order to induce Secured Party to extend the
aforementioned credit facilities, and for other good and valuable consideration,
the receipt and adequacy of which hereby is acknowledged, Grantor hereby
represents, warrants, covenants, agrees, assigns and grants as follows:
1. Definitions. Terms defined in the Loan Agreement and not otherwise
-----------
defined in this Agreement shall have the meanings defined for those terms in the
Loan Agreement. Terms defined in the Uniform Commercial Code and not otherwise
defined in this Agreement or in the Loan Agreement shall have the meanings
defined for those terms in the Nevada Commercial Code. In addition, as
-1-
<PAGE>
used in this Agreement, the following terms shall have the meanings respectively
set forth after each:
"Agreement" means this Security Agreement, and any extensions,
---------
modifications, renewals, restatements, supplements or amendments hereof.
"Collateral" means and includes all present and future right,
----------
title and interest of Grantor in or to any Property or assets whatsoever,
and all rights and powers of Grantor to transfer any interest in or to any
Property or assets whatsoever, including, without limitation, any and all
---------
of the following Property:
(a) All present and future accounts, accounts receivable,
agreements, contracts, leases, contract rights, rights to payment,
instruments, documents, chattel paper, security agreements,
guaranties, undertakings, surety bonds, insurance policies, notes and
drafts, and all forms of obligations owing to Grantor or in which
Grantor may have any interest, however created or arising;
(b) All present and future general intangibles, all tax
refunds of every kind and nature to which Grantor now or hereafter may
become entitled, however arising, all other refunds, and all deposits,
goodwill, choses in action, trade secrets, computer programs,
software, customer lists, trademarks, trade names, service marks,
patents, licenses, copyrights, technology, processes, proprietary
information and insurance proceeds;
(c) All present and future deposit accounts of Grantor,
including, without limitation, any demand, time, savings, passbook or
---------
like account maintained by Grantor with any bank, savings and loan
association, credit union or like organization, and all money, Cash
and Cash Equivalents of Grantor, whether or not deposited in any such
deposit account;
(d) All present and future books and records, including,
---------
without limitation, books of account and ledgers of every kind and
nature, all electronically recorded data relating to Grantor or its
business, all receptacles and containers for such records, and all
files and correspondence;
(e) All present and future goods, including, without
---------
limitation, all consumer goods, farm products, inventory, equipment,
gaming devices and associated equipment as defined in Nevada Revised
Statutes Chapter 463, machinery, tools, molds, dies, furniture,
furnishings, fixtures, trade fixtures, motor vehicles and all other
goods used in connection with or in the conduct of Grantor's business;
-2-
<PAGE>
(f) All present and future inventory and merchandise, including,
---------
without limitation, all present and future goods held for sale or lease or
to be furnished under a contract of service, all raw materials, work in
process and finished goods, all packing materials, supplies and containers
relating to or used in connection with any of the foregoing, and all bills
of lading, warehouse receipts or documents of title relating to any of the
foregoing;
(g) All present and future stocks, bonds, debentures, securities,
subscription rights, options, warrants, puts, calls, certificates,
partnership interests, joint venture interests, Investments and/or
brokerage accounts and all rights, preferences, privileges, dividends,
distributions, redemption payments, or liquidation payments with respect
thereto;
(h) All present and future accessions, appurtenances, components,
repairs, repair parts, spare parts, replacements, substitutions, additions,
issue and/or improvements to or of or with respect to any of the foregoing;
(i) All other tangible and intangible Property of Grantor;
(j) All rights, remedies, powers and/or privileges of Grantor
with respect to any of the foregoing; and
(k) Any and all proceeds and products of any of the foregoing,
including, without limitation, all money, accounts, general intangibles,
---------
deposit accounts, documents, instruments, chattel paper, goods, insurance
proceeds, and any other tangible or intangible property received upon the
sale or disposition of any of the foregoing.
"Secured Obligations" means any and all present and future Obligations
-------------------
of any type or nature of Grantor arising under or relating to the Guaranty, of
even date herewith, made Grantor in favor of Secured Party. The Guaranty relates
to the Loan Agreement and the Loan Documents or any one or more of them, and all
obligations thereunder whether due or to become due, matured or unmatured,
liquidated or unliquidated, or contingent or noncontingent, including
---------
Obligations of performance as well as Obligations of payment, and including
---------
interest that accrues after the commencement of any bankruptcy or insolvency
proceeding by or against Grantor.
"Secured Party" means the Administrative Agent, as collateral agent
-------------
for the ratable benefit of the Banks. All rights of the Secured Party under this
Agreement shall be exercised by the Administrative Agent, acting with the
consent of the Banks or Majority Banks to the extent required by the Loan
Agreement.
-3-
<PAGE>
2. Further Assurances. At any time and from time to time at the
------------------
request of Secured Party, Grantor shall execute and deliver to Secured Party all
such financing statements and other instruments and documents in form and
substance satisfactory to Secured Party as shall be necessary or desirable to
fully perfect, when filed and/or recorded, Secured Party's security interests
granted pursuant to Section 3 of this Agreement. At any time and from time to
time, Secured Party shall be entitled to file and/or record any or all such
financing statements, instruments and documents held by it, and any or all such
further financing statements, documents and instruments, and to take all such
other actions, as Secured Party may deem appropriate to perfect and to maintain
perfected the security interests granted in Section 3 of this Agreement. Before
and after the occurrence of any Event of Default, at Secured Party's request,
Grantor shall execute all such further financing statements, instruments and
documents, and shall do all such further acts and things, as may be deemed
necessary or desirable by Secured Party to create and perfect, and to continue
and preserve, an indefeasible security interest in the Collateral in favor of
Secured Party, or the priority thereof. With respect to any Collateral
consisting of certificated securities, instruments, documents, certificates of
title or the like, as to which Secured Party's security interest need be
perfected by, or the priority thereof need be assured by, possession of such
Collateral, Grantor will upon demand of Secured Party deliver possession of same
in pledge to Secured Party. With respect to any Collateral consisting of
securities, instruments, partnership or joint venture interests or the like,
Grantor hereby consents and agrees that the issuers of, or obligors on, any such
Collateral, or any registrar or transfer agent or trustee for any such
Collateral, shall be entitled to accept the provisions of this Agreement as
conclusive evidence of the right of Secured Party to effect any transfer or
exercise any right hereunder or with respect to any such Collateral,
notwithstanding any other notice or direction to the contrary heretofore or
hereafter given by Grantor or any other Person to such issuers or such obligors
or to any such registrar or transfer agent or trustee.
3. Security Agreement. For valuable consideration, Grantor hereby
------------------
assigns and pledges to Secured Party, and grants to Secured Party a security
interest in, all presently existing and hereafter acquired Collateral, as
security for the timely payment and performance of the Secured Obligations, and
each of them. This Agreement is a continuing and irrevocable agreement and all
the rights, powers, privileges and remedies hereunder shall apply to any and all
Secured Obligations, including those arising under successive transactions which
shall either continue the Secured Obligations, increase or decrease them, or
from time to time create new Secured Obligations after all or any prior Secured
Obligations have been satisfied, and notwithstanding the bankruptcy of Grantor
or any other Person or any other event or proceeding affecting any Person.
4. Grantor's Representations. Warranties and Agreements. Except as
----------------------------------------------------- ------
otherwise disclosed to Secured Party in writing concurrently herewith, Grantor
represents, warrants and agrees that: (a) Grantor will pay, prior to
delinquency, all taxes, charges, Liens and assessments against the Collateral,
except such as are expressly permitted by the Loan Agreement or are timely
- ------
contested in good faith, and upon its failure to pay or so contest such taxes,
charges, Liens and assessments,
-4-
<PAGE>
Secured Party at its option may pay any of them, and Secured Party shall be the
sole judge of the legality or validity thereof and the amount necessary to
discharge the same; (b) the Collateral will not be used for any unlawful purpose
or in violation of any Law, regulation or ordinance, nor used in any way that
will void or impair any insurance required to be carried in connection
therewith; (c) Grantor will, to the extent consistent with good business
practice, keep the Collateral in reasonably good repair, working order and
condition, and from time to time make all needful and proper repairs, renewals,
replacements, additions and improvements thereto and, as appropriate and
applicable, will otherwise deal with the Collateral in all such ways as are
considered good practice by owners of like Property; (d) Grantor will take all
reasonable steps to preserve and protect the Collateral; (e) Grantor will
maintain, with responsible insurance companies, insurance covering the
Collateral against such insurable losses as is required by the Loan Agreement
and as is consistent with sound business practice, and will cause Secured Party
to be designated as an additional insured and loss payee with respect to such
insurance, will obtain the written agreement of the insurers that such insurance
shall not be cancelled, terminated or materially modified to the detriment of
Secured Party without at least 30 days prior written notice to Secured Party,
and will furnish copies of such insurance policies or certificates to Secured
Party promptly upon request therefor; and (f) Grantor will promptly notify
Secured Party in writing in the event of any substantial or material damage to
the Collateral from any source whatsoever, and, except for the disposition of
------
collections and other proceeds of the Collateral permitted by Section 6 hereof,
Grantor will not remove or permit to be removed any part of the Collateral from
its place of business without the prior written consent of Secured Party, except
------
for such items of the Collateral as are removed in the ordinary course of
business or in connection with any transaction or disposition otherwise
permitted by the Loan Documents.
5. Secured Party's Rights Re Collateral. At any time (whether or not
------------------------------------
an Event of Default has occurred), without notice or demand and at the expense
of Grantor, Secured Party may, to the extent it may be necessary or desirable to
protect the security hereunder, but Secured Party shall not be obligated to: (a)
enter upon any premises on which Collateral is situated and examine the same or
(b) perform any obligation of Grantor under this Agreement or any obligation of
any other Person under the Loan Documents. At any time and from time to time, at
the expense of Grantor, Secured Party may, to the extent it may be necessary or
desirable to protect the security hereunder, but Secured Party shall not be
obligated to: (i) notify obligors on the Collateral that the Collateral has
been assigned to Secured Party; (ii) at any time and from time to time request
from obligors on the Collateral, in the name of Grantor or in the name of
Secured Party, information concerning the Collateral and the amounts owing
thereon; and (iii) cause the Collateral to be registered in the name of Secured
Party, as legal owner. Grantor shall maintain books and records pertaining to
the Collateral in such detail, form and scope as Secured Party shall reasonably
require consistent with Secured Party's interests hereunder. Grantor shall at
any time at Secured Party's request mark the Collateral and/or Grantor's ledger
cards, books of account and other records relating to the Collateral with
appropriate notations satisfactory to Secured Party disclosing that they are
subject to Secured Party's security interests. Secured Party shall at all
reasonable
-5-
<PAGE>
times on reasonable notice have full access to and the right to audit any and
all of Grantor's books and records pertaining to the Collateral, and to confirm
and verify the value of the Collateral and to do whatever else Secured Party
reasonably may deem necessary or desirable to protect its interests; provided,
--------
however, that any such action which involves communicating with customers of
- -------
Grantor shall be carried out by Secured Party through Grantor's independent
auditors unless Secured Party shall then have the right directly to notify
obligors on the Collateral as provided in Section 9. Secured Party shall be
under no duty or obligation whatsoever to take any action to preserve any rights
of or against any prior or other parties in connection with the Collateral, to
exercise any voting rights or managerial rights with respect to any Collateral,
whether or not an Event of Default shall have occurred, or to make or give any
presentments, demands for performance, notices of non-performance, protests,
notices of protests, notices of dishonor or notices of any other nature
whatsoever in connection with the Collateral or the Secured Obligations. Secured
Party shall be under no duty or obligation whatsoever to take any action to
protect or preserve the Collateral or any rights of Grantor therein, or to make
collections or enforce payment thereon, or to participate in any foreclosure or
other proceeding in connection therewith.
6. Collections on the Collateral. Except as otherwise provided in any
----------------------------- ------
Loan Document, Grantor shall have the right to use and to continue to make
collections on and receive dividends and other proceeds of all of the Collateral
in the ordinary course of business so long as no Event of Default shall have
occurred and be continuing. Upon the occurrence and during the continuance of an
Event of Default, at the option of Secured Party, except as prohibited by
applicable Law Grantor's right to make collections on and receive dividends and
other proceeds of the Collateral and to use or dispose of such collections and
proceeds shall terminate, and any and all dividends, proceeds and collections,
including all partial or total prepayments, then held or thereafter received on
or on account of the Collateral will be held or received by Grantor in trust for
Secured Party and immediately delivered in kind to Secured Party. Any remittance
received by Grantor from any Person shall be presumed to relate to the
Collateral and to be subject to Secured Party's security interests. Upon the
occurrence and during the continuance of an Event of Default, Secured Party
shall have the right at all times to receive, receipt for, endorse, assign,
deposit and deliver, in the name of Secured Party or in the name of Grantor, any
and all checks, notes, drafts and other instruments for the payment of money
constituting proceeds of or otherwise relating to the Collateral; and Grantor
hereby authorizes Secured Party to affix, by facsimile signature or otherwise,
the general or special endorsement of it, in such manner as Secured Party shall
deem advisable, to any such instrument in the event the same has been delivered
to or obtained by Secured Party without appropriate endorsement, and Secured
Party and any collecting bank are hereby authorized to consider such endorsement
to be a sufficient, valid and effective endorsement by Grantor, to the same
extent as though it were manually executed by the duly authorized officer of
Grantor, regardless of by whom or under what circumstances or by what authority
such facsimile signature or other endorsement actually is affixed, without duty
of inquiry or responsibility as to such matters, and Grantor hereby expressly
waives demand, presentment, protest and notice of protest
-6-
<PAGE>
or dishonor and all other notices of every kind and nature with respect to any
such instrument.
7. Possession of Collateral by Secured Party. All the Collateral now,
-----------------------------------------
heretofore or hereafter delivered to Secured Party shall be held by Secured
Party in its possession, custody and control. Any or all of the Collateral
delivered to Secured Party may be held in an interest bearing or noninterest
bearing account, in Secured Party's sole and absolute discretion, and Secured
Party may, in its discretion, apply any such interest to payment of the Secured
Obligations. Nothing herein shall obligate Secured Party to invest any
Collateral or obtain any particular return thereon. Upon the occurrence and
during the continuance of an Event of Default, whenever any of the Collateral is
in Secured Party's possession, custody or control, Secured Party may use,
operate and consume the Collateral, whether for the purpose of preserving and/or
protecting the Collateral, or for the purpose of performing any of Grantor's
obligations with respect thereto, or otherwise. Secured Party may at any time
deliver or redeliver the Collateral or any part thereof to Grantor, and the
receipt of any of the same by Grantor shall be complete and full acquittance for
the Collateral so delivered, and Secured Party thereafter shall be discharged
from any liability or responsibility therefor. So long as Secured Party
exercises reasonable care with respect to any Collateral in its possession,
custody or control, Secured Party shall have no liability for any loss of or
damage to such Collateral, and in no event shall Secured Party have liability
for any diminution in value of Collateral occasioned by economic or market
conditions or events. Secured Party shall be deemed to have exercised reasonable
care within the meaning of the preceding sentence if the Collateral in the
possession, custody or control of Secured Party is accorded treatment
substantially equal to that which Secured Party accords its own property, it
being understood that Secured Party shall not have any responsibility for (a)
ascertaining or taking action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relating to any Collateral, whether or not
Secured Party has or is deemed to have knowledge of such matters, or (b) taking
any necessary steps to preserve rights against any Person with respect to any
Collateral.
8. Events of Default. There shall be an Event of Default hereunder
-----------------
upon the occurrence and during the continuance of an Event of Default under the
Loan Agreement.
9. Rights Upon Event of Default. Upon the occurrence and during the
----------------------------
continuance of an Event of Default, Secured Party shall have, in any
jurisdiction where enforcement hereof is sought, in addition to all other rights
and remedies that Secured Party may have under applicable Law or in equity or
under this Agreement (including, without limitation, all rights set forth in
---------
Section 6 hereof) or under any other Loan Document, all rights and remedies of a
secured party under the Uniform Commercial Code as enacted in any jurisdiction,
and, in addition, the following rights and remedies, all of which may be
exercised with or without notice to Grantor and without affecting the
Obligations of Grantor hereunder or under any other Loan Document, or the
enforceability of the Liens and security interests created hereby: (a) to
foreclose the Liens and security interests created hereunder or under any other
agreement relating to any Collateral by any available judicial procedure or
without
-7-
<PAGE>
judicial process; (b) to enter any premises where any Collateral may be located
for the purpose of securing, protecting, inventorying, appraising, inspecting,
repairing, preserving, storing, preparing, processing, taking possession of or
removing the same; (c) to sell, assign, lease or otherwise dispose of any
Collateral or any part thereof, either at public or private sale or at any
broker's board, in lot or in bulk, for cash, on credit or otherwise, with or
without representations or warranties and upon such terms as shall be acceptable
to Secured Party; (d) to notify obligors on the Collateral that the Collateral
has been assigned to Secured Party and that all payments thereon are to be made
directly and exclusively to Secured Party; (e) to collect by legal proceedings
or otherwise all dividends, distributions, interest, principal or other sums now
or hereafter payable upon or on account of the Collateral; (f) to enter into any
extension, reorganization, deposit, merger or consolidation agreement, or any
other agreement relating to or affecting the Collateral, and in connection
therewith Secured Party may deposit or surrender control of the Collateral
and/or accept other Property in exchange for the Collateral; (g) to settle,
compromise or release, on terms acceptable to Secured Party, in whole or in
part, any amounts owing on the Collateral and/or any disputes with respect
thereto; (h) to extend the time of payment, make allowances and adjustments and
issue credits in connection with the Collateral in the name of Secured Party or
in the name of Grantor; (i) to enforce payment and prosecute any action or
proceeding with respect to any or all of the Collateral and take or bring, in
the name of Secured Party or in the name of Grantor, any and all steps, actions,
suits or proceedings deemed by Secured Party necessary or desirable to effect
collection of or to realize upon the Collateral, including any judicial or
---------
nonjudicial foreclosure thereof or thereon, and Grantor specifically consents to
any nonjudicial foreclosure of any or all of the Collateral or any other action
taken by Secured Party which may release any obligor from personal liability on
any of the Collateral, ad Grantor waives any right not expressly provided for in
this Agreement to receive notice of any public or private judicial or
nonjudicial sale or foreclosure of any security or any of the Collateral; and
any money or other property received by Secured Party in exchange for or on
account of the Collateral, whether representing collections or proceeds of
Collateral, and whether resulting from voluntary payments or foreclosure
proceedings or other legal action taken by Secured Party or Grantor may be
applied by Secured Party without notice to Grantor to the Secured Obligations in
such order and manner as Secured Party in its sole discretion shall determine;
(j) to insure, process and preserve the Collateral; (k) to exercise all rights,
remedies, powers or privileges provided under any of the Loan Documents; (1) to
remove, from any premises where the same may be located, the Collateral and any
and all documents, instruments, files and records, and any receptacles and
cabinets containing the same, relating to the Collateral, and Secured Party may,
at the cost and expense of Grantor, use such of its supplies; equipment,
facilities and space at its places of business as may be necessary or
appropriate to properly administer, process, store, control, prepare for sale or
disposition and/or sell or dispose of the Collateral or to properly administer
and control the handling of collections and realizations thereon, and Secured
Party shall be deemed to have a rent-free tenancy of any premises of Grantor for
such purposes and for such periods of time as reasonably required by Secured
Party; (m) to receive, open and dispose of all mail addressed to Grantor and
notify postal authorities to change the address for delivery thereof to such
address as Secured Party may designate; provided that Secured Party agrees that
--------
-8-
<PAGE>
it will promptly deliver over to Grantor such opened mail as does not relate to
the Collateral; and (n) to exercise all other rights, powers, privileges and
remedies of an owner of the Collateral; all at Secured Party's sole option and
as Secured Party in its sole discretion may deem advisable. Grantor will, at
Secured Party's request, assemble the Collateral and make it available to
Secured Party at places which Secured Party may designate, whether at the
premises of Grantor or elsewhere, and will make available to Secured Party, free
of cost, all premises, equipment and facilities of Grantor for the purpose of
Secured Party's taking possession of the Collateral or storing same or removing
or putting the Collateral in salable form or selling or disposing of same.
Upon the occurrence and during the continuance of an Event of Default,
Secured Party also shall have the right, without notice or demand, either in
person, by agent or by a receiver to be appointed by a court, and without regard
to the adequacy of any security for the Secured Obligations, to take possession
of the Collateral or any part thereof and to collect and receive the rents,
issues, profits, income and proceeds thereof. Taking possession of the
Collateral shall not cure or waive any Event of Default or notice thereof or
invalidate any act done pursuant to such notice. The rights, remedies and powers
of any receiver appointed by a court shall be as ordered by said court.
Any public or private sale or other disposition of the Collateral may
be held at any office of Secured Party, or at Grantor's place of business, or at
any other place permitted by applicable Law, and without the necessity of the
Collateral's being within the view of prospective purchasers. Secured Party may
direct the order and manner of sale of the Collateral, or portions thereof, as
it in its sole and absolute discretion may determine, and Grantor expressly
waives any right to direct the order and manner of sale of any Collateral.
Secured Party or any Person on Secured Party's behalf may bid and purchase at
any such sale or other disposition. The net cash proceeds resulting from the
collection, liquidation, sale, lease or other disposition of the Collateral
shall be applied, first, to the expenses (including reasonable attorneys' fees
and disbursements) of retaking, holding, storing, processing and preparing for
sale or lease, selling, leasing, collecting, liquidating and the like, and then
to the satisfaction of the Secured Obligations in such order as shall be
determined by Secured Party in its sole and absolute discretion. Grantor and any
other Person then obligated therefor shall pay to Secured Party on demand any
deficiency with regard thereto which may remain after such sale, disposition,
collection or liquidation of the Collateral.
Unless the Collateral is perishable or threatens to decline speedily
in value or is of a type customarily sold on a recognized market, Secured Party
will send or otherwise make available to Grantor reasonable notice of the time
and place of any public sale thereof or of the time on or after which any
private sale thereof is to be made. The requirement of sending reasonable notice
conclusively shall be met if such notice is mailed, first class mail, postage
prepaid, to Grantor at its address set forth in the Loan Agreement, or delivered
or otherwise sent to Grantor, at least five (5) days before the date of the
sale. Grantor expressly waives any right to receive
-9-
<PAGE>
notice of any public or private sale of any Collateral or other security for the
Secured Obligations except as expressly provided for in this paragraph.
------
With respect to any Collateral consisting of securities, partnership
interests, joint venture interests, Investments or the like, and whether or not
any of such Collateral has been effectively registered under the Securities Act
of 1933 or other applicable Laws, Secured Party may, in its sole and absolute
discretion, sell all or any part of such Collateral at private sale in such
manner and under such circumstances as Secured Party may deem necessary or
advisable in order that the sale may be lawfully conducted. Without limiting the
foregoing, Secured Party may (i) approach and negotiate with a limited number of
potential purchasers, and (ii) restrict the prospective bidders or purchasers to
persons who will represent and agree that they are purchasing such Collateral
for their own account for investment and not with a view to the distribution or
resale thereof. In the event that any such Collateral is sold at private sale,
Grantor agrees that if such Collateral is sold for a price which Secured Party
in good faith believes to be reasonable under the circumstances then existing,
then (a) the sale shall be deemed to be commercially reasonable in all respects,
(b) Grantor shall not be entitled to a credit against the Secured Obligations in
an amount in excess of the purchase price, and (c) Secured Party shall not incur
any liability or responsibility to Grantor in connection therewith,
notwithstanding the possibility that a substantially higher price might have
been realized at a public sale. Grantor recognizes that a ready market may not
exist for such Collateral if it is not regularly traded on a recognized
securities exchange, and that a sale by Secured Party of any such Collateral for
an amount substantially less than a pro rata share of the fair market value of
the issuer's assets minus liabilities may be commercially reasonable in view of
the difficulties that may be encountered in attempting to sell a large amount of
such Collateral or Collateral that is privately traded.
Upon consummation of any sale of Collateral hereunder, Secured Party
shall have the right to assign, transfer and deliver to the purchaser or
purchasers thereof the Collateral so sold. Each such purchaser at any such sale
shall hold the Collateral so sold absolutely free from any claim or right upon
the part of Grantor or any other Person except a third party lienholder
permitted under the Loan Documents, and Grantor hereby waives (to the extent
permitted by applicable Laws) all rights of redemption, stay and appraisal which
it now has or may at any time in the future have under any rule of Law or
statute now existing or hereafter enacted. If the sale of all or any part of the
Collateral is made on credit or for future delivery, Secured Party shall not be
required to apply any portion of the sale price to the Secured Obligations until
such amount actually is received by Secured Party, and any Collateral so sold
may be retained by Secured Party until the sale price is paid in full by the
purchaser or purchasers thereof. Secured Party shall not incur any liability in
case any such purchaser or purchasers shall fail to pay for the Collateral so
sold, and, in case of any such failure, the Collateral may be sold again.
10. Voting Rights: Dividends: etc. With respect to any Collateral
-----------------------------
consisting of securities, partnership interests, joint venture interests,
Investments or the like (referred to collectively and individually in this
Section 10 and in Section 11
-10-
<PAGE>
as the "Investment Collateral"), so long as no Event of Default occurs and
---------------------
remains continuing:
10.1 Voting Rights. Grantor shall be entitled to exercise any and all
-------------
voting and other consensual rights pertaining to the Investment Collateral, or
any part thereof, for any purpose not inconsistent with the terms of this
Agreement, the Loan Agreement, or the other Loan Documents; provided, however
-------- -------
that Grantor shall not exercise, or shall refrain from exercising, any such
right if it would result in a Default.
10.2 Dividend and Distribution Rights. Except as otherwise provided in
--------------------------------
any Loan Document, Grantor shall be entitled to receive and to retain and use
any and all dividends or distributions paid in respect of the Investment
Collateral; provided, however, that any and all such dividends or distributions
-------- -------
received in the form of capital stock, certificated securities, warrants,
options or rights to acquire capital stock or certificated securities forthwith
shall be, and the certificates representing such capital stock or certificated
securities, if any, forthwith shall be delivered to Secured Party to hold as
pledged Collateral and shall, if received by Grantor, be received in trust for
the benefit of Secured Party, be segregated from the other Property of Grantor,
and forthwith be delivered to Secured Party as pledged Collateral in the same
form as so received (with any necessary endorsements).
11. Rights During Event of Default. With respect to any Investment
------------------------------
Collateral, so long as an Event of Default has occurred and is continuing:
11.1 Voting, Dividend, and Distribution Rights. At the option of
-----------------------------------------
Secured Party, all rights of Grantor to exercise the voting and other consensual
rights which it would otherwise be entitled to exercise pursuant to Section 10.1
above, and to receive the dividends and distributions which it would otherwise
be authorized to receive and retain pursuant to Section 10.2 above, shall cease,
and all such rights thereupon shall become vested in Secured Party which
thereupon shall have the sole right to exercise such voting and other consensual
rights and to receive and to hold as pledged Collateral such dividends and
distributions.
11.2 Dividends and Distributions Held in Trust. All dividends and
-----------------------------------------
other distributions which are received by Grantor contrary to the provisions of
this Agreement shall be received in trust for the benefit of Secured Party,
shall be segregated from other funds of Grantor, and forthwith shall be paid
over to Secured Party as pledged Collateral in the same form as so received
(with any necessary endorsements).
11.3 Irrevocable Proxy. Grantor does hereby revoke all previous
-----------------
proxies with regard to the Investment Collateral and appoint Secured Party as
its proxyholder to attend and vote at any and all meetings of the shareholders
or other equity holders of the Persons that issued the Investment Collateral and
any adjournments thereof, held on or after the date of the giving of this proxy
and prior to the termination of this proxy, and to execute any and all written
consents of shareholders or equity holders of such Persons executed on or after
the date of the giving of this
-11-
<PAGE>
proxy and prior to the termination of this proxy, with the same effect as if
Grantor had personally attended the meetings or had personally voted its shares
or other interests or had personally signed the written consents; provided,
--------
however, that the proxyholder shall have rights hereunder only upon the
- -------
occurrence and during the continuance of an Event of Default. Grantor hereby
authorizes Secured Party to substitute another Person as the proxyholder and,
upon the occurrence and during the continuance of any Event of Default, hereby
authorizes the proxyholder to file this proxy and any substitution instrument
with the secretary or other appropriate official of the appropriate Person. This
proxy is coupled with an interest and is irrevocable until such time as all
Secured Obligations have been paid and performed in full.
12. Attorney-in-Fact. Grantor hereby irrevocably nominates and
----------------
appoints Secured Party as its attorney-in-fact for the following purposes: (a)
to do all acts and things which Secured Party may deem necessary or advisable to
perfect and continue perfected the security interests created by this Agreement
and, upon the occurrence and during the continuance of an Event of Default, to
preserve, process, develop, maintain and protect the Collateral; (b) upon the
occurrence and during the continuance of an Event of Default, to do any and
every act which Grantor is obligated to do under this Agreement, at the expense
of the Grantor so obligated and without any obligation to do so; (c) to prepare,
sign, file and/or record, for Grantor, in the name of the Grantor, any financing
statement, application for registration, or like paper, and to take any other
action deemed by Secured Party necessary or desirable in order to perfect or
maintain perfected the security interests granted hereby; and (d) upon the
occurrence and during the continuance of an Event of Default, to execute any and
all papers and instruments and do all other things necessary or desirable to
preserve and protect the Collateral and to protect Secured Party's security
interests therein; provided, however, that Secured Party shall be under no
-------- -------
obligation whatsoever to take any of the foregoing actions, and, absent bad
faith or actual malice, Secured Party shall have no liability or responsibility
for any act taken or omission with respect thereto.
13. Costs and Expenses. Grantor agrees to pay to Secured Party all
------------------
costs and expenses (including, without limitation, reasonable attorneys' fees
---------
and disbursements) incurred by Secured Party in the enforcement or attempted
enforcement of this Agreement, whether or not an action is filed in connection
therewith, and in connection with any waiver or amendment of any term or
provision hereof. All advances, charges, costs and expenses, including
---------
reasonable attorneys' fees and disbursements, incurred or paid by Secured Party
in exercising any right, privilege, power or remedy conferred by this Agreement
(including, without limitation, the right to perform any Secured Obligation of
---------
Grantor under the Loan Documents), or in the enforcement or attempted
enforcement thereof, shall be secured hereby and shall become a part of the
Secured Obligations and shall be paid to Secured Party by Grantor, immediately
upon demand, together with interest thereon at the Default Rate.
14. Statute of Limitations and Other Laws. Until the Secured
-------------------------------------
Obligations shall have been paid and performed in full, the power of sale and
all other rights, privileges, powers and remedies granted to Secured Party
hereunder shall
-12-
<PAGE>
continue to exist and may be exercised by Secured Party at any time and from
time to time irrespective of the fact that any of the Secured Obligations may
have become barred by any statute of limitations. Grantor expressly waives the
benefit of any and all statutes of limitation, and any and all Laws providing
for exemption of property from execution or for valuation and appraisal upon
foreclosure, to the maximum extent permitted by applicable Law.
15. Other Agreements. Nothing herein shall in any way modify or limit
----------------
the effect of terms or conditions set forth in any other security or other
agreement executed by Grantor or in connection with the Secured Obligations, but
each and every term and condition hereof shall be in addition thereto. All
provisions contained in the Loan Agreement or any other Loan Document that apply
to Loan Documents generally are fully applicable to this Agreement and are
incorporated herein by this reference.
16. Understandings With Respect to Waivers and Consents. Grantor
---------------------------------------------------
warrants and agrees that each of the waivers and consents set forth herein are
made after consultation with legal counsel and with full knowledge of their
significance and consequences, with the understanding that events giving rise to
any defense or right waived may diminish, destroy or otherwise adversely affect
rights which Grantor otherwise may have against Secured Party or others, or
against Collateral, and that, under the circumstances, the waivers and consents
herein given are reasonable and not contrary to public policy or Law. If any of
the waivers or consents herein are determined to be contrary to any applicable
Law or public policy, such waivers and consents shall be effective to the
maximum extent permitted by Law.
17. Release of Grantor. This Agreement and all Secured Obligations of
------------------
Grantor hereunder shall be released when all Secured Obligations have been paid
in full in cash or otherwise performed in full and when no portion of the
Commitments remain outstanding. Upon such release of Grantor's Secured
Obligations hereunder, Secured Party shall return any pledged Collateral to
Grantor, or to the Person or Persons legally entitled thereto, and shall
endorse, execute, deliver, record and file all instruments and documents, and do
all other acts and things, reasonably required for the return of the Collateral
to Grantor, or to the Person or Persons legally entitled thereto, and to
evidence or document the release of Secured Party's interests arising under this
Agreement, all as reasonably requested by, and at the sole expense of, Grantor.
IN WITNESS WHEREOF, Grantor has executed this Agreement by its duly
authorized officers as of the date first written above.
"Grantor"
ELDORADO CAPITAL CORP.
By:
----------------------------------------
Donald L Carano, Chief Executive Officer
-13-
<PAGE>
EXHIBIT 5
LATHAM & WATKINS
ATTORNEYS AT LAW
633 WEST FIFTH STREET, SUITE 4000
LOS ANGELES, CA 90071-2007
September 12, 1996
Eldorado Resorts LLC
Eldorado Capital Corp.
345 North Virginia Street
Reno, Nevada 89501
Re: Eldorado Resorts LLC
Eldorado Capital Corp.
REGISTRATION STATEMENT ON FORM S-4 (FILE NO. 333-______)
Ladies and Gentlemen:
At your request, we have examined the Registration Statement on Form
S-4 (the "Registration Statement") referenced above, which you have filed with
the Securities and Exchange Commission in connection with the registration under
the Securities Act of 1933, as amended, of $100,000,000 principal amount of 10
1/2 Senior Subordinated Notes due 2006 (the "Exchange Notes"), to be offered and
issued by Eldorado Resorts LLC, a Nevada limited-liability company (the
"Company"), and Eldorado Capital Corp., a Nevada corporation ("Capital" and,
together with the Company, the "Issuers").
We have examined such matters of fact and questions of law as we have
considered appropriate for purposes of this opinion. We have examined, among
other things, the terms of the Exchange Notes and the Indenture pursuant to
which the Exchange Notes are to be issued. In our examination, we have assumed
the genuineness of all signatures, the authenticity of all documents submitted
to us as originals, and the conformity to authentic original documents of all
documents submitted to us as copies.
We are opining herein as to the effect on the subject transaction only
of the federal laws of the United States and the internal laws of the State of
New York, and we express no opinion with respect to the applicability thereto,
or the effect thereon, of any other laws.
Based upon the foregoing, we are of the opinion that, upon issuance
thereof in the manner described in the Registration Statement, the Exchange
Notes will be legally valid and binding obligations of the Issuers, except as
may be limited by the effect of bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to or
affecting the rights or remedies of creditors; the effect of general principles
of equity, whether enforcement is considered in a proceeding in equity or at
law, and the discretion of the court before which any proceeding therefor may be
brought; and the unenforceability under certain circumstances under law or court
decisions of provisions providing for the indemnification of or contribution to
a party with respect to a liability where such indemnification or contribution
is contrary to public policy.
<PAGE>
LATHAM & WATKINS
Eldorado Resorts LLC
Eldorado Capital Corp.
Page 2
We consent to your filing this opinion as an exhibit to the
Registration Statement.
Very truly yours,
LATHAM & WATKINS
<PAGE>
EXHIBIT 8
LATHAM & WATKINS
ATTORNEYS AT LAW
633 WEST FIFTH STREET, SUITE 4000
LOS ANGELES, CALIFORNIA 90071
September 9, 1996
Eldorado Resorts LLC
Eldorado Capital Corp.
345 North Virginia Street
Reno, Nevada 89501
Re: ELDORADO RESORTS LLC AND ELDORADO CAPITAL CORP.
REGISTRATION STATEMENT ON FORM S-4 (FILE NO. 333-__________)
Ladies and Gentlemen:
You have requested our opinion concerning the material federal income
tax consequences of the exchange of 10 1/2% Senior Subordinated Notes due 2006
of Eldorado Resorts LLC (the "Company") and Eldorado Capital Corp. ("Capital"
and, together with the Company, the "Issuers") which have been registered under
the Securities Act of 1933, as amended, for outstanding 10 1/2% Senior
Subordinated Notes due 2006 of the Issuers, in connection with the Registration
Statement on Form S-4 filed herewith (the "Registration Statement").
The facts, as we understand them, and upon which with your permission
we rely in rendering the opinion expressed herein, are set forth in the
Registration Statement. Based on such facts, it is our opinion that the
material federal income tax consequences are accurately set forth under the
heading "Certain Federal Income Tax Considerations" in the Registration
Statements. No opinion is expressed as to any matter not discussed therein.
This opinion is based on various statutory provisions, regulations
promulgated thereunder and interpretations thereof by the Internal Revenue
Service and the courts having jurisdiction over such matters, all of which are
subject to change either prospectively or retroactively. Also, any variation or
difference in the facts from those set forth in the Registration Statement may
affect the conclusion stated herein.
This opinion is rendered to you solely for use in connection with the
Registration Statement. We consent to your filing this opinion as an exhibit to
the Registration Statement and to the reference to our firm under the headings
"Certain Federal Income Tax Considerations" and "Legal Matters."
Very truly yours,
LATHAM & WATKINS
<PAGE>
EXHIBIT 10.1
AGREEMENT OF JOINT VENTURE
OF
CIRCUS AND ELDORADO JOINT VENTURE
---------------------------------
This AGREEMENT OF JOINT VENTURE OF CIRCUS AND ELDORADO JOINT VENTURE is
entered into and shall be effective as of the 1st day of March, 1994, by and
between ELDORADO LIMITED LIABILITY COMPANY ("E"), a Nevada limited liability
company owned and controlled by ELDORADO HOTEL ASSOCIATES LIMITED PARTNERSHIP, a
Nevada limited partnership ("EHALP"), and GALLEON, INC., a Nevada corporation
("C"), owned and controlled by CIRCUS CIRCUS ENTERPRISES, INC., a Nevada
corporation ("CC"), pursuant to the provisions of the Nevada Uniform Partnership
Act, on the following terms and conditions:
SECTION 1
THE JOINT VENTURE
-----------------
1.1 FORMATION. The Joint Venture is hereby formed as a Nevada general
---------
partnership between E and C ("Partners") effective as of the date hereof
pursuant to the provisions of the Nevada Uniform Partnership Act ("Act").
1.2 NAME. The name of the Joint Venture shall be CIRCUS AND ELDORADO
----
JOINT VENTURE and all business of the Joint Venture shall be conducted in such
name. The Joint Venture shall hold all of its property in the name of the Joint
Venture and not in the name of any Partner.
1.3 PURPOSE.
-------
(a) The purpose of the Joint Venture is to acquire, develop,
construct, finance, manage, and operate a hotel with up to approximately 2,000
rooms and an entertainment facility, together with a casino, restaurants,
amusement and other related facilities ("Casino Project"), to be located in
Reno, Nevada, on the property described in Exhibit "A" attached hereto and
incorporated herein by reference (the "Casino Property").
(b) The Joint Venture shall be a partnership only for the purpose
specified in this Section 1.3. Except as otherwise provided in this Agreement,
the Joint Venture shall not engage in any other activity or business and no
Partner shall have any authority to hold himself out as the agent of the other
Partner in any other business or activity.
1.4 PLACE OF BUSINESS. The principal place of business of the Joint
-----------------
Venture shall be at 430 North Virginia Street, Reno, Nevada or at such other
place within Reno,
<PAGE>
Nevada, as may be determined by the Managing Partner.
1.5 TERM. The term of the Joint Venture shall commence on the date hereof
----
and shall continue until the winding up and liquidation of the Joint Venture
following a "Liquidating Event," as provided in Section 13 hereof.
1.6 PERCENTAGE INTEREST. The Percentage Interest of each Partner shall
-------------------
be fifty percent (50%) and shall not be changed except as provided herein.
1.7 STATUTORY COMPLIANCE. The Joint Venture shall exist under and be
--------------------
governed by, and this Agreement shall be construed in accordance with, the
applicable laws of the State of Nevada including the Nevada Gaming Control Act
embodied in Chapter 463 of the Nevada Revised Statutes and the regulations
promulgated thereunder. The Partners shall make all filings and disclosures
required by, and shall otherwise comply with, all such laws. The Partners shall
execute and file in the appropriate records any assumed or fictitious name
certificates and other documents and instruments as may be necessary or
appropriate with respect to the formation of, and conduct of business by, the
Joint Venture.
1.8 TITLE TO PROPERTY. All real and personal property owned by the Joint
-----------------
Venture shall be owned by and in the name of the Joint Venture as an entity and
no Partner shall have any ownership interest in such property in its individual
name or right, and each Partners's interest in the Joint Venture shall be
personal property for all purposes.
1.9 PAYMENTS OF INDIVIDUAL OBLIGATIONS. The Joint Venture's credit and
----------------------------------
assets shall be used solely for the benefit of the Joint Venture, and no asset
of the Joint Venture shall be transferred or encumbered for or in payment of any
separate obligation of a Partner.
1.10 INDEPENDENT ACTIVITIES; TRANSACTIONS WITH AFFILIATES.
----------------------------------------------------
(a) Each Partner shall be required to devote only such time to the
affairs of the Joint Venture as such Partner determines in its sole discretion
may be necessary to develop, construct, manage and operate the Joint Venture,
and each Partner shall be free to serve any other Person or enterprise in any
capacity that it may deem appropriate. Nothing in this Agreement shall prevent
either Partner from engaging in other business ventures of every nature,
including, but not limited to, the ownership, management, improvement,
development and operation of any other hotels and/or casinos wherever located,
and this Agreement shall grant neither
2
<PAGE>
the Joint Venture nor any Partner any right in any such independent venture or
business or to the income and profits derived therefrom. Each Partner
specifically acknowledges that the other Partner or an Affiliate of the other
Partner is the owner and operator of a competing hotel casino adjacent to the
Casino Property and to be connected to the Casino Project and that this
Agreement shall not be deemed or construed to prevent, hinder or inhibit in any
way the present operation or future expansion of said properties.
(b) Each Partner shall pay and discharge when due its non-Joint
Venture debts and obligations unrelated to the Joint Venture and shall indemnify
and save harmless the Joint Venture and the other party from and against any and
all claims, demands, actions and expenses, including reasonable attorneys' fees,
incurred on account of or with respect to any such non-Joint Venture debts or
obligations.
(c) As used in this Agreement, the term "Affiliate" shall mean any
other entity directly or indirectly controlling, controlled by or under common
control with that of any Partner.
1.11 EXPENSES OF PARTNERS. Except as specifically provided in this
--------------------
Agreement, including, without limitation, the provisions of Section 2.9(d), no
Partner shall be paid for services rendered to the Joint Venture by such
Partner. However, each party shall be entitled to reimbursement from the Joint
Venture for the actual out-of-pocket expenses reasonably incurred by such
Partner in furtherance of the Joint Venture's business to the extent such
expenses are contemplated by a budget approved by the Partners , upon the
presentation of reasonable supporting documentation of the amount and purpose of
such expense.
SECTION 2
---------
PARTNERS' PERFORMANCE AND CAPITAL CONTRIBUTIONS
-----------------------------------------------
2.1 PHASE I PERFORMANCE REQUIREMENTS. Upon execution of this Agreement,
--------------------------------
the Partners shall commence the following activities on behalf of the Joint
Venture toward the development of the Project:
(a) C shall undertake the necessary architectural, engineering,
design and construction drawings for the Casino Project.
(b) C shall undertake to provide committed CONSTRUCTION FINANCING as
defined in Paragraph 2.4.
(c) Utilizing the preliminary design provided by C, E shall file and
process all applications to obtain all necessary
3
<PAGE>
governmental approvals and entitlements, not including building permits, or
approval of the Nevada gaming authorities, both of which shall be obtained by
the Joint Venture for the Casino Project.
(d) E, on behalf of the Joint Venture, will undertake such
negotiations as may be required to acquire that certain parcel of property
within the Casino Project site not currently owned by E, commonly known as the
Power Company Property. Both Partners shall pay one-half (1/2) of all costs,
fees, expenses and purchase price for the acquisition of the Power Company
Property and take title as tenants in common with each Partner holding an
undivided one-half (1/2) interest. In the event that for any reason the Casino
Project does not proceed to Phase II as set forth below within one (1) year from
the date of this Agreement, E shall, within one (1) year thereafter, purchase
C's interest in the Power Company Property at C's cost, plus interest at the
prime rate of Bank of America as adjusted from time to time. In such event, E
shall indemnify and hold C harmless from all obligations under the agreement for
purchase of the Power Company Property.
(e) E shall obtain all appropriate consents, including consents
required from the Cafferata Trust with respect to the assignment of the
Cafferata Lease and the leasehold estate created thereby, as described in
Paragraph 2.2, to the Joint Venture at E's sole cost and expense.
(f) E shall provide adequate assurances to C of the availability of
the Subordination Security as defined in the Trust Agreement between EHALP and
the Cafferata Trust at E's sole cost and expense.
(g) E shall provide assurance to C that upon conveyance or assignment
of the Casino Property, a CLTA Owner's Policy of title insurance is committed to
be issued by First American Title Company of Nevada insuring title to the
parcels vested in the Joint Venture, except for the Cafferata parcel, as to
which a CLTA leasehold policy of title insurance shall be committed to be issued
in favor of the Joint Venture, showing title to the Casino Property free and
clear of all liens and encumbrances, except those set forth as Exceptions 1
through 27, with all taxes and assessments being paid current through the
transfer date, 28, 34, 51 and 54 as set forth on Schedule B to the Preliminary
Title Report of First American Title Company Report Order No. 170763MC, dated as
of October 4, 1993, at 7:30 a.m.
2.2 PHASE II CAPITAL CONTRIBUTIONS. After the formation of the Joint
------------------------------
Venture and the satisfaction or waiver of the conditions
4
<PAGE>
set forth in Paragraph 2.3 below, the Partners shall make the following initial
CAPITAL CONTRIBUTIONS:
(a) E shall convey, or shall cause to be conveyed fee title to the
parcels comprising the Casino Property (excluding the Power Company Property and
the Cafferata Parcel) to the Joint Venture by Grant, Bargain and Sale Deed. The
parties acknowledge that Lot 14 in Block B of Original Town, now City of Reno
(the "Cafferata Parcel"), is the subject of a ground lease entered into by and
between EHALP and Gladys A. Cafferata, as Trustee of the Gladys A. Cafferata
Trust U/T/A November 2, 1990 (the "Cafferata Trust"), evidenced by a Lease
Agreement, Memorandum of Lease and Option to Purchase, Put Option to Purchase
and Trust Agreement, each dated as of the 1st day of October, 1992
(collectively, the "Cafferata Lease"). E agrees to assign and convey all of its
right, title and interest in and to the Cafferata Lease and leasehold estate to
the Joint Venture. E further covenants and agrees that upon the exercise of the
option to purchase in the Cafferata Lease by the Joint Venture, E shall be
responsible for payment of the Purchase Price (as therein defined) at E's sole
cost and expense. E shall also be responsible for the Subordination Security as
defined in the Trust Agreement by and between EHALP and the Cafferata Trust, at
E's sole cost and expense. E shall cause the Casino Property parcels to be
deeded or assigned to the Joint Venture free and clear of all liens and
encumbrances, except as set forth in Section 2.1. Upon the conveyance or
assignment of the Casino Property parcels, E shall cause a CLTA Owner's Policy
or Policies of Title Insurance to be issued by First American Title Company of
Nevada, in the aggregate amount of Twenty-Five Million Dollars ($25,000,000),
insuring title to the parcels vested in the Joint Venture in fee, except for the
Cafferata Parcel as to which a CLTA Leasehold Policy of Title Insurance shall be
issued to the Joint Venture, free and clear of all liens and encumbrances,
except as approved in writing by both Partners. The premiums for the CLTA
policy(ies) shall be borne equally by the Partners. All rental payments and
other monetary obligations (except for payment of the Purchase Price for the
Cafferata Parcel) under the Cafferata Lease shall be paid by E pending
assignment of the Cafferata Lease and leasehold estate to the Joint Venture and
thereafter shall be the obligation of the Joint Venture, pending exercise of the
option to purchase by the Joint Venture. Provided, however, that at the request
of the Managing Partner, all rental payments and other monetary obligations
necessary to maintain the Cafferata Lease in effect following assignment to the
Joint Venture shall be paid by E and repaid by the Joint Venture as a loan from
E under Section 15.9, below.
(b) C shall contribute the sum of $25,000,000 to the Partnership in
cash and/or technology, intellectual property or
5
<PAGE>
equipment of a kind and of value, including holding costs, as set forth in a
written itemized schedule approved and signed by both Partners, and C's Capital
Account shall be credited accordingly.
(c) The Partners shall transfer the Power Company Property to the
Joint Venture, and each party's Capital Account shall be credited with one-half
(1/2) the acquisition costs.
(d) After taking into account all Capital Contributions made by the
Partners, each Partner shall contribute sufficient additional cash to bring such
Partner's capital contribution to fifteen percent (15%) of the total Casino
Project costs, including land acquisition and preopening expenses which shall be
in an amount not to exceed the final Project budget approved by both Partners
("Final Budget"), thereby making the total aggregate capital contributions of
the Partners equal to thirty percent (30%) of the Final Budget. In making the
contribution as provided in this subparagraph, each Partner shall receive a
credit for the property or other assets contributed to the Venture by such
Partner as provided in Paragraph 2.2 (a), (b) and (c) above, and the remainder
of the required Capital Contribution shall be in cash. Any costs incurred or
amounts paid by a Partner in carrying out its Phase I responsibilities for the
Project as provided in Paragraph 2.1 shall be credited to that Partner's
required cash contribution under this Paragraph 2.2.
(e) The Capital Contributions required under Subparagraph 2.2(d)
shall be made at the time required by the provider of the Construction Financing
if not C or CC, or if the financing is provided by C or CC, in such amounts and
at such time as the Managing Partner reasonably determines necessary to coincide
with the funding of the construction, preopening expenses and initial bankroll.
In no event shall either Partner have a duty to make a cash Capital Contribution
required by Paragraph 2.2(d) prior to January 1, 1994. Prior to January 1, 1994,
amounts provided to the Joint Venture shall be loans in accordance with the
provisions of Section 15.9 hereof and shall bear interest at a rate of ten
percent (10%). All such loans shall be repaid upon the payment of the Capital
Contributions as herein provided after January 1, 1994. No Partner shall have
any obligation to provide any such loans to the Partnership.
(f) Nothwithstanding any other provision of this Agreement of Joint
Venture, if a Partner defaults in the Capital Contributions required by this
Paragraph 2.2, the nondefaulting party shall have all remedies available in law
and in equity.
2.3 CONDITIONS TO CAPITAL CONTRIBUTIONS. The following are conditions to
-----------------------------------
be satisfied or waived prior to the requirement that
6
<PAGE>
the Partners make the Capital Contributions set forth in Paragraph 2.2 above:
(a) All government approvals have been obtained to the satisfaction
of both Partners.
(b) The Partners have agreed on the Final Budget.
(c) The Partners have agreed on the scope of the Casino Project and
the plans and specifications relating thereto.
(d) The Construction Financing has been committed and is available
for the funding of the construction of the Casino Project.
(e) The consent to the Assignment of the Cafferata Lease in a form
acceptable to the Partners is obtained.
(f) If each of the above conditions has not been satisfied or waived
by July 31, 1994, the Joint Venture shall be dissolved pursuant to Section 13.
2.4 CONSTRUCTION FINANCING. Construction Financing is the financing
----------------------
required for the development, construction and completion of the Casino Project
as provided herein. The terms of the Construction Financing must be approved by
both Partners; provided, however, that if such Construction Financing is
provided by C or CC, the Construction Financing will be deemed approved if it is
on terms and conditions required herein and carries an interest rate of ten
percent (10%) and a payment schedule, including principal and interest, based on
a twenty (20) year amortization and all due and payable in ten (10) years. CC
guarantees to E and EHALP the obligation of C to obtain the Construction
Financing. EHALP shall not be required to be a signator to nor guarantor of the
Construction Financing. The Construction Financing, together with the aggregate
of all Capital Contributions of the Partners, shall be sufficient to pay when
due the real estate taxes, assessments and insurance premiums on the Casino
Property during the period prior to opening of the Casino, all architectural,
engineering and design expenses to the extent not contributed by a Partner,
legal and accounting expenses (not including organizational fees), demolition,
excavation and construction costs, and furniture, fixtures and equipment in
order to complete the Casino Project in the amount of the Final Budget. C and
CC shall be obligated to provide adequate funds or additional Construction
Financing to cover any and all cost over-runs, extras or additions in excess of
the Final Budget arising during the course of construction unless caused in
whole or in part by E or E's delay or failure in performance of E's obligations
in connection with the Casino
7
<PAGE>
Project. Any such additions, changes, extras or over-runs shall be subject to
the approval of both Partners. To the extent that such financing is required, if
CC is required to guarantee such excess financing, EHALP agrees to also
guarantee such excess financing. The aggregate amount of all Construction
Financing, including the financing of cost over-runs, will be in the form of a
recourse note against the Partners and may be secured by a Deed of Trust and/or
other security interest in the real and personal property of the Joint Venture,
including, without limitation, the Casino Property; provided, however, if the
Construction Financing is provided by C or CC, then the note and deed of trust
securing the obligation to C or CC shall provide a one-year right to cure before
filing a Notice of Default and Election to Sell or before other foreclosure or
Trustee sale proceedings on such deed of trust may be instituted. There shall be
no additional Capital Contributions, other than those required by Paragraph
2.2(d), required until construction is complete. Either Partner may at any time
arrange for third party financing on commercially reasonable terms for the
Casino Project; provided, however, that neither CC nor EHALP shall be obligated
to provide a personal guarantee for such third party financing. In the event
that it is necessary for C to guarantee such third party financing and EHALP
does not guarantee it, then C shall be entitled to receive an annual guarantee
fee in the amount of two percent (2%) of the average outstanding principal
balance of such third party financing.
2.5 REVOLVING CREDIT LINE. Prior to the opening of the Casino Project, C
---------------------
and CC shall arrange or provide a Revolving Credit Line for the business of the
Joint Venture in the minimum amount of $10,000,000. If the Revolving Credit
Line is provided by C or CC, interest shall be charged at the rate of ten
percent (10%) per annum on outstanding principal amounts. This revolving credit
line shall be maintained as long as C is the Managing Partner. EHALP shall not
be required to be a signator to or guarantor of the Revolving Credit Line.
2.6 ADDITIONAL CAPITAL CONTRIBUTIONS.
--------------------------------
(a) Additional Capital Contributions may be called for by the
Managing Partner by written demand upon the Partners from time to time solely
for the purpose of defraying an annual net loss not including depreciation and
amortization expenses of the Casino Project after opening and only after full
utilization of the Revolving Credit Line to fund working capital requirements
because of such losses. Such Additional Capital Contributions shall be payable
in proportion to the Percentage Interests of the Partners. Each Partner shall
contribute its respective share of such subsequent capital calls within fifteen
(15) days of receipt of notice if the entire amount (including both Partners'
shares) of
8
<PAGE>
the capital call is less than or equal to $1,000,000.00; within thirty (30) days
if such amount exceeds $1,000,000.00 but is less than or equal to $2,000,000.00;
within sixty (60) days if such amount exceeds $2,000,000.00 but is less than or
equal to $3,000,000.00; and within 120 days if such amount of the capital call
is greater than $3,000,000.00. In the event that such annual net losses exceed a
total amount of $10,000,000, then both parties agree to use their best efforts
in order to obtain additional financing within 120 days for such excess
operating losses. The terms of such financing shall be subject to the approval
of both Partners. If the Partners are unable to obtain financing for such excess
operating losses, then the Managing Partner may require an Additional Capital
Contribution to be paid by each Partner in proportion to the Percentage
Interests.
2.7 FAILURE TO MAKE ADDITIONAL CAPITAL CONTRIBUTIONS. The Partners'
------------------------------------------------
obligation to make Additional Capital Contributions shall be a personal
obligation of each Partner and shall be enforceable by this Joint Venture and
each of its Partners, but shall not be enforceable by any third party creditor
of the Joint Venture or any other person. If either Partner fails to make an
Additional Capital Contribution when due under this Agreement (the "Defaulting
Partner"), the Non-Defaulting Partner shall have the following remedies:
(a) Immediately upon a default by a Partner under this Section, the
Non-Defaulting Partner shall have the right (but not the obligation) to do any
one of the following:
(i) contribute, as a capital contribution of the Defaulting
Partner and as a loan to the Defaulting Partner, the amount of the Additional
Capital Contribution in default, and all such amounts shall be considered loans
to the Defaulting Partner from such Non-Defaulting Partner. The unpaid principal
balance of the loan shall bear interest from the date of the advance at the
Default Rate. Interest shall be accumulated daily and compounded on an annual
basis. The loan, with interest, shall be repaid by the Defaulting Partner from
its cash distributions pursuant to this Agreement, or, if the provisions of
Section 12.4 become applicable, the loan shall be repaid out of proceeds
received pursuant thereto.
(ii) loan the entire amount of the Additional Capital Contribution
to the Joint Venture, such loan to bear interest from the date of advance until
repaid at the Default Rate. Interest on any such loan shall be accumulated daily
and compounded on an annual basis. Interest and principal on such loan shall be
paid in accordance with Section 4.1.
9
<PAGE>
(b) If the Non-Defaulting Partner has elected the remedy described in
subparagraph 2.7(a)(i) above, and the loan is not repaid to the Non-Defaulting
Partner within two (2) years of the date of the loan advance or if a Partner is
in default at any time on two (2) Additional Capital Contributions which remain
unpaid or uncured as provided herein, then, and only then, may the Non-
Defaulting Partner elect to purchase the Defaulting Partner's interest in the
Joint Venture pursuant to and in accordance with the terms of Section 12.4.
(c) For purposes of this Agreement, the "Default Rate" of interest
shall be the greater of ten percent (10%) or two (2) percentage points added to
the "prime" interest rate of the Bank of America, as announced from time to
time.
2.8 CAPITAL ACCOUNTS. An individual Capital Account shall be established
----------------
and maintained for each Partner. The Capital Account of each Partner shall be
equal to the aggregate amount of cash contributed by such Partner to the Joint
Venture, increased by (i) the fair market value of property contributed by such
Partner to the Joint Venture (other than a promissory note by such Partner who
is the maker of such note), net of liabilities secured by such property that the
Joint Venture assumes or takes the property subject to, (ii) the amount of any
Joint Venture liabilities assumed by such Partner other than liabilities secured
by property distributed to such Partner, (iii) such Partner's distributive share
of Profits of the Joint Venture and (iv) any items in the nature of income and
gain which are excluded from the definitions of Profits and Losses and allocated
to such Partner, and reduced by (i) such Partner's distributive share of Losses,
(ii) the amount of any distributions of cash to such Partner, (iii) the amount
of liabilities of such Partner assumed by the Joint Venture, other than
liabilities secured by property contributed by such Partner, (iv) the fair
market value of property (net of liabilities assumed by such Partner and
liabilities to which such distributed property is subject) distributed to such
Partner, and (v) any items in the nature of deductions or losses which are
excluded from the definitions of Profits and Losses and allocated to such
Partner. Upon a distribution of property, other than one described in Section
3.7(a) hereof, the Capital Account of each Partner shall be adjusted as provided
in Regulations of the Internal Revenue Code of 1986, as amended ("Code") Section
1.704-1(b) (2) (iv) (e). In the event the Gross Asset Values of Joint Venture
assets are adjusted pursuant to Section 3.7(a) hereof, the Capital Account of
each Partner shall be adjusted simultaneously to reflect the aggregate net
adjustment as if the Joint Venture recognized gain or loss equal to the amount
of such aggregate net adjustment. The foregoing provisions and the other
provisions of this Agreement relating to the maintenance of Capital Accounts are
intended to
10
<PAGE>
comply with Regulations Sections 1.704-1(b) and 1.704-2 and shall be interpreted
and applied in a manner consistent with such Regulations.
2.9 OTHER MATTERS.
-------------
(a) Except as otherwise provided in this Agreement, no Partner shall
demand or receive a return of his Capital Contributions or withdraw from the
Joint Venture without the consent of all Partners. Under circumstances
requiring a return of any Capital Contributions, no Partner shall have the right
to receive property other than cash except as may be specifically provided
herein.
(b) No Partner shall receive any interest, salary, or draws with
respect to its Capital Contributions or its Capital Account or for services
rendered on behalf of the Joint Venture or otherwise in its capacity as Partner,
except as otherwise provided in this Agreement.
(c) Except as provided in Section 10, no Person shall be admitted to
the Joint Venture as a Partner without the unanimous consent of the Partners.
(d) The Managing Partner, on behalf of the Joint Venture, may
contract with an Affiliate of the Managing Partner for the provision of
accounting, bookkeeping, computer services and management information and
similar central office services at a cost not to exceed the reasonable direct
costs incurred by such Affiliate in providing such services.
11
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SECTION 3
ALLOCATIONS
-----------
3.1 PROFITS AND LOSSES. "Profits" and "Losses" means, for each fiscal
------------------
year or other period, an amount equal to the Joint Venture's taxable income or
loss for such year or period, determined in accordance with Section 703(a) of
the Code (for this purpose, all items of income, gain, loss, or deduction
required to be stated separately pursuant to Code Section 703(a)(1) shall be
included in taxable income or loss), with the following adjustments:
(a) Any income of the Joint Venture that is exempt from federal
income tax and not otherwise taken into account in computing Profits or Losses
pursuant to this Agreement shall be added to such taxable income or loss.
(b) Any expenditures of the Joint Venture described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to
Regulations Section 1.704-1(b)(2)(iv)(l) ("Section 705(a)(2)(B) Expenditure"),
and not otherwise taken into account in computing Profits or Losses pursuant to
this Agreement, shall be subtracted from such taxable income or loss.
(c) In the event the Gross Asset Value of any Joint Venture asset is
adjusted pursuant to this Agreement, the amount of such adjustment shall be
taken into account as gain or loss from the disposition of such asset for
purposes of computing Profits or Losses.
(d) Gain or loss resulting from any disposition of Joint Venture
Property with respect to which gain or loss is recognized for federal income tax
purposes shall be computed by reference to the Gross Asset Value of the property
disposed of, notwithstanding that the adjusted tax basis of such property
differs from its Gross Asset Value.
(e) In lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing such taxable income or loss,
there shall be taken into account depreciation for such fiscal year or other
period.
(f) Notwithstanding any other provisions of this Section (other than
Sections 3.4(a) and 3.4(b)), any items which are specially allocated pursuant to
Sections 3.4 and 3.5 hereof shall not be taken into account in computing Profits
and Losses.
3.2 PROFITS.
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(a) Except as provided in Sections 3.2(b) hereof, the allocation of
Profits among the Partners for any fiscal year shall be determined in the
following manner: (1) The net operating income of the Joint Venture for
financial reporting purposes (determined in accordance with generally accepted
accounting principles) for such fiscal year, exclusive of interest expense,
shall be credited to C, up to the amount of its Priority Allocation for such
fiscal year, any balance shall be credited to E, up to the amount of C's
Priority Allocation with respect to such fiscal year, and any remaining balance
shall be credited to the Partners in proportion to their Percentage Interests;
(ii) Interest expense of the Joint Venture (determined in accordance with
generally accepted accounting principles) for such fiscal year shall be charged
to the Partners in proportion to their Percentage Interests; and (iii) The
difference (whether positive or negative) between (A) net operating income of
the Joint Venture for financial reporting purposes (determined in accordance
with generally accepted accounting principles) for such fiscal year, less the
amount of interest expense of the Joint Venture (determined in accordance with
generally accepted accounting principles) for such fiscal year and (B) Profits
of the Joint Venture for such fiscal year shall be credited or charged to the
Partners, as the case may be, in proportion to their Percentage Interests. Each
Partner shall then be allocated Profits for such fiscal year in an amount equal
to the net amount credited to such Partner pursuant to the preceding sentence;
provided, however, that in the event the computation pursuant to the preceding
sentence would result in a Partner being charged a loss, such Partner shall be
allocated zero Profits for such fiscal year and the other Partner shall be
allocated all of the Profits of the Joint Venture for such fiscal year.
(b) Profits attributable to the sale, exchange or other disposition
of all or substantially all of the assets of the Joint Venture shall be
allocated among the Partners as follows: (i) First, if the Capital Accounts of
the Partners are unequal (after reducing each Partner's Capital Account for any
undistributed Net Cash From Operations distributable to such Partner pursuant to
Section 4.1 hereof and after adjusting each Partner's Capital Account for any
Profits or Losses of the Joint Venture for such fiscal year allocated to such
Partner pursuant to Section 3.2(a) or 3.3(a) hereof, such Profits shall be
allocated to the Partner with the smaller Capital Account (determined after the
foregoing adjustments) until each Partner's Capital Account (as adjusted) is
equal, and (ii) Second, the balance of any such Profits shall be allocated among
the Partners in proportion to their Percentage Interests.
3.3 LOSSES.
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13
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(a) Except as provided in Section 3.3(b) hereof, Losses for any
fiscal year shall be allocated among the Partners in proportion to their
Percentage Interests.
(b) Losses attributable to the sale, exchange or other disposition of
all or substantially all of the assets of the Joint Venture shall be allocated
among the Partners as follows: (i) First, if the Capital Accounts of the
Partners are unequal (after reducing each Partner's Capital Account for any
undistributed Net Cash From Operations distributable to such Partner pursuant to
Section 4.1 hereof and after adjusting each Partner's Capital Account for any
Profits or Losses of the Joint Venture for such fiscal year allocated to such
Partner pursuant to Section 3.2(a) or 3.3(a) hereof), such Losses shall be
allocated to the Partner with the larger Capital Account (determined after the
foregoing adjustments) until each Partner's Capital Account (as adjusted) is
equal, and (ii) Second, the balance of any such Losses shall be allocated among
the Partners in proportion to their Percentage Interests.
3.4 SPECIAL ALLOCATIONS. The following special allocations shall be made
-------------------
in the following order:
(a) MINIMUM GAIN CHARGEBACK. Except as otherwise provided in Section
-----------------------
1.704-2(f) of the Income Tax Regulations promulgated under the Code, as amended
from time to time, ("Regulations") notwithstanding any other provision of this
Agreement, if there is a net decrease in Joint Venture Minimum Gain during any
Joint Venture fiscal year, each Partner shall be specially allocated items of
Joint Venture income and gain for such fiscal year (and, if necessary,
subsequent fiscal years) in an amount equal to such Partner's share of the net
decrease in Joint Venture Minimum Gain, determined in accordance with
Regulations Section 1.704-2(g). Allocations pursuant to the previous sentence
shall be made in proportion to the respective amounts required to be allocated
to each Partner pursuant thereto. The items to be so allocated shall be
determined in accordance with Sections 1.704-2(f)(6) and 1.704-2(j)(2) of the
Regulations. This Section 3.4(a) is intended to comply with the minimum gain
chargeback requirement in Section 1.704-1(f) of the Regulations and shall be
interpreted consistently therewith.
(b) PARTNER NONRECOURSE DEBT. Any item of Joint Venture loss,
------------------------
deduction or Section 705(a)(2)(B) Expenditure that is attributable to Partner
Nonrecourse Debt shall be allocated to the Partner or Partners that bear the
economic risk of loss with respect to such Partner Nonrecourse Debt in
accordance with Regulations Section 1.704-2(i). Notwithstanding any other
provisions of this Agreement except Section 3.4(a) hereof, if there
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<PAGE>
is a net decrease during any fiscal year in the minimum gain attributable to a
Partner Nonrecourse Debt (within the meaning of Regulations Section 1.704-
2(i)(3)), then any Partner with a share of the minimum gain attributable to such
Partner Nonrecourse Debt at the beginning of such fiscal year shall be allocated
items of Joint Venture income and gain for such fiscal year (and, if necessary,
for subsequent fiscal years) equal to such Partner's share of the net decrease
in Partner Nonrecourse Debt Minimum Gain as provided in Regulations Section
1.704-2(i)(4).
(c) CODE SECTION 754 ADJUSTMENT. To the extent an adjustment to the
---------------------------
adjusted tax basis of any Joint Venture asset pursuant to Code Section 734(b) or
Code Section 743(b) is required, pursuant to Regulations Section 1.704-
1(b)(2)(iv)(m)(2) or Regula-tions Section 1.704-1(b)(2)(iv)(m)(4), to be taken
- - - -
into account in determining Capital Accounts as the result of a distribution to
a Partner in complete liquidation of his interest in the Joint Venture, the
amount of such adjustment to the Capital Accounts shall be treated as an item of
gain (if the adjustment increases the basis of the asset) or loss (if the
adjustment decreases such basis) and such gain or loss shall be specially
allocated to the Partners in accordance with their interests in the Joint
Venture in the event Regulations Section 1.704-1(b)(2)(iv)(m)(2) applies, or to
- -
the Partners to whom such distribution was made in the event Regulations Section
1.704-1(b)(2)(iv)(m)(4) applies.
- -
(d) ALLOCATIONS RELATING TO TAXABLE ISSUANCE OF JOINT VENTURE
---------------------------------------------------------
INTERESTS. Any income, gain, loss or deduction realized as a direct or indirect
- ---------
result of the issuance of an interest in the Joint Venture to a Partner (the
"Issuance Items") shall be allocated among the Partners so that, to the extent
possible, the net amount of such Issuance Items, together with all other
allocations under this Agreement to each Partner, shall be equal to the net
amount that would have been allocated to each such Partner if the Issuance Items
had not been realized.
(e) LIMITATIONS ON ALLOCATION OF LOSSES. Notwithstanding the
-----------------------------------
provisions of this Section 3, in no event shall any allocation of Losses (or any
other loss, deduction or Section 705(a)(2)(B) Expenditure) to any Partner cause
such Partner to have or increase a deficit balance in its Capital Account.
(f) QUALIFIED INCOME OFFSET. If a Partner receives an adjustment,
-----------------------
allocation or distribution described in Regulations Section 1.704-
1(b)(2)(ii)(d)(4), (5) or (6) which creates or increases a deficit balance
(taking into account distributions, other than distributions in liquidation of
the Joint Venture, reasonably expected to be made) in the Partner's Capital
Account (as provided in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) or
15
<PAGE>
(6)), the Managing Partner shall allocate items of income or gain (as those
terms are used in Regulations Section 1.704-1(b)(2)(ii)(d)) to Such Partner in
an amount and manner to eliminate the Partner's Capital Account deficit
attributable to such adjustment, allocation or distribution as quickly as
possible.
(g) CAPITAL ACCOUNT DEFICITS. For purposes of Sections 3.4(a),
------------------------
3.4(b), 3.4(e) and 3.4(f) hereof, there shall be excluded from any deficit in a
Partner's Capital Account any amount such Partner is obligated to restore to its
Capital Account under Regulations Section 1.704-1(b)(2)(ii)(c), as well as any
addition thereto pursuant to the penultimate sentences of Regulations Sections
1.704-2(g)(1) and 1.704-2(i)(5) after taking into account thereunder any changes
during such fiscal year in Minimum Gain and Partner Nonrecourse Debt Minimum
Gain.
(h) CAPITAL ACCOUNT ADJUSTMENT. For purposes of Sections 3.4(a),
--------------------------
3.4(b) and 3.4(e) hereof, each Partner's Capital Account shall be reduced by the
items described in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
(i) DEFINITIONS. For purposes of this Agreement, the following terms
-----------
shall have the following meanings:
(i) "Depreciation" means, for each fiscal year or other period,
an amount equal to the depreciation, amortization or other cost recovery
deduction allowable with respect to an asset for such year or other period,
except that if the Gross Asset Value of an asset differs from its adjusted
basis for federal income tax purposes at the beginning of such year or
other period, Depreciation shall be an amount which bears the same ratio to
such beginning Gross Asset Value as the federal income tax depreciation,
amortization or other cost recovery deduction for such year or other period
bears to such beginning adjusted tax basis.
(ii) "Gross Asset Value" means, with respect to any asset, the
asset's adjusted basis for federal income tax purposes, except as follows:
(i) the initial Gross Asset Value of any asset contributed by a Partner to
the Joint Venture shall be the gross fair market value of such asset, as
determined by the Partners; and (ii) the Gross Asset Value of all assets
whose Gross Asset Value has been adjusted pursuant to Section 3.7(a) hereof
shall be adjusted pursuant to the last sentence of Section 3.7(a) hereof.
(iii) "Minimum Gain" means the sum of the separately computed
amount of gain, if any, that would be realized by the Company if, with
respect to each nonrecourse
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<PAGE>
liability of the Company, the Company disposed of the property subject to
such nonrecourse liability for no other consideration than full
satisfaction of such liability in accordance with Regulations Section 1.70
4-2(d). For this purpose, the term "nonrecourse liability" shall have the
meaning set forth in Regulations Section 1.752-1(a)(2).
(iv) "Partner Nonrecourse Debt" means any Joint Venture
liability to the extent the liability is nonrecourse for purposes of
Regulations Section 1.1001-2, and a Partner (or a related person within the
meaning of Regulations Section 1.752-4(b)) bears the economic risk of loss
(within the meaning of Regulations Section 1.752-2).
(v) "Partner Nonrecourse Debt Minimum Gain" means Minimum Gain
attributable to Partner Nonrecourse Debt.
3.5 CURATIVE ALLOCATIONS. The allocations set forth in Sections 3.4(a),
--------------------
3.4(b), 3.4(c) and 3.4(d) hereof (the "Regulatory Allocations") are intended to
comply with certain requirements of the Regulations. It is the intent of the
Partners that, to the extent possible, all Regulatory Allocations shall be
offset either with other Regulatory Allocations or with special allocations of
other items of Joint Venture income, gain, loss, or deduction pursuant to this
Section 3.5. Therefore, notwithstanding any other provision of this Agreement
(other than the Regulatory Allocations), the Managing Partner shall make such
offsetting special allocations of Joint Venture income, gain, loss or deduction
in whatever manner it determines appropriate so that, after such offsetting
allocations are made, each Partner's Capital Account balance is, to the extent
possible, equal to the Capital Account balance such Partner would have had if
the Regulatory Allocations were not part of the Agreement and all Joint Venture
items were allocated pursuant to Sections 3.2 and 3.3 hereof. In exercising his
discretion under this Section 3.5, the Managing Partner shall take into account
future Regulatory Allocations under Section 3.4 that, although not yet made, are
likely to offset other Regulatory Allocations previously made under Section 3.4.
3.6 CODE SECTION 704(C) ALLOCATIONS.
-------------------------------
(a) Solely for federal income tax purposes and not with respect to
determining any partner's capital account, distributive share of profits or
losses, distributions or other items, a partner's distributive share of income,
gain, loss, or deduction with respect to any property (other than money)
contributed to the Joint Venture shall be determined in accordance with Code
Section 704(c) and Regulations thereunder.
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<PAGE>
(b) For purposes of allocation of income, gain, loss, or deduction
under Code Section 704(c), the Joint Venture adopts the "traditional method with
curative allocations" as identified in Proposed Regulation 1.704-3(c). If this
Proposed Regulation is modified or changed when issued in final form, the
Managing Partner shall select the method which most closely resembles the
traditional method with curative allocations.
(c) In the event the Gross Asset Value of any Joint Venture property
is adjusted (other than for Depreciation) subsequent allocations of income,
gain, loss and deduction with respect to such property shall take account of any
variation between the adjusted basis of such property and its Gross Asset Value
in the same manner as under Section 704(c) and the Regulations thereunder. Any
elections or other decisions relating to such allocation shall be made in a
manner that reasonably reflects the purpose and intention of this Agreement.
3.7 OTHER ALLOCATION RULES.
----------------------
(a) The Gross Asset Values of all Joint Venture assets may be
adjusted by the Managing Partner in accordance with Regulations Section 1.704-
1(b)(2)(iv) to equal their respective gross fair market values as reasonably
determined by the Managing Partner as of the following times: (i) the
acquisition of an additional interest in the Joint Venture by any new or
existing Partner in exchange for more than a de minimis capital contribution;
(ii) the distribution by the Joint Venture to a retiring or continuing Partner
as consideration for an interest in the Joint Venture of more than a de minimis
amount of money or other Joint Venture property; and (iii) the liquidation of
the Joint Venture. In such event, if the Gross Asset Value of an asset does not
equal its adjusted basis for federal income tax purposes, such Gross Asset Value
shall thereafter be adjusted by the Depreciation taken into account with respect
to such asset for purposes of computing Profits and Losses.
(b) The Partners are aware of the income tax consequences of the
allocations made by this Section 3 and agree to be bound by the provisions of
this Section 3 in reporting their shares of Joint Venture income and loss for
income tax purposes.
(c) For purposes of determining the Profits, Losses, or any other
items allocable to any period, Profits, Losses, and any such other items shall
be determined on a daily, monthly, or other basis, as determined by the Managing
Partner using any permissible method under Code Section 706 and the Regulations
thereunder.
3.8 PRIORITY ALLOCATION OF OPERATING INCOME.
---------------------------------------
18
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(a) For so long as E selects the General Manager of the Casino
Project, as provided in Section 5.10, C shall be entitled to a priority
allocation of operating income, as determined in accordance with this
Section3.8, equal to fifteen percent (15%) of the Initial Investment (as defined
below) in the Casino Project, adjusted each year for depreciation and repayment
of principal on the Construction Financing. C's right to this Priority
Allocation is non-cumulative and shall commence on an annual basis after the
first full year of operation of the Casino Project. The Priority Allocation
shall be calculated as follows:
The "Initial Investment" shall be equal to the total Project
cost, excluding only preopening expenses and initial bankroll, but shall not
exceed $290,000,000. The Initial Investment shall be adjusted at the end of each
year by subtracting (i) the depreciation on the Initial Investment taken in such
year (in accordance with the depreciation schedule agreed to by the Partners in
the initial year) and (ii) the principal payments made in repayment of any
Construction Financing. The average of the Initial Investment at the beginning
of each year and the Initial Investment at the end of each year (the "Average
Investment") shall be multiplied by fifteen percent (15%) which sum shall be
divided by sixty-five percent (65%). The resulting number multiplied by the
Percentage Interest of C shall be the amount of C's Priority Allocation. If, in
any year, the Casino Project generates insufficient operating income to allocate
C its full Priority Allocation, C shall be entitled to such allocation only to
the extent the operating income is available, and the Priority Allocation shall
not be cumulative.
If, however, the Casino Project reports sufficient operating
income to allocate C all or a portion of its Priority Allocation, but sufficient
cash is unavailable (i.e., not on hand) to distribute to C its Priority
Allocation, C shall be entitled to receive the next cash available for
distribution to satisfy the Priority Allocation which has been allocated to it.
(b) For purposes of the above calculation, the purchase of new assets
shall not be considered. Prior to the purchase of income producing assets, the
parties shall negotiate in good faith to adjust net income to take into account
the net income produced from such assets.
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(c) This Priority Allocation set forth in subparagraph (a) above
shall be distributed to C to the extent available as provided in Section 4.1.
SECTION 4
DISTRIBUTIONS
-------------
4.1 NET CASH FROM OPERATIONS. The term "Net Cash From Operations" shall
------------------------
mean the gross cash proceeds from all Joint Venture operations, less the
following amounts agreed to by the Partners as set forth in the operating and
capital budgets for the businesses of the Joint Venture: (i) Cash operating
expenses and payments of other expenses and obligations of the Joint Venture,
including interest and scheduled principal payments on Venture indebtedness,
including the Construction Financing, not including cost overruns, and the
Revolving Credit Line (in accordance with commercial business practices), other
than indebtedness owed to Partners or Affiliates as set forth below, and not
including depreciation expense; and (ii) Such reasonable reserves as the
Partners deem necessary in good faith and in the best interests of the Joint
Venture to meet anticipated future obligations and liabilities of the Joint
Venture. Net Cash From Operations shall be subject to the annual audit of the
Joint Venture. The Net Cash From Operations with respect to each fiscal year
shall be distributed not later than the forty-fifth (45th) day after the end of
each fiscal quarter as follows:
(a) At the end of the first year of operation only, to each Partner,
an amount equal to (or in proportion if less than) such partner's Tax Liability
(as determined pursuant to Section 4.2 hereof) with respect to such fiscal year.
(b) Payment of interest on all loans to the Joint Venture from
Partners and Affiliates, including, without limitation, loans to the Joint
Venture made as a result of a Defaulting Partner pursuant to Section 2.7(a)(ii).
(c) Payment of principal on any loan(s), except the Construction
Financing, made by a Partner or an Affiliate to the Joint Venture, including a
loan made by a Non-Defaulting Partner made to the Joint Venture pursuant to
Section 2.7(a)(ii).
(d) Payment of interest and principal on any loan(s) a Non-Defaulting
Partner made on behalf of a Defaulting Partner pursuant to Section 2.7(a)(i) as
a distribution to the Defaulting Partner, plus an additional distribution to the
Non-Defaulting Partner in an equal amount.
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(e) If C or CC provides the Construction Financing, to the payment of
the construction cost overruns in the amount that the total Construction
Financing Loan exceeds seventy percent (70%) the Final Budget.
(f) At the end of the first year of operation only, the entire
balance shall be paid toward the principal of the Construction Financing, not
including cost overruns. The amount of such payment shall reduce the Initial
Investment for the purpose of calculating the Priority Allocation as provided in
Paragraph 3.8.
(g) To the extent earned and available, an amount to C up to the
amount of the Priority Allocation defined in Section 3.8 with respect to such
fiscal year. Any shortfall in the Priority Allocation shall not be cumulative
from year to year.
(h) To the extent earned and available, an amount to E up to the
amount distributed to C under Subparagraph (g) from year to year, above, with
respect to such fiscal year. Any shortfall in this distribution shall not be
cumulative.
(i) After the first year of operation, to each Partner, an amount
equal to (or in proportion if less than) such Partner's Tax Liability (as
determined pursuant to Section 4.2 hereof) with respect to such fiscal year. In
the event that for such fiscal year there is not adequate cash available to
distribute to E an amount equal to E's Tax Liability for such fiscal year, CC
agrees to loan such amount to E, to be repaid, plus interest at the prime rate
of Bank of America, from time to time, from future distributions to E.
(j) The entire balance, unless otherwise agreed by the Partners,
shall be applied to the payment of the Construction Financing if provided by C
or CC until said loan is paid in full or refinanced; provided, however, in the
event that such Construction Financing is not repaid in full within five (5)
years after the commencement of operation of the Project, then the outstanding
principal balance shall be refinanced on a commercially reasonable basis so as
to allow the maximum distribution to the Partners in accordance with their
Percentage Interests.
(k) After satisfaction of the above obligations, any remaining
balance of the Net Cash From Operations shall be distributed to the Partners in
proportion to their Percentage Interests.
4.2 TAX LIABILITY. A Partner's "Tax Liability" for any fiscal year shall
-------------
be an amount equal to the Profits of the Joint Venture allocated to such Partner
with respect to such fiscal year
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multiplied by a percentage (initially, 39.6%) equal to the greater of the
maximum marginal federal income tax rate applicable to individuals for such
fiscal year or the maximum marginal federal income tax rate applicable to
corporations for such fiscal year.
SECTION 5
MANAGEMENT
----------
5.1 DAY-TO-DAY MANAGEMENT BY MANAGING PARTNER. C shall be and hereby is
-----------------------------------------
appointed the Managing Partner for the Joint Venture and is hereby charged with
and C hereby agrees to assume the responsibility and authority for the prudent
day-to-day management of the business affairs of the Joint Venture, except as
otherwise designated to the General Manager in accordance herewith.
Subject to the limitations and restrictions set forth in this Agreement and
the Annual Business Plan, the Managing Partner may exercise the following
specific rights and powers without any further consent of the other Partners
being required:
(a) Oversee and manage the day-to-day operations of the Casino
Project and other Joint Venture business.
(b) Direct and oversee the legal, architectural, engineering,
construction and other work necessary for the development, construction,
completion, opening,care and improvement of the Casino Project and the Casino
Property and other Joint Venture business.
(c) Prepare budgets and appropriate development schedules for the
development, construction, opening, repair, improvement and operation of the
Casino Project and Casino Property.
(d) Negotiate with and enter into contracts for the development,
construction, completion, opening, care and improvement of the Casino Project
and to supervise all such work.
(e) Implement decisions made by both of the Partners.
(f) Utilize due diligence to operate, on behalf of and for the sole
benefit of Joint Venture, a hotel, casino, and entertainment complex as
contemplated by the description of the Casino Project and such other business
and activities which are customary and usual in connection with such operation;
(g) Care for and distribute Joint Venture funds in accordance with
the provisions of this Agreement.
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(h) Contract on behalf of the Joint Venture for the services of
independent contractors such as lawyers and accountants.
(i) Establish, maintain and supervise the deposit of monies or
securities of the Joint Venture with federally insured banking institutions or
other banking institutions as may be selected by the Managing Partner. The
Managing Partner is authorized to sign on behalf of the Joint Venture on all
accounts with such banking institutions.
(j) After consultation with the Executive Committee, prepare and
submit the Annual Business Plan for review and approval of the Executive
Committee as provided herein.
(k) Acquire by purchase, lease, or otherwise such personal property
which may be necessary, convenient, or incidental to the accomplishment of the
purposes of the Joint Venture consistent with the Annual Business Plan;
(l) Execute any and all agreements, contracts, documents,
certifications, and instruments necessary or convenient in connection with the
management, maintenance, and operation of the Casino Project, or in connection
with managing the affairs of the Joint Venture, including, without limitation,
adequate insurance as provided in the Annual Business Plan.
5.2 ANNUAL BUSINESS PLAN. No later than forty-five (45) days prior to the
--------------------
end of the then current Fiscal Year, after consultation with the Executive
Committee, the Managing Partner and the General Manager shall prepare a business
plan (the "Annual Business Plan") for the next Fiscal Year. The Annual Business
Plan shall be subject to the review and approval of the Executive Committee.
After approval of the Business Plan, there shall be no material changes in the
Annual Business Plan without the approval of the Executive Committee. The
Annual Business Plan shall include, but not be limited to, the following:
(a) A narrative description of any activities proposed to be
undertaken including the physical development of the Casino Project;
(b) A projected annual income statement (accrual basis) on a monthly
basis for upcoming Fiscal Year and subsequent Fiscal Year;
(c) A projected balance sheet as of the end of the upcoming Fiscal
Year and subsequent Fiscal Year;
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(d) A capital budget and an operating budget for the Casino Project
by department, including the establishment and amount of working capital,
capital improvement, and contingency reserves;
(e) A schedule of projected operating cash flow, including itemized
operating revenues, Casino Project costs, expenses, a schedule of projected
operating deficits and capital calls for Additional Capital Contributions, if
any;
(f) A marketing plan indicating the nature, type and timing of
advertising, public relations, complementaries, and promotions (e.g.
print,television, food/beverage, billboard, signage, and other media),
contemplated distribution and amounts payable to contractors;
(g) An operating plan, including executive and other key employee and
department staffing needs;
(h) An entertainment plan and budget;
(i) Proposed personal property acquisitions;
(j) Anticipated insurance needs of the Joint Venture, including
comprehensive, general liability, casualty, fire and extended coverage, workers'
compensation, fidelity insurance protecting against employee loss or theft and
business interruption insurance in an amount agreed to by all Partners, together
with assurance that each Partner is named as an additional insured on the Joint
Venture insurance policies.
5.3 RESTRICTIONS ON THE PARTNERS. The following shall require the
----------------------------
unanimous approval of all Partners:
(a) The admission of an additional Partner;
(b) The purchase of additional real property;
(c) Any other transaction which is unrelated to the purposes of the
Joint Venture;
(d) Except as otherwise provided herein, incurring any indebtedness
that encumbers the real property of the Casino Project;
(e) Sales or other dispositions of all or substantially all of the
assets of the Joint Venture;
24
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(f) Capital improvements in the aggregate in excess of $250,000, not
included in the approved Annual Business Plan ;
(g) Refinancing of the Construction Financing;
(h) Any obligation, contract, agreement, or commitment of any type
whatsoever with a Partner or an Affiliate of a Partner, other than those
specifically described in this Agreement;
(i) Except as provided in Section 10, the sale, assignment, pledge,
mortgage, encumbrance or disposal of all or any portion of such Partner's
interest in the Venture. Except as specifically provided herein, nothing herein
shall prohibit or limit a Partner's right to assign or pledge its proceeds from
the Joint Venture;
(j) The assignment, pledge or transfer of any debt in excess of
$250,000 due the Venture or the release of any such debt, except on payment in
full, other than in the ordinary course of the business of the Venture;
(k) The compromise of any claim due to the Venture in excess of
$250,000 or submission to arbitration of any dispute or controversy involving
the Venture, other than in the ordinary course of the business of the Venture;
(l) The Managing Partner shall select the Project Controller subject
to the approval of the other Partner, which approval shall not be unreasonably
withheld;
(m) Transfer or conveyance of any of the Casino Property or the grant
of easements or other property rights relating to the Casino Property;
(n) Cancellation of any insurance as set forth in the approved Annual
Business Plan.
5.4 REPLACEMENT OF MANAGING PARTNER.
-------------------------------
(a) Except as provided herein, the Managing Partner may only be
changed by the unanimous agreement of all Partners. If the actual net operating
results of the business of the Joint Venture for any four (4) consecutive
quarters are less than eighty percent (80%) of the projected amount as set forth
in the approved Annual Business Plan, after appropriate adjustments for factors
affecting similar business in the vicinity of the Project, then the other
Partner may require the Managing Partner to resign. Provided, however, that as
long as E appoints the General Manager, E shall not be entitled to require CC to
resign as Managing Partner. In
25
<PAGE>
the event that a Partner exercises its option to require the Managing Partner to
resign, then that Partner shall become the Managing Partner of the Joint Venture
and assume all obligations of the Managing Partner as required by this
Agreement.
(b) In the event that there is any dispute with respect to whether
the Managing Partner has performed in accordance with the standards set forth in
Section 5.4(a), such dispute shall be submitted to the CPA firm of Arthur
Andersen for resolution. Arthur Andersen shall consider the positions of both
Partners and shall render a decision with respect to the performance of the
Managing Partner, which decision shall be final and binding on the Partners. In
the event that Arthur Andersen is unable or unwilling to undertake this dispute
resolution, then the dispute will be resolved by another qualified CPA firm as
appointed by Arthur Andersen.
(c) The Managing Partner reserves the right to resign as the Managing
Partner. In the event that the Managing Partner resigns, the other Partner will
have the right and option to become the Managing Partner of the Joint Venture
and assume all the obligations of the Managing Partner as required by this
Agreement. In the event that the other Partner does not exercise its option to
become the Managing Partner, then the Partners shall attempt to appoint a third
party ("Manager") to manage and operate the property. In the event that the
Partners are unable to agree on the Manager, then the Joint Venture shall be
dissolved and liquidated in accordance with the provisions of Section 13, with
the last active Managing Partner being responsible for the dissolution and
liquidation as provided in Section 13.
5.5 IMPLEMENTATION OF ANNUAL BUSINESS PLAN. The Managing Partner
--------------------------------------
shall use due diligence to implement the Annual Business Plan. The Joint
Venture will be conducted consistent with prudent business practices, with the
objective of maximizing the profits of the Joint Venture, and each Partner will
use due diligence to achieve that objective. The Managing Partner shall
promptly notify the other Partner of any transaction, notice, event or proposal
relating to the management and operation of the Casino Project which could
significantly affect, either adversely or favorably, the Casino Project or the
Joint Venture or otherwise cause a significant deviation from the Annual
Business Plan.
5.6 EXECUTIVE COMMITTEE. There shall be established an Executive
-------------------
Committee. The Executive Committee shall consult with, review, monitor and
oversee the performance of the Managing Partner and the General Manager. The
Managing Partner and the General Manager shall consult with the Executive
Committee on a periodic basis as provided herein and seek the input and counsel
of the
26
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Executive Committee prior to the preparation of the Annual Business Plan.
5.7 MEMBERSHIP; VOTING EXECUTIVE COMMITTEE.
--------------------------------------
(a) MEMBERSHIP. The Executive Committee will initially consist of
----------
five (5) members, with three (3) members appointed by the Managing Partner and
two (2) members appointed by the other Partner. In the event that neither of
the Partners are the Managing Partner, then the Executive Committee shall
consist of five (5) members, with two (2) members appointed by each party, and
the Manager appointed pursuant to Section 5.4(c) shall be the fifth member of
the Executive Committee. Each Partner may, at any time, appoint alternate
members to the Executive Committee and such alternates will have all the powers
of a regular committee member in the absence or inability of a regular committee
member to serve. Each Partner shall notify the other Partner in writing of its
appointments to the Executive Committee within ten (10) business days of the
execution of this Agreement.
(b) VOTING. Each member of the Executive Committee shall have one
------
vote on any decision of the Executive Committee. A member of the Executive
Committee may give his written proxy to another member of the Executive
Committee to vote on his behalf in his absence. All actions of the Executive
Committee must be approved by a majority of all of the members of the Executive
Committee, present or voting by proxy.
5.8 MEETINGS OF THE EXECUTIVE COMMITTEE; TIME AND PLACE. Unless otherwise
---------------------------------------------------
requested by a Partner after completion of the Casino Project, regular meetings
of the Executive Committee shall be held quarterly at such time and at such
place as the Executive Committee shall determine. During construction of the
Casino Project, the Executive Committee shall meet at least once every other
week. At such regular meetings, the Managing Partner's representatives and the
General Manager shall report on the financial performance and condition of the
Joint Venture on a year-to-date basis (including cash flows, reserves,
outstanding loans, and compliance efforts), give progress reports on capital
projects including construction of the Project, compliance with the Annual
Business Plan, material contracts entered into, material litigation, marketing
efforts and such other matters relevant to the operation of the Joint Venture.
The Executive Committee may make use of telephones and other electronic devices
to hold meetings, provided that each member of the Executive Committee may
simultaneously participate with all of the other members of the Executive
Committee with respect to all discussions and votes of the Executive Committee.
The Executive Committee may act without a meeting if the action taken is reduced
to writing (either prior
27
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to or thereafter) and approved by members of the Executive Committee in
accordance with the voting provisions of this Agreement. Written minutes shall
be taken at each meeting of the Executive Committee. Any Partner may call for a
special meeting of the Executive Committee by giving three (3) days prior
written notice to all members of the Executive Committee.
5.9 DUTIES OF THE EXECUTIVE COMMITTEE. The duties of the Executive
---------------------------------
Committee shall include, but not be limited to, the following:
(a) Reviewing, adjusting, approving, developing, and supervising the
Annual Business Plan, including budgeting for the construction of the Casino
Project;
(b) Reviewing development progress of the Casino Project;
(c) Reviewing and approving the terms of any loans made to the Joint
Venture;
(d) Determining, except as otherwise provided in this Agreement, the
capital requirements of the Joint Venture;
(e) Appointment of a firm of independent certified public accountants
to perform an annual audit and issue an opinion letter with respect to the
financial statements of the Joint Venture;
(f) Appointment of those individuals, other than the Managing Partner
and General Manager, who will have the authority to open and draw checks on bank
accounts in the name of the Joint Venture, or endorse checks for deposit to such
accounts;
(g) Approving all material purchases, sales, leases or other
dispositions of Joint Venture Property other than in the ordinary course of
business; and
(h) Determine the compensation of the General Manager and the
Controller.
5.10 GENERAL MANAGER.
---------------
(a) E shall select the General Manager of the Casino Project, subject
to the approval of C, which shall not be unreasonably withheld.
(b) The General Manager shall perform those functions of the Managing
Partner set forth in Sections 5.1(a), (e), (f), (h),
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(i), (j), (k), (l), 5.2, 5.5, including restrictions with respect to the Annual
Business Plan, and such other duties and responsibilities as the Managing
Partner may assign to the General Manager.
(c) The General Manager shall consult with the Managing Partner on a
weekly basis and review results of operations and proposals for future
operations.
(d) The General Manager shall continue to be selected by E so long as
the annual results of operations are within the standards and criteria set forth
in Section 5.4 or so long as C is allocated its Priority Allocation as defined
in Section 3.8. In the event that the General Manager does not meet the
performance standards set forth in this paragraph, C may replace the General
Manager. If the General Manager is replaced by C without E's consent, C shall
not receive the Priority Allocation set forth in Section 3.8.
(e) In the event that C, as Managing Partner, and the Executive
Committee do not approve the Annual Business Plan as proposed by the General
Manager, then the General Manager may resign, in which event, C shall no longer
receive the Priority Allocation as set forth in Section 3.8. In the event that
the General Manager resigns, the Managing Partner shall appoint the new General
Manager. In the event that the General Manager does not resign, the General
Manager shall implement the Annual Business Plan as revised and approved by the
Managing Partner and the Executive Committee and the Priority Allocation shall
remain in effect.
SECTION 6
---------
INDEMNIFICATION OF PARTNERS
---------------------------
6.1 GENERAL. The Joint Venture shall indemnify, save harmless, and pay
-------
all judgments and claims of third parties against each Partner or any officer,
shareholder, member, partner, or director of such Partner and members of the
Executive Committee relating to any liability or damage, including attorneys'
fees to be paid as incurred, arising by reason of any act performed or omitted
to be performed by such Partner, officer, director or member in connection with
the business of the Joint Venture, except for any conduct of a Partner that
constitutes fraud, bad faith or breach of fiduciary duty.
6.2 JOINT VENTURE EXPENSES.
----------------------
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(a) The Joint Venture shall indemnify, hold harmless, and pay all
expenses, costs, or liabilities of any Partner who for the benefit of the Joint
Venture makes any deposit, acquires any option, or makes any other similar
payment or assumes any obligation in connection with any property proposed to be
acquired by the Joint Venture in accordance with this Agreement and who suffers
any financial loss as the result of such action.
(b) Notwithstanding anything to the contrary in any of Sections 6.1
and 6.2, in the event that any provision in any of such Sections is determined
to be invalid in whole or in part, such Section shall be enforced to the maximum
extent permitted by law.
SECTION 7
REPRESENTATIONS AND WARRANTIES
------------------------------
7.1 REPRESENTATIONS AND WARRANTIES. Each Partner hereby represents and
------------------------------
warrants that:
(a) If such Partner is a corporation, limited liability company, or a
partnership, it is duly organized, validly existing, and in good standing under
the laws of the jurisdiction of its incorporation or formation and has the
corporate, company, statutory, or partnership power and authority to own its
property and carry on its business as owned and carried on at the date hereof
and as contemplated hereby.
(b) Such Partner has the individual, corporate, company, statutory,
or partnership power and authority to execute and deliver this Agreement and to
perform its obligations hereunder and, if such partner is a corporation, limited
liability company, or partnership, the execution, delivery, and performance of
this Agreement has been duly authorized by all necessary corporate, company,
statutory, or partnership action.
(c) This Agreement constitutes the legal, valid, and binding
obligation of such Partner, CC and EHALP and is enforceable in accordance with
its terms and does not violate the terms and conditions of any law, regulation,
order or award of any court or governmental agency or otherwise violate or
result in a breach or default of the terms and conditions of any mortgage,
agreement or other written document by which a Partner may be bound.
30
<PAGE>
SECTION 8
ACCOUNTING, BOOKS AND RECORDS
-----------------------------
8.1 ACCOUNTING, BOOKS AND RECORDS. The Joint Venture shall maintain at
-----------------------------
its principal place of business separate books of account for the Joint Venture
which shall show a true and accurate record of all costs and expenses incurred,
all charges made, all credits made and received, and all income derived in
connection with the operation of the Joint Venture business in accordance with
generally accepted accounting principles and casino industry guidelines
consistently applied and, to the extent inconsistent therewith, in accordance
with this Agreement. The Joint Venture shall use the accrual method of
accounting in preparation of its annual reports and for tax purposes and shall
keep its books accordingly. The Joint Venture's books and records shall be
independently audited annually at the Joint Venture's expense. Each Partner
shall, at its sole expense, have the right, without notice to any other Partner,
to examine, copy, and audit the Joint Venture's books and records during normal
business hours.
8.2 REPORTS.
-------
(a) IN GENERAL. The Managing Partner, the General Manager and the
----------
Controller shall be responsible for the preparation of financial reports of the
Joint Venture and the coordination of financial matters of the Joint Venture
with the Joint Venture's accountants.
(b) REPORTS. Within sixty (60) days after the end of each Fiscal Year
-------
and within forty-five (45) days after the end of any fiscal quarter, and within
twenty (20) days after the end of any calendar month, the Managing Partner shall
cause each Partner to be furnished with a copy of the balance sheet of the Joint
Venture as of the last day of the applicable period, a statement of income or
loss for the Joint Venture for such period, and a statement of the Joint
Venture's cash flow for such period. The Managing Partner shall determine the
fiscal year of the Joint Venture for financial reporting requirements and for
Federal Income Tax purposes. Annual statements shall also include a statement of
the Partners' Capital Accounts and changes therein for such Fiscal Year. Annual
statements shall be examined by the Joint Venture's independent accountants.
8.3 TAX RETURNS; INFORMATION. The Managing Partner shall cause the Joint
------------------------
Venture's accountants to prepare all income and other tax returns of the Joint
Venture and shall cause the same to be filed in a timely manner. The Managing
Partner shall furnish to each Partner a copy of each such return, together with
any
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<PAGE>
schedules or other information which each Partner may require in connection
with such Partner's own tax affairs.
8.4 TAX MATTERS PARTNER. The Managing Partner is specially authorized to
-------------------
act as the "Tax Matters Partner" under the Code and any state or local law.
SECTION 9
AMENDMENTS
----------
9.1 AMENDMENTS. This Joint Venture Agreement may only be amended by the
----------
consent and approval of both Partners. Any such amendment shall be in writing
and executed by both Partners.
SECTION 10
TRANSFERS OF INTERESTS
----------------------
10.1 RESTRICTIONS ON TRANSFERS. Except as expressly permitted by this
-------------------------
Agreement, no Partner shall transfer all or any portion of its interest in the
Joint Venture or any rights therein without the unanimous consent of the
Partners. Any transfer or attempted transfer by any Partner in violation of the
preceding sentence shall be null and void and of no force or effect whatever.
The Partners acknowledge and agree that they are relying on the experience,
expertise, reputation and financial condition of the other Partner in entering
into this Agreement and that the nature of the relationship between the parties
is personal. Each Partner hereby acknowledges the reasonableness of the
Restrictions on Transfers imposed by this Agreement in view of the Joint Venture
purposes and the relationship of the Partners. Accordingly, the Restrictions on
Transfers contained herein shall be specifically enforceable. Each Partner
hereby further agrees to hold the Joint Venture and each Partner (and each
Partner's successors and assigns) wholly and completely harmless from any cost,
liability, or damage (including, without limitation, liabilities for income
taxes and costs of enforcing this indemnity) incurred by any of such indemnified
Partners as a result of a transfer or an attempted transfer in violation of this
Agreement.
10.2 PERMITTED TRANSFERS.
-------------------
(a) GENERAL. A Partner shall be entitled to transfer or convey all or
-------
any portion of its interest in this Joint Venture to any of the following
persons or entities ("Permitted Transferee"):
(i) An Affiliate of such Partner, subject to the provisions of
Paragraph 10.3;
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(ii) Members of the Partner's family, which includes the
Partner's spouse, natural or adoptive lineal descendants, and trusts for their
benefit.
(iii) Any other partner.
(iv) A personal representative of such Partner, which includes
any person or entity who succeeds to the Partner's estate as a result of the
Partner's death, legal incompetence or bankruptcy.
(v) Any person or entity approved by the unanimous consent of
the Partners.
(b) ADMISSION OF PERMITTED TRANSFEREE AS A PARTNER. A Permitted
----------------------------------------------
Transferee of an interest in the Joint Venture shall be admitted as a Partner in
the Joint Venture only upon the unanimous
consent of the Partners. The rights of a Permitted Transferee who is not
admitted as a Partner shall be limited to the right to receive allocations and
distributions from the Joint Venture with respect to the interest transferred,
as provided by this Agreement. A Permitted Transferee that is not admitted as a
Partner shall not be a Partner with respect to such interest, and, without
limiting the foregoing, shall not have the right to inspect the Joint Venture's
books, act for or bind the Joint Venture, or otherwise interfere in its
operations.
(c) EFFECT OF PERMITTED TRANSFER ON JOINT VENTURE. The Partners
---------------------------------------------
intend that the Permitted Transfer of an interest in the Joint Venture shall not
cause the dissolution of the Joint Venture under the Act; however, if determined
by a court of competent jurisdiction that a dissolution has occurred, the
Partners shall continue to hold the Joint Venture's assets and operate its
business in Joint Venture form under this Agreement as if no such dissolution
had occurred.
(d) NOTICE AND COSTS OF TRANSFER. In the event of any Permitted
----------------------------
Transfer, the Partner making the transfer shall notify the other Partner of the
transfer and shall furnish the Joint Venture with the Transferee's tax
identification number and sufficient information to determine the Transferee's
interest and tax basis in the Joint Venture and any other information reasonably
necessary to permit the Joint Venture to file all required federal and state tax
returns. The Partner making a transfer permitted hereunder of all or a portion
of his Joint Venture interest shall pay all costs and expenses incurred by the
Joint Venture in connection with such transfer.
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<PAGE>
10.3 LIMITATION ON OWNERSHIP OF PARTNERS.
-----------------------------------
(a) Unless otherwise agreed by C, Donald L. Carano or a member of his
immediate family acceptable to C, which acceptance will not be unreasonably
withheld, or an Affiliate controlled by Donald L. Carano or a member of his
immediate family acceptable to C, which acceptance will not be unreasonably
withheld, shall be the manager of and shall control E. Nothing herein shall
prohibit, restrict or otherwise limit EHALP's or an Affiliate's right and
ability to become a publicly traded entity so long as the above restriction on
control of E is met.
(b) Unless otherwise agreed by E, which shall not be unreasonably
withheld, C shall be controlled by CC.
(c) In the event that the provisions of this Section 10.3 are
breached, the Non-Defaulting Partner shall have the right to exercise the Buy-
Sell provisions of Section 12.1. 12.2 and 12.3.
SECTION 11
WITHDRAWALS; ACTION FOR PARTITION;
----------------------------------
BREACHES
--------
11.1 WAIVER OF PARTITION AND COVENANT NOT TO WITHDRAW. Each Partner
------------------------------------------------
hereby covenants and agrees that the Partners have entered into this Agreement
based on their mutual expectation that both Partners will continue as Partners
and carry out the duties and obligations undertaken by them hereunder and that,
except as otherwise expressly required or permitted hereby, each Partner hereby
covenants and agrees not to (a) take any action to require partition or to
compel any sale with respect to its Joint Venture interest, (b) take any action
to file a certificate of dissolution or its equivalent with respect to itself,
(c) take any action that would cause a Bankruptcy of such Partner, (d) withdraw
or attempt to withdraw from the Joint Venture, (e) exercise any power under the
Act to dissolve the Joint Venture, (f) transfer all or any portion of its
interest in the Joint Venture (other than as permitted hereunder), (g) petition
for judicial dissolution of the Joint Venture, or (h) demand a return of such
Partner's contributions or profits (or a bond or other security for the return
of such contributions or profits) without the unanimous consent of the Partners.
11.2 CONSEQUENCES OF VIOLATION OF COVENANTS. If a Partner (a "Breaching
--------------------------------------
Partner") attempts to (i) cause a partition or (ii) withdraw from the Joint
Venture or dissolve the Joint Venture or
34
<PAGE>
take any action in breach of Section 11.1 hereof, the Joint Venture shall
continue and such Breaching Partner shall be subject to this Section 11.2. In
such event, the following shall occur;
(a) The Breaching Partner shall immediately cease to have the
authority to act as a Partner and shall have no further power to act for or bind
the Joint Venture;
(b) The other Partner shall continue to have the right to possess the
Joint Venture's property and goodwill and to conduct its business and affairs;
(c) The Breaching Partner shall be liable in damages, without
requirement of a prior accounting, to the Joint Venture for all costs and
liabilities that the Joint Venture or any Partner may incur as a result of such
breach;
(d) Distributions to the Breaching Partner shall be reduced to
seventy-five percent (75%) of the Distributions otherwise payable to the
Breaching Partner. The Joint Venture may apply any distributions otherwise
payable to the Breaching Partner to satisfy any claims it may have against the
Breaching Partner.
(e) The Breaching Partner shall continue to be liable to the Joint
Venture for any unpaid Capital Contributions required hereunder with respect to
such interest and to be jointly and severally liable with the other Partners for
any debts and liabilities (whether actual or contingent, known or unknown) of
the Joint Venture existing at the time the Breaching Partner withdraws or
dissolves.
(f) If E is a Breaching Partner, then the limitations on foreclosure
of any deed of trust for the benefit of C or CC for the Construction Financing
shall no longer be applicable.
SECTION 12
BUY-SELL AND BUY-OUT ON DEFAULT
-------------------------------
12.1 CONDITIONS PRECEDENT TO BUY-SELL. The Buy-Sell provisions of this
--------------------------------
Agreement may not be instituted by any Partner until each of the following
events or conditions have taken place:
(a) The initial Construction Financing has been paid in full;
35
<PAGE>
(b) Except as otherwise provided herein, ten (10) years from the date
of commencement of operation of the Casino Project; and
(c) Such Partner is not in default of any of the provisions of this
Agreement.
12.2 EXERCISE OF RIGHT TO BUY OR SELL. At any time after the occurrence of
--------------------------------
the conditions precedent set forth in Paragraph 12.1, either Partner may make an
offer to purchase ("Offer") the interest of the other Partner. The Offer shall
be in writing and shall set forth the proposed price ("Price") to be paid for
the other Partner's interest in the Partnership. The Offer shall constitute an
irrevocable offer by the Partner giving the Offer either to (i) purchase all,
but not less than all, of the interest in the Joint Venture of the other Partner
free of liens and encumbrances for the Price, or (ii) sell all, but not less
than all, of its interest in the Joint Venture free of liens and encumbrances to
the other Partner for the Price. The Partner receiving the Offer shall have a
period of two (2) months to accept the Offer to purchase at the Price or, in the
alternative, to require that the Offering Partner sell its interest to the other
Partner at the Price. If, at the time of the Offer, the Percentage Interests are
not equal, then the Purchase Price for the respective interests shall be
prorated proportionately without any premium for a controlling interest. The
Partner receiving the Offer shall give written notice (Notice of Election) of
its acceptance of the Offer to sell or purchase to the Offering Partner within
two (2) months of the receipt of the Offer. Failure to give the Notice of
Election shall constitute an acceptance of the offer to sell to the Offering
Partner on the terms set forth in the Offer. The closing of the transaction for
the sale or purchase of the Joint Venture Interest shall occur not later than
six (6) months after the Notice of Election or at such other time as may be
required by the Nevada Gaming Authorities. The Purchasing Partner shall be
entitled to encumber the Joint Venture Property in order to finance the
purchase. The Purchasing Partner may elect to pay the purchase price in cash or
on terms which require at least a twenty-five percent (25%) down payment with
the balance to be paid quarterly on a five (5) year amortization, plus interest
at the prime rate of Bank of America from time to time. In the event that the
Purchasing Partner elects to finance the purchase, the obligation to the Selling
Partner may be secured by a Deed of Trust on the Partnership Property, which
Deed of Trust will only be subordinate to the Joint Venture debt in the amount
encumbering the Joint Venture Property that existed on the date of the Offer to
Purchase. If such Deed of Trust is not allowed by the First Deed of Trust
Holder, then the Selling Partner may require a pledge of the Partnership
interest of the Purchasing Partner as security for the financing of the purchase
or such other
36
<PAGE>
security of the Purchasing Partner as may be reasonably required by the Selling
Partner.
12.3 CLOSING.
-------
(a) At the closing, the Partners shall execute such documents and
instruments of conveyance as may be necessary or appropriate to confirm the
transaction contemplated hereby, including, without limitation, the transfer of
the Joint Venture interest of the Selling Partner and the assumption by the
Purchasing Partner of the Selling Partner's obligations with respect to the
Joint Venture interest transferred. The reasonable costs of such transfer and
closing, including, without limitation, attorneys' fees and filing fees, shall
be divided equally between the Purchasing and Selling Partner.
(b) The closing of the purchase and sale of the Partner's interest
shall be subject to the approval of the Nevada Gaming Board and Commission. The
Purchasing Partner shall file all necessary applications for approval of the
transaction with the Nevada Gaming Board and Commission within sixty (60) days
after the Notice of Election. The Purchasing Partner shall pay all costs and
fees in connection with the approval of the Nevada Gaming Board and Commission.
(c) At the close of the transaction contemplated under the provisions
of Section 12.2, the Selling Partner shall assign to the Purchasing Partner all
of the interest of the Selling Partner in the Joint Venture, free and clear of
all liens, claims, encumbrances, and, at the request of the Purchasing Partner,
shall convey and transfer to the Purchasing Partner, subject only to all matters
of record at the time of the conveyance which have been approved by the
Purchasing Partner, an undivided percentage interest in the assets of the Joint
Venture equal to the Selling Partner's interest therein, and shall execute and
deliver to the Purchasing Partner an amended Certificate of Fictitious Name (or
cancellation thereof), together with all other documents as may be reasonably be
required to give effect to the transfer of the Selling Partner's interest in the
Joint Venture. In connection with such transfer, the Partners shall take all
necessary action to discharge or release any Affiliate from any guarantee of any
debt of the Joint Venture.
(d) The Purchasing Partner shall use the assets of the Joint Venture
to discharge to the extent possible all loans and other indebtedness,
liabilities or other obligations of the Joint Venture (but shall not be required
to prepay any obligations under any permanent loans secured by the Property) for
which the Selling Partner has any personal or corporate liability or otherwise
obtain
37
<PAGE>
the release of the Selling Partner from any such liability. The Purchasing
Partner shall also cause the Joint Venture to repay to the Selling Partner any
loans that were made by the Selling Partner to the Joint Venture or to the
Purchasing Partner, together with unpaid accrued interest thereon.
(e) The Purchasing Partner shall indemnify and hold harmless the
Selling Partner from all indebtedness, liabilities and other obligations of the
Venture, whether the same arose prior to or after the purchase, except that such
indemnification shall not apply to liabilities, if any, of the Joint Venture
which were created by the Selling Partner while acting in fraud of either the
Joint Venture or the rights of the Purchasing Partner or in violation of the
terms of this Agreement.
12.4 BUY-OUT ON DEFAULT.
------------------
(a) RIGHT TO PURCHASE. In the event that a Partner is in default on
-----------------
Additional Capital Contributions required by the Managing Partner as provided in
Paragraph 2.6 and the Non-Defaulting Partner has elected the remedy described in
Paragraph 2.7(a)(i) and such loan is not repaid to the Non-Defaulting Partner
within two (2) years of the date of the loan advance or if a Partner is in
default at any time on two (2) Additional Capital Contributions which remain
unpaid or uncured as provided herein, including payments from distributions on
behalf of the Defaulting Partner pursuant to Section 4, or if any deed of trust
for the benefit of C or CC for the Construction Financing is in default, then
the Non-Defaulting Partner or CC, as the case may be, shall have the right to
purchase the interest in the Joint Venture of the Defaulting Partner for a
purchase price that is equal to the Net Equity of the Defaulting Partner's
interest in the Joint Venture less any amounts paid on behalf of the Defaulting
Partner pursuant to Section 2.7(a)(i).
(b) NOTICE OF ELECTION TO PURCHASE. The Non-Defaulting Partner may
------------------------------
exercise its right to purchase under this Section 12.4 at any time that such
default remains unpaid or uncured, either through payments by the Partner or
distributions in accordance with Section 4. The Non-Defaulting Partner shall
give written notice of its election to purchase the Defaulting Partner's
interest. The Defaulting Party shall have a period of sixty (60) days after
receipt of such Notice of Election in order to cure the entire default, plus
accrued interest. In the event that the Defaulting Partner does not cure within
said 60-day period, then the Partners shall proceed to determine the Net Equity
of the Defaulting Partner's interest in the Joint Venture in accordance with the
procedures set forth below, and the Defaulting Partner shall have no further
right to cure.
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(c) NET EQUITY. The "Net Equity" of a Partner's interest in the Joint
----------
Venture shall be the amount that would be distributed to such Partner in
liquidation of the Joint Venture pursuant to Section 13 if (1) all the Joint
Venture's assets were sold for their Gross Appraised Values; (2) the Joint
Venture paid its unpaid liabilities and established reserves for the payment of
reasonably anticipated contingent and unknown liabilities; and (3) the Joint
Venture distributed the remaining proceeds to the Partners in liquidation. The
Net Equity of a Partner's interest in the Joint Venture shall be determined from
the books and records of the Joint Venture by the firm of independent certified
public accountants regularly employed by the Joint Venture. The Net Equity of a
Partner's interest shall be determined within thirty (30) days after receipt in
writing of the Gross Appraised Value of the Casino Project and Property. The
amount of such Net Equity shall be disclosed in writing to the Joint Venture and
each of the Partners. The Net Equity determination of such accountants shall be
final and binding in the absence of a showing of gross negligence or willful
misconduct.
(d) GROSS APPRAISED VALUE. "Gross Appraised Value" shall be equal to
---------------------
the fair market value of the Casino Project and Property as determined by
qualified appraisers in accordance with the procedures set forth herein and
shall represent the amount that a single buyer would reasonably be expected to
pay for the entire Casino Project and Property (business and assets), free and
clear of all liens and encumbrances, in a single cash purchase, taking into
account the current condition, use, zoning and net income of the Casino Project
and Property.
(e) PROCEDURE FOR DETERMINING GROSS APPRAISED VALUE. The Partners
-----------------------------------------------
shall attempt to agree to appoint a mutually acceptable MAI appraiser to
determine the Gross Appraised Value of the Casino Project and Property. If the
Partners agree on such appraiser, that appraiser's determination of Gross
Appraised Value shall be final and binding on the Partners. In the event that
the Partners are unable to agree on a single MAI appraiser, then the
Non-Defaulting Partner shall appoint an MAI appraiser and give written notice
thereof to the Defaulting Partner. The Defaulting Partner shall then have
twenty (20) days to appoint a second MAI appraiser. In the event that the
Defaulting Partner fails or refuses to appoint a second appraiser within twenty
(20) days, then the Defaulting Partner agrees to be bound by the determination
of Gross Appraised Value as established by the appraiser appointed by the Non-
Defaulting Partner. If the second appraiser is timely designated, the first and
second appraisers shall meet within ten (10) days and shall select a third MAI
appraiser. The Gross Appraised Value shall be the amount determined and agreed
to by at least two (2) of the three (3) appraisers. If at least two of the
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appraisers are not able to agree on an appraised value, then each appraiser
shall independently undertake to determine the Gross Appraised Value of the
Project. The Gross Appraised Value to be used pursuant to the terms of this
Agreement to determine the Net Equity for the purposes of Paragraph 12.4 shall
be the average of the two (2) closest appraisals. The appraisers shall complete
their appraisals and give written notice of their determinations of the Gross
Appraised Value within sixty (60) days after appointment of the third appraiser.
The costs and fees of the appraiser(s) shall be divided equally between the
Partners.
(f) CLOSING. The closing of the purchase and sale of the interest of
-------
the Defaulting Partner, pursuant to this Section 12.4, shall occur not later
than ninety (90) days after the determination of the Net Equity of the
Defaulting Partner. The Purchase Price shall be equal to the Net Equity of the
Defaulting Partner and shall be paid in full in cash at the time of closing. At
closing, the Partners shall execute such documents and instruments of conveyance
as may be necessary or appropriate to confirm the transactions contemplated
hereby, including, without limitation, the transfer of the Joint Venture
interest of the Defaulting Partner to the Non-Defaulting Partner and the
assumption by the Non-Defaulting Partner of the obligations with respect to
Defaulting Partner's interest in the Joint Venture. The reasonable costs of
transfer and closing, including, without limitation, attorneys' fees and filing
fees shall be divided equally between the Defaulting and the Non-Defaulting
Partners except as provided with respect to appraisal costs. The Defaulting
Partner shall deliver to the Non-Defaulting Partner good title to its
Partnership interest, free and clear of any liens, claims, encumbrances,
security interests or options.
SECTION 13
DISSOLUTION AND WINDING UP
--------------------------
13.1 LIQUIDATING EVENTS. The Joint Venture shall dissolve and commence
------------------
winding up and liquidating upon the first to occur of any of the following
("Liquidating Events"):
(a) Failure to proceed to Phase II of the Casino Project by July 31,
1994;
(b) January 1, 2053;
(c) The sale of all or substantially all of the Property;
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(d) The unanimous vote of the Partners to dissolve, wind up, and
liquidate the Joint Venture;
(e) The happening of any other event that makes it unlawful or
impossible to carry on the business of the Joint Venture;
(f) The occurrence of an event of bankruptcy of a Partner.
The Partners hereby agree that, notwithstanding any provision of the
Act, the Joint Venture shall not dissolve prior to the occurrence of a
Liquidating Event. If it is determined, by a court of competent jurisdiction,
that the Joint Venture has dissolved prior to the occurrence of a Liquidating
Event, the Partners hereby agree to continue the business of the Joint Venture
without a winding up or liquidation.
13.2 WINDING UP. Upon the occurrence of a Liquidating Event, the Joint
----------
Venture shall continue solely for the purpose of winding up its affairs in an
orderly manner, liquidating its assets, and satisfying the claims of its
creditors and Partners and no Partner shall take any action that is inconsistent
with, or not necessary to or appropriate for, winding up the Joint Venture's
business and affairs. To the extent not inconsistent with the foregoing, all
covenants and obligations in this Agreement shall continue in full force and
effect until such time as the Property has been distributed pursuant to this
Section and the Joint Venture has terminated. The Managing Partner shall be
responsible for overseeing the winding up and liquidation of the Joint Venture,
shall take full account of the Joint Venture's liabilities and assets, shall
cause the assets to be liquidated as promptly as is consistent with obtaining
the fair market value thereof, and shall cause the proceeds therefrom, to the
extent sufficient therefor, to be applied and distributed in the following
order:
(a) First, to the payment and discharge of all of the Joint Venture's
debts and liabilities to creditors other than Partners;
(b) Second, to the payment and discharge of all of the Joint
Venture's debts and liabilities to Partners; and
(c) The balance, if any, to the Partners in the amount of their
respective Capital Accounts, after giving effect to all contributions,
distributions, and allocations for all periods.
The Managing Partner shall not receive any additional compensation for
any services performed pursuant to this Section
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but shall be entitled to reimbursement for all costs and expenses incurred in
connection therewith. Each Partner understands and agrees that by accepting the
provisions of this Section setting forth the priority of the distribution of the
assets of the Joint Venture to be made upon its liquidation, such Partner
expressly waives any right which it, as a creditor of the Joint Venture, might
otherwise have to receive distributions of assets pari passu with the other
---- -----
creditors of the Joint Venture in connection with a distribution of assets of
the Joint Venture in satisfaction of any liability of the Joint Venture, and
hereby subordinates to said creditors any such right.
Any gains or losses on the disposition of properties of the Joint
Venture in the process of liquidation shall be credited or charged to the
Partners in accordance with Section 3. Any property distributed in kind in the
liquidation shall be valued by agreement of the Partners and treated as though
the property were sold and the cash proceeds distributed. The difference
between the agreed value of the property distributed in kind and its book value
shall be treated as a gain or loss on sale of the property and shall be credited
or charged to the Partners in accordance with Section 3.
13.3 COMPLIANCE WITH CERTAIN REQUIREMENTS OF REGULATIONS. In the event the
---------------------------------------------------
Joint Venture is "liquidated" within the meaning of Regulations Section 1.704-
1(b)(2)(ii)(g), (a) distributions shall be made pursuant to this Section to the
Partners who have positive Capital Accounts in compliance with Regulations
Section 1.704-1(b)(2)(ii)(b)(2).
13.4 RESERVE FOR CONTINGENT AND UNFORESEEN LIABILITIES. In the discretion
-------------------------------------------------
of the Managing Partner, a pro rata portion of the distributions that would
otherwise be made to the Partners pursuant to this Section 13 may be:
(a) distributed to a trust established for the benefit of the
Partners for the purposes of liquidating Joint Venture assets, collecting
amounts owed to the Joint Venture, and paying any contingent or unforeseen
liabilities or obligations of the Joint Venture or of the Partners arising out
of or in connection with the Joint Venture. The assets of any such trust shall
be distributed to the Partners from time to time, in the reasonable discretion
of the Managing Partner, in the same proportions as the amount distributed to
such trust by the Joint Venture would otherwise have been distributed to the
Partners pursuant to this Section; or
(b) withheld to provide a reasonable reserve for Joint Venture
liabilities (contingent or otherwise) and to reflect the
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unrealized portion of any installment obligations owed to the Joint Venture,
provided that such withheld amounts shall be distributed to the Partners as soon
as practicable.
13.5 RIGHTS OF PARTNERS. Except as otherwise provided in this Agreement,
------------------
(a) each Partner shall look solely to the assets of the Joint Venture for the
return of his Capital Contributions and shall have no right or power to demand
or receive property other than cash from the Joint Venture and (b) no Partner
shall have priority over any other Partner as to the return of his Capital
Contributions, distributions, or allocations.
13.6 NOTICE OF DISSOLUTION. In the event a Liquidating Event occurs,
---------------------
the Managing Partner shall, within thirty (30) days thereafter, (a) provide
written notice thereof to each of the Partners and to all other parties with
whom the Joint Venture regularly conducts business (as determined in the
discretion of the Managing Partner), and (b) publish notice of such dissolution
in a newspaper of general circulation in each place in which the Joint Venture
regularly conducts business.
SECTION 14
BANKRUPTCY OR DISSOLUTION OF A PARTNER
--------------------------------------
14.1 EVENT OF BANKRUPTCY. Considering the personal nature of the
-------------------
relationship between the Partners of this Joint Venture, upon occurrence of an
Event of Bankruptcy with respect to a Partner, the remaining Partner shall have
the right and option to dissolve and liquidate the Joint Venture in accordance
with Section 13 of this Agreement.
For the purposes of this Agreement, any of the following shall
constitute an "Event of Bankruptcy" with respect to the Partner involved:
(i) The filing of an involuntary petition under the United
States Bankruptcy Act or any other United States or state bankruptcy statute, as
now in effect or as hereafter amended, against a Partner, which involuntary
petition is not dismissed within 120 days after the filing thereof;
(ii) The commencement by a Partner of any proceeding of any type
under the United States Bankruptcy Act or any other United States or state
bankruptcy statute; or
(iii) If a Partner makes an assignment for the benefit of
creditors, or allows the appointment of a receiver,
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trustee, conservator or liquidator of all or any Portion of the partner or its
assets.
14.2 STATUS OF BANKRUPTCY ASSIGNEE. After the date of an Event of
-----------------------------
Bankruptcy, the successor to the bankrupt Partner shall be considered an
Assignee of the bankrupt Partner's interest in the Joint Venture but shall not
be entitled to interfere in management or administration of the Joint Venture
business or affairs, to receive or require information or an accounting with
respect to the Joint Venture transactions or to inspect the books of the Joint
Venture; provided, however, that the successor to the bankrupt Partner's
interest in the Joint Venture may inspect the books of the Joint Venture at
reasonable times with reasonable notice for the sole purpose of assuring that
the successor receives the appropriate distribution of profits and losses.
SECTION 15
MISCELLANEOUS
-------------
15.1 NOTICES. Unless otherwise provided, all notices, demands or other
-------
communications hereunder shall be in writing and shall be deemed to have been
given or submitted upon personal delivery or upon deposit in the United States
mail by certified or registered mail, postage prepaid, with return receipt
requested and addressed as follows:
(a) If to C, at Galleon, Inc.
c/o Circus Circus Enterprises, Inc.
2880 Las Vegas Blvd. South
Las Vegas, Nevada 89109
Attention: General Counsel
(b) If to E, at Eldorado Limited Liability Company
c/o Eldorado Hotel Casino
345 N. Virginia Street
P.O. Box 3399
Reno, Nevada 89505
with a copy to:
McDonald, Carano, Wilson, McCune,
Bergin, Frankovich & Hicks
P.O. Box 2670
Reno, Nevada 89505
44
<PAGE>
Notices shall be deemed received upon personal delivery or three (3) days
following deposit in the mail, if sent through the mail. Each Partner may
designate, from time to time, another address in place of the address
hereinabove set forth by notifying the other Partners of the new address in
writing.
15.2 BINDING EFFECT. Except as otherwise provided in this Agreement, every
--------------
covenant, term, and provision of this Agreement shall be binding upon and inure
to the benefit of the Partners and their respective heirs, legatees, legal
representatives, successors, transferees, and assigns.
15.3 TIME. Time is of the essence with respect to this Agreement.
----
15.4 HEADINGS. Section and other headings contained in this Agreement are
--------
for reference purposes only and are not intended to describe, interpret, define,
or limit the scope, extent, or intent of this Agreement or any provision hereof.
15.5 SEVERABILITY. Every provision of this Agreement is intended to be
------------
severable. If any term or provision hereof is illegal or invalid for any reason
whatsoever, such illegality or invalidity shall not affect the validity or
legality of the remainder of this Agreement.
15.6 FURTHER ACTION. Each Partner agrees to perform all further acts and
--------------
execute, acknowledge, and deliver any documents which may be reasonably
necessary, appropriate, or desirable to carry out the provisions of this
Agreement.
15.7 ATTORNEYS' FEES. In case of any action or proceeding to compel
---------------
compliance with, or for a breach of, the provisions of this Agreement, the
prevailing party shall be entitled to recover all costs of such action or
proceeding, including, but not limited to, reasonable attorneys' fees and court
costs as determined by the court.
15.8 GOVERNING LAW. The laws of the State of Nevada shall govern the
-------------
validity of this Agreement, the construction of its terms, and the
interpretation of the rights and duties of the Partners.
15.9 LOANS. Any Partner may, with the approval of the Part-ners or as
-----
provided by this Agreement, lend or advance money to the Joint Venture. If any
Partner shall make any loan or loans to the Joint Venture or advance money on
its behalf, the amount of any such loan or advance shall not be treated as a
contribution to the capital of the Joint Venture but shall be a debt due from
the Joint
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Venture. The amount of any such loan or advance by a lending Partner shall be
repaid in accordance with Section 4.1. Except as otherwise provided herein, none
of the Partners shall be obligated to make any loan or advance to the Joint
Venture.
15.10 USE OF WALKWAYS TO ADJACENT PROPERTY. Part of the Casino Project will
------------------------------------
include the utilization of space within walkways over Fourth and Fifth Streets
to the adjacent respective properties of CC and EHALP. The connection of these
walkways to the adjacent facilities will require modification of the existing
facilities of CC and EHALP. Portions of the area within the walkway structure
will be for the exclusive use of the adjacent properties of EHALP and CC, and
other portions will be for the exclusive use of the Casino Project. The air
space and the structural facility connecting the Casino Project to the adjacent
property of CC shall belong to CC. The air space and the structural facility
connecting the Casino Project to the adjacent property of EHALP shall belong to
EHALP. CC and EHALP agree that that portion of the walkway structure connecting
to their respective adjacent facilities intended to be utilized by the Casino
Project as shown on the approved plans shall be leased to the Joint Venture on
commercially reasonable terms. E shall be responsible for the construction of
the walkway structure connect-ing the Casino Project to the adjacent property of
EHALP and C shall be responsible for the construction of the walkway structure
connecting the Casino Project to the adjacent property of CC. The Joint Venture
shall be responsible for all improvements, equipment, furniture and fixtures
placed in such walkways which are utilized as part of the operation of the
Casino Project as shown on the approved plans. All improvements, equipment,
furniture and fixtures placed on the walkway structures in areas which are for
the exclusive use of EHALP or CC shall be paid by the respective entity
utilizing such space.
15.11 ACCESS TO ADJACENT PROPERTIES. Each of the Partners recognizes
-----------------------------
and acknowledges that the Casino Project shall have reasonably equivalent
entrances and access to each Partner's Affiliate's properties located generally
north and south of the Casino Project and under no circumstances, including,
without limitation, a buy-out or dissolution, shall the Joint Venture or any
successor in interest in any way hinder reasonable access to such entrances
between the Casino Project and such Affiliate's property or otherwise interfere
with or claim control or ownership of the equipment or facilities servicing such
Affiliate's adjacent property.
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IN WITNESS WHEREOF, the parties have entered into this Agreement of Joint
Venture as of the day first above set forth.
ELDORADO LIMITED LIABILITY
COMPANY GALLEON, INC.
a Nevada limited liability a Nevada corporation
company
By: ELDORADO HOTEL ASSOCIATES By: [Signature Appears Here]
LIMITED PARTNERSHIP --------------------------
Its Managing Member Its President
By: RECREATIONAL ENTERPRISES,
INC., General Partner
By: /s/ Donald L. Carano
----------------------------
Its President
and
By: HOTEL-CASINO MANAGEMENT, INC.
General Partner
By: /s/ Raymond J. Poncia, Jr.
-----------------------------
Its President
The undersigned are executing this Agreement only with respect to Sections 2.4,
2.5, 7.1, 10.3, 12.4 and 15.10:
ELDORADO HOTEL ASSOCIATES CIRCUS CIRCUS ENTERPRISES, INC.,
LIMITED PARTNERSHIP, A Nevada Corporation
A Nevada Limited Partnership
By: RECREATIONAL ENTERPRISES, By:[Signature Appears Here]
INC., A Nevada Corporation --------------------------
Its President
General Partner
By /s/ Donald L. Carano
-------------------------
Its President
HOTEL-CASINO MANAGEMENT, INC.
A Nevada Corporation APPROVED BY:
General Partner CIRCUS CIRCUS ENTERPRISES, INC.
By: /s/ Raymond J. Poncia, Jr. /s/ William G. Bennett
--------------------------- ------------------------------
Its President William G. Bennett
Chairman of the Board
47
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Its President
48
<PAGE>
EXHIBIT 10.2
ENVIRONMENTAL INDEMNITY
THIS ENVIRONMENTAL INDEMNITY (this "Indemnity") is entered into as of
May 30, 1995, jointly and severally by CIRCUS CIRCUS ENTERPRISES, INC., a Nevada
corporation, and ELDORADO HOTEL ASSOCIATES LIMITED PARTNERSHIP, a Nevada limited
partnership ("Eldorado"), (each an "Indemnitor," and collectively, the
"Indemnitors"), to and for the benefit of Agent and Lenders (each as defined
below), and each of their respective successors and permitted assigns, and their
respective parent, subsidiary and affiliated corporations, and the respective
directors, officers, agents, attorneys, and employees of each of the foregoing
(each of which shall be referred to hereinafter individually as an "Indemnitee"
and collectively as the "Indemnitees"). As used herein, "Agent" means FIRST
INTERSTATE BANK OF NEVADA, N.A., acting in its capacity as agent for and
representative of the Lenders, and any successor in that capacity, and "Lenders"
means the Persons identified as "Lenders" and listed on the signature pages of
the Credit Agreement, as defined below, together with their successors and
permitted assigns.
RECITALS
A. Lenders have agreed to make certain Loans to CIRCUS AND ELDORADO
JOINT VENTURE, a Nevada general partnership ("Partnership") pursuant to that
certain Credit Agreement (as it may be amended, supplemented or otherwise
modified from time to time, the "Credit Agreement") of even date herewith by and
among Agent, as arranger and administrative agent, Partnership, Lenders, and
First Interstate Bank of Nevada, N.A., The Long-Term Credit Bank of Japan, Ltd.,
Los Angeles Agency, and Societe Generale, collectively, as managing agents
("Managing Agents") and Bank of America, N.T. & S.A., CIBC Inc. and Credit
Lyonnais, Los Angeles Branch, collectively, as co-agents ("Co-Agents") which
Loans are to be secured by, among other things, that certain Deed of Trust,
Fixture Filing and Security Agreement with Assignment of Rents, dated as of even
date herewith (the "Deed of Trust") executed by Partnership, as trustor, to
First American Title Company of Nevada, as trustee, in favor of Agent, as
beneficiary, which Deed of Trust encumbers, among other things that certain real
property described on Exhibit A attached hereto (the "Premises"), and the
Improvements thereon, whether now existing or hereafter constructed.
B. It is a condition of Lenders making the Loans that this Indemnity
be executed and delivered by Indemnitor. Lenders are making the Loans in
reliance upon this Indemnity.
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NOW, THEREFORE, based upon the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and in order to induce Lenders, Managing Agents, Co-Agents and
Agent to enter into the Credit Agreement and to make the Loans thereunder,
Indemnitors jointly and severally agree as follows:
1. Each capitalized term which is used herein but which is not
defined herein shall have the meaning given to that term in the Credit
Agreement. As used in this Indemnity:
"Agreed Rate" means a rate per annum equal to the sum of two percent
(2%) plus the Base Rate, such rate to change as and when the Base Rate
changes.
"CERCLA" means the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980 (42 U.S.C. (S)(S) 9601 et seq.), as heretofore or
-- ---
hereafter amended from time to time.
"Environmental Losses" means Losses suffered or incurred by any
Indemnitee, arising out of or as a result of: (i) any Hazardous Material
Activity that occurs, or is alleged by any governmental agency or any
claimant other than an Indemnitee to have occurred, in whole or in part, on
or prior to the Transfer Date; (ii) any violation on or prior to the
Transfer Date of any applicable Environmental Laws relating to the Premises
or other portion of the Project or to the ownership, use, occupancy or
operation thereof; (iii) any investigation, inquiry, order, hearing,
action, or other proceeding by or before any governmental agency in
connection with any Hazardous Material Activity that occurs, or is alleged,
by any governmental agency or any claimant other than an Indemnitee to have
occurred, in whole or in part, on or prior to the Transfer Date; (iv) any
breach of any covenant of the Partnership set forth in Section 6.7
(Environmental Disclosure and Inspection) or Section 6.8 (Partnership's
Remedial Action Regarding Hazardous Materials) of the Credit Agreement; (v)
the existence, prior to the Transfer Date, in the aquifer underlying the
Premises and other portions of Reno, Nevada, or in soils affecting that
aquifer, of PCE (tetrachloroethylene) and hydrocarbons, or either of them,
insofar as the Losses arise out of or otherwise relate (whether physically
or economically) to the Premises or other portion of the Project; or (vi)
any claim, demand or cause of action, or any action or other proceeding,
whether meritorious or not, brought or asserted against any Indemnitee that
directly or indirectly relates to, arises from or is based on any of the
matters described in clauses (i), (ii), (iii), (iv) or (v) of this
definition or any allegation by any governmental agency or any claimant
other than an Indemnitee of any such matters. Environmental Losses shall
include Losses suffered or incurred by an Indemnitee after the Transfer
Date that would not have been incurred or
2
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suffered but for any matter described in clause (i), (ii), (iii), (iv) or (v) of
this definition that commenced prior to the Transfer Date or any allegation by
any governmental agency or any claimant other than an Indemnitee of any such
matters, including, but not limited to, Environmental Losses incurred by any
Indemnitee arising out of or as a result of (x) the introduction or release of a
Hazardous Material that is discovered or released at the Premises or any portion
thereof after the Transfer Date but that was introduced at the Premises prior to
the Transfer Date, or (y) the continuing migration onto, on or from the
Premises, or the release on or at the Premises, of any Hazardous Material
introduced in, on or under the Premises or the surrounding streets and sidewalks
prior to the Transfer Date.
"Hazardous Material Activity" means any actual, proposed or threatened use,
storage, holding, existence, release (including any spilling, leaking, pumping,
pouring, emitting, emptying, dumping, disposing into the environment, and the
continuing migration into or through soil, surface water, or groundwater),
emission, discharge, generation, processing, abatement, removal, disposition,
handling or transportation to or from the Premises or other portion of the
Project of any Hazardous Material from, under, in, into or on the Premises or
other portion of the Project (including, but not limited to, the surrounding
streets and sidewalks), including, without limitation, the movement or migration
of any Hazardous Material from surrounding property or groundwater in, into or
onto the Premises or other portion of the Project and any residual Hazardous
Material contamination on or under the Premises or other portion of the Project.
"Losses" means any and all costs and expenses actually incurred required to
comply with (and, in the case of investigation and response costs, costs
necessary to assure compliance with) applicable Environmental Laws and other
governmental requirements (including, without limitation, reasonable attorneys'
fees and disbursements) but only to the extent such costs and expenses
reasonably were required for such compliance; provided that Losses shall not
-------------
include: (i) with respect to any particular Indemnitee and loss, that portion,
if any, of that loss which was caused by the gross negligence or wilful
misconduct Of (including any wilful violation of any Environmental Law by) that
Indemnitee, and (ii) any special assessments made by any special assessment
district formed pursuant to Nevada law for the purpose of investigating and
remediating pollution of the groundwater aquifer underlying downtown Reno,
Nevada, which become a lien on the Premises after foreclosure of the lien of the
Deed of Trust by or for the benefit of the Lenders, and (iii) any damages
measured by the diminution in the value of the Premises caused by any Hazardous
Material Activity (it being expressly understood and agreed, however, that this
exclusion shall not affect the obligation of Indemnitors to compensate
Indemnitees for actual damages
3
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reasonably incurred by them in complying with Environmental Laws except as
otherwise provided in clause (ii) above), and (iv) costs and expenses
incurred by any Indemnitee after indefeasible payment in full, in lawful
money of the United States, of the Loans and all other monetary Obligations
then due under the Loan Documents, expiration or cancellation of all
Letters of Credit and termination of the Commitments (it being expressly
understood and agreed that this clause (iv) shall not apply if foreclosure
of the lien of the Deed of Trust occurs).
"Transfer Date" means the later of: (i) the date on which any of
Lenders (or any of their affiliates) acquires, directly or through Agent,
fee title to the Premises and Improvements pursuant to the power of sale or
judicial foreclosure of the lien of the Deed of Trust, or by acceptance of
a deed in lieu of such foreclosure, and all redemption rights that
Partnership may have with respect thereto have expired, and (ii) the date
on which a period of ninety-one (91) days has elapsed since the date on
which fee title thereto has vested in any of Lenders or Agent (or any
affiliate thereof) and, during such period, no bankruptcy or other
insolvency proceeding has been filed by or against Partnership. If
Partnership should remain in possession of the Project after the Transfer
Date, or if Partnership should engage in any Hazardous Material Activity on
or at the Premises or other portion of the Project after the Transfer Date,
the Transfer Date shall be deemed to be the date after which Partnership is
no longer in possession of the Premises or other portion of the Project and
has ceased to engage in any Hazardous Material Activity on or at the
Premises or other portion of the Project (it being expressly understood and
agreed, however, that, solely for purposes of this definition, the presence
of any Hazardous Material on the Premises or other portion of the Project
after the Transfer Date, or the migration of such Hazardous Material
thereon, in either instance without the active involvement of Partnership
(whether directly or through any agent or contractor of Partnership) shall
not be deemed or construed to be engaging in any Hazardous Material
Activity on or at the Premises or other portion of the Project after the
Transfer Date).
2. Indemnitors jointly and severally hereby agree to indemnify,
defend, and hold harmless Indemnitees, and each of them, from and against any
and all Environmental Losses.
3. (a) Indemnitee shall notify Indemnitors of any claim or notice
of the commencement of any action, administrative or legal proceeding or
investigation as to which the indemnity provided for in Section 2 applies,
within a reasonable period of time after such claim, action, proceeding or
investigation becomes known to Indemnitee (it being expressly understood and
agreed, however, that no such notice shall be required to an Indemnitor if the
claim, action, proceeding or investigation has already become known to such
Indemnitor prior to or during that
4
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period). Indemnitors shall assume on behalf of such Indemnitee and conduct with
due diligence and in good faith the investigation and defense of such claim,
action, proceeding or investigation and the response thereto with counsel
reasonably satisfactory to Agent; provided, however, that such Indemnitee shall
-------- -------
have the right to be represented by advisory counsel of its own selection and at
its own expense; and provided, further, that if any such claim, action,
-------- -------
proceeding, or investigation involves both an Indemnitor and an Indemnitee, and
such Indemnitee shall have reasonably concluded that there may be legal defenses
available to it that are different from, additional to, or inconsistent with
those available to such Indemnitor, or that such Indemnitor is not adequately
investigating or defending such matter on behalf of Indemnitee, then the
Indemnitee shall have the right to select separate counsel to participate in the
investigation and defense of and response to such claim, action, proceeding or
investigation on its own behalf at Indemnitors' expense. In addition to the
foregoing, after foreclosure of the lien of the Deed of Trust by or on behalf of
Lenders, Indemnitee shall notify Indemnitors of Hazardous Material Activity not
previously known to Indemnitors and which may be the basis for a claim by
Indemnitee against Indemnitors hereunder within a reasonable period of time
after such newly discovered Hazardous Material Activity becomes known to
Indemnitee.
(b) If any claim, action, proceeding, or investigation arises as to
which the indemnity provided for in Section 2 applies, and Indemnitors fail to
assume promptly (and in any event within fifteen (15) days after being notified
of the claim, action, proceeding, or investigation) the defense of an
Indemnitee, then such Indemnitee may contest and settle the claim, action,
proceeding, or investigation at Indemnitors' expense using counsel selected by
such Indemnitee; provided, however, that after any such failure by Indemnitors
-------- -------
no such contest need be made by such Indemnitee and settlement or full payment
of any claim may be made by such Indemnitee without Indemnitors' consent and
without releasing any of the Indemnitors from any obligations to such Indemnitee
under Section 2.
4. This Indemnity is given solely to protect Lenders and the other
Indemnitees against Environmental Losses, and not as additional security for, or
as a means of repayment of, the Loans. The obligations of Indemnitors under this
Indemnity are independent of, and shall not be measured or affected by (i) any
amounts at any time owing under the Loans or secured by the Deed of Trust, (ii)
the sufficiency or insufficiency of any collateral (including, without
limitation, the Premises) given to Lenders to secure repayment of the Loans,
(iii) the consideration given by Lenders or any other Person in order to acquire
the Project or any portion thereof, (iv) the modification, expiration or
termination of the Deed of Trust or any other document or instrument relating to
the Loans, or (v) except as otherwise expressly provided herein, the discharge
or repayment in full of the Loans (including, without limitation, by amounts
paid or credit bid at a foreclosure sale or by discharge in connection with a
deed in lieu of foreclosure).
5
<PAGE>
5. Indemnitors' obligations hereunder shall survive the sale or other
transfer of the Project or any portion thereof prior to the Transfer Date, and
shall remain in force beyond (i) the expiration of any statute of limitations
and (ii) payment or satisfaction in full of any single claim within the scope of
this Indemnity. The rights of each Indemnitee under this Indemnity shall be in
addition to any other rights and remedies of such Indemnitee against Indemnitors
or any of them under any other document or instrument now or hereafter executed
by Partnership, any of the Indemnitors or any Affiliate thereof, or at law or in
equity (including, without limitation, any right of reimbursement or
contribution pursuant to CERCLA), and shall not in any way be deemed a waiver of
any of such rights. Each Indemnitor agrees that it shall have no right of
contribution (including, without limitation, any right of contribution under
CERCLA) against any Indemnitee with respect to any matter covered by this
Indemnification, and hereby waives and relinquishes any such right excepting,
however, any right of contribution which such Indemnitor may have by reason of
the ownership or other interest in, or use of, by any Indemnitee of property,
other than the Premises, in Reno, Nevada. Indemnitor further agrees that it
shall have no right of subrogation to any right or claim of any Indemnitee
against any third Person until all obligations of such Indemnitor to such
Indemnitee hereunder with respect to such right or claim have been satisfied.
6. All obligations of Indemnitors hereunder shall be payable on
demand, and any amount due and payable hereunder to any Indemnitee by any
Indemnitor that is not paid within thirty (30) days after written demand
therefor from an Indemnitee with an explanation of the amounts demanded shall
bear interest from the date of such demand at the Agreed Rate.
7. If any action or proceeding is brought in connection with the
construction or enforcement of this Indemnity, the prevailing party in such
matter shall be entitled to reimbursement of its costs and expenses (including
reasonable attorneys' fees) in such matter. The obligations set forth in this
Section 7 are in addition to and not in lieu of other obligations set forth
herein and in other Loan Documents or any of them.
8. Each Indemnitor hereby waives, for the benefit of each
Indemnitee:
(a) any right to require Indemnitee, as a condition of payment or
performance by such Indemnitor, to (i) proceed against Partnership, any
guarantor of the Obligations or any other Person, (ii) proceed against or
exhaust any security held from Partnership, any other guarantor of the
Obligations or any other Person, (iii) proceed against or have resort to
any balance of any deposit account or credit on the books of Indemnitee in
favor of Partnership or any other Person, or (iv) pursue any other remedy
in the power of Indemnitee whatsoever;
6
<PAGE>
(b) any defense arising by reason of the incapacity, lack of authority
or any disability or other defense of Partnership including, without
limitation, any defense based on or arising out of the lack of validity or
the unenforceability of the Obligations or any agreement or instrument
relating thereto or by reason of the cessation of the liability of
Partnership from any cause other than indefeasible payment in full of the
Obligations;
(c) any defense based upon any statute or rule of law which provides
that the obligation of a surety must be neither larger in amount nor in
other respects more burdensome than that of the principal;
(d) any defense based upon any error or omission of any Person in the
administration of the Obligations, except, in the case of any particular
Indemnitee, behavior by such Indemnitee which amounts to bad faith by such
Indemnitee;
(e) any principles or provisions of law, statutory or otherwise, which
are or might be in conflict with the terms of this Indemnity and any legal
or equitable discharge of such Indemnitor's obligations hereunder, (i) the
benefit of any statute of limitations affecting such Indemnitor's liability
hereunder or the enforcement hereof, (ii) any rights to set-offs,
recoupments and counterclaims, and (iii) promptness, diligence and any
requirement that any Indemnitee protect, secure, perfect or insure any
security interest or lien or any property subject thereto;
(f) notices, demands, presentments, protests, notices of protest,
notices of dishonor and notices of any action or inaction, including
acceptance of this Indemnity, notices of default under the Credit Agreement
or any agreement or instrument related thereto, notices of any renewal,
extension or modification of the Obligations or any agreement related
thereto, notices of any extension of credit to Partnership and notices of
any of the matters referred to in Section 4 and any right to consent to any
thereof; and
(g) any defenses or benefits that may be derived from or afforded by
law which limit the liability of or exonerate guarantors or sureties, or
which may conflict with the terms of this Indemnity, including without
limitation the provisions of Nevada Revised Statutes Sections 40.430-
40.459, 40.475 and 40.485 as permitted by Nevada Revised Statutes Sections
40.495 (1993), and any successor provisions.
9. In order to induce Indemnitees to accept this Indemnity and to
induce Lenders and Agent to enter into the Credit Agreement and to make the
Loans thereunder, each Indemnitor hereby represents and warrants to each
Indemnitee that the following statements are true and correct:
7
<PAGE>
(a) Such Indemnitor is duly organized, validly existing and in good
standing under the laws of the State of Nevada, has the corporate (or, in the
case of Eldorado, the partnership) power to own its assets and to transact the
business in which it is now engaged and is duly qualified as a foreign
corporation (or, in the case of Eldorado, foreign partnership) and in good
standing under the laws of each jurisdiction where its ownership or lease of
property or the conduct of its business requires such qualification, except for
failures to be so qualified, authorized or licensed that would not in the
aggregate have a material adverse effect on the business, operations, assets or
financial condition of such Indemnitor and its Subsidiaries, taken as a whole;
(b) Such Indemnitor has the corporate (or, in the case of Eldorado,
partnership) power, authority and legal right to execute, deliver and perform
this Indemnity and all obligations required hereunder and has taken all
necessary corporate (or, in the case of Eldorado, partnership) action to
authorize its Indemnity hereunder on the terms and conditions hereof and its
execution, delivery and performance of this Indemnity and all obligations
required hereunder. No consent of any other Person including, without
limitation, stockholders, partners and creditors of such Indemnitor, and no
license, permit, approval or authorization of, exemption by, notice or report
to, or registration, filing or declaration with, any governmental authority is
required by such Indemnitor in connection with this Indemnity or the execution,
delivery, performance, validity or enforceability of this Indemnity and all
obligations required hereunder. This Indemnity has been, and each instrument or
document required hereunder will be, executed and delivered by a duly authorized
officer (or, in the case of Eldorado, general partner) of such Indemnitor, and
this Indemnity constitutes, and each instrument or document required hereunder
when executed and delivered hereunder will constitute, the legally valid and
binding obligation of such Indemnitor, enforceable against such Indemnitor in
accordance with its terms, except as enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws or
equitable principles relating to or limiting creditors' rights generally.
(c) The execution, delivery and performance of this Indemnity and the
documents or instruments required hereunder, will not violate any provision of
any existing law or regulation binding on such Indemnitor, or any order,
judgment, award or decree of any court, arbitrator or governmental authority
binding on such Indemnitor, or the certificate of incorporation or bylaws of
such Indemnitor or any securities issued by such Indemnitor, or any mortgage,
indenture, lease, contract or other agreement, instrument or undertaking to
which such Indemnitor is a party or by which such Indemnitor or any of its
assets may be bound, the violation of which would have a material adverse effect
on the business, operations, assets or condition
8
<PAGE>
(financial or otherwise) of such Indemnitor and its Subsidiaries, taken as
a whole, and will not result in, or require, the creation or imposition of
any Lien on any of its property, assets or revenues pursuant to the
provisions of any such mortgage, indenture, lease, contract or other
agreement, instrument or undertaking.
10. This Indemnity shall be binding upon Indemnitors, their
respective heirs, representatives, administrators, executors, successors and
assigns and shall inure to the benefit of and shall be enforceable by each
Indemnitee, and its successors, and permitted assigns (it being expressly
understood and agreed that the term "permitted assign" means any Person to which
any Lender assigns or sells all or any portion of its interest in the Loans in
accordance with the terms of the Credit Agreement, any "Eligible Assignee" as
defined in the Credit Agreement and any other Person to whom assignment by a
Lender or Agent of rights under the Credit Agreement or other Loan Document is
permitted thereby, and any Person to whom consent to an assignment thereto has
been given by the Indemnitor against whom enforcement is sought).
11. THIS INDEMNITY SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEVADA, WITHOUT
REGARD TO CONFLICTS OF LAWS PRINCIPLES.
12. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY INDEMNITOR ARISING
OUT OF OR RELATING TO THIS INDEMNITY MAY BE BROUGHT IN ANY STATE OR FEDERAL
COURT OF COMPETENT JURISDICTION IN THE STATE OF NEVADA AND, BY EXECUTION AND
DELIVERY OF THIS INDEMNITY, EACH INDEMNITOR ACCEPTS FOR ITSELF AND IN CONNECTION
WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE EXCLUSIVE JURISDICTION
OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS AND
IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION
WITH THIS INDEMNITY. Each Indemnitor hereby agrees that service of all process
in any such proceeding in any such court may be made by registered or certified
mail, return receipt requested, to at its address provided in Section 17, such
service being hereby acknowledged by such Indemnitor to be sufficient for
personal jurisdiction in any action against such Indemnitor in any such court
and to be otherwise effective and binding service in every respect. Nothing
herein shall affect the right to serve process in any other manner permitted by
law.
13. EACH INDEMNITOR AND, BY ITS ACCEPTANCE OF THE BENEFITS HEREOF,
INDEMNITEE EACH HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF
ANY CLAIM OR
9
<PAGE>
CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS INDEMNITY. The scope of this
waiver is intended to be all-encompassing of any and all disputes that may be
filed in any court and that relate to the subject matter of this transaction,
including without limitation contract claims, tort claims, breach of duty claims
and all other common law and statutory claims. Indemnitor and, by its acceptance
of the benefits hereof, Indemnitee each (i) acknowledges that this waiver is a
material inducement for Indemnitors and the Lenders to enter into a business
relationship, that Indemnitors and Indemnitee have already relied on this waiver
in entering into this Indemnity or accepting the benefits thereof, as the case
may be, and that each will continue to rely on this waiver in their related
future dealings and (ii) further warrants and represents that each has reviewed
this waiver with its legal counsel, and that each knowingly and voluntarily
waives its jury trial rights following consultation with legal counsel. THIS
WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN
WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTS OR MODIFICATIONS TO THIS INDEMNITY. In the event of litigation, this
Indemnity may be filed as a written consent to a trial by the court.
14. Every provision of this Indemnity is intended to be severable. If
any provision of this Indemnity or the application of any provision hereof to
any Person or circumstance is declared to be illegal, invalid or unenforceable
for any reason whatsoever by a court of competent jurisdiction, such invalidity
shall not affect the balance of the terms and provisions hereof or the
application of the provision in question to any other Person or circumstance,
all of which shall continue in full force and effect.
15. No failure or delay on the part of any Indemnitee to exercise any
power, right or privilege under this Indemnity shall impair or prejudice the
exercise by Indemnitee of any such power, right or privilege with respect to any
future claim, action, proceeding, investigation or Environmental Loss, or be
construed to be a waiver of any default or an acquiescence therein. No such
failure or delay shall impair or prejudice the exercise by Indemnitee of any
such power, right or privilege with respect to any claim, action, proceeding,
investigation or Environmental Loss existing at the time of such failure or
delay unless (and then only to the extent that) Indemnitor establishes by a
preponderance of the evidence that such failure or delay by Indemnitee
materially impaired the ability of Indemnitor to defend against or to limit its
liability with respect to the Environmental Loss for which such Indemnitee is
seeking indemnification hereunder. No single or partial exercise of such power,
right or privilege shall preclude other or further exercise thereof or of any
other right, power or privilege. No provision of this Indemnity may be changed,
waived, discharged or terminated except by an instrument in writing signed by
the party against whom enforcement of the change, waiver, discharge or
termination is sought. The rights, powers and remedies given to Indemnitees by
this Indemnity are
10
<PAGE>
cumulative and shall be in addition to and independent of all rights, powers and
remedies given to any of the Indemnitees by virtue of any statute or rule of law
or in any of the other Loan Documents or in any other agreement or document.
16. All notices, requests and demands to be made hereunder to the
parties hereto shall be in writing (at the respective address of the Person for
whom intended set forth below or hereafter provided in accordance with this
Section) and shall be given by any of the following means: (a) personal service;
(b) electronic communication, whether by telex, telegram or telecopying (if
confirmed in writing sent by registered or certified, first class mail, return
receipt requested); or (c) registered or certified, first class mail, return
receipt requested. Such addresses may be changed by notice to the other parties
given in the same manner as provided above. Any notice, demand or request sent
pursuant to either clause (a) or (b) hereof shall be deemed received upon such
personal service or upon dispatch by electronic means, and, if sent pursuant to
clause (c) shall be deemed received three (3) days following deposit in the
mail. Eldorado, HCM and REI shall designate a single address for themselves and
shall be entitled to only a single notice, request or demand addressed all of
them at that address.
To Agent: First Interstate Bank of Nevada, N.A.
3800 Howard Hughes Parkway
Suite 400
Las Vegas, Nevada 89109
Attention: Silver Legacy Loan Officer
To Indemnitors: Circus Circus Enterprises, Inc.
2880 Las Vegas Boulevard South
Las Vegas, Nevada 89109
Attention: Yvette Landau
Associate General Counsel
and to: Eldorado Hotel Associates Limited Partnership
c/o Eldorado Hotel Casino
345 North Virginia Street
Reno, Nevada 89501
Attention: Bob Jones
Chief Financial Officer
17. This Indemnity may be executed in counterparts each of which
shall be deemed an original and all of which shall constitute one and the same
Indemnity with the same effect as if all parties had signed the same signature
page. Any signature page of this Indemnity may be detached from any other
counterpart of this Indemnity and reattached to any other counterpart of this
Indemnity identical in form hereto but having attached to it one or more
additional signature pages.
11
<PAGE>
IN WITNESS WHEREOF, Indemnitor has executed this Indemnity as of the
day and year first written above.
Indemnitors: CIRCUS CIRCUS ENTERPRISES, INC.
a Nevada corporation
By: [SIGNATURE APPEARS HERE]
-------------------------------------
Title: President
--------------------------------------
ELDORADO HOTEL ASSOCIATES LIMITED PARTNERSHIP, a
Nevada general partnership
By: ,
----------------
a Nevada ____________
Its: Managing Partner
By:
--------------------------------------------
Title:
------------------------------------------
Accepted by:
FIRST INTERSTATE BANK OF NEVADA, N.A.,
on behalf of itself as Agent and
on behalf of all Managing Agents
and all Lenders
By:
-----------------------------------------
Title:
--------------------------------------
<PAGE>
IN WITNESS WHEREOF, Indemnitor has executed this Indemnity as of the
day and year first written above.
Indemnitors: CIRCUS CIRCUS ENTERPRISES, INC.
a Nevada corporation
By: [SIGNATURE APPEARS HERE]
------------------------------------
Title: President
---------------------------------
ELDORADO HOTEL ASSOCIATES LIMITED PARTNERSHIP, a
Nevada general partnership
By: Recreational Enterprises, Inc.
------------------------------
a Nevada Corporation
Its: Managing Partner
By: /s/ Donald L. Carano
-----------------------------------------
Title: President
--------------------------------------
Accepted by:
FIRST INTERSTATE BANK OF NEVADA, N.A.,
on behalf of itself as Agent and
on behalf of all Managing Agents
and all Lenders
By: [SIGNATURE APPEARS HERE]
------------------------------------------
Title: Vice President
---------------------------------------
S-1
<PAGE>
EXHIBIT A
Legal Description of Real Property
----------------------------------
THE LAND REFERRED TO HEREIN IS SITUATED IN THE COUNTY OF WASHOE, STATE OF
NEVADA, AND IS DESCRIBED AS FOLLOWS:
PARCEL 1:
- --------
Beginning at the intersection of the Southern line of West Fifth Street
with the Western line of North Virginia Street; thence Southerly along said
Western line of North Virginia Street, 88.00 feet; thence Westerly parallel
with the Northern line of West Fourth Street 140.00 feet to the Eastern
line of alley; thence Northerly along the last mentioned line 88.00 feet to
said Southern line of West Fifth Street; thence Easterly along said
Southern line of West Fifth Street, 140.00 feet to the point of beginning.
PARCEL 2:
- --------
Beginning at the intersection of the West line of North Virginia Street
with the North line of Lot 10 in Block "B" of ORIGINAL TOWN, NOW CITY OF
RENO, according to the map thereof, filed in the office of the County
Recorder of Washoe County, State of Nevada, on June 27, 1871; thence
Northerly along the Westerly line of North Virginia Street, 12 feet, more
or less, to the Southeast corner of the parcel of land described in the
deed to Ivanhoe Corporation of record in Book 453, File No.278019, Deed
Records; thence Westerly along the Southern line of said Ivanhoe
Corporation parcel 140 feet to the Easterly line of an alley; thence
Southerly along the last mentioned line, 12 feet, more or less, to the
Northwest corner of said Lot 10; thence Easterly to the point of beginning.
PARCEL 3:
- --------
Lots 10, 11, 12 and the North 13 feet of Lot 13 in Block "B" of ORIGINAL
TOWN, NOW CITY OF RENO, according to the map thereof, filed in the office
of the County Recorder of Washoe County, State of Nevada, on June 27, 1871.
PARCEL 4:
- --------
The Northerly 9.25 feet of Lot 3 and all of Lots 4, 5, 6, 7 and 8 in Block
"B" of ORIGINAL TOWN, NOW CITY OF RENO, according to the map thereof, filed
in the office of the County Recorder of Washoe County, State of Nevada, on
June 27, 1871.
ALSO a parcel of land bounded on the South by the Southern line of the 40
foot alley as laid out on the map of the Town, now City of Reno, in said
Block "B", bounded on the West by the Eastern line of North Sierra Street,
bounded on the North by the Southern line of West Fifth Street and bounded
on the East by the Western line of the 20 foot alley running Northerly and
Southerly through said Block "B".
PARCEL 5:
- --------
The South 37 feet of Lot 13 in Block "B" of the "ORIGINAL TOWN, NOW CITY OF
RENO", according to the official map thereof, filed in the office of the
County Recorder of Washoe County, State of Nevada, on June 27, 1871.
A-1
<PAGE>
PARCEL 6:
- --------
Lot 14 in Block B of ORIGINAL TOWN, NOW CITY OF RENO, according to the map
thereof, filed in the office of the County Recorder of Washoe County, State
of Nevada, on June 27, 1871.
PARCEL 7:
- --------
The West forty (40) feet of Lot Fifteen (15) in Block "B" fronting forty
(40) feet on the North line of Fourth Street, as designated on the official
map of said City of Reno, Nevada, on file and of record in the office of
the County Recorder in and for the said County of Washoe; the property
hereby conveyed being the same property described in a Deed from May J. A.
Nadon and others to Dale V. Clanton, dated November 18, 1920, and filed for
record on the 29th day of November, 1920, in the office of the County
Recorder in and for the County of Washoe, and therein recorded in Book 56
of Deeds, at Page 440.
PARCEL 8:
- --------
The East 100 feet of Lot 15 in Block B of original town, now City of Reno,
according to the map thereof, filed in the office of the County Recorder of
Washoe County, State of Nevada, on June 27, 1871.
PARCEL 9:
- --------
All of Lots 1 and 2, and the South 40.75 feet of Lot 3 in Block B of the
ORIGINAL TOWN, NOW CITY OF RENO, according to the map thereof, filed in the
office of the County Recorder of Washoe County, State of Nevada, on June
27, 1871.
PARCEL 10:
- ---------
The South 20 feet of Lot 10, and all of Lots 11, 12, 13, 14, 15 and 16, in
Block A, of ORIGINAL TOWN, NOW CITY OF RENO, according to the map thereof,
filed in the office of the County Recorder of Washoe County, State of
Nevada, on June 27, 1871.
TOGETHER WITH the East 1/2 of the North-South alley running through said
Block A, immediately adjoining Lots 11, 12, 13, 14, 15 and 16 on the West,
and more particularly described in those certain Orders of Abandonment
recorded January 19, 1977 in Book 1044, Page 521 as Document No. 445058,
and recorded November 14, 1985 in Book 2251, Page 933 as Document No.
1034253 of Official Records.
PARCEL 11:
- ---------
The East 78 feet of Lot 9 and the East 78 feet of the North 30 feet of Lot
10 in Block A of the ORIGINAL TOWN, NOW CITY OF RENO, according to the
Official Map thereof, filed in the office of the County Recorder of Washoe
County, State of Nevada, on June 27, 1871.
Together with that portion of the vacated alley lying Southerly of the
Southerly line of West Fifth Street and Westerly of the Westerly line of
North Sierra Street adjoining said Lot 9 at its most Northeasterly corner.
A-2
<PAGE>
PARCEL 12:
- ---------
A portion of the Southwest 1/4 of the Northeast 1/4 of Section 11, Township
19 North, Range 19 East, M.D.B&M., lying and being in the City of Reno,
County of Washoe, State of Nevada, and more particularly described as
follows:
The Westerly 74 feet of Lot 9 and the Westerly 74 feet of the North 30 feet
of Lot 10, all in Block A of the ORIGINAL TOWN, NOW CITY OF RENO, according
to the official map thereof, filed in the office of the County Recorder of
Washoe County, State of Nevada, on June 27, 1871.
PARCEL 13:
- ---------
BEGINNING at the Northeast corner of Lot 8, Block A, as shown on the
official plat of the town, now City of Reno, Nevada, filed in the office of
the County Recorder of Washoe County, Nevada, on June 27, 1871; thence
Southerly along the Easterly lines of Lots 8 and 7 of said Block A to the
Southeast corner of Lot 7; thence Westerly along the Southerly line of Lot
7 and the Southerly line of Lot 7 projected to its intersection with the
Easterly line of West Street; thence Northerly along the Easterly line of
West Street to the Southerly line of West Fifth Street; thence Easterly
along the Southerly line of West Fifth Street to the point of beginning.
PARCEL 14:
- ---------
Lots 1, 2, 3, 4, 5, 6, in Block A, of ORIGINAL TOWN, NOW CITY OF RENO,
according to the map thereof, filed in the office of the County Recorder of
Washoe County, State of Nevada, on June 27, 1871, together with that parcel
immediately adjoining Lots 5 and 6 on the West, that is more particularly
described as follows:
BEGINNING at the Northeasterly corner of Lot 6, in Block A of ORIGINAL
TOWN, NOW CITY OF RENO, according to the map thereof, filed in the office
of the County Recorder of Washoe County, State of Nevada, on June 27, 1871;
thence Southerly along the Easterly line of said Lots 5 and 6, in Block A,
100 feet to the Southeasterly corner thereof; thence Westerly along the
Southerly line of said Lot 5 and the Southerly line of Lot 5 extended
Westerly to the Easterly line of West Street, as now located in the City of
Reno, a distance of 140 feet; thence Northerly along the Easterly line of
West Street 100 feet to a point which would be intersected by a line
extended Westerly from the Northeasterly corner of said Lot 6 and along the
Northerly line of said Lot 6; thence Easterly and along said line and the
Northerly line of said Lot 6, a distance of 140 feet to the Northeasterly
corner of said Lot 6, the point of beginning; said premises being Lots 5
and 6 in Block A of the TOWN OF RENO, according to the map above mentioned,
and that portion of the 40 foot alley around the Town of Reno, according to
the map above mentioned, lying Westerly of Lots 5 and 6 and East of the
East line of West Street, as now located and between the Northerly and
Southerly line of said Lots 5 and 6 if said lines were extended Westerly to
the Easterly line of West Street as now located.
TOGETHER WITH the West one-half of the North-South alley running through
said Block A, immediately adjoining said LOTS 1, 2, 3, 4, 5 and 6 on the
East, and more particularly described in those certain Orders of
Abandonment recorded January 19, 1977 in Book 1044, Page 521 as Document
No. 445058, and recorded on November 14, 1985 in Book 2251, Page 533 as
Document No. 1034253, Official Records, Washoe County, State of Nevada.
A-3
<PAGE>
PARCEL 15:
- ---------
All that certain 20.0 ft. wide alley connecting West Fourth Street with
West Fifth Street, Reno, Nevada, lying within Block B of the original Town,
now City of Reno, according to the map thereof, filed in the Office of the
Washoe County Recorder on June 27, 1871, and within Block B of the Evans
North Addition, according to the map thereof, filed in the office of the
Washoe County Recorder on December 16, 1879.
PARCEL 16:
- ---------
All that certain 20.0 ft. wide alley lying between Lots 7, 8, 9 and 10 of
Block A of the Original Town, now City of Reno, according to the map
thereof, filed in the office of the Washoe County Recorder on June 27,
1871.
PARCEL 17: (Air Rights Only)
- ---------
All that certain piece or parcel of land located within a portion of the
Northeast 1/4 of Section 11, Township 19 North, Range 19 East, M.D.B.&M.
more particularly described as follows:
That certain air space located above Sierra Street commencing at an
elevation of 4,521 and extending vertically 32 feet to an elevation of
4,553 feet, which height is measured from the finished floor elevation of
the Silver Legacy Casino at 4,503 feet, and located directly over that
certain parcel of real property described as follows:
Commencing at the Southwest corner of Block B Reno Townsite as shown on
Record-of-Survey 2665, recorded January 27,1994,
thence North 13 degrees 48'48" West 97.13 feet to the True Point of
Beginning
thence North 13 degrees 48'48" West 223.17 feet
thence South 76 degrees 11 '12" West 80.00 feet thence South 13048'48" East
223.17 feet
thence North 76 degrees 11 '12" East 80.00 feet to the True Point of
Beginning
PARCEL 18: (Subterranean Rights Only)
- ---------
All that certain piece or parcel of land located within a portion of the
Northeast 1/4 of Section 11, Township 19 North, Range 19 East, M.D.B.&M.
more particularly described as follows:
That certain subterranean space located beneath Sierra Street commencing at
an elevation of 4,480 and extending vertically 20 feet to an elevation of
4,500 feet, which height is measured from the finished floor elevation of
the Silver Legacy Casino at 4,503 feet, and located directly below that
certain parcel of real property described as follows:
Commencing at the Southwest corner of Block B Reno Townsite as shown on
Record-of -Survey 2665, recorded January 27, 1994,
thence North 13 degrees 48'48" West 181.05 feet to the True Point of
Beginning
A-4
<PAGE>
thence North 13(degrees)48'48" West 24.33 feet
thence South 76(degrees)11 '12" West 80.00 feet
thence South 13(degrees)48'48" East 24.33 feet
thence North 76(degrees)11'12" East 80.00 feet to the True Point of
Beginning
EXCEPTING THEREFROM the above Parcels 1 through 18, all those certain
parcels as conveyed to THE CITY OF RENO, a Nevada municipal corporation, by
Deed of Dedication recorded March 9, 1995 in Book 4259, Page 956 as
Document No. 1876631 of Official Records, and as amended by Deed of
Dedication recorded May 5, 1995 in Book 4297, Page 667 as Document
No. 1891266 of Official Records.
PARCEL 19:
- ---------
Together with the reciprocal easement rights, as contained in those certain
Bridge Easements dated May ___,1995 by and between CIRCUS AND ELDORADO
JOINT VENTURE, a Nevada general partnership and CIRCUS CIRCUS CASINO, INC.,
a Nevada corporation and ELDORADO HOTEL ASSOCIATES LIMITED PARTNERSHIP, a
Nevada limited partnership, recorded May ___,1995 as Document Numbers
________________ and ________________ Official Records, Washoe County,
Nevada.
<PAGE>
EXHIBIT 10.3
MANAGEMENT AGREEMENT
--------------------
This Management Agreement (this "Agreement") is made and entered into as of
this 28th day of June, 1996, by and between ELDORADO RESORTS LLC, a Nevada
limited liability company (the "Company"), and RECREATIONAL ENTERPRISES, INC., a
Nevada corporation, and HOTEL-CASINO MANAGEMENT, INC., a Nevada corporation
("Managers").
RECITALS
--------
A. The Managers are Members of the Company.
B. Under that certain Operating Agreement, of even date herewith, by and
among all of the Members of the Company, the Managers have been appointed by the
Members of the Company to be "Managers" of the Company.
C. Among other duties that the Managers may have as Managers of the
Company, the Managers have agreed to provide planning, financial and related
services to the Company in accordance with the terms and provisions of this
Agreement and for the compensation provided for in this Agreement.
AGREEMENT
---------
NOW, THEREFORE, in accordance with the recitals set forth above and AS
CONSIDERATION for the representations, warranties, covenants and agreements set
forth in this Agreement, as well as for other good and valuable consideration
the receipt and sufficiency of which hereby are acknowledged, the parties hereto
hereby agree as follows:
ARTICLE I
MANAGEMENT SERVICES
The Managers shall provide to the Company executive oversight and
management services consistent with policies established by the Company's Board
of Managers (the "Board") and/or the Company's Chief Executive Officer,
President and Presiding Manager. The Manager shall (a) develop strategic plans
for the Company's business and prepare annual budgets and capital expenditure
plans for presentation to and approval by the Board, (b) provide advice and
oversight with respect to financial matters for the Company, (c) establish and
oversee the operation of financial accounting systems and controls, regularly
review the Company's financial
<PAGE>
reports, including statements of operations of the Company, and prepare and make
reports concerning financial matters as requested by the Board and/or the
Company's Chief Executive Officer, President and Presiding Manger, (d) provide
planning, design and architectural services as directed by the Board and/or the
Company's Chief Executive Officer, and (d) furnish advice and recommendations
with respect to human resource issues, facilities relocations and expansions,
acquisitions, joint ventures and concerns that arise in connection with the
operations of the Company.
ARTICLE II
COMPENSATION
Section 2.1 Compensation. Compensation to be paid to Managers shall be
------------
determined in advance on a quarterly basis for each quarter at the beginning of
each quarter of each fiscal year of the Company. The Management Fee shall be
based upon the services performed by the Managers, together with the performance
of the Company in the preceding quarter and the anticipated services to be
provided by the Managers in the upcoming quarter; provided, however, that the
total annual Management Fee shall not exceed one and one-half percent (1-1/2%)
of the Company's Net Revenue as defined herein.
Section 2.2 "Net Revenue". For the purposes of this Agreement, Net
-------------
Revenue shall mean all revenues of the Company, including, without limitation,
gaming, food and beverage, room and other revenues less promotional allowances
determined in accordance with generally accepted accounting principles and as
reflected on periodic financial reports of the Company.
Section 2.3 Employee Benefit and Expense Reimbursement. The Company shall
------------------------------------------
reimburse the Managers for all reasonable out-of-pocket costs and expenses
incurred in performing the Managers' duties under this Agreement. The Company
shall provide insurance benefits to the employees of the Managers on the same
basis as provided to the employees of the Company.
ARTICLE III
TERM
Section 3.1 Term. Unless terminated earlier by the mutual agreement of
----
the Company and the Managers, or unless terminated by the Company for Cause (as
defined in Section 3.2 hereof), the term of this Agreement shall be for a period
of THREE (3) years, commencing on the date of this Agreement. At the end of
such initial THREE (3) year period, this Agreement shall be renewed and the term
of this Agreement shall be extended automatically for an additional period of
THREE (3) years unless one party hereto at least THREE (3) calendar months
before the end of such
2
<PAGE>
initial THREE (3) year period gives written notice to the other party hereto of
such first party's intention to terminate this Agreement. Each renewed and
extended term of this Agreement shall be renewed and extended automatically for
an additional period of FIVE (5) years unless one party hereto at least THREE
(3) calendar months before the end of such renewed and extended term of this
Agreement gives written notice to the other party hereto of such first party's
intention to terminate this Agreement.
Section 3.2 Termination for Cause. The Company may terminate this
---------------------
Agreement and the services of one or both of the Managers if, in the performance
of such Manager's duties under this Agreement, such Manager commits any felony,
commits gross negligence in the performance of the Manager's duties under this
Agreement, willfully engages in any activity that is contrary to the best
interests of the Company and willfully disregards instructions from the Board or
the Company's Chief Executive Officer, President and Presiding Manager to cease
such activity, or otherwise willfully violates and disregards instructions from
the Board and/or the Company Chief Executive Officer, President and Presiding
Manager with respect to such Manager's responsibility and authority in
performing such Manager's duties under this Agreement.
ARTICLE IV
SCOPE OF DUTIES AND OBLIGATIONS
Notwithstanding any other term or provision of this Agreement, the Managers
shall not be required to devote their full time to the business or affairs of
the Company but shall devote the time reasonably necessary to perform the duties
and obligations of the Managers under this Agreement.
ARTICLE V
CONFIDENTIALITY AND NONDISCLOSURE
The Managers acknowledge that information, observations and data obtained
by the Managers and their personnel during the term of this Agreement concerning
the business or affairs of the Company and its affiliates are the property of
the Company. The Mangers shall not disclose to any unauthorized person or use
for the Managers' own account any of such information, observations or data
without the written consent of the Board, and the Managers shall require all
personnel and other persons performing duties under
3
<PAGE>
this Agreement on behalf of the Managers to agree to be bound by comparable
limitations. Notwithstanding the foregoing, nothing in this Agreement shall
prevent the disclosure of information, observations or data that becomes
generally known to and available for use by the public other than as a result of
a disclosure by any person or entity owing a duty of confidentiality to the
Company. Upon the termination of this Agreement, the Managers shall deliver to
the Company all memoranda, notes, plans, records, reports and other documents,
and all copies thereof, regarding Company business or affairs, that the Managers
then may possess or have under their control as a result of being or having been
the Managers under this Agreement. The obligations of the Managers set forth in
this Article V shall continue and remain in force and effect for a period of TWO
(2) years following the termination of this Agreement.
ARTICLE VI
MISCELLANEOUS
Section 6.1 Successors and Assigns. This Agreement is intended to bind
----------------------
and inure to the benefit of and be enforceable by the parties hereto and their
respective permitted successors and assigns. the Managers may not delegate or
assign any of their respective duties or obligations under this Agreement except
to any corporation, partnership, limited liability company or other entity under
the same control as currently in place for each Manager.
Section 6.2 Notices. All notices or other communications required or
-------
permitted to be given under this Agreement shall be in writing and shall be (a)
delivered personally, (b) sent via Federal Express (or via another comparable
overnight delivery service), (c) sent via facsimile machine or (d) mailed,
certified or registered mail, return receipt requested, to the parties hereto at
the addresses set forth in relation to the signature lines of this Agreement.
Personally delivered notices shall be deemed given upon actual personal delivery
to the intended recipient. Facsimile notices shall be deemed given upon
completion of transmission of the receiving facsimile machine and the return to
the transmitting facsimile machine of an acknowledgment of the receipt thereof.
Notices sent via Federal Express (or via another comparable overnight delivery
service) shall be deemed given on the business day immediately following the day
of dispatch. Mailed notices shall be deemed given upon the earlier of THREE (3)
business days after deposit into the United States mail, registered or
certified, with postage fully prepaid, or the date of actual receipt as
evidenced by the return receipt.
4
<PAGE>
Section 6.3. Severability. If any sentence, paragraph, clause or
------------
combination of the same is this Agreement is held by a court of competent
jurisdiction to be unenforceable in any jurisdiction where it is so held, the
remainder of this Agreement shall remain binding on the parties hereto in such
jurisdiction as if such unenforceable provision had not been contained herein.
The enforceability of such sentence, paragraph, clause or combination of the
same in this Agreement otherwise shall be unaffected and shall remain
enforceable in all other jurisdictions.
Section 6.4. Governing Law. The validity, construction, interpretation
-------------
and enforceability of this Agreement shall be determined and governed by the
laws of the State of Nevada.
5
<PAGE>
Notwithstanding the foregoing, if any law or set of laws in the State of Nevada
requires or otherwise dictates that the laws of another state or jurisdiction
must be applied in any proceeding involving this Agreement, then such Nevada law
or set of laws shall be superseded by this Section 6.4, and the remaining laws
of the State of Nevada nonetheless shall be applied in such proceeding.
Section 6.5. Choice of Forum. Any judicial proceeding brought by any
---------------
party hereto as a result of a dispute or controversy arising out of or related
to this Agreement shall be commenced in courts located within Washoe County,
Nevada. All parties hereto agree to submit to the jurisdiction of the federal
and state courts located within such county in the event of such a dispute or
controversy.
Section 6.6. Headings. The headings and captions appearing at the
--------
beginning of each Article and Section of this Agreement are included herein for
the convenience of reference only, do not constitute a part of this Agreement
and shall not be deemed to limit, characterize or in any way affect any term or
provision of this Agreement. This Agreement shall be enforced and construed as
if no headings or captions appeared herein.
Section 6.7. Waiver. No waiver of any breach or default of this Agreement
------
by any party hereto shall be considered to be a waiver of any other breach or
default of this Agreement.
Section 6.8. Remedies. Each of the parties to this Agreement shall be
--------
entitled to enforce its rights under this Agreement specifically, to recover
damages by reason of any breach of any term or provision of this Agreement and
to exercise all other rights existing in its favor. The parties to this
Agreement agree and acknowledge that money damages may not be an adequate remedy
for any breach of any term or provision of this Agreement and that any party to
this Agreement in its sole and absolute discretion may apply to any court of law
or equity of competent jurisdiction for specific performance and/or injunctive
relief in order to enforce or prevent any breach of any term or provision of
this Agreement.
Section 6.9. Venue and Arbitration. Any dispute arising under this
---------------------
Agreement shall be submitted to binding arbitration under the Commercial
Arbitration Rules of the American Arbitration Association. The arbitration
shall be conducted in Reno, Nevada, before a single arbitrator selected by the
Managers and the Company, or, if they are unable to agree on the identity of the
arbitrator, before a panel of three (3) arbitrators, one (1) selected by the
Mangers, one (1) selected by the Company, and the third selected by the other
two (2) arbitrators. Failing the selection of any required arbitrator, the
selection of such
6
<PAGE>
arbitrator shall be made by the American Arbitration Association. The award of
the arbitrators shall be final and binding, and judgment on the award may be
entered by any court of competent jurisdiction located within Washoe County,
Nevada. This submission and agreement to arbitrate shall be specifically
enforceable. The prevailing party or parties in any such arbitration or in any
action to enforce this agreement to arbitrate shall be entitled all reasonable
costs and expenses, including attorneys' fees, incurred in connection therewith.
Section 6.10. Attorneys' Fees. If a dispute arises with respect to this
---------------
Agreement, the party prevailing in such dispute shall be entitled to recover all
expenses, including, without limitation, reasonable attorneys' fees and expense,
incurred in ascertaining such party's rights and in preparing to enforce and in
enforcing such party's rights under this Agreement, whether or not it was
necessary for such party to institute suit.
Section 6.11. Counterparts. This Agreement may be executed in
------------
counterparts, each of which shall be deemed to be an original, but all of which,
when taken together, shall constitute one agreement.
Section 6.12. Entire Agreement. This Agreement contains the entire
----------------
agreement between the parties hereto relating to the subject matter of this
Agreement, and no written or oral prior representations, agreements or
warranties of any party hereto shall be of any force or effect unless embodied
herein.
IN WITNESS WHEREOF, the Company and the Managers have executed this
Agreement on the date first written above.
The "Company"
ELDORADO RESORTS LLC
A Nevada Limited Liability Company
By: /s/ Donald L. Carano
________________________________
DONALD L. CARANO,
Chief Executive Officer,
President and Presiding Officer
By: /s/ Raymond J. Poncia, Jr.
________________________________
RAYMOND J. PONCIA, JR.,
President of Hotel-Casino
7
<PAGE>
Management, Inc., Assistant
Presiding Manager of the Company
8
<PAGE>
"Managers"
RECREATIONAL ENTERPRISES, INC.,
A Nevada Corporation
By: /s/ Donald L. Carano
________________________________
DONALD L. CARANO, President
HOTEL-CASINO MANAGEMENT, INC.
A Nevada Corporation
By: /s/ Raymond J. Poncia, Jr.
__________________________________
RAYMOND J. PONCIA, JR., President
9
<PAGE>
EXHIBIT 10.4
INDEMNITY AGREEMENT
INDEMNITY AGREEMENT ("Agreement") dated as of July 25, 1996, between
ELDORADO RESORTS LLC, a Nevada limited-liability company (the "Company"), and
ELDORADO CAPITAL CORP., a Nevada corporation ("Capital").
WITNESSETH:
WHEREAS, pursuant to the terms of a Purchase Agreement dated July 25, 1996,
between the Company and Capital, on the one hand, and Bear, Stearns & Co. Inc.,
Wasserstein Perella Securities, Inc. and BA Securities, Inc., as initial
purchasers (the "Initial Purchasers"), on the other hand, the Company and
Capital will issue and deliver $100 million principal amount of 10 1/2% Senior
Subordinated Notes due 2006 (the "Notes") to the Initial Purchasers;
WHEREAS, Capital is a wholly-owned subsidiary of the Company and was
incorporated for the sole purpose of serving as co-issuer of the Notes;
WHEREAS, Capital does not currently own any assets and will not during its
life own any assets;
WHEREAS, Capital has not transacted any business and will not during its
life transact any business;
WHEREAS, other than its obligations as co-obligor under the Notes and under
the Loan Agreement, dated as of March 25, 1994, among the Company, the banks
named therein and Bank of America NT&SA, as administrative agent, as amended or
supplemented now or in the future (as amended or supplemented now or in the
future, the "Loan Agreement"), Capital has not incurred any debt and will not
during its life incur any debt; and
WHEREAS, all of the proceeds from the sale of the Notes were distributed to
the Company and Capital did not receive any of such proceeds.
NOW, THEREFORE, in consideration of the premises and of the agreements
contained herein, it is hereby agreed as follows:
1. Capital not to Conduct Business. Capital hereby covenants and agrees
-------------------------------
that it will not transact, carry on or engage in any business activity
whatsoever during the term of this Agreement, including, without limitation,
enter into any contract for any purpose, acquire or hold any assets, create or
incur any indebtedness (other than indebtedness as co-obligor under the Notes
and the Loan Agreement), maintain bank accounts, or permit any person or agent
to take any such action on its behalf.
2. Indemnity. The Company shall indemnify and hold harmless Capital and any
---------
person authorized to act and who acts on behalf of Capital (an "Agent") against
any obligation under the Notes or the Loan Agreement and against any losses,
claims, damages, liabilities, costs (including the costs of preparation and
attorneys' fees) and expenses (collectively, "Losses") incurred by Capital in
connection with the Notes or the Loan Agreement and pursuant to any
investigation or proceeding against Capital or any Agent arising out of or in
connection with the Notes, the Loan Agreement, this Agreement or otherwise in
connection with the transactions contemplated thereby. The Company agrees to pay
promptly for all such Losses as such obligations arise. The obligations of the
Company to Capital and each of its Agents hereunder shall be separate
obligations and the Company's liability to Capital and any
<PAGE>
of its Agents hereunder and shall survive the redemption of the Notes, mandatory
or otherwise, the termination of the Loan Agreement and the termination of this
Agreement.
3. Payment of the Notes and Amounts Due Under the Loan Agreement. The
-------------------------------------------------------------
Company hereby covenants and agrees to pay as due all obligations, whether for
principal, interest or otherwise, under the Notes and the Loan Agreement. If at
any time, or from time to time, Capital receives any demand for payment under
the Notes or the Loan Agreement, Capital shall deliver a notice demanding
payment by the Company which notice shall specify the amount of payment due and
the person to whom payment shall be made. No later than ten days following the
date of such notice, the Company shall pay the amount due in full to Capital or
such person as may be designated by Capital in such notice.
4. Waiver of Contribution. The Company hereby waives all right to
----------------------
contribution from Capital to which it would otherwise be entitled under
applicable law.
5. Interest Deduction. As the Company is hereby obligated to pay all
------------------
interest expense under the Notes and the Loan Agreement, the Company and Capital
hereby agree that the Company, and not Capital, shall be entitled to claim as a
deduction for income tax purposes all interest expense under the Notes and the
Loan Agreement, regardless of whether such deduction may be claimed prior to
actual payment of such interest expense by the Company.
6. Nature of Obligations. The obligations of the Company hereunder are
---------------------
direct, absolute, unconditional and irrevocable and may be enforced by Capital
without first making any payment under the Notes or the Loan Agreement. The
obligations of the Company hereunder shall not in any way be reduced, limited,
terminated, discharged, affected or otherwise impaired by, (i) any invalidity or
irregularity in whole or in part of the Notes, (ii) any waiver by any person of
the performance or observance by the Company or Capital of any of the
agreements, covenants, terms or conditions contained in the Notes or the Loan
Agreement, (iii) any indulgence in or the extension of the time for payment by
the Company or Capital of any amounts payable under or in connection with the
Notes or the Loan Agreement, or of the time for performance by the Company or
Capital of any other obligations under or arising out of the Notes or the Loan
Agreement, (iv) any modification or amendment (whether material or otherwise) of
any duty, agreement or obligation of the Company or Capital set forth in the
Notes or the Loan Agreement, (v) the voluntary or involuntary liquidation, sale
or other disposition of all or substantially all the assets of the Company or
Capital, or receivership, insolvency, bankruptcy, reorganization, or other
similar proceedings affecting the Company or Capital or any of their respective
assets, (vi) the consolidation or merger of the Company or Capital, (vii) the
failure of the Company to pay a fee or provide other consideration in
consideration of its issuance of this Agreement, (viii) the occurrence or
continuance of any event of default under the Notes or the Loan Agreement or any
acceleration or required prepayment of any indebtedness of the Company or
Capital under or in respect of the Notes or the Loan Agreement as a result
thereof or otherwise, (ix) any change of circumstances, whether or not
foreseeable, and whether or not any such change does or may vary the risk of the
Company under this Agreement, (x) any right, claim or defense, waiver, surrender
or compromise that any person may have under or in respect of this Agreement or
otherwise or (xi) any other cause or circumstance, whether similar or dissimilar
to the foregoing which might otherwise constitute a defense available to, or
discharge of, the Company in respect of its obligations under the Notes or the
Loan Agreement.
2
<PAGE>
7. Remedies; No Waiver.
-------------------
(a) Capital may protect and enforce its rights hereunder in any court
or other tribunal by an action at law, suit in equity or other appropriate
proceedings, whether for damages, for the specific performance of any term
hereof or otherwise, or in aid of the exercise of any power granted hereby
or in law.
(b) No failure or delay by Capital in exercising any right, power or
remedy shall operate as a waiver thereof or otherwise impair any of its
rights, powers or remedies. No single or partial exercise of any such
right shall preclude any other or further exercise thereof or the exercise
of any other legal right. No waiver of any such right shall be effective
unless given in writing.
(c) The rights or remedies provided for herein are cumulative and are
not exclusive of any other rights, powers or remedies provided by law. The
assertion or employment of any right or remedy hereunder, or otherwise,
shall not prevent the concurrent assertion of any other appropriate right
or remedy.
8. Successors and Assigns. This Agreement shall bind the successors and
----------------------
assigns of the Company and shall inure to the benefit of Capital, its successors
and assigns. The Company may not assign any of its obligations hereunder
without the prior written consent of Capital or its successors or assigns.
9. Notices. Each notice, demand or other communication relating to this
-------
Agreement shall be in writing, shall be hand-delivered or sent by mail, postage
prepaid, telegram or facsimile (with confirmation by mail) and shall be deemed
duly given when sent to the following addresses, or to such other address or
number as a party shall have last specified by notice to the other party:
To the Company:
Eldorado Resorts LLC
Fourth and Virginia Streets
Reno, Nevada 89501
Attention: Chief Financial Officer
Telecopier: (702) 348-7513
To Capital:
Eldorado Capital Corp.
Fourth and Virginia Streets
Reno, Nevada 89501
Attention: Secretary
Telecopier: (702) 348-7513
3
<PAGE>
10. GOVERNING LAW; HEADINGS. THIS AGREEMENT SHALL BE GOVERNED BY AND
-----------------------
CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF NEVADA. THE
HEADINGS IN THIS AGREEMENT ARE FOR PURPOSES OF REFERENCE ONLY AND DO NOT LIMIT
OR AFFECT ITS MEANING.
11. Amendments. The provisions hereof may be waived, supplemented, or
----------
amended only by an instrument in writing signed by a duly authorized
representative of each of the parties hereto.
4
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed and delivered as of the day and year first above written.
ELDORADO RESORTS LLC
By: /s/ Donald L. Carano
--------------------------------------------
Name: Donald L. Carano
Title: Chief Executive Officer, President and
Presiding Manager
By: /s/ Gary L. Carano
--------------------------------------------
Name: Gary L. Carano
Title: Corporate Representative of Recreational
Enterprises, Inc., Manager
ELDORADO CAPITAL CORP.
By: /s/ Donald L. Carano
---------------------------------------------
Name: Donald L. Carano
Title: President
5
<PAGE>
EXHIBIT 10.5
PURCHASE AGREEMENT AND JOINT ESCROW INSTRUCTIONS
------------------------------------------------
THIS PURCHASE AGREEMENT AND JOINT ESCROW INSTRUCTIONS
("Agreement") is made this 26th day of June, 1996, by and between DANIEL'S
----
MOTOR LODGE, INC., a Nevada corporation (the "Seller"), party of the first part,
and ELDORADO HOTEL ASSOCIATES LIMITED PARTNERSHIP, a Nevada limited partnership
("Buyer"), party of the second part.
W_I_T_N_E_S_S_E_T_H
In consideration of the mutual promises hereinafter contained
and other good and valuable considerations as hereinafter set forth, Seller and
Buyer agree as follows:
1. Joint Instructions. This Agreement shall also constitute
------------------
Escrow Instructions to First American Title Company of Nevada, 241 Ridge Street,
Reno, Nevada 89504 ("Escrow Holder") upon acceptance by Escrow Holder of this
Agreement as constituting instructions to it, creating its escrow no. 189498-MC.
2. Property. Upon all the terms and conditions contained in
--------
this Agreement, Buyer agrees to purchase from Seller, and Seller agrees to sell
to Buyer, that certain real property and improvements situated in the City of
Reno, County of Washoe, State of Nevada, consisting of that certain real
property containing an 82 unit motel located on Washoe Assessor Parcels
007-292-18, 007-292-20 and 007-292-25, and more commonly known as Daniel's Motor
Lodge, 275 North Sierra Street, Reno, Nevada 89501, more particularly described
in the Title Report, hereinafter defined, attached hereto as Exhibit A
(hereinafter referred to as the "Real Property") and together with all
furniture, furnishings, equipment, consumables, inventories and other intangible
assets located on the Real Property and use in connection with the motel
business conducted on the Real Property (collectively the "Personal Property"
and together with the Real Property the "Sale Property").
3. Purchase Price. The total purchase price of the Sale
--------------
Property shall be Four Million Three Hundred Thousand Dollars ($4,300,000.00)
(the "Purchase Price") which Purchase Price shall be paid in the following
manner:
a. The sum of Ten Thousand Dollars ($10,000.00) in cash,
certified check or other immediately
<PAGE>
available funds, shall be deposited with Escrow Holder (the "Earnest Money")
within five (5) Business Days following the execution of this Agreement, which
shall be held in escrow by Escrow Holder during the pendency of this Agreement.
If Buyer defaults under this Agreement, and Seller is not in default, Seller
shall be entitled to receive the Earnest Money as liquidated damages. If Seller
defaults under this Agreement or if any of Buyer's Conditions for Closing (as
hereinafter defined) are not satisfied, Buyer shall be entitled to receive a
return of the Earnest Money and to pursue other available remedies as
hereinafter provided.
b. Closing Deposits. Prior to close of escrow, Buyer shall deposit in
----------------
escrow the additional sums or evidence of assumption of debt set forth below
which collectively shall constitute the down payment in the aggregate amount of
the sums set forth below (as adjusted and calculated with particularly as of the
Closing Date, collectively the "Down Payment"):
(i) One Million Dollars ($1,000,000.00) in cash, certified check or
other immediately available funds, to which the Earnest Money shall be
fully credited;
(ii) the amount necessary to pay in full that certain obligation owing
by Seller to Bank of America (formerly Valley Bank of Nevada) ("BofA")
evidenced by U.S. Small Business Administration Note dated April 19, 1991,
in the original principal sum of Five Hundred Fifty Thousand Dollars
($550,000.00) (the "BofA Note") made by Seller, payable to the order of
BofA and secured by Deed of Trust recorded April 19, 1991, in the Office of
the County Recorder of Washoe County, Nevada, in Book 3243 of Official
Records at Page 992, as Document No. 1473353 (the "BofA Deed of Trust") and
by Assignment of Rentals and Leases recorded April 1991 in the Office of
the County Recorder of Washoe County, Nevada, in Book 3243 of Official
Records at Page 998, as Document No. 1473354 (the "BofA Assignment of
Leases" and together with the BofA Deed of Trust, collectively the "BofA
Security Documents");
(iii) at the election of Buyer, in Buyer's sole discretion, either (A)
the amount necessary to pay in full that certain obligation owing by Seller
-2-
<PAGE>
to John E. Dooley, trustee of the John E. Dooley Family Trust, dated
February 8, 1984, as to an undivided 80% interest, Eugene Cudworth,
trustee of the Nevada Physical Therapy Profit Sharing Trust, fbo Randy
Jacobe, as to an undivided 10% interest, Eugene Codworth, trustee of the
Nevada Physical Therapy Profit Sharing Trust, fbo Eugene Cudworth, as to
an undivided 6% interest, and Eugene Cudworth and Raylene Cudworth,
husband and wife, as joint tenants, as to an undivided 4% interest
(collectively the "Dooley Group") evidenced by Promissory Note dated
January 4, 1995, in the original principal sum of Two Hundred Fifty
Thousand Dollars ($250,000) (the "Dooley Note") made by Seller, payable
to the order of the Dooley Group and secured by Deed of Trust with
Assignment of Rents recorded January 6, 1995, in the Office of the
County Recorder of Washoe County, Nevada, in Book 4224 of Official
Records at Page 956, as Document No. 1862109 (the "Dooley Deed of
Trust"), having an approximate unpaid balance of principal and interest
of Two Hundred Forty-Eight Thousand Dollars ($248,000.00) as of the date
of this Agreement (the unpaid balance of principal and interest owing as
of the Closing Date being hereafter referred to as the "Dooley
Obligation"), or (B) Buyer shall assume full liability and
responsibility for the timely payment and performance of all liabilities
and obligations of Seller for the amount of the Dooley Obligation under
the terms of the Dooley Note and Dooley Deed of Trust by execution of an
Assumption Agreement in a form acceptable to the Dooley Group and Buyer
(the "Dooley Obligation Assumption").
c. Note. The balance of the Purchase Price shall be evidenced
----
by a promissory note in a principal amount determined by subtracting the amount
of the Down Payment from the Purchase Price, which promissory note shall be
executed by Buyer, payable to the order of the Seller in the form of the
Promissory Note ("Purchase Note"), a copy of which is marked "Exhibit B",
affixed hereto and by this reference incorporated herein and made a part hereof,
bearing interest at nine percent (9%) per annum, commencing on the Closing Date
and continuing until fully paid, with said principal plus accrued interest to be
paid in one-hundred twenty (120) equal installments based on a ten (10) year
fully amortizing payment schedule.
-3-
<PAGE>
The Purchase Note shall be secured by a Deed of Trust with
Assignment of Rents (the "Purchase Deed of Trust") encumbering the Property as a
first mortgage lien (or second mortgage lien in the event Buyer elects to cause
the BofA Note Assumption to occur) in the form of the Deed of Trust and
Assignment of Rents marked "Exhibit C", affixed hereto and by this reference
incorporated herein and made a part hereof.
3. Title Insurance. Title to the Real Property shall be insured by
---------------
Escrow Holder by Standard Form of Joint Protection Policy of Title Insurance
(the "Title Policy") in favor of Buyer in amount of Purchase Price and in favor
of Seller as Beneficiary of the Purchase Deed of Trust, Exhibit C hereto, in the
amount of the Purchase Note, Exhibit B hereto, subject only to exceptions
numbered 1-4 (all taxes and assessments to be paid current by Seller or pro
rated as of the Closing Date), 6, 8 (only in the event of the Dooley Obligation
Assumption as provided in Paragraph 3(b)(ii)(B) above) and 9 (collectively the
"Permitted Exceptions") as shown on Escrow Holder's Preliminary Report dated
June 19, 1996, reporting on title as of May 30, 1996, Order No. 189498-MC (the
"Title Report"), a copy of which Title Report is marked "Exhibit A", affixed
hereto and by this reference incorporated herein and made a part hereof. It is
specifically understood and agreed that Seller shall be fully responsible for
the removal of exceptions numbered 5, 7, and 9 of the Title Report.
4. Seller's Warranties and Representations. Seller warrants to
---------------------------------------
Buyer as follows:
a. Seller has the full right, power, and authority to enter
into this Agreement and has the authority to carry out Seller's obligations,
including the conveyance of the Sale Property to Buyer as provided in this
Agreement without the joinder of any other person.
b. There are no leases, rental agreements or other
agreements, written or verbal (collectively the "Leases"), for the use or
occupancy of all or any portion of the Sale Property beyond the Closing Date,
except for customer room reservations, none of which reservations are for use of
any portion of the Sale Property for more than seven (7) consecutive days.
c. Seller has good, marketable and insurable title to the
Sale Property, free and clear of any matters except the Permitted Exceptions.
Subject to the foregoing, no
-4-
<PAGE>
agreement concerning or restricting the sale of the Property is in effect and no
person or entity, other than Buyer, has any right or option to acquire all or
any portion of the Sale Property.
d. Except as may have been heretofore disclosed to Buyer in
writing, Seller has not contracted for any services and has made no commitments
or obligations therfor which will become binding upon Buyer with respect to the
Sale Property, with the exception of the Leases.
e. The persons executing this Agreement have all the necessary
power to do so and to consummate the transaction described herein. Seller is not
subject to any commitment, obligation, default or agreement or parties to any
litigation which would prevent Seller from completing the sale of the Sale
Property under this Agreement.
f. As of the Close of Escrow, the Sale Property will be free and
clear of all liens and encumbrances other than the Permitted Encumbrances and
the Purchase Deed of Trust.
5. Buyer Inspection and Investigation. Buyer and its designated
----------------------------------
agents shall have until September 5, 1996, in which to make such inspections of,
and to examine, the Sale Property, all plans and specifications, contracts,
leases, inventories, surveys, engineering reports, environmental assessments
and reports of any governmental agency, including a certificate of occupancy, as
Buyer deems necessary to analyze the Sale Property, including, but not limited
to, the performance of environmental surveys and inspections as well as
inspections by governmental agencies in contemplation of the issuance of a
certificate of occupancy, all at Buyer's expense (collectively, the "Due
Diligence"). Buyer may terminate this Agreement for any reason by giving notice
to Escrow Holder (a "Termination Notice"), provided that such Termination Notice
is given on or before September 5, 1996. Upon timely receipt of the Termination
Notice, Escrow shall return the Earnest Money to Buyer and Buyer shall have no
further obligations under this Agreement.
6. Closing.
-------
a. Date and Place. Close of escrow ("Closing") for the sale of
--------------
the Sale Property by Seller to Buyer shall occur on or before September 20, 1996
(the date of Closing being herein referred to as the "Closing Date").
- 5 -
<PAGE>
b. Seller's Obligations at Closing. At the Closing, Seller, at
-------------------------------
Seller's sole cost and expense, shall deliver, or cause to be delivered, to
Buyer the following:
(1) Deed. A Deed in the form of the Deed marked "Exhibit
----
D", affixed hereto and by this reference incorporated herein and made a part
hereof (the "Deed"), fully executed and acknowledged by Seller, conveying all of
Seller's right, title and interest to the Real Property to Buyer.
(2) Bill of Sale. A Bill of Sale in the form of the Bill of
------------
Sale marked "Exhibit E", affixed hereto and made a part hereof (the "Bill of
Sale"), fully executed and acknowledged by Seller, transferring all of Seller's
right, title and interest to the Personal Property to Buyer.
(3) Other Instruments. Such other documents as are
-----------------
customarily executed in the State of Nevada as evidence of authority to execute
the documents, and any other instruments that may be reasonably required by the
Escrow Holder.
(4) Possession. Possession of the Sale Property shall pass
----------
to Buyer at Closing.
c. Buyer's Obligations at Closing.
------------------------------
(1) Conditions for Closing. Buyer shall not be obligated to
----------------------
close this transaction until and unless: (i) Buyer has not given a Termination
Notice to Escrow Holder on or before September 5, 1996, (ii) all warranties
contained herein in Section 4 shall be true and correct as of the Closing Date;
and (iii) on the Closing Date there shall be no litigation pending or threatened
seeking to enjoin the performance of this Agreement. The conditions stated
herein shall be collectively referred to as "Buyer's Conditions for Closing". At
Buyer's option, any of Buyer's Conditions For Closing that are unsatisfied at
the time of Closing may be waived by Buyer.
(2) Payment of Purchase Price. At the Closing, Buyer shall:
-------------------------
(i) pay or assume, as the case may be, the Down Payment as provided in Section
3, subject to any adjustments for prorations and other credits provided for in
this Agreement, (ii) deposit such other sums as are necessary to pay Buyer's
costs, expenses and prorations in connection with this transaction, and (iii)
execute and deliver the Purchase Note and Purchase Deed of Trust to Escrow
Holder.
- 6 -
[LETTERHEAD OF
HENDERSON & NELSON
APPEARS HERE]
<PAGE>
d. Prorations. All real estate taxes relating to the Sale
----------
Property for the year of the Closing shall be prorated as of the Closing Date
between Seller and Buyer. If the amount of taxes for that year are not known at
the time of Closing, the prorations shall be based on an estimate of the taxes
for the year of Closing, and when the tax information becomes available, Seller
or Buyer may request reimbursement from the other party for any excess amount
charged to that party at the Closing. Likewise, any other amounts normally
prorated between Seller and Buyer, such as rents, prepaid deposits, insurance
premiums, and utility bills, if any, shall be prorated between Seller and Buyer
as of the Closing Date.
e. Closing Costs. At the Closing Date, Seller and Buyer shall
-------------
be responsible for costs and expenses of the Escrow as follows:
(1) Seller shall pay:
(a) Cost of any transfer or conveyance taxes applicable
to the recordation of the Deed;
(b) Cost of the Title Insurance Policy;
(c) Seller's share of ad valorem property taxes,
assessments, sewer charges and personal property taxes shall be prorated as of
the Closing Date;
(d) Proration of rent, power, gas, electric and other
utility bills shall be prorated as of the Closing Date and paid by Seller to
Buyer for costs and expenses accrued to the Closing Date;
(e) All rent, prepaid deposits and security deposits
held by Seller relating to the Leases shall be transferred to Buyer; and
(f) One-half (1/2) of the fees of Escrow Holder for the
handling of the Escrow.
(2) Buyer shall pay:
-7-
<PAGE>
(a) The remaining one-half (1/2) of the fees and
expenses of Escrow Holder for the handling of this Escrow; and
(b) Buyer's share of prorations as provided in
Paragraph 6(e)(1)(c) and (d).
f. Except as otherwise specifically provided in this Agreement,
Seller and Buyer shall bear their own costs and expenses arising out of
negotiation, execution, delivery and performance of this Agreement and the
consummation of the transaction as contemplated herein, including, without
limitation, legal and accounting fees and expenses.
7. Defaults and Remedies.
---------------------
a. Buyer's Default and Seller's Remedies.
-------------------------------------
(1) Buyer's Default. Buyer shall be deemed to be in default
---------------
under this Agreement if all of Buyer's Conditions For Closing have been
satisfied and Buyer fails or refuses to perform Buyer's obligations at Closing
including, but not limited to, closing escrow on or before September 30, 1996,
for any reason other than a default by Seller or termination by Buyer under some
provision of this Agreement.
(2) Seller's Remedies. If Buyer is deemed to be in default
-----------------
under this Agreement, Seller, as Seller's sole and exclusive remedy for such
default, shall be entitled to receive the Earnest Money. It is agreed between
Buyer and Seller that such amount shall be liquidated damages for a default of
Buyer under this Agreement because of the difficulty, inconvenience and
uncertainty of ascertaining actual damages for such default and such amount will
constitute the reasonable amount of Seller's damages in the event of Buyer's
default.
b. Seller's Defaults and Buyer's Remedies.
--------------------------------------
(1) Seller's Defaults. Seller shall be deemed to be in
-----------------
default under this Agreement on the occurrence of any of one or more of the
following events:
(a) Any of Seller's warranties or representations set
forth in Section 4 of this Agreement is or becomes untrue at any time on or
before the Closing Date.
-8-
LAW OFFICES OF
HENDERSON & NELSON
164 HUBBARD WAY
SUITE B
<PAGE>
(b) Seller fails to meet, comply with, or perform any
covenant, agreement, or obligation which is set forth as a condition precedent
to the Closing within the time limits and in the manner required in this
Agreement.
(2) Buyer's Remedies. If Seller breaches any of its obligations
----------------
under this Agreement or fails to consummate this Agreement for any reason except
default solely on the part of Buyer or the termination by Buyer of this
Agreement pursuant to the terms hereof, Buyer may enforce specific performance
of this Agreement or bring suit for damages against Seller, or exercise any
other right or remedy Buyer may have at law or in equity by reason of such
default, including, but not limited to, recovery of attorneys' fees incurred by
Buyer in connection herewith.
8. Seller's Disclaimers. Buyer acknowledges and agrees that Buyer's
--------------------
purchase of the Sale Property shall be based solely upon Buyer's inspection and
investigation of the Sale Property and that Buyer will be purchasing the Sale
Property on an "as is, where is" basis, with all faults, latent and patent.
Without limiting the generality of the foregoing, Buyer acknowledges that,
except as otherwise expressly represented or warranted in this Agreement, Seller
has not made, and is not hereby making and Seller hereby expressly disclaims and
negates any representations or warranties of any kind whatsoever, either
express, implied or statutory, on which Buyer is relying as to the condition of
or title to the Sale Property or any matters concerning the Sale Property
(including, without limitation, any express or implied warranty of
merchantability or fitness for a particular purpose), including, without
limitation, development rights, permissible uses, covenants, conditions and
restrictions, water or water rights, topography, utilities, soil and subsoil
conditions, drainage, zoning, environmental or building (i) laws, (ii) rules, or
(iii) regulations or any other representations or warranties.
9. Escrow Holder's Rights. Should Escrow Holder, before or after
----------------------
close of escrow, receive or become aware of any conflicting demands or claims
with respect to this escrow or the rights of any of the parties hereto, or any
money or property deposited herein or affected hereby, Escrow Holder shall have
the right to discontinue any or all further acts on its part until such conflict
is resolved to its satisfaction, and Escrow Holder shall have the further right
to commence or defend any action or proceedings for the determination of such
conflict. The parties hereto jointly and severally agree to
-9-
<PAGE>
pay all costs, damages, judgments and expenses, including reasonable attorney's
fees, suffered or incurred by Escrow Holder in connection with or arising out of
this escrow, including, but without limiting the generality of the foregoing, a
suit in interpleader brought by Escrow Holder. In the event Escrow Holder files
a suit in interpleader, Escrow Holder shall ipso facto be fully released and
discharged from all obligations imposed upon Escrow Holder in this escrow.
10. Real Estate Commission. Buyer and Seller represent and warrant to,
----------------------
and with each other, that neither party has incurred any real estate broker's
commissions, finders fee or any similar fee in connection with this Agreement.
Each party shall, and does hereby, indemnify and hold harmless the other party
and its respective successors in interest from any demands, liabilities,
expenses, actions, attorneys fees and obligations arising out of, or in any way
connected with, any obligations whatsoever by the other party or by any person
to pay any real estate broker's fee or other similar fee in connection with this
Agreement. In this regard, Seller represents that William T. Daniels of William
T. Daniels and Associates, 330 E. Liberty Street, Suite 215, Reno, Nevada 89501
("Daniels") has performed certain services on behalf of Seller and that Seller
is solely responsible for the payment of all fees and other compensation to
Daniels in connection with the Purchase Agreement.
11. Risk of Loss. Risk of loss from fire or other hazards shall remain
------------
with Seller until close of escrow.
12. Miscellaneous.
-------------
a. Notices. Any and all notices and demands by any party hereto to
-------
the other party, required or desired to be given hereunder shall be in writing
and shall be validly given or made only if personally delivered or if deposited
in the United States mail, postage prepaid, return receipt requested, or if made
by Federal Express or other similar delivery service keeping records of
deliveries and attempted deliveries. Services shall be conclusively deemed made
on the first business day delivery is attempted or upon receipt, whichever is
sooner.
Any notice or demand to Seller shall be addressed to Seller at:
-10-
<PAGE>
To Seller: Daniel's Motor Lodge
275 North Sierra Street
Reno, NV 89501
Any notice or demand to Buyer shall be addressed to Buyer at:
To Buyer: Eldorado Hotel Associates
Limited Partnership
345 North Virginia Street
Reno, Nevada 89501
Attn: Donald L. Carano
Escrow Holder: First American Title Company
of Nevada
241 Ridge Street
Reno, Nevada 89504
Attn: Escrow No. 189498-MC
Any party hereto may change its address for the purpose of
receiving notices or demands as herein provided by a written notice given in the
manner aforesaid to the other party hereto, which notice of change of address
shall not become effective, however, until the actual receipt thereof by the
other party.
b. Entire Agreement. This Agreement, with its attachments,
----------------
constitutes the entire agreement between the parties hereto with respect to the
transactions contemplated hereby, and supersedes any prior written or oral
agreements between them concerning the subject matter contained herein. There
are no representations, agreements, understandings, oral or written, between and
among the parties hereto relating to the subject matter contained in this
Agreement which are not fully expressed herein.
c. Parties bound. This Agreement shall inure to the benefit
-------------
of and shall be binding upon the assigns, successors in interest, personal
representatives, estates, heirs and legatees of each of the parties hereto.
d. Survival of Covenants. The terms, provisions, promises,
---------------------
covenants and conditions contained in this Agreement shall survive the Closing
of escrow and execution of all documents required to be executed pursuant to the
terms hereof.
-11-
<PAGE>
e. Assignment. This Agreement may not be assigned by Buyer
----------
without the prior written consent of Seller, except that Buyer may assign its
rights and obligations hereunder to Eldorado Resorts, LLC, into which Buyer
intends to merge and which entity will have the identical ownership as Buyer.
f. Severability. If any of the terms and conditions hereof
------------
shall for any reason be held to be invalid, illegal, or unenforceable in any
respect, such invalidity, illegality, or unenforceability shall not affect any
other of the terms and conditions hereof and the terms and conditions hereof
thereafter shall be construed as if such invalid, illegal, or unenforceable term
or conditions have never been contained herein.
g. Time. Time is of the essence to the performance of any
----
provision of this Agreement. If the date for performance of any provisions of
this Agreement is a Saturday, Sunday, or banking holiday (in the State of
Nevada), the date for perf ormance shall be extended until the next day that is
not a Saturday, Sunday or banking holiday.
h. Interpretation. Words of any gender used in this Agreement
--------------
shall be held and construed to include any other gender and words in the
singular number shall be held to include the plural, and vice versa, unless the
context requires otherwise.
i. Waiver. Either the Buyer or the Seller may specifically
------
waive any breach of the terms and conditions hereof by the other party, but no
waiver specified in this Section shall constitute a continuing waiver of similar
or other breaches of the terms and conditions hereof. All remedies,- rights,
undertaking, obligations, and agreements contained herein shall be cumulative
and not mutually exclusive.
j. Costs to Prevailing Party. If any action or proceeding is
-------------------------
brought by any party against any other party under this Agreement, the
prevailing party shall be entitled to recover such costs and attorney's fees as
the court in such action or proceeding may adjudge reasonable.
k. Governing Law. The terms and conditions hereof shall be
-------------
governed by and construed in accordance with the laws of the State of Nevada.
- 12 -
<PAGE>
1. Headings. The headings herein are for reference purposes
only and shall not affect the meaning or interpretation of the terms and
conditions hereof.
m. Counterparts. This Agreement may be executed in any number
of counterparts, each of which when executed and delivered shall be an original,
but all such counterparts shall constitute one and the same Agreement. Any
signature page of this Agreement may be detached from any counterpart without
impairing the legal effect of any signatures thereon, and may be attached to
another counterpart, identical in form thereto, but having attached to it one or
more additional signature pages.
IN WITNESS WHEREOF, Seller and Buyer have executed this
Agreement as of the date written below:
SELLER: BUYER:
- ------ -----
DANIEL'S MOTOR LODGE, INC., ELDORADO HOTEL ASSOCIATES
a Nevada corporation LIMITED PARTNERSHIP,
a Nevada limited partnership.
By /s/ James T. Daniel, Jr. By: RECREATIONAL
-------------------------- ENTERPRISES, INC., a
Title Pres. Nevada corporation,
----------------------- general partner
6-26-96
By /s/ Donald L. Carano
------------------------
Title CEO
---------------------
By: HOTEL-CASINO MANAGEMENT,
INC. a Nevada
corporation, general
partner
By /s/ Raymond J. Poncia, Jr.
---------------------------
Title President
------------------------
- 13 -
<PAGE>
ESCROW HOLDER:
- -------------
FIRST AMERICAN TITLE COMPANY OF NEVADA hereby acknowledges receipt of
a duplicate original of the Agreement.
DATED this 27th day of June, 1996.
FIRST AMERICAN TITLE
COMPANY OF NEVADA
By /s/ Mary A. Clark
-------------------------------------------
Title Vice President
----------------------------------------
- 14 -
<PAGE>
FIRST AMERICAN TITLE COMPANY OF NEVADA
241 Ridge Street (P.O. Box 531) Reno, Nevada 89504 (702)688-4848
Preliminary Report
June 19, 1996
Your No.:
Our order No.: 189498MC AP # 007-292-18, 20, 25
In response to the above referenced application for a policy of title insurance,
this Company hereby reports that it is prepared to issue, or cause to be issued,
as of the date hereof, a Policy or Policies of Title Insurance describing the
land and the estate or interest therein hereinafter set forth, insuring against
loss which may be sustained by reason of any defect, lien or encumbrance not
shown or referred to is an Exception below or not excluded from coverage
pursuant to the printed Schedules, Conditions and Stipulations of said Policy
forms.
The printed Exceptions and Exclusions from the coverage of said Policy or
Policies are set forth in Exhibit A attached. Copies of the Policy forms should
be read. They are available from the office which issued this report.
Please read the exceptions shown or referred to below and the exceptions and
exclusions set forth in Exhibit A of this report carefully. The exceptions and
exclusions are meant to provide you with notice of insurance coverage provided
by the title insurance policy selected and should be carefully considered.
It is important to note that this Preliminary Report is not a written
representation as to the condition of title and may not list all liens, defects
and encumbrances affecting title to the land.
This report (and any supplements or amendments thereto) is issued solely for the
purpose of facilitating the issuance of a policy of title insurance and no
liability is assumed hereby. If it is desired that liability be assumed prior to
the issuance of a policy of The insurance, a Binder or Commitment should be
requested.
Dated as of May 30, 1996 at 7:30a.m.
/s/ Joe McCaffrey
-------------------------------------------
Joe McCaffrey, Title Officer
Title to said estate or interest at the date hereof is vested in:
DANIEL'S MOTOR LODGE, INC., a Nevada corporation
The estate or interest in the land hereafter described or referred to covered by
this report is:
A FEE
Page 1
EXHIBIT A
<PAGE>
At the date hereof exceptions to coverage in addition to the printed exceptions
and exclusions contained in said policy form would be as follows:
1. Taxes for the fiscal year 1995-1996, including any secured personal property
tax, have been paid in full.
AP # 007-292-18
Total $530.89
(Affects Parcel 1)
2. Taxes for the fiscal year 1995-1996, including any secured personal property
tax, have been paid in full.
AP # 007-292-20
Total $13,590.30
(Affects Parcel 2)
3. Taxes for the fiscal year 1995-1996, including any secured personal property
tax, have been paid in full.
AP # 007-292-25
Total $34,307.37
(Affects Parcel 3)
4. The lien of any delinquent sewer service charges with interest and
penalties, should it be determined that the same have attached to the
premises, pursuant to Chapter 7.20 of the Reno Municipal Code.
Specific amounts may be obtained by calling (702)334-2095.
5. A Lease dated May 12, 1969, executed by DANIEL'S MOTOR LODGE, INC., as
Lessor, and by STANDARD OIL COMPANY OF CALIFORNIA, as Lessee, for the period
and upon the terms, conditions, and covenants therein contained, recorded
July 22, 1969 in Book 401, Page 425 as Document No. 149145 of Official
Records, reference being hereby made to the record thereof for full
particulars.
(Affects Lot 7 of Parcel 3)
6. The fact that the land lies within the "Downtown Project Area" of the
Redevelopment Agency of the City of Reno, as evidenced by a document which
was recorded in the office of the Washoe County Recorder on May 5, 1983 in
Book 1862, Page 498 as Document No. 853150 of Official Records.
An annexation to the above referenced redevelopment project was recorded
August 25, 1983 in Book 1909, Page 141 as Document No. 875211 of Washoe
County Official Records.
An amendment to the above referenced redevelopment project was adopted on
November 27, 1990 by The Redevelopment Agency of the City of Reno,
Resolution No. 57. Although not filed in the Recorder's office of Washoe
County, this Company is in possession of a copy of the amendment.
7. A deed of trust to secure an original indebtedness of $550,000.00, and any
other amounts or obligations secured thereby, recorded April 19, 1991 in
Book 3243, Page 992, as Document No. 1473353 of Official Records.
Dated : April 19, 1991
Trustor : DANIEL'S MOTOR LODGE, INC., a Nevada corporation
Trustee : WESTERN TITLE COMPANY, INC
Page 2
<PAGE>
7. continued
An assignment of RENTALS AND LEASES, as additional security for the payment
of the indebtedness secured by said deed of trust recorded April 19, 1991 in
Book 3243, Page 998, as Document No. 1473354 of Official Records.
8. A deed of trust to secure an original indebtedness of $250,000.00, and any
other amounts or obligations secured thereby, recorded January 6, 1995 in
Book 4224, Page 956, as Document No. 1862109 of Official Records.
Dated : January 4, 1995
Trustor : DANIEL'S MOTOR LODGE, INC., a Nevada corporation
Trustee : FOUNDERS TITLE COMPANY OF NEVADA, a Nevada corporation
Beneficiary: JOHN E. DOOLEY, Trustee of THE JOHN E. DOOLEY FAMILY TRUST,
dated February 8, 1984, as to an undivided 80% interest,
EUGENE CUDWORTH, Trustee of THE NEVADA PHYSICAL THERAPY
PROFIT SHARING TRUST, FBO RANDY JACOBE, as to an undivided
10% interest, EUGENE CUDWORTH, Trustee of THE NEVADA PHYSICAL
THERAPY PROFIT SHARING TRUST, FBO EUGENE CUDWORTH, as to an
undivided 6% interest, and EUGENE CUDWQRTH and RAYLENE
CUDWORTH, husband and wife, as joint tenants, as to an
undivided 4% interest.
9. Rights of parties in possession.
10. Prior to the issuance of any policy of title insurance, the Company will
require:
a: With respect to DANIEL'S MOTOR LODGE, INC., a Nevada corporation:
(1) A certificate of good standing of recent date issued by the
Secretary of State of the corporation's state of domicile .
(2) A certified copy of a resolution of the Board of Directors
authorizing the contemplated transaction and designating which
corporate officers shall have the power to execute on behalf of
the corporation.
(3) Other requirements which the Company may impose following its
review of the material required herein and other information which
the Company may require.
(CONTINUED ON NEXT PAGE)
Page 3
<PAGE>
10. continued
b: With respect to ELDORADO HOTEL, a corporation:
(1) A certificate of good standing of recent date issued by the
Secretary of State of the corporation's state of domicile.
(2) A certified copy of a resolution of the Board of Directors
authorizing the contemplated transaction and designating which
corporate officers shall have the power to execute on behalf of
the corporation.
(3) Other requirements which the Company may impose following its
review of the material required herein and other information which
the Company may require.
c: A full copy of all unrecorded leases affecting the land, together with
all supplements, assignments and amendments.
DESCRIPTION: SEE ATTACHED
NOTE: This report makes no representations as to water, water rights,
minerals or mineral rights and no reliance can be made upon this
report or a resulting title policy for such rights or ownership.
NOTE: SHORT-TERM RATE APPLIES 80%
Page 4
<PAGE>
DESCRIPTION
All that certain lot, piece or parcel of land situate in the County of Washoe,
State of Nevada, described as follows:
Parcel 1:
---------
That portion of Lot 3 in Block F of ORIGINAL TOWN, NOW CITY OF RENO,
according to the map thereof, filed in the office of the County
Recorder of Washoe County, State of Nevada, on June 27, 1871, described
as follows:
COMMENCING at a point on the West line of the alley running Northerly
and Southerly through said Block F, 6 feet Northerly of the Southeast
corner of said Lot 3 in Block F of said town, now City of Reno; thence
Northerly along the East line of said Lot 3, a distance of 32 1/2 feet;
thence at a right angle Westerly, a distance of 44 1/2 feet; thence at
a right angle Southerly, a distance of 32 1/2 feet; thence at a right
angle Easterly, a distance of 44 1/2 feet to the Point of Beginning.
The above described premises being the Easterly portion of Lot 3 in
Block F of ORIGINAL TOWN, NOW CITY OF RENO, according to the map above
mentioned.
Parcel 2:
---------
Lot 6 in Block F of original Town, now City of Reno, according to the
map thereof filed in the office of the County Recorder of Washoe
County, State of Nevada on June 27, 1871.
Parcel 3:
---------
Lots 7, 8, 9, the Northerly 39.66 feet of Lot 10 and that portion of
Lot 10 in Block F or original Town, now City of Reno, according to the
map thereof filed in the office of the County Recorder of Washoe
County, State of Nevada on June 27, 1871, described as follows :
BEGINNING at a point 39.66 feet South of the Northeast corner of Lot
10 in Block F, Original Reno Townsite; thence West along a line
parallel to the North side line of said Lot 10, 140 feet; thence South
.2 feet along the West end line of Lot 10; thence East 140 feet to a
point 40.06 feet South of the Northeast corner of Lot 10; thence North
.4 feet to the point of beginning; said fraction being contained in Lot
10, Block F, Original Reno Townsite.
Page 5
<PAGE>
[ASSESSOR'S MAP COUNTY OF WASHOE, NEVADA, APPEARS HERE]
<PAGE>
ESCROW NO. 189498-MC
FORM OF
-------
PROMISSORY NOTE
---------------
$ Reno, Nevada, , 1996
--------------------- ------------------------
FOR VALUE RECEIVED, the undersigned, ELDORADO HOTEL ASSOCIATED
LIMITED PARTNERSHIP, a Nevada limited partnership [OR ELDORADO RESORTS, LLC]
(hereinafter called "Borrower") promises to pay to the order of DANIEL'S MOTOR
LODGE, INC., a Nevada corporation (hereinaftet referred to as "Lender"), c/o
_________________________ __________________________ , or at such other place
as the legal holders of this Note shall designate in writing, in coin or
currency which at the time or times of payment shall be legal tender for the
payment of public and private debts in the United States of America, the
principal sum of _____________________ ____________________ ($_______________),
with interest on the unpaid balance of the principal sum hereof at the rate of
nine percent (9%) per annum commencing on the date of the recording of the Deed
of Trust with Assignment of Rents securing repayment of this Note (hereinafter
the "Recording Date") and continuing until fully paid.
Said principal and interest shall be paid monthly in the
following manner:
The sum of _____________________________________________
($_____________________), or more, shall be paid on the
first monthly anniversary of the Recording Date and
a like sum of __________________________________________
($______________________), or more, shall be paid on the same
day of each consecutive month occurring thereafter until the
tenth (10th) annual anniversary of the Recording Date, on
which date the entire balance of the principal sum, together
with the interest accrued thereon, shall be ful1y paid. Each
of said monthly installment payments shall be applied first to
the payment of interest then due on the decreasing balance of
the principal sum and then to the reduction of the principal
sum.
PAGE 1 OF 3
EXHIBIT B
<PAGE>
This Note is secured by a Deed of Trust With Assignment of
Rents of even date herewith executed by Borrower, as Trustor, for Lender
above-named, as Beneficiary
The undersigned promises and agrees that in case of default:
(i) In the payment of any installment of interest and/or
principal and interest due under this Note on or before the fifth (5th) day
following the date upon which such payment is due and payable; or
(ii) In the event of failure to perform any covenant in the Deed
of Trust With Assignment of Rents securing repayment of this Note; or
(iii) In the event that Borrower shall make a general assignment
for the benefit of creditors or be adjudged a bankrupt or if a proceeding be
either voluntarily or involuntarily instituted for reorganization or other
debtor relief, provided by the Bankruptcy Code, and, if the proceeding be
involuntarily instituted the failure of the undersigned to have the same stayed
or dismissed within sixty (60) days after its entry;
Then upon the happening of any one of such events the whole sum
of principal and interest which shall then remain unpaid shall, at the option of
the Lenders hereof, become forthwith due and payable although the time of
maturity as expressed herein shall not have arrived. In the event of default,
all sums thereafter received shall be applied first to the payment of interest
then due on the decreasing balance of the principal sum and then to the
reduction of the principal sum.
In the event of such default, commencing on the 15th day
following the mailing of written notice thereof by Lender, the total of the
unpaid balance of principal and the then accrued unpaid interest shall
collectively commence accruing interest at an annual rate equal to the Note Rate
plus three percent (3%) added to such Note Rate until such time as all payments
and additional interest are paid, together with the curing of any other default
which may have occurred, at which time the interest rate shall revert to the
Note Rate.
PAGE 2 OF 3
<PAGE>
In the event of such default, the undersigned agrees to pay all
costs of collection and/or expenses and fees incurred by Lender, including but
not limited to fees or expenses incurred in any foreclosure proceeding, court
actions or in any bankruptcy or Chapter 11 proceeding initiated by or against
Borrower, including a reasonable attorney's fee, in addition to and at the time
of the payment of such sum of money and/or the performance of such acts as may
be required to cure such default. In the event legal action is commenced for the
collection of any sums owing hereunder the undersigned agrees that any judgment
issued as a consequence of such action against the maker hereof shall bear
interest at an annual rate equal to the Note Rate, plus three percent (3%) added
to such Note Rate until ful1y paid.
The Borrower waives presentment, demand, protest and notice of non-
payment.
ELDORADO HOTEL ASSOCIATES [for ELDORADO RESORTS, LLC
LIMITED PARTNERSHIP,
a Nevada limited partnership By: RECREATIONAL
ENTERPRISES, INC., a
By: RECREATIONAL Nevada corporation,
ENTERPRISES, INC., a Board of Managers
Nevada corporation,
general partner
By
----------------------------------
By
----------------------- Title
-------------------------------
Title
-------------------- By: HOTEL-CASINO MANAGEMENT,
INC., a Nevada
By: HOTEL-CASINO MANAGEMENT, corporation, Board of Managers
INC., a Nevada
corporation, general
partner By
---------------------------------
By Title
---------------------- ------------------------------
Title By:
-------------------
-----------------------------------
Donald L. Carano,
Board of Managers]
PAGE 3 OF 3
<PAGE>
FORM OF
-------
DEED OF TRUST WITH ASSIGNMENT OF RENTS
--------------------------------------
THIS DEED OF TRUST is made , 1996, between ELDORADO HOTEL
ASSOCIATES LIMITED PARTNERSHIP, a Nevada limited partnership [or ELDORADO
RESORTS, LLC], herein called "Trustor", FIRST AMERICAN TITLE COMPANY OF NEVADA,
herein called "Trustee", and DANIEL'S MOTOR LODGE, INC., a Nevada corporation,
herein called "Beneficiary".
W I T N E S S E T H:
- - - - - - - - - -
That Trustor irrevocably grants to Trustee in trust, with
power of sale, all interest of Trustor in that certain property situate in the
City of Reno, County of Washoe, State of Nevada, more particularly described on
that certain exhibit marked "Exhibit A", affixed hereto and by this reference
incorporated herein and made a part hereof.
TOGETHER WITH, the tenements, hereditaments and
appurtenances thereunto belonging or appertaining, and the reversion and
reversions, remainder and remainders, rents, issues and profits thereof,
subject, however, to the right of Beneficiary, during any period of default
hereunder, and without waiver of such default, to collect said rents, issues and
profits by any lawful means, and to apply the same, less costs and expenses of
collection, to any indebtedness secured hereby.
FOR THE PURPOSE OF SECURING: (1) Payment of the principal
sum of ________________________________________________________________________
($________________ ), according to the terms of a promissory note a of even date
herewith made by Trustor, payable to order of Beneficiary, and all extensions
and renewals thereof (the "Note"); and (2) the performance of each agreement of
Trustor incorporated herein by reference or contained herein.
AND THIS INDENTURE FURTHER WITNESSETH:
1. Trustor agrees to properly care for and keep said property in
good condition and repair; not to remove or demolish any building thereon or any
portion thereof; to complete in a good and workmanlike manner any building which
may be constructed thereon, and to pay when due all claims for labor performed
and materials furnished therefor; to comply with all laws, ordinances and
regulations relating to any
EXHIBIT C
<PAGE>
alterations or improvements made thereon; not to commit or permit any waste
thereof; not to commit, suffer or permit any act to be done in or upon said
property in violation of any law, covenant, condition or restriction affecting
said property; to cultivate, irrigate, fertilize, fumigate, prune and/or do any
other act or acts, all in a timely and proper manner, which, from the character
or use of said property, may be reasonably necessary, the specific enumerations
herein not excluding the general.
2. Trustor agrees to pay and discharge all costs, fees
and expenses of this trust incurred in connection with any default by Trustor.
3. During the continuance of this trust, Trustor
covenants to keep all buildings that may now or at any time be on said property
in good repair and insured against loss by fire, with extended coverage
endorsement, in a company or companies authorized to issue such insurance in the
State of Nevada. Said insurance shall be in such sum or sums as shall equal the
total indebtedness secured by this Deed of Trust and all obligations having
priority over this Deed of Trust, or the maximum full insurable value of such
buildings, whichever is less. Said insurance shall be payable to Beneficiary to
the amount of the unsatisfied obligation to Beneficiary hereby secured. The
policy or policies of said insurance shall be delivered to Beneficiary or to the
collection agent of Beneficiary, as further security, and in default thereof,
Beneficiary may procure such insurance and/or make such repairs, and expend for
either of such purposes such sum or sums as Beneficiary shall deem necessary.
The amount collected by Beneficiary under any fire or other insurance policy may
be applied by Beneficiary upon the indebtedness secured hereby and in such order
as Beneficiary may determine, or, at the option of Beneficiary, the entire
amount so collected, or any part thereof, may be released to Trustor. Such
application or release shall not cure or waive any default or notice of default
hereunder or invalidate any act done pursuant to such notice.
4. Trustor promises and agrees that if, during the
existence of this trust, there be commenced or pending any suit or action
affecting said property, or any part thereof, or the title thereto, or if any
adverse claim for or against said property, or any part thereof, be made or
asserted, he will appear in and defend any such matter purporting to affect the
security and will pay all costs and damages arising because of such action.
5. Any award of damages in connection with any
condemnation for public use of, or injury to said property, or
2
<PAGE>
any part thereof, is hereby assigned and shall be paid to Beneficiary, who may
apply or release such moneys received by him in the same manner and with the
same affect as herein provided for disposition of proceeds of insurance.
6. By accepting payment of any sum secured hereby after
its due date, Beneficiary does not waive its right either to require prompt
payment, when due, of all other sums so secured or to declare default, as herein
provided, for failure to so pay.
7. At any time, and from time to time, without liability
therefor and without notice to Trustor, upon written request of Beneficiary and
presentation of this Deed of Trust and the Note secured hereby for endorsement,
and without affecting the personal liability of any person for payment of the
indebtedness secured hereby or the effect of this Deed of Trust upon the
remainder of said property, Trustee may: reconvey any part of said property;
consent in writing to the making of any map or plat thereof; join in granting
any easement thereon, or join in any extension agreement or subordination
agreement in connection herewith.
8. Upon receipt of written request from Beneficiary
reciting that all sums secured hereby have been paid and upon surrender of this
Deed of Trust and the Note secured hereby to Trustee for cancellation and
retention, or such other disposition as Trustee, in its sole discretion, may
choose, and oupon payment, of its fees, the Trustee shall reconvey, without
warranty, the property then held hereunder. The recitals in such reconveyance of
any matters of fact shall be conclusive proof of the truth thereof. The Grantee
in such reconveyance may be described in general terms as "the person or persons
legally entitled thereto".
9. Should Trustor default in the payment of any
indebtedness secured hereby, or in the performance of any of the covenants and
agreements herein contained or incorporated herein by reference, Beneficiary may
declare all sums secured hereby immediately due and payable.
10. The following covenants Nos. 1, 3, 4 (interest 12%), 5,
6, 7 (counsel fees-a reasonable percentage), 8 and 9 of Nevada Revised Statutes
107.030, are hereby adopted and made a part of this Deed of Trust.
11. Trustor agrees to pay any deficiency arising from any
cause after application of the proceeds of the sale held in accordance with the
provisions of the covenants hereinabove adopted by reference.
3
<PAGE>
12. This Deed of Trust applies to, inures to the benefit
of, and binds all parties hereto, their heirs, legatees, devisees,
administrators, executors, successors, and assigns. It is expressly agreed that
the Trust created hereby is irrevocable by Trustor.
13. Trustee accepts this trust when this Deed of Trust,
duly executed and acknowledged, is made a public record as provided by law,
reserving, however, unto the Trustee, the right to resign from the duties and
obligations imposed herein whenever Trustee, in its sole discretion, deems such
resignation to be in the best interest of the Trustee. Written notice of such
resignation shall be given to Trustor and Beneficiary.
14. In this Deed of Trust, whenever the context so
requires, the masculine gender includes the feminine and/or neuter, and the
singular number includes the plural. The term "Beneficiary" includes any
future holder of the Note secured hereby. The term "Trustor" includes the term
"Grantor".
TRUSTOR:
ELDORADO HOTEL ASSOCIATES [or ELDORADO RESORTS, LLC
LIMITED PARTNERSHIP,
a Nevada limited partnership By: RECREATIONAL
ENTERPRISES, INC., a
By: RECREATIONAL Nevada corporation,
ENTERPRISES, INC., a Board of Managers
Nevada corporation,
general partner
By
---------------------------------
By Title
---------------------- ------------------------------
Title
------------------- By: HOTEL-CASINO MANAGEMENT,
INC., a Nevada
By: HOTEL-CASINO MANAGEMENT, corporation, Board of
INC., a Nevada Managers
corporation, general
partner
By
--------------------------------
By Title
---------------------- -----------------------------
Title
------------------- By:
-----------------------------------
Donald L. Carano,
Board of Managers]
4
<PAGE>
STATE OF NEVADA )
) ss
COUNTY OF WASHOE )
This instrument was acknowledged before me on _______________________,
1996, by ________________________________ as __________________________________
of/for RECREATIONAL ENTERPRISES, INC.
- ---------------------------------
Notary Public
STATE OF NEVADA )
) ss
COUNTY OF WASHOE )
This instrument was acknowledged before me on _______________________,
1996, by _________________________________ as _________________________________
of/for HOTEL-CASINO MANAGEMENT, INC.
- ----------------------------------
Notary Public
[STATE OF NEVADA )
) ss
COUNTY OF WASHOE )
This instrument was acknowledged before me on _______________________,
1996, by DONALD L. CARANO.
- ----------------------------------
Notary Public]
5
<PAGE>
FORM OF
-------
DEED
----
THIS INDENTURE, made and entered into ______________________________,
1996, by and between DANIEL'S MOTOR LODGE, INC., a Nevada corporation, party
of the first part, and ELDORADO HOTEL ASSOCIATES LIMITED PARTNERSHIP, a Nevada
limited partnership [or ELDORADO RESORTS, LLC), party of the second part, whose
address is: 345 North Virginia Street, Reno, Nevada 89501.
W_I_T_N_E_S_S_E_T_H
That the said party of the first part, in consideration of the sum of
Ten Dollars ($10.00), lawful money of the United States of America, to it in
hand paid by the said party of the second part, the receipt whereof is hereby
acknowledged, do by these presents, grant, bargain and sell unto the said party
of the second part, and to its successors and assigns forever, all of the right,
title and interest of first party in and to that certain real property situate
in the City of Reno, County of Washoe, State of Nevada, described on that
certain exhibit marked Exhibit "A", attached hereto, and by this reference made
a part hereof.
TOGETHER with the tenements, hereditaments and appurtenances thereunto
belonging or appertaining, and the reversion and reversions, remainder and
remainders, rents, issues and profits thereof.
TO HAVE AND TO HOLD the said premises, together with the appurtenances,
unto the said party of the second part, and to its successors and assigns
forever.
IN WITNESS WHEREOF the party of the first part has executed this
conveyance the day and year first hereinabove written.
DANIEL'S MOTOR LODGE, INC.,
a Nevada corporation
By
----------------------------------------
Title
-------------------------------------
EXHIBIT D
TO PURCHASE AGREEMENT
<PAGE>
STATE OF NEVADA )
) ss
COUNTY OF WASHOE )
This instrument was acknowledged before me on ___________________________,
1996, by __________________________ as ________________________________________
of/for DANIEL'S MOTOR LODGE, INC.
- ----------------------------
Notary Public
2
<PAGE>
FORM OF
-------
BILL OF SALE
------------
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, DANIEL'S MOTOR LODGE, INC., a Nevada
corporation, for and in consideration of the sum of Ten Dollars ($10.00), lawful
money of the United States of America, and other good and valuable consideration
by it received, receipt of which is hereby acknowledged, does by these presents
grant, bargain, sell and convey unto ELDORADO HOTEL ASSOCIATES LIMITED
PARTNERSHIP, a Nevada limited partnership [or ELDORADO RESORTS, LLC]
("Eldorado"), all those certain fixtures, equipment, inventory and supplies
situate in and about those certain premises known as the Daniel's Motor Lodge
which is located at 275 North Sierra Street in Reno, Nevada, which are more
particularly described on that certain exhibit marked "Exhibit A", affixed
hereto and by this reference incorporated herein and made a part hereof.
TO HAVE AND TO HOLD the same unto the said Eldorado, and to its
assigns forever, and the undersigned hereby covenants and warrants that the
undersigned owns free and clear title to the said personal property herein
described, and has the right to sell the same.
DATED: This ____ day of _________________________, 1996.
DANIEL'S MOTOR LODGE, INC.,
a Nevada corporation
By
-------------------------
Title
----------------------
EXHIBIT E
<PAGE>
STATE OF NEVADA )
) ss
COUNTY OF WASHOE )
This instrument was acknowledged before me on ____________________,
1996, by ___________________________ as _____________________________________
of/for DANIEL'S MOTOR LODGE, INC.
_______________________________
Notary Public
[LETTERHEAD OF HENDERSON
& NELSON APPEARS HERE]
<PAGE>
EXHIBIT 10.6.1
L E A S E
---------
THIS LEASE, made and entered into this 21st day of July, 1972, by and
between C, S AND Y ASSOCIATES, a general partnership, First Party, hereinafter
sometimes referred to as "Lessor", and ELDORADO HOTEL ASSOCIATES, a limited
partnership, Second Party, hereinafter sometimes referred to as "Lessee",
W I T N E S S E T H:
-------------------
1. Property Leased: Lessor hereby leases and lets unto lessee, and lessee
---------------
hereby hires and leases from lessor, subject to all of the terms, covenants and
provisions of this lease hereinafter contained, all that certain real property
situate, lying and being in the City of Reno, Washoe County, State of Nevada,
and more particularly described in Exhibit "A" attached hereto and incorporated
herein by reference and made a part hereof.
2. Term: The term of this lease shall commence on the 1st day of July,
----
1972, and terminate on the 30th day of June, 2027.
3. Rental During Term of This Lease:
--------------------------------
a) The rental for the first period of this lease, commencing August 1,
1972, and continuing during the period of construction shall be the sum of
$4,000.00 per month.
b) After the expiration of the first period of this lease and for a
period of twelve (12) months thereafter, the monthly rental shall be the
sum of $6,000.00 per month.
<PAGE>
c) For the balance of the terms of this lease the rental for said
demised premises shall be either the amount provided for in Subparagraph (i) or
Subparagraph (ii) of this paragraph whichever amount is greater.
i) A basic minimum monthly rental (hereinafter referred to in this
agreement as "basic rental") of the sum of $8,000.00 per month.
The basic rental shall be adjusted every five (5) years from and
after the _____ day of __________, 1977 during the term of this
lease in proportion that the Consumer Price Index of the Bureau
of Labor Statistics of the U.S. Department of Labor for the City
of San Francisco in the manner as set forth in Exhibit "B"
attached hereto and incorporated herein by reference.
ii) A sum equal to 3% of the gross gaming receipts for any one
calendar year during the remainder term of this lease. The gross
gaming receipts shall be defined by the rules and regulations of
the Nevada State Gaming Commission as of this date.
4. Utilities, Etc.: Also, Services, Assessments and Taxes:
-------------------------------------------------------
Lessee shall pay when due for all utility, light, water, sewer, gas, heat,
power, air conditioning, garbage and other charges, taxes and bills in
connection with the said premises herein demised, and shall pay when due all
taxes and assessments levied, assessed, or at any time becoming payable during
the term hereof, on the real property and improvements thereon subject to this
lease or in any way relating thereto, and shall hold Lessor free and clear of
any liability whatsoever in connection therewith. Lessee shall also pay all
personal property taxes in any way relating to the premises. Following the
commencement of this lease, Lessee shall pay during the term hereof all taxes
<PAGE>
assessed when the same become payable. All taxes, assessments and utilities
shall be prorated between lessor and lessee as of the date of the commencement
of this lease.
Lessee shall exhibit or deliver to Lessor, as often as Lessee is
reasonably requested so to do, the receipts showing the payment of the taxes and
other expenses mentioned hereinabove.
It is not intended by the provisions of this lease to require the Lessee
to pay any income, estate or succession taxes which may at any time during the
term of this lease be required to be paid by Lessor upon any gift, devise, deed,
mortgage, descent or other alienation of Lessor of any part of, or all of, the
leased premises or any interest therein.
7. Improvements and Repairs: It is the intention of Lessee to construct
-------------------------
new income producing improvements on the demised premises, and the nature,
extent, and use of such improvements, if made, shall be in the discretion of
Lessee. It is agreed that Lessee may construct on said premises any income
producing structure or structures. All improvements, alterations, additions,
deletions, modifications and repairs to the premises shall be at the sole cost
of Lessee and Lessee agrees to pay for all labor and materials used, and said
improvements shall be the property of Lessee during the term of this lease.
Lessee shall advise Lessor in writing of any intended improvements, alterations
additions, deletions, modifications and repairs at least thirty (30) days in
advance of commencing any work thereon. After initial construction of major
improvements, such notice shall not be required as to incidental or minor
improvements or repairs. All improvements on the premises shall, except as may
otherwise be hereafter agreed in writing by the parties, be the property of
Lessee during the term hereof, and on the termination of this lease shall
-3-
<PAGE>
become a part of the realty and the property of the Lessor. Improvements to the
premises shall not be removed therefrom, unless the same shall be rebuilt or
replaced with improvements of equal or greater value, or unless the removal
shall be for the economic betterment of the premises.
Lessee will comply at its sole expense with all requirements of public
authorities. The expense of all repairs, alterations or improvements heretofore
or hereafter ordered by any public authority relative to the leased premises
shall be the responsibility of Lessee and paid for by it. This covenant shall
apply not only to incidental repairs, alterations or improvements required by
public authorities, but also to those of substantial or structural nature. It
shall also apply to safety requirements by public authorities.
In the event of substantial improvements, alterations or construction on
the subject premises, the funds requisite for the same shall first be escrowed
with a recognized bank or lending institution or a binding contract for the
furnishing of such funds shall be entered into by Lessee with a person or
persons, individual or corporate, of sound financial responsibility.
The cost of said improvements shall be financed by a loan from a lending
institution satisfactory to lessor. This loan is to be evidenced by a promissory
note executed by lessee and secured by a first deed of trust against the leased
premises and executed by lessor. The principal, interest, and terms and
conditions of the promissory note and deed of trust shall be subject to the
prior written approval of lessor. From and after obtaining the written approval
of the lessor of the terms and conditions of said promissory note and deed of
trust, the deed of trust shall then be recorded as a first deed of trust as to
-4-
<PAGE>
the leased premises and this lease shall be subordinate to said first deed of
trust.
Prior to commencing any substantial improvements, alteration or
construction on the subject premises, lessee shall cause to be secured, relative
to the same, without cost to lessor, a payment and performance bond by the
general contractor, guaranteeing all payments incident to the cost, including
but not limited to costs and material, will be duly made, and that the
performance of such project shall be completed and in accordance with the
construction contract.
The said bond, or bonds, shall provide, standard, adequate and reasonable
protection so that the work to be none shall be completed and that there shall
be no liens against the improvements or premises. Such bond shall be secured
from a major national surety or insurance company of good standing and a copy
thereof furnished to lessor. The obligees of the bond shall include the lessee
and the lessor.
It is agreed that the form, and amount of, and the surety or insurance
company selected relative to the form, and amount of, such completion bond, or
bonds, shall first be submitted to and approved by Lessor, who shall, however,
not unreasonably withhold such approval.
8. Liens: Lessee shall not permit any liens to be filed against the said
------
premises herein demised on account of the furnishing of any labor, materials or
supplies, or for any other cause or reason for which the lien laws of Nevada
authorize the filing of a lien, but promptly shall pay for all such labor,
materials and supplies before any lien or liens are filed upon said premises, or
any part thereof. In the event liens of any kind or character are filed, then
Lessee shall promptly cause the
-5-
<PAGE>
same to be released and satisfied in full within twenty (20) days from the date
of any such filing, or shall deposit with Lessor security against the payment
thereof by Lessee, such security to be reasonably acceptable to Lessor.
9. Public Liability and Property Damage. Lessee shall save and keep
------------------------------------
Lessor free and harmless from any loss, damage, injury or claim arising from any
cause whatsoever to any person or persons or property whatsoever while in, upon
or about said premises, or the approaches adjacent thereto and from all
liability or claims for damages by reason of any injury to person or persons or
damage to or loss of property of any kind whatsoever while in, upon, or in any
way about the said premises, or upon the approaches thereto during the
continuance of this lease, including, but not limited to, the injury to persons
or damage to property by reason of snow and ice, or either, or both, being upon
the sidewalks adjacent thereto, or from any cause whatsoever, from which a cause
of action would arise; and Lessee hereby agrees to save harmless the Lessor from
all liability on account of or by reason of any such injuries or damage growing
out of the same.
10. Public Liability Insurance and Property Damage Insurance: Lessee
--------------------------------------------------------
shall carry for the protection of lessor and lessee, comprehensive general
liability insurance and property damage insurance with a company or companies to
be approved by lessor in writing in an amount of not less than
$500,000/$1,000,000 public liability and $25,000 property damage; lessor shall
not unreasonably withhold approval of the said insurance company or companies.
Lessor and lessee shall be named as insureds on all such policies.
11. Subleases, Assignment, and Sale.
-------------------------------
a) Lessee shall have the right to rent or sublease
-6-
<PAGE>
all or portions of the subject premises to persons, individual or corporate, of
sound financial responsibility. In the event of such subleasing, lessee will be
and remain primarily liable for compliance with all of the terms, covenants and
conditions of this lease.
b) Lessee may assign this lease upon the written consent of lessor,
which consent shall not be unreasonably withheld.
Provided further, however, it is understood that to finance such
improvements as may be constructed on the subject premises during this lease,
the lessee may desire to assign this lease. It is specifically agreed that to
accomplish such purpose, lessee shall have the right to make such assignment or
assignments to any financially responsible party or parties, without the
requirement of securing the written consent of lessor. This paragraph shall
apply to interim as well as take-out financing.
c) Except in the ordinary course of business necessarily or usually
involving short term written or oral subleases (such, for example, as the
renting of hotel or motel rooms), no assignment or subletting shall be made or
be valid unless, in addition to all other requirements and conditions herein
contained, the following shall be complied with:
(1) Any such assignment shall be in writing and executed by Lessee
and shall also be executed by the assignee, who shall therein and thereby assume
this lease and all agreements, terms, covenants and conditions thereof on the
part of Lessee to be performed. In the event of an assignment for
-7-
<PAGE>
security, such assignee, while holding the lease for security, need not
be obligated or required to assume the obligations of the lease, but
such assignment shall be subject to the same. As to subletting, the same
shall be effected by a written sublease which shall expressly provide
that it is subject and subordinate to all the terms and provisions of
this lease. Further, no sublessee may assign his sublease without the
written consent of the Lessee, Second Party hereunder.
(2) A duplicate original of such assignment or sublease, as the case
may be, and the assumption (when required by the terms hereof, in the
case of an assignment) in recordable form shall have been promptly
delivered to Lessor.
(3) In the event of sale or sales of all or any of improvements on
the premises, such purchaser or purchasers shall be bound by and assume
in writing all applicable terms, covenants, conditions and provisions of
this lease, including but not limited to the provision that all
improvements become the property of Lessor upon the termination of this
lease. A duplicate original of said assumption, in recordable form,
shall be promptly delivered to the Lessor.
In the event of such sale or sales, the purchaser (with the
exceptions noted in (c) hereinabove) shall not sublease without the
written consent of the Lessee, Second Party hereunder.
12. Surrender of Premises: Upon termination of this lease, either by the
----------------------
ending of the lease period or by violation of
-8-
<PAGE>
any term, condition or covenant thereof, or otherwise, Lessee shall quit and
surrender the premises and every part thereof in as good condition as the same
now is, or may be put into, except for reasonable use and wear thereof and
damage by the elements. The improvements now existent on such premises shall not
be removed or razed until such time as there shall be adequate provision,
including financing for construction on said premises, buildings or other
improvements equal to or in excess of the value of the present improvements. As
to any improvements hereinafter placed on the said premises, the same shall not
be removed or razed, except for the general economic betterment of the premises
or by the replacement thereof by other improvements of a value then equal to or
exceeding the improvements removed or razed.
13. Repairs, Improvements and Maintenance:
--------------------------------------
a) Lessor shall not be called upon to make any repairs or
improvements in or about said premises of any kind or nature
whatsoever, whether structural, nonstructural and whether inside or
outside, and without limiting the generality of the foregoing,
whether relating to the grounds, drives, sidewalks, foundations,
walls or principal structural supports of the building or interiors,
and without limiting the generality of the foregoing whether or not
required by any public authority or agency.
b) Lessee shall keep the said premises in good and first class
repair and order and in a painted (where appropriate) and sightly
condition at all times during the continuance of this lease, at its
own expense. Lessee shall be responsible for all maintenance and
repair of the demised premises, including but not
-9-
<PAGE>
limited to exterior, interior and structural maintenance and repair, and
for repair and maintenance of all equipment, furnaces, air conditioning and
all other mechanical devices, machinery and property of any sort or nature
situate in the demised premises, whether or not attached thereto, and
lessee will pay for all costs incurred in connection therewith. Lessee
shall not commit any strip or waste on said premises.
In this connection, it is understood that there are presently existing
improvements on the subject premises, and that during this lease lessee may
desire to raze the same, so that the area occupied thereby may be utilized
for other improvements to be placed thereon. Subject to the other
provisions of this lease and particularly Paragraph 7 hereinabove, the said
presently existing improvements may be altered or razed. Such may not be
done, however, prior to compliance with said provisions or prior to
escrowing or contracting for requisite funds for improvements of equal or
greater value than the existing improvements and the securing of the
requisite payment and performance bond as provided in said Paragraph 7.
Lessor shall be advised in writing of all activities relating to alteration
or razing of existing structures under this Paragraph.
14. Examination of Premises: Lessor or its agents and representatives may
-------------------------
come into and upon the premises at any reasonable time for the purpose of
examining said premises.
15. Damage: Lessor shall not be responsible in any respect, notwithstanding
-------
any other provision hereof, for any damage whatsoever, howsoever caused, to the
premises, to the
-10-
<PAGE>
goods, furnishings, fixtures, equipment, merchandise, personal property or other
belongings of Lessee, or any of its employees, agents, guests or customers, or
to any improvements made upon said premises by Lessee.
16. Bankruptcy: This lease shall not become an asset of any assignment
----------
Lessee may make for the benefit of creditors, but in the event of any such
assignment, or should Lessee become bankrupt either voluntarily or
involuntarily, or should it, on account of insolvency, be placed in the hands of
a receiver because of insolvency by order of Court, or should this lease in any
wise be transferred by operation of law to any person or persons who shall not
be subject to or obligated by the provisions of this lease. Lessor may, at its
option, terminate this lease upon fifteen (15) days' notice. In the event an
execution be levied upon the interests of Lessee in this lease, this lease may
be terminated by Lessor, unless Lessee shall cause such execution to be
satisfied or the lien thereof released prior to any sale of execution. If any of
the events set forth in this paragraph shall occur, Lessor shall promptly be
informed thereof in writing, and failure so to do shall be sufficient cause for
the cancellation of this lease by Lessor.
17. Fire and Casualty Insurance: It is agreed that in case any
---------------------------
improvements and buildings upon said premises shall be at any time damaged or
destroyed by fire or other casualty, this lease shall not thereby be terminated,
except as herein provided, any law of the State of Nevada to the contrary
notwithstanding.
Lessee shall secure and maintain in effect fire and casualty insurance
from a major national insurance company of good standing approved by lessor in
writing, such insurance to cover at all times such improvements as shall be on
the subject
-11-
<PAGE>
premises. The insurance shall be on a replacement basis of not less than 80% of
value. Lessor shall be named one of the insureds as its interest may appear. In
the event of loss or damage, lessee shall promptly and without unreasonable
delay repair, restore and rebuild at its own expense the improvements or replace
the damaged improvements with others of equal value, and shall apply all
proceeds of said insurance toward such repair, restoration, rebuilding or
replacement. The lessee shall not be required to rebuild if the loss, damage or
destruction shall be such that it is not for the economic betterment of the
premises to rebuild. However, the lessee shall in such event apply all the
insurance proceeds not used for rebuilding toward permanent improvements,
repairs or alterations of the premises, and lessee shall give written advance
notice to lessor of its intended application of such insurance proceeds if it
does not rebuild, advising as to how the proceeds are specifically intended to
be applied.
In the event of loss or damage by fire or other casualty, there shall be
not abatement of rental by reason thereof, except as herein stated in this
Paragraph 17. Provided, however, when the time for repairing, restoring or
rebuilding is necessarily extended for a period beyond nine months after the
loss, by reason of causes beyond the control of lessee, then for such period
(not to exceed one year including said nine month period) rental shall be abated
on the following basis: While the premises are untenantable during such period
due to fire or other casualty, no rental shall accrue under the terms hereof,
except that if the premises shall be partially tenantable so that a portion of
same is usable for operation by Lessee or its sub-tenants, Lessee shall pay a
reasonable prorated portion of the total rental based on the
-12-
<PAGE>
portion of the premises which is tenantable.
To the extent which may be necessary to give this paragraph 17 full
effect, the provisions of this paragraph shall, where applicable, be deemed to
control and supplant the provisions set forth elsewhere in this lease relative
to maintaining in repair and obligations to rebuild.
18. Condemnation: In the event the subject premises or any part thereof
------------
be taken for public or quasi-public use or condemned under eminent domain, the
award shall be distributed to the Lessor, Lessee and sublessees, in proportion
to the appraised value of their respective interests. Such appraisal and
determination of respective interests shall be made with due consideration of
the provisions of this lease and the rights and obligations hereunder. Such
taking shall not be deemed an eviction, nor, except as hereinafter stated, shall
it affect Lessee's obligation to pay rent.
In the event any portion of the subject premises shall be so taken, the
rent herein stipulated and payable shall be decreased in proportion to the
amount of portion of said premises as shall be so taken. Such decrease shall be
effective as of the time actual possession is taken. In the event, however, half
or more of the subject premises shall be so taken, Lessee shall have the option
to terminate this lease, as of the date of actual taking of possession, by
giving notice in writing to Lessor. Such notice shall be given at least thirty
(30) days prior to the actual taking of possession, if the same can reasonably
be done.
19. Violation of Fire Regulations: Nothing shall be done by Lessee which
-----------------------------
in any way or manner shall be a violation of the rules, regulations and
requirements of the Board of Fire Underwriters of the Pacific, or if such be not
in effect, or such violation then as should be in violation of the statutes,
ordi-
-13-
<PAGE>
nances and requirements of the State of Nevada, County of Washoe and City of
Reno.
20. Inspection of Premises: Lessee hereby asserts that it has examined
----------------------
and inspected the said premises and hereby accepts the same as the same now are
and hereby agrees that it will not make any claim or demand whatsoever upon
Lessor in relation thereto.
21. Default: Lessee shall be in default:
-------
a) If Lessee shall fail to pay any installment or payment of rent at
the time hereinabove provided for such payment, and such default
continues for a period of fifteen (15) days after written notice by
Lessor to Lessee (Lessee to have the right to cure any such claimed
default during said 15 day notice period); or,
b) If the premises become vacant or abandoned or if the premises or
interest under this lease shall be come an asset in and be transferred
or encumbered in any way by proceedings in a Court of competent
jurisdiction for reorganization, arrangement, composition, liquidation,
dissolution or similar relief, and such default aforesaid continues for
a period of thirty (30) days after written notice by Lessor to Lessee
(Lessee to have the right to cure any such claimed default during the
said 30-day notice period); or
c) If the Lessee shall fail to make any payments on any promissory
note or to perform any or all of the terms and conditions of any deed of
trust relating to the premises the subject matter of this lease, and
said default shall not have been dured within thirty-five (35) days from
and after the date or recordation and mailing of a Notice of Breach and
Election to Sell
-14-
<PAGE>
(Lessee to have the right to cure any such claimed default during said 35 day
period); or
d). If Lessee shall violate any other covenant, term or condition of this
lease, on the part of Lessee to be kept and performed, and Lessee fails to cure
the same within thirty (30) days, after written notice by Lessor to Lessee
(Lessee to have the right to cure any such claimed default during the said
30-day notice period; and Lessee to have such additional reasonable period of
time over and above said 30-day notice period in respect to any such default
which cannot reasonably be cured during said 30-day notice period).
22. Lessor's Rights Upon Default by Lessee:
---------------------------------------
a) In the event any of the aforementioned default or defaults occur and
are not cured within the prescribed period of time, Lessor may
(i) declare the lease terminated and enter and remove all persons and
property of the Lessee therefrom and Lessor shall be entitled to recover from
Lessee all damages occasioned by virtue of such a breach; or
(ii) without terminating this lease, may re-let the premises to a
tenant or tenants satisfactory to it at such rental or rentals as it may with
reasonable diligence secure, and should such rental or rentals so received be
less than that agreed to be paid by Lessee in this lease, Lessee shall pay such
deficiency to Lessor monthly together with all costs and expenses incurred by
Lessor in connection with such reletting. No re-entry or taking possession of
the premises by
-15-
<PAGE>
Lessor shall be construed as election upon its part to terminate this lease
unless written notice of such intention is given the Lessee or unless
termination is decreed by a court of competent jurisdiction.
Notwithstanding any such reletting without termination the Lessor may at
any time thereafter elect to terminate this lease for such previous breach;
or
(iii) or without terminating this lease as provided in subparagraph
(i) above or taking possession of the premises as provided in subparagraph
(ii) above Lessor is given the right and option to cure any deficiency or
default in payment or other performance by Lessee as maker of any
promissory note or trustor of any deed of trust concerning the premises the
subject matter of this lease. In the event that Lessor expends money or
otherwise incurs damages in curing any such deficiency or default, Lessee
shall forthwith become obligated to Lessor in the amount of any such
expenditures or other damages.
(iv) take possession of any and all personal property and
furnishings of Lessee located upon the premises as security for the payment
of damages sustained by Lessor due to any default or defaults .
b) The rights granted unto Lessor pursuant to the above paragraphs are
cumulative and in addition to any and all rights Lessor may have pursuant to the
laws of the State of Nevada.
c) Lessee hereby waives all rights or notice under the unlawful detainer
statutes of the State of Nevada, or any other notice provided for by law. Lessee
waives
-16-
<PAGE>
all bonds required to be posted by Lessor before the issuance of any writ of
restitution permitted by the laws of the State of Nevada. In the event of a suit
to enforce any of the terms of this lease, the prevailing party shall be
entitled to a reasonable attorney's fee to be fixed by the Court as part of the
costs.
d) Any and all subleases of all or portions of the subject premises
shall upon written notice by Lessor become payable to Lessor as security in the
event Lessee becomes in default of the rental as provided herein, until said
default of the rental be cured, subject to the terms of the deed of trust
covering the leased premises to be given by Lessor and Lessee to the First
National Bank of Nevada.
e) Any and all subleases of all or portions of the subject premises shall
upon written notice by Lessor become payable to Lessor as security in the event
Lessee as the maker of any promissory notes relating to the premises become
delinquent or in default in payment or other performance, subject to the terms
of the deed of trust covering the leased premises securing said promissory
notes.
f) The failure or delay of Lessor to insist on strict performance of any
of the covenants, agreements, stipulations or conditions of this lease, or to
exercise any option herein conferred, in any one or more instances, shall not be
construed to be a waiver or relinquishment of any such, or any other covenant
or agreements, stipulations or conditions, but the same shall be and remain in
full force and effect.
-17-
<PAGE>
23. At the expiration of the term hereof or the earlier termination of
this lease, as provided for herein, the Lessee does hereby covenant, promise and
agree that it will remove all equipment and personal property belonging to it
from the demised premises within a period of fifteen (15) days.
24. Use of Premises: Lessee may use the demised premises for any lawful
---------------
purpose during the term hereof. Lessee agrees to operate any and all types of
business conducted on said premises in full compliance with all Federal, State,
County and City laws and ordinances and in conformity with the rules and
regulations of the State, County and City Boards of Health.
25. Quiet Possession: Lessor covenants that it is seized of the demised
----------------
premises and has full right to make this lease and further that during the term
hereof Lessee shall have quiet possession thereof.
26. Licenses: Lessee shall and will apply for all licenses required to
--------
conduct the business by it maintained on the premises and to keep the same in
force, and upon the termination of this lease for any reason, agrees to assign
any and all licenses to Lessor or its successor in interest, insofar as the law
allows, it being understood that in the event of such assignment the prepaid
license fees shall and will be prorated between the parties.
27. Time: Time is of the essence in every particular set forth in this
----
lease, any law or decision of any Court of the State of Nevada to the contrary
notwithstanding.
28. Notices: All notices required to be served upon the parties shall be
-------
served by registered mail, postage prepaid. The various periods of notice
referred to herein mean such period of time counting the day of mailing as the
first day of the period
-18-
<PAGE>
Notice of change of place of service shall be given as above.
29. Security: The trust deed to the lending institution granted by lessor
--------
and lessee, securing any promissory notes in favor of said lending institution
given by makers thereof for financing to construct and to furnish any
improvements on said premises, shall not be used to secure renewals or
extensions thereof or additional loans or financing without the express consent
in writing of lessor.
30. Modification: No modification, release, discharge or waiver of any
------------
provision hereof shall be of any force, effect or value unless it is in writing
and signed by lessor and lessee.
31. Titles: Titles are used herein for convenience only and the use of
------
them does not mean that all provisions relative to a particular title are
necessarily included in any particular paragraph.
32. Parties Bound: It is hereby covenanted and agreed between the parties
-------------
hereto that all covenants, conditions, agreements, and undertakings in this
lease contained shall extend to and be binding on the heirs, executors,
administrators and assigns of lessor and the successors and assigns of lessee
the same as if they were in every case named and expressed and the same shall be
construed as covenants running with the land. Also, the terms "lessor" and
"lessee" shall be construed in the singular or plural number according as they
respectively represent one or more than one person.
IN WITNESS WHEREOF, lessor and lessee have caused this lease to be executed
and have hereunto affixed their signatures the day and year in this instrument
first written.
ELDORADO HOTEL ASSOCIATES C, S and Y ASSOCIATES
By Lessee By Lessor
[SIGNATURE APPEARS HERE] [SIGNATURE APPEARS HERE]
------------------------ ------------------------
[SIGNATURE APPEARS HERE] [SIGNATURE APPEARS HERE]
------------------------ ------------------------
[SIGNATURE APPEARS HERE] [SIGNATURE APPEARS HERE]
------------------------ ------------------------
[SIGNATURE APPEARS HERE]
------------------------
[SIGNATURE APPEARS HERE]
------------------------
-19-
<PAGE>
STATE OF NEVADA )
: ss.
County of Washoe )
On this 21st day of July, 1972, personally appeared before me, a Notary
Public, GEORGE L. SIRI, JR., GEORGE YORI, WILLIAM CARANO, RAYMOND J. PONCIA,
RICHARD STRINGHAM and DONALD L. CARANO, who acknowledged to me that they
executed the foregoing Lease on behalf of ELDORADO HOTEL ASSOCIATES.
-----------------------------
Notary Public
STATE OF NEVADA )
: ss.
County of Washoe )
On this 21st day of July, 1972, personally appeared before me, a Notary
Public, GEORGE L. SIRI, JR., GEORGE YORI, WILLIAM CARANO and DONALD L. CARANO,
who acknowledged to me that they executed the foregoing Lease on behalf of C, S
and Y ASSOCIATES.
-----------------------------
Notary Public
-20-
<PAGE>
EXHIBIT 10.6.2
ADDENDUM
THIS AGREEMENT entered into this 20th day of March, 1973, by and between
the parties hereto, constitutes an addendum to and shall become part of the
lease dated the 21st day of July, 1972, by and between C, S and Y ASSOCIATES, a
general partnership, as "Lessor" and ELDORADO HOTEL ASSOCIATES, a limited
partnership, as "Lessee".
WITNESSETH:
In consideration of the terms and conditions hereinafter stated and of her
good and valuable consideration, the receipt of which is hereby acknowledged,
the parties agree as follows:
Subparagraph (ii) (c) on page 2 shall be amended as follows:
(ii) A sum equal to 3% of the gross gaming receipts for any one calendar
year during the remainder of the term of this lease. The gross gaming
receipts shall be defined by the rules and regulations of the Nevada
State Gaming Commission as of this date. The sum equal to 3% of the
gross gaming receipts will not become effective until such time as
all the partners of this general partnership known as C, S and Y
ASSOCIATES are licensed by the State Gaming Control Board.
IN WITNESS WHEREOF, lessor and lessee have caused this Addendum to be
executed and have hereunto affixed their signatures the day and year in this
instrument first above written.
C, S and Y ASSOCIATES, ELDORADO HOTEL ASSOCIATES,
a General Partnership a Limited Partnership
[Signature Appears Here] [Signature Appears Here]
- ------------------------------- ------------------------------
[Signature Appears Here] [Signature Appears Here]
- ------------------------------- ------------------------------
[Signature Appears Here] [Signature Appears Here]
- ------------------------------- ------------------------------
[Signature Appears Here] [Signature Appears Here]
- ------------------------------- ------------------------------
[Signature Appears Here] [Signature Appears Here]
- ------------------------------- ------------------------------
<PAGE>
MEMORANDUM OF LEASE
BE IT KNOWN, that C, S and Y ASSOCIATES, a general partnership, has
pursuant to the terms and conditions of a certain written Lease dated the 21st
day of July, 1972, leased unto ELDORADO HOTEL ASSOCIATES, a limited partnership,
the hereinafter described real property.
The real property the subject matter of this Lease is located in the City
of Reno, County of Washoe, State of Nevada, and more particularly described as
follows:
Lots 5, 6, 7 and 8 in Block G of original town now City of Reno,
according to the map thereof, filed in the Office of the County Recorder
of Washoe County, State of Nevada, on June 27, 1871.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and
seals this 21st day of July, 1972.
C, S and Y ASSOCIATES, a general
partnership
/s/ Donald Louis Carano
---------------------------------------
Donald Louis Carano
/s/ William Carano
---------------------------------------
William Carano
/s/ Lena M. Carano
---------------------------------------
Lena M. Carano
/s/ George Lawrence Sirl, Jr.
---------------------------------------
George Lawrence Sirl, Jr.
/s/ Susan B. Sirl
---------------------------------------
Susan B. Sirl
/s/ George E. York
---------------------------------------
George E. York
/s/Genevieve York
---------------------------------------
Genevieve York
<PAGE>
ELDORADO HOTEL ASSOCIATES,
a limited partnership
/s/ William Carano
---------------------------------------
William Carano
/s/ Lena M. Carano
---------------------------------------
Lena M. Carano
/s/ Donald Louis Carano
---------------------------------------
Donald Louis Carano
/s/ George Lawrence Siri, Jr.
---------------------------------------
George Lawrence Siri, Jr.
/s/ Susan B. Siri
---------------------------------------
Susan B. Siri
/s/ George E. Yori
---------------------------------------
George E. Yori
/s/ Genevieve Yori
---------------------------------------
Genevieve Yori
/s/ Raymond Ponca
---------------------------------------
Raymond Ponca
STATE OF NEVADA
ss.
COUNTY OF WASHOE
On this 21st day of July, 1972, personally appeared before me, a Notary
Public, DONALD LOUIS CARANO, WILLIAM CARANO, LENA M. CARANO, GEORGE LAWRENCE
SIRI, JR., SUSAN B. SIRI, and GEORGE E. YORI and GENEVIEVE YORI, who
acknowledged to me that they executed the foregoing Memorandum of Lease for C,
S, AND Y ASSOCIATES.
[SEAL [SIGNATURE APPEARS HERE]
APPEARS ---------------------------------------
HERE] Notary Public
STATE OF NEVADA
ss.
COUNTY OF WASHOE
On this 21st day of July, 1972, personally appeared before me, a Notary
Public, WILLIAM CARANO, LENA M. CARANO, DONALD LOUIS CARANO, GEORGE LAWRENCE
SIRI, JR., SUSAN B. SIRI, GEORGE E. YORI, GENEVIEVE YORI and RAYMOND PONCIA, who
acknowledged to me that they execute the foregoing Memorandum of Lease for
ELDORADO HOTEL ASSOCIATES.
[SIGNATURE APPEARS HERE]
McDonald, Carano, Wilson [SEAL ---------------------------------------
Bergin & Bible APPEARS Notary Public
Attorney at Law HERE]
Reno, Nevada 89505
<PAGE>
EXHIBIT 10.6.3
AMENDMENT TO LEASE
------------------
THIS AMENDMENT made this 1st day of January, 1978, by and between C. S. &
Y. ASSOCIATES, a general partnership, first party, hereinafter referred to as
"Lessor", and ELDORADO HOTEL ASSOCIATES, a limited partnership, second party,
herein sometimes referred to as "Lessee"
WITNESSETH:
----------
WHEREAS, Lessor executed a certain lease of real property in the City of
Reno, County of Washoe, State of Nevada, more particularly described in Exhibit
"A" attached hereto and made a part hereof to Lessee on July 21, 1972 and as
amended on March 20, 1973; and
WHEREAS, it has been recognized by both the Lessor and Lessee that it
is to the economic advantage of both parties to expand the present facilities,
known as the Eldorado Hotel and Casino situated on the real property described
in Exhibit "A". To accomplish the proposed expansion, Eldorado Hotel Associates
have acquired adjoining property known as the Shell Property more particularly
described in Exhibit "C" attached hereto and incorporated herein by reference
and made a part hereof. The proposed expanded facility would require
substantial improvements on both parcels of real estate, and the result would be
a much larger hotel and casino that would be economically dependent on both
parcels of real property to fully realize its highest value.
THEREFORE, the Lessor and Lessee agree to amend the above mentioned lease
so that both parcels of real property, Exhibits "A" and "C", may be used jointly
to facilitate improving and expanding the Eldorado Hotel and Casino.
WITNESSETH:
-----------
1. Delete in total items 3. a), b), c) i) and II) page 1 and 2 RENTAL
DURING TERM OF LEASE and substitute the following:
MCDONALD, CARANO, WILSON, BERGIN & BIBLE
ATTORNEYS AT LAW
RENO, NEVADA 89505
<PAGE>
RENTAL DURING TERM OF LEASE:
- ---------------------------
a) The rental for the year ending December 31, 1978 shall be $11,648.00 per
month representing an annual rent of $139,776.00 or a sum equal to 3% of the
gross gaming receipts, whichever is greater, for said year. The gross gaming
receipts shall be as defined by the rules and regulations of the Nevada Gaming
Commission as of this date.
b) For the balance of the term of the lease the rental for said demised
premises shall be either the amount provided for in Subparagraph (i) or
Subparagraph (ii) of this paragraph, whichever is greater.
i) A basic monthly rental (hereinafter referred to in this agreement as
"basic rental") of the sum of $11,648.00 per month. The basic rental shall
be adjusted every five (5) years from and after June 30, 1982, during the
term of this lease to reflect changes in the Consumer Price Index of the
Bureau of Labor Statistics of the U. S. Department of Labor for the City of
San Francisco in the manner as set forth in Exhibit "B" attached hereto and
incorporated herein by reference. In no event shall the basic monthly
rental be reduced below Eight Thousand Dollars ($8,000.00).
ii) A sum equal to 3% of the gross gaming receipts on the first
$6,500,000.00 of such gross gaming receipts and 1% of the gross gaming
receipts in excess of $6,500,000.00. The gross gaming receipts shall be as
defined by the rules and regulations of the Nevada State Gaming Commission
as of this date.
c) The rental payment due in Paragraphs (a) and (b) shall be paid as follows:
i) The base rental in Subparagraph (i) above shall be payable monthly.
ii) The amount payable in Subparagraph (ii) above, if greater than the
amount payable in Subparagraph (i) for any calendar year, shall be payable
in full at the end of 90 days after the end of each calendar year or after
the Lessee's independent auditors have completed the annual examination of
the Lessee's financial statements, whichever is later.
d) The Lessee shall provide the Lessor a copy of all gaming tax reports filed
with the State of Nevada for the purposes of determining gross gaming receipts
and copies of the results of any audits of gaming receipts by representatives of
the State of Nevada. In addition, the independent auditors of the Lessee shall
provide the Lessor written confirmation after the completion of their
examination of the Lessee's financial statements for each year, that their
opinion on the financial statements was unqualified, or if their opinion was
qualified
-2-
McDONALD, CARANO, WILSON, BERGEN & BIBLE
ATTORNEYS AT LAW
RENO, NEVADA 89505
<PAGE>
in any respect related to gross gaming receipts, the independent
auditors shall provide the reasons for such qualification to the
Lessor. The Lessor may, at any time and at its own expense, obtain its
own independent audit of the gross gaming receipts provided that it
does not interfere with the conduct of normal business by the Lessee or
audits which are in progress by the State of Nevada or the Lessee's
independent auditors.
2. Delete in total item 7, pages 3, 4 and 5 IMPROVEMENTS AND REPAIRS, and
substitute the following:
IMPROVEMENTS AND REPAIRS:
------------------------
It is the intention of Lessee to construct income producing
improvements on the demised premises and adjoining properties owned by
the Lessee, and the nature, extent, and use of such improvements, if
made, shall be in the discretion of Lessee. It is agreed that Lessee
may construct on said premises income producing structure or
structures. All improvements, alterations, additions, deletions,
modifications and repairs to premises shall be the sole cost of Lessee
and Lessee agrees to pay for all labor and materials used, and said
improvements shall be the property of Lessee during the term of this
lease. All improvements on the premises shall, except as may otherwise
hereafter agree in writing by the parties, be the property of Lessee
during the term hereof, and on the termination of this lease shall
become a part of the realty and the property of the Lessor and Lessee
in accordance with the following formula:
i) All of the real property described in Exhibit "A" and "C"
approximates 42,000 square feet, without regard to the alley that
will be abandoned and the new alley that must be created, shall be
considered as one entity. Exhibit "A" consists of property measuring
140' x 200' or 28,000 square feet and Exhibit "C" consists of
property measuring 100' x 140' or 14,000 square feet. The fraction
of ownership of the real property when considered as a whole is
therefore 2/3 C. S. & Y. ASSOCIATES, Lessor, and 1/3 ELDORADO HOTEL
ASSOCIATES, Lessee.
It is, therefore, agreed that upon termination of this lease, C. S.
& Y. Associates, Lessor, shall have an undivided 2/3 interest and
Eldorado Hotel Associates, Lessee, shall have an undivided 1/3
interest in the total of all improvements then existing on the
property described in Exhibits "A" and "C" taken as whole and
considered as one entity without regard to the physical
characteristics of the improvements then existing on either piece of
property when considered separately.
Improvements to the premises shall not be removed therefrom, unless the
same shall be rebuilt or replaced with improvements of equal or greater value,
or unless the removal shall be for the
MCDONALD, CARANO, WILSON, BERGIN & BIBLE
ATTORNEYS AT LAW
RENO, NAVADA 89505
-3-
<PAGE>
economic betterment of the premises.
Lessee will comply at its sole expense with all requirements of public
authorities. The expenses of all repairs, alterations or improvements heretofore
or hereafter ordered by any public authority relative to the leased premises
shall be the responsibility of Lessee and paid for by it. This covenant shall
apply not only to incidental repairs, alterations or improvements required by
public authorities, but also to those of substantial or structural nature. It
shall also apply to safety requirements by public authorities.
In the event of substantial improvements, alterations, construction or
refinancing of existing debt on the subject premises, a binding contract for
the furnishing of such funds may be entered into by Lessee and secured by a
first mortgage or first deed of trust against the leased premises and this lease
shall be subordinate to said mortgage or deed of trust except as herein
provided. No such lien or encumbrance shall extend beyond the term of this
lease. Such subordination shall be effective automatically without any further
act of Lessor and Lessor hereby consents thereto. Lessor agrees to execute and
deliver any such first mortgage or first deed of trust or any other documents or
instruments that may be required by a lender to effectuate the subordination of
this lease.
Twenty years prior to the termination of this lease or beginning July 1,
2007, the above said automatic subordination clause shall terminate and
thereafter, any subordination of this lease will require the written approval of
the Lessor, which approval will not be unreasonably withheld. From and after
obtaining the written approval of the Lessor of the terms and conditions of any
promissory note and mortgage or deed of trust, the mortgage or deed of trust may
then be recorded as a first mortgage or first deed of trust as to the leased
premises and this lease shall then be subordinated to said first mortgage or
first deed of trust.
Prior to commencing any substantial improvements, alterations or
construction the subject premises, Lessee shall cause to be secured, relative to
the same, without cost to Lessor, a payment
MCDONALD, CARANO, WILSON, BERGIN & BIBLE
ATTORNEYS AT LAW
RENO, NEVADA 89505
-4-
<PAGE>
and performance bond by the general contractor, guaranteeing all payments
incident to the cost, including but not limited to costs and materials, will be
duly made, and that the performance of such project shall be completed and in
accordance with the construction contract.
The said bond, or bonds, shall provide, standard, adequate and
reasonable protection so that the work to be done shall be completed and that
there shall be no liens against the improvements of premises. Such bond shall be
secured from a major national surety or insurance company of good standing and
a copy thereof furnished to Lessor. The obligees of the bond shall include the
Lessee and the Lessor.
It is agreed that the form, and amount of, and the surety or insurance
company selected relative to the form, and amount of, such completion bond, or
bonds, shall first be submitted to and approved by Lessor, who shall, however,
not unreasonably withhold such approval.
IN WITNESS WHEREOF, Lessor and Lessee have caused this Amendment to
Lease to be executed and have affixed their signatures the day and year in this
instrument first written.
ELDORADO HOTEL ASSOCIATES C.S. & Y. ASSOCIATES
/s/ William Carano /s/ George L. Siri, Jr.
- ------------------------- -------------------------
William Carano George L. Siri, Jr.
/s/ Raymond J. Poncia, Jr. /s/ George Yori
- ------------------------- -------------------------
Raymond J. Poncia, Jr. George Yori
/s/ Ludwig Corrao /s/ William Carano
- ------------------------- -------------------------
Ludwig Corrao William Carano
/s/ Donald L. Carano /s/ Donald L. Carano
- ------------------------- -------------------------
Donald L. Carano Donald L. Carano
/s/ Lena M. Carano
-------------------------
Lena M. Carano
/s/ Susan B. Siri
-------------------------
Susan B. Siri
/s/ Genevieve Yori
-------------------------
Genevieve Yori
MCDONALD, CARANO, WILSON, BERGIN & BIBLE
ATTORNEYS AT LAW
RENO, NEVADA 89505
-5-
<PAGE>
The real property is located in the City of Reno,
County of Washoe, State of Nevada and more particularly
described as follows:
Lots 5, 6, 7 and 8 in Block G of original
town now City of Reno, according to the
map thereof, filed in the Office of the
County Recorder of Washoe County, State of
Nevada, on June 27, 1871.
<PAGE>
"EXHIBIT B"
ADJUSTMENT TO BASIC MONTHLY RENTAL
CONSUMER PRICE INDEX
----------------------------------
The basic monthly rental shall be increased or decreased effective the
month of July of every (5) years (the adjustment month) beginning with the month
of July, 1982 as follows:
The base for computing the adjustment is the index figure for the month
of June, 1977 (the index month) as shown in the Consumer Price Index
(CPI) for the City of San Francisco for all items based on the period
1967 equals 100 as published by the United States Department of Labor's
Bureau of Labor Statistics. The base figure for the index month is one
hundred eighty and seven tenths (180.7). The index for the adjustment
month shall be computed as a percentage of the base figure for the index
month. That percentage shall be applied to the base monthly rent of
Eleven Thousand Six Hundred Forty Eight Dollars (11,648.00) and the
resulting amount shall be the monthly rent for the period beginning
the adjustment month and continuing until the next adjustment month.
The index for the adjustment month shall be the one reported in the
United States Department of Labor's most comprehensive official index
then in use and most nearly answering the foregoing description of the
index to be used. If it is calculated from a base different that the
base period 1967 equals 100 used for the base figure above, then the
base figure used for calculating the adjustment percentage shall first
be converted under a formula supplied by the Bureau of Labor Statistics.
If the Consumer Price Index for the City of San Francisco average of all
items shall no longer be published, then another index generally
recognized as authoritative shall be substituted by the agreement of
Lessor and Lessee. If Lessor and Lessee are unable to agree within ten
(10) days after demand by either party, then the substitute index shall,
on application of either party, be selected by the Chief Office of the
San Francisco Regional Office of the Bureau of Labor Statistics or
his successor.
<PAGE>
The increase or decrease in the basic monthly rent to be computed pursuant
to the provisions of this subparagraph shall be determined as soon after
the adjustment month as is practicable, and any increased or decreased rent
accrued for the period beginning with the adjustment month to the date the
computation is finally made shall be paid by Lessee to Lessor or refunded
by Lessor to Lessee, as the case may be, not later than ten (10) days after
the computation date.
COMPUTATION EXAMPLE
If the Consumer Price Index for the month of June, 1982 is 210.7, then the
monthly rent commencing July, 1982, until and including June 30, 1987, shall be
$13,582.00 computed as follows:
210.7/180.7 equals 116.6%
116.6% of $11,648. equals $1,3582.00
<PAGE>
"EXHIBIT C"
The real property is situated in the City of Reno, County of Washoe, State
of Nevada, as follows:
Lots 3 and 4 in Block G of original town, now City of Reno, According
to the map thereof, filed in the office of the County Recorder of
Washoe County, State of Nevada, on June 27, 1871.
<PAGE>
[STREET MAP FOR EVANS NORTH ADDITION APPEARS HERE]
<PAGE>
EXHIBIT 10.6.4
AMENDMENT TO LEASE
------------------
THIS AMENDMENT is made this 31st day of January, 1985, by and between
C.S.& Y. ASSOCIATES, a general partnership (hereinafter referred to as
"Lessor"), and ELDORADO HOTEL ASSOCIATES, a limited partnership (hereinafter
referred to as "Lessee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Lessor and Lessee entered into a Lease dated July 21, 1972, for
that certain parcel of real property located in Reno, Washoe County, Nevada,
more particularly described in Exhibit "A" attached hereto and incorporated
herein by reference (hereinafter referred to as the "Demised Premises"); and
WHEREAS, said Lease has been amended by written agreements dated March 20,
1973, and January 1, 1978; and
WHEREAS, the January 1, 1978, Amendment to the Lease enabled the Eldorado
Hotel and Casino to expand to the adjoining "Shell Property" owned by Lessee
with the combined properties now constituting the existing Eldorado Hotel and
Casino (hereinafter "Existing Eldorado"); and
WHEREAS, the Lessee owns certain additional real property adjacent to and
located generally south and west of the Demised Premises (hereinafter referred
to as the "Expansion Property"); and
WHEREAS, Lessee intends to construct a hotel and casino facility on the
Expansion Property and to connect those improvements to the Existing Eldorado;
and
WHEREAS, Lessee has obtained the necessary government approvals for the
construction of the improvements
MCDONALD, CARANO, WILSON, BERGIN,
FRANKOVICH & HICKS
ATTORNEYS AT LAW
RENO, NEVADA 89505-2670
<PAGE>
on the Expansion Property; and
WHEREAS, as part of the approved project on the Expansion Property, Lessee
has obtained the abandonment of certain alleys adjoining the Demised Premises
and anticipates the future abandonment of an additional alley abutting the
Demised Premises; the description of these alleys (hereinafter referred to as
"Alley Properties") is attached hereto as Exhibit "B" and incorporated herein
by reference; and
WHEREAS, the parties hereto desire to transfer all right, title, and
interest in and to the Alley Properties to the Lessee; and
WHEREAS, in consideration thereof, the parties desire to amend the
existing Lease Agreement, as amended, between the parties.
NOW, THEREFORE, in consideration of the mutual promises, covenants, and
conditions set forth herein, the parties agree as follows:
1. Lessor agrees to, and hereby does, transfer and convey all right,
title, and interest in and to the Alley Properties described in Exhibit "B"
attached hereto and incorporated herein by reference, to Lessee. Lessor
agrees to execute any other documents, including a quitclaim deed, that may
be necessary to carry out the intent and purpose of this paragraph. Lessee
agrees to pay all costs and compensation that may be required to the City of
Reno to obtain abandonment of the Alley Properties and further agrees to pay
all costs to relocate the utilities located within the Alley Properties and
agrees to hold C. S. & Y. harmless from any and all liability or cost
associated therewith.
-2-
MCDONALD, CARANO, WILSON, BERGIN,
FRANKOVICH & HICKS
ATTORNEYS AT LAW
RENO, NEVADA 09505-2670
<PAGE>
2. Paragraph 3(a), (b), and (c) of the original Lease, together with
Paragraph 1 of the Amendment to Lease dated January 1, 1978, are hereby deleted
in their entirety and are amended and substituted as follows:
RENTAL DUPING TERM OF LEASE:
___________________________
(a) Commencing January 1, 1985, and for the balance of the term of the
Lease, the rental for the Demised Premises shall be either the amount
provided for in subparagraph (i), or subparagraph (ii) set forth below,
whichever is greater.
(i) There shall be a guaranteed minimum annual rent in the sum of
Four Hundred Thousand Dollars ($400,000) (hereinafter referred to
as "Basic Rental"). This Basic Rental shall not be subject to any
adjustment based on the Consumer Price Index or otherwise during the
remaining term of this Lease.
(ii) A sum equal to three percent (3%) of the gross gaming revenues
for the first Six Million Five Hundred Thousand Dollars
($6,500,000) of such gross gaming revenues, one percent (1%) of the
gross gaming revenues in excess of Six Million Five Hundred Thousand
Dollars ($6,500,000) up to Thirty-Five Million Dollars ($35,000,000),
and one-fourth of one percent (.25%) of gross gaming revenues in
excess of Thirty-Five Million Dollars ($35,000,000) up to Seventy-
Five Million Dollars ($75,000,000), and one-tenth of one percent
(.1%) of all gross gaming revenues in excess of Seventy-Five Million
Dollars ($75,000,000). In addition thereto, for a period of five (5)
years commencing January 1, 1985, Lessee shall pay an additional one-
fourth of one percent (.25%) of all gross gaming revenues in excess
of Thirty-Five Million Dollars ($35,000,000) up to Forty Million
Dollars ($40,000,000). Gross gaming revenue for the purposes of
this Agreement shall include all gaming revenues received by Lessee
from all gaming operations on the city block on which the Demised
Premises is located including future expansions thereon that may be
undertaken by Lessee, and the gross gaming revenue for the purposes
of this Agreement shall be computed as follows:
The total of all amounts received from gaming operations,
as winnings, less the total of all amounts paid out, from gaming
operations, as losses. In computing winnings, no revenue shall
be recognized on noncash
MCDONALD, CARANO, WILSON, BERGIN,
FRANKOVICH & HICKS -3-
ATTORNEYS AT LAW
Reno, Nevada 89505-2670
<PAGE>
promotional items, or uncollected credit play. In computing losses,
no deductions shall be allowed for noncash promotional payout or for
the provision of anticipated payouts on progressive slot machines.
Additionally, a deduction will be allowed for uncollected returned
checks which were cashed for gaming purposes.
(b) The rental payments due under paragraph (a) above shall be paid as
follows:
(i) The Basic Rental payable under subparagraph (a) (i) above shall
be payable in monthly installments in the amount of Thirty-Three
Thousand Three Hundred Thirty-Three and 33/100 Dollars ($33,333.33).
(ii) To the extent that the amount payable under subparagraph (a) (ii)
above is greater than the amount payable under subparagraph (a) (i)
for any calendar year, the difference shall be payable within ninety
(90) days after each calendar year.
(c) Lessee shall make available for inspection by Lessor's duly authorized
agent a copy of all gaming tax reports filed with the State of Nevada for
the purposes of determining gross gaming revenues and copies of the result
of any audits of the gaming revenue by representatives of the State of
Nevada. In addition, the independent auditors of the Lessee shall
provide the Lessor written confirmation after the completion of their
examination of Lessee's financial statements for each year, that their
opinion on the financial statements was unqualified, or if their opinion
was qualified in any respect related to the gross gaming revenue, the
independent auditors shall provide the reasons for such qualification
to the Lessor. The Lessor may, at any time and at its own expense,
obtain its own independent audit of the gross gaming revenue, provided
that it does not interfere with the conduct of normal business operations
by the Lessee or the audits which are in progress by the State of
Nevada or the Lessee's independent auditors.
3. Lessor shall have no right, title, and interest to any of the Expansion
Property or the Alley Properties or any improvements located thereon.
4. Lessee shall have the right to encumber the Existing Eldorado with
a first mortgage or first deed of trust for financing for purposes other
than substantial improvements, alterations or construction on the Demised
MCDONALD, CARANO, WILSON, BERGIN,
FRANKOVICH & HICKS
ATTORNEYS AT LAW
RENO, NEVADA 89505-2670
-4-
<PAGE>
Premises and the Lease of the Demised Premises shall be subordinate
to said mortgage or deed of trust; provided, however, that such
financing shall be limited in amount to eighty percent (80%) of the
fair market value of the Existing Eldorado, shall be at a prevailing
rate of interest, shall not extend beyond the term of the Lease and
shall be with a National or State Banking Institution authorized to
do business in the State of Nevada. If the parties are unable to
agree on the fair market value of the Existing Eldorado, an M.A.I.
Appraiser shall be mutually selected by the parties who shall appraise
the Existing Eldorado. The Appraiser's determination of fair market
value shall be the value for the purposes of this provision. Lessee
may enter into a binding agreement for such financing and the
subordination of this Lease shall be effective automatically without
further act of Lessor and Lessor hereby consents thereto. Lessor
agrees to execute and deliver any such first mortgage or first deed
of trust or any other documents or instruments that may be required
by a lender to effectuate the subordination of this Lease. After
July 1, 2007, the automatic subordination as set forth herein shall
terminate and thereafter any subordination of this Lease will require
the written approval of the Lessor; which approval will not be
unreasonably withheld.
5. All other terms and conditions of the Lease Agreement
dated July 21, 1972, together with amendments thereto, except as
otherwise provided herein or inconsistent with the terms and
conditions set forth herein, shall remain in full force and effect.
IN WITNESS WHEREOF, Lessor and Lessee have caused this
Amendment to Lease to be executed and have affixed their
MCDONALD, CARANO, WILSON, BERGIN
FRANKOVICH & HICKS -5-
ATTORNEYS AT LAW
RENO, NEVADA 89505-2670
<PAGE>
signatures the day and year first written above.
LESSOR: LESSEE:
C. S. & Y. ASSOCIATES ELDORADO HOTEL ASSOCIATES
By RECREATIONAL ENTERPRISES, INC.
/s/ George L. Siri, Jr.
- ------------------------------------- By /s/ Donald L. Carano
George L. Siri, Jr. ------------------------------------
Donald L. Carano
/s/ Susan B. Siri
- ------------------------------------- By HOTEL-CASINO MANAGEMENT, INC.
Susan B. Siri
/s/ George Yori By /s/ Raymond J. Poncia, Jr.
- ------------------------------------- ------------------------------------
George Yori Raymond J. Poncia, Jr.
By HOTEL-CASINO REALTY
/s/ Genevieve Yori INVESTMENTS, INC.
- -------------------------------------
Genevieve Yori
By /s/ Raymond J. Poncia, Jr.
/s/ William Carano ------------------------------------
- ------------------------------------- Raymond J. Poncia, Jr.
William Carano
/s/ Donald L. Carano
/s/ Lena M. Carano ---------------------------------------
- ------------------------------------- Donald L. Carano, Trustee
Lena M. Carano for the Carano Family Trust
/s/ Donald L. Carano
- -------------------------------------
Donald L. Carano
/s/ Donald L. Carano
- -------------------------------------
Donald L. Carano, Trustee
for the Sonja Carano Trust
/s/ Mildred Carano Lewis
- -------------------------------------
Mildred Carano Lewis
MCDONALD, CARANO, WILSON, BERGIN,
FRANKOVICH & HICKS
ATTORNEYS AT LAW
RENO, NEVADA 89505-2670
-6-
<PAGE>
STATE OF NEVADA )
: ss
COUNTY OF WASHOE )
On this 30 day of January, 1985, personally appeared before me, GEORGE
L. SIRI, JR. and SUSAN B. SIRI, husband and wife, general partners of C. S. & Y.
ASSOCIATES, a general partnership, known to me to be the persons whose names are
subscribed to the above instrument and acknowledged to me that they executed the
same.
/s/ Robert B. MacKay
-------------------------
NOTARY PUBLIC
----------------------------------------------
ROBERT B. MACKAY
(SEAL
APPEARS Notary Public - State of Nevada
HERE)
Appointment Recorded in Washoe County
MY APPOINTMENT EXPIRES SEPT. 15, 1985
----------------------------------------------
STATE OF NEVADA )
: ss
COUNTY OF WASHOE )
On this 30 day of January, 1985, personally appeared before me, GEORGE
YORI and GENEVIEVE YORI, husband and wife, general partners of C. S. & Y.
ASSOCIATES, a general partnership, known to me to be the persons whose names are
subscribed to the above instrument and acknowledged to me that they executed the
same.
/s/ Robert B. MacKay
-----------------------------
NOTARY PUBLIC
----------------------------------------------
ROBERT B. MACKAY
(SEAL
APPEARS Notary Public - State of Nevada
HERE)
Appointment Recorded in Washoe County
MY APPOINTMENT EXPIRES SEPT. 15, 1985
----------------------------------------------
MCDONALD, CARANO, WILSON, BERGIN
FRANKOVICH & HICKS
ATTORNEYS AT LAW -7-
RENO, NEVADA 89505-2670
<PAGE>
STATE OF NEVADA )
: ss
COUNTY OF WASHOE )
On this 31st day of January, 1985, personally appeared before me,
WILLIAM CARANO and LENA CARANO, husband and wife, general partners of C. S. & Y.
ASSOCIATES, a general partnership, known to me to be the persons whose names are
subscribed to the above instrument and acknowledged to me that they executed the
same.
/s/ Robert B. MacKay
-------------------------
NOTARY PUBLIC
(SEAL APPEARS HERE)
STATE OF NEVADA )
: ss
COUNTY OF WASHOE )
On this 30th day of January, 1985, personally appeared before me,
DONALD L. CARANO, a married man, general partner of C. S. & Y. ASSOCIATES, a
general partnership, known to me to be the person whose name is subscribed to
the above instrument and acknowledged to me that he executed the same.
/s/ Robert B. MacKay
-----------------------------
NOTARY PUBLIC
(SEAL APPEARS HERE)
MCDONALD, CARANO, WILSON, BERGIN,
FRANKOVICH & HICKS
ATTORNEYS AT LAW -8-
RENO, NEVADA 89505-2670
<PAGE>
STATE OF NEVADA )
: ss
COUNTY OF WASHOE )
On this 30th day of January, 1985, personally appeared before me, DONALD L.
CARANO, Trustee for the Sonja Carano Trust, general partner of C. S. & Y.
ASSOCIATES, a general partnership, known to me to be the person whose name is
subscribed to the above instrument and acknowledged to me that he executed the
same.
/s/Robert B. MacKay
----------------------------------
NOTARY PUBLIC
[SEAL OF NOTARY PUBLIC APPEARS HERE]
STATE OF NEVADA )
: ss
COUNTY OF WASHOE )
On this 31st day of January, 1985, personally appeared before me, MILDRED
CARANO LEWIS, a married woman, general partner of C. S. & Y. ASSOCIATES, a
general partnership, known to me to be the person whose name is subscribed to
the above instrument and acknowledged to me that he executed the same.
/s/Robert B. MacKay
----------------------------------
NOTARY PUBLIC
[SEAL OF NOTARY PUBLIC APPEARS HERE]
MCDONALD, CARANO, WILSON, BERGIN,
FRANKOVICH & HICKS
ATTORNEYS AT LAW
RENO, NEVADA 89505-2670
-9-
<PAGE>
STATE OF NEVADA )
: ss.
COUNTY OF WASHOE )
On this 30 day of January, 1985, personally appeared before me, DONALD L.
CARANO, President of RECREATIONAL ENTERPRISES, INC., a Nevada corporation,
general partner of ELDORADO HOTEL ASSOCIATES, a limited partnership, known to me
to be the person whose name is subscribed to the above instrument and
acknowledged to me that he executed the same.
/s/Robert B. MacKay
-----------------------------------
NOTARY PUBLIC
[SEAL OF NOTARY PUBLIC APPEARS HERE]
STATE OF NEVADA )
: ss.
COUNTY OF WASHOE )
On this 30 day of January, 1985, personally appeared before me, RAYMOND J.
PONCIA, JR., President of HOTEL-CASINO MANAGEMENT, INC., a Nevada corporation,
general partner of ELDORADO HOTEL ASSOCIATES, a limited partnership, known to me
to be the person whose name is subscribed to the above instrument and
acknowledged to me that he executed the same.
/s/Robert B. MacKay
-----------------------------------
NOTARY PUBLIC
[SEAL OF NOTARY PUBLIC APPEARS HERE]
MCDONALD, CARANO, WILSON, BERGIN,
FRANKOVICH & HICKS
ATTORNEYS AT LAW
RENO, NEVADA 89505-2670
-10-
<PAGE>
STATE OF NEVADA )
: ss.
COUNTY OF WASHOE )
On this 30th day of January, 1985, personally appeared before me, RAYMOND
J.PONCIA, JR., President of HOTEL-CASINO REALTY INVESTMENTS, INC., a Nevada
corporation, general partner of ELDORADO HOTEL ASSOCIATES, a limited
partnership, known to me to be the person whose name is subscribed to the above
instrument and acknowledged to me that he executed the same.
/s/ Robert B. MacKay
----------------------------------
NOTARY PUBLIC
(Seal-Notary Public appears here)
STATE OF NEVADA )
: ss.
COUNTY OF WASHOE )
On this 30th day of January, 1985, personally appeared before me, DONALD
L. CARANO, Trustee for The Carano Family Trust, general partner of ELDORADO
HOTEL ASSOCIATES, a limited partnership, known to me to be the person whose name
is subscribed to the above instrument and acknowledged to me that he executed
the same.
/s/ Robert B. MacKay
-----------------------------------
NOTARY PUBLIC
(Seal-Notary Public appears here)
MCDONALD, CARANO, WILSON, BERGIN,
FRANKOVICH & HICKS
ATTORNEYS AT LAW -11-
RENO, NEVADA 89505-2670
<PAGE>
Exhibit 11
DESCRIPTION
-----------
SITUATE IN THE CITY OF RENO, COUNTY OF WASHOE, STATE OF NEVADA, AS FOLLOWS:
PARCEL 1
LOT 5 in BLOCK G of ORIGINAL TOWN NOW CITY OF RENO,
ACCORDING TO THE MAP THEREOF, FILED IN THE OFFICE
OF THE COUNTY RECORDER OF WASHOE COUNTY, STATE OF
NEVADA, ON JUNE 27, 1871.
PARCEL 2
LOT 6 IN BLOCK G OF ORIGINAL TOWN NOW CITY OF RENO,
ACCORDING TO THE MAP THEREOF, FILED IN THE OFFICE
OF THE COUNTY RECORDER OF WASHOE COUNTY, STATE OF
NEVADA, ON JUNE 27, 1871.
PARCEL 3
LOT 7 in BLOCK G of ORIGINAL TOWN NOW CITY OF RENO,
ACCORDING TO THE MAP THEREOF, FILED IN THE OFFICE
OF THE COUNTY RECORDER OF WASHOE COUNTY, STATE OF
NEVADA, ON JUNE 27, 1871.
PARCEL 4
LOT 8 IN BLOCK G OF ORIGINAL TOWN NOW CITY OF RENO,
ACCORDING TO THE MAP THEREOF, FILED IN THE OFFICE
OF THE COUNTY RECORDER OF WASHOE COUNTY, STATE OF
NEVADA, ON JUNE 27, 1871.
<PAGE>
[LOGO OF TRANSWESTERN ENGINEERING CORP. APPEARS HERE]
LEGAL DESCRIPTION
PORTION ALLEY BLOCK G, RENO TOWNSITE
That certain parcel of land situate in the Northeast quarter Section 11,
T. 19.N., R. 19E., M.B.D. & M., City of Reno, Washoe County, Nevada more
particularly described as follows:
BEGINNING at the southeast corner of Lot 8, Block G of Reno Townsite as
shown on Tract Map #94, said point being the TRUE POINT OF BEGINNING;
THENCE southerly along the easterly line of said Block G S 13(DEGREES)
50' 00" E 10.00';
THENCE S 76(DEGREES) 12' 06" W 150.42';
THENCE N 13(DEGREES) 41' 52" W 130.03';
THENCE N 76(DEGREES) 12' 06" E 10.00';
THENCE S 13(DEGREES) 41' 52" E 120.03';
THENCE N 76(DEGREES) 12' 06" E 140.40' to the TRUE POINT OF BEGINNING;
The basis of bearing is the west line of Virginia Street taken as
N 13(DEGREES) 50' 00" E as shown on Survey Map #1207 filed on July 25,
1978 in the Office of the County Recorder, Washoe County, Nevada.
[REGISTERED LAND
SURVEYORS' SEAL
APPEARS HERE]
EXHIBIT B
539 Riverside Drive
Reno, Nevada 89513
(702) 329-0202
P.O. Box 50357
Reno, Nevada 89513
<PAGE>
[Street map for Eldorado Hotel & Casino appears here.]
<PAGE>
EXHIBIT 10.6.5
THIRD AMENDMENT TO LEASE
THIS THIRD AMENDMENT TO LEASE ("Third Amendment") is made and entered into
this 24th day of December, 1987, by and between C.S.&Y. ASSOCIATES, a general
partnership, hereinafter referred to as "Lessor", party of the first part, and
ELDORADO HOTEL ASSOCIATES, a Nevada limited partnership, hereinafter referred to
as "Lessee", party of the second part.
R E C I T A L S:
- - - - - - - -
WHEREAS:
A. Lessor is the owner of that certain real property situate in the City
of Reno, County of Washoe, State of Nevada, that is more particularly described
on that certain exhibit marked "Exhibit A", affixed hereto and by this reference
incorporated herein and made a part hereof (hereinafter the "CS&Y Parcel"). By
Agreement dated July 21, 1972, Lessor and Lessee did enter into a Lease
Agreement under the terms of which the CS&Y Parcel was leased by Lessor to
Lessee for a term expiring June 30, 2027 (hereinafter the "Lease"). On or about
March 20, 1973, Lessor and Lessee executed an Addendum to the Lease (hereinafter
the "Addendum").
B. Subsequent to the execution of the Lease and the Addendum, Lessee
caused to be constructed on the CS&Y Parcel a hotel and casino facility known as
the "Eldorado Hotel and Casino". Thereafter, Lessee acquired a parcel of real
property lying adjacent to the CS&Y Parcel as more particularly described on
that certain exhibit marked "Exhibit B", affixed hereto and by this reference
incorporated herein and made a part hereof (hereinafter the "Shell Property").
Lessee desired to expand the hotel/casino facility onto the Shell Property and
to make substantial improvements to both the CS&Y Parcel and the Shell Property.
By Amendment to Lease dated January 1, 1978 (hereinafter the "First Amendment"),
Lessor and Lessee amended the provisions of the Lease and Addendum concerning
the amount of rental to be paid during the term of the Lease, construction of
improvements and repairs, disposition of the CS&Y Parcel and Shell Property on
the termination of the Lease, subordination of the Lease to a first mortgage or
a first deed of trust encumbering the CS&Y Parcel and Shell Property and other
provisions as more particularly therein described.
C. Subsequent to the First Amendment, Lessee acquired additional real
property lying adjacent to the CS&Y Parcel as more particularly described on
that certain exhibit marked "Exhibit C", affixed hereto and by this reference
incorporated herein and made a part hereof (hereinafter the "Phase I Property").
Lessee desired to construct additional hotel and casino facilities on the Phase
I Property and connect such facilities to the hotel/casino facilities then
existing on the CS&Y Parcel and Shell Property (hereinafter the "Phase I
Project"). By Amendment to Lease dated January 31, 1985 (hereinafter the "Second
Amendment"), Lessor and Lessee further modified the terms of the Lease,
Addendum and First Amendment concerning
LAW OFFICES OF
HENDERSON & NELSON
164 HUBBARD WAY
SUITE B
RENO, NEVADA 89502
<PAGE>
the disposition of certain alley properties abandoned by the City of Reno, the
amount of rental to be paid by Lessee to Lessor during the term of the Lease,
and Lessee's right to cause the CS&Y Parcel to be encumbered by a first mortgage
or deed of trust securing funds borrowed by Lessee.
D. Lessee is the owner of certain real property lying between West Street
on the West, West Fourth Street on the South, and North Sierra Street on the
East, which is presently used by Lessee for additional parking for the Eldorado
Hotel and Casino (hereinafter the "Fourth Street Parking Property"). The Fourth
Street Parking Property is more particularly described on that certain exhibit
marked "Exhibit D", affixed hereto and by this reference incorporated herein and
made a part hereof. In connection with the financing procured by Lessee for the
Phase I Project, Lessee was required by the lender to encumber, for the purpose
of securing such financing, the CS&Y Parcel, the Shell Property, the Phase I
Property and the Fourth Street Parking Property.
E. Lessee has acquired fee title to all of the remaining property on the
city block upon which the CS&Y Parcel, Shell Property and Phase I Property are
situate, with the exception of the parcel of real property upon which the Talley
Ho Motel is situate for which parcel Lessee holds an option to purchase which
option Lessee intends to exercise prior to April 1, 1988. Upon the exercise of
such option, Lessee will be the owner of all of the real property (except for
the CS&Y Parcel) bounded by West Fourth Street to the North, North Virginia
Street to the East, West Plaza Street to the South, and North Sierra Street to
the West. The City block and real property therein contained so bounded by West
Fourth Street to the North, North Virginia Street to the East, West Plaza Street
to the South, and North Sierra Street to the West (including the CS&Y Parcel),
shall hereinafter collectively be referred to as the "Eldorado Block Property".
F. Lessee also owns that certain parcel of real property lying across
North Sierra Street from the Eldorado Block Property that is more particularly
described on that certain exhibit marked "Exhibit E", affixed hereto and by this
reference incorporated herein and made a part hereof (hereinafter the
"Petricciani Property").
G. Lessee presently plans a further expansion of the Eldorado Hotel and
Casino on the Eldorado Block Property (hereinafter the "Phase II Project") which
is presently intended to consist generally of, subject to further modification:
(i) two subterranean levels of parking, (ii) additional casino space and new
motor entrance on the ground floor, (iii) two additional restaurants, cocktail
lounge, kitchen and support facilities, new registration desk and lobby, and
expansion of the convention facilities on the second floor, (iv) food and
beverage storage, additional kitchen and housekeeping support facilities, and
employee dining, kitchen and lounge on the third floor, and (v) twenty-one (21)
additional stories which will contain approximately 400 additional guest rooms
and support facilities. The date upon which the City of Reno issues the
permanent Certificate of Occupancy for the use and occupancy
-2-
LAW OFFICES OF
HENDERSON & NELSON
164 HUBBARD WAY
SUITE A
RENO, NEVADA
<PAGE>
of the Phase II Project by Lessee and the public shall hereinafter be referred
to as the "Phase II C of O Date".
H. Lessee also anticipates constructing a parking garage on the
Petricciani Property sometime in the future for the purpose of providing
additional parking for the hotel/casino facility (hereinafter the "Parking
Garage"). Upon the completion of the Parking Garage, Lessee intends to cause
the Fourth Street Parking Property to be released from the deed of trust or
other security instruments securing repayment of the financing for the Phase I
Project or, if then applicable, securing repayment of the financing for the
Phase II Project.
I. Throughout the term of the Lease thus far elapsed, the continual
expansions of the Eldorado Hotel and Casino have required amendments concerning
the rental which will be paid to Lessor and the terms upon which the Lessee is
entitled to encumber the CS&Y Parcel. These modifications to the Lease are
evidenced by the First Amendment and Second Amendment. It is Lessor's and
Lessee's intention to enter into this Third Amendment to Lease for the purpose
of amending the Lease in a manner that will provide the basis upon which Lessee
can pursue future expansions and other business endeavors including, but not
limited to, financing and constructing the Phase II Project and the Parking
Garage. It is the intention of Lessor and Lessee that the provisions contained
in this Third Amendment to Lease shall exclusively set forth the terms upon
which Lessee may require the Lessor to encumber the CS&Y Parcel to secure loans
and financing made by Lessee, and the additional consideration which will be
paid to Lessor in the form of rental payments and, under certain circumstances
as hereinafter set forth, a Subordination Fee for the subordination of the
Lessor's position to such loans and financing.
NOW, THEREFORE, in consideration of the foregoing, and the other
considerations hereinafter set forth in this Third Amendment, Lessor and Lessee
do hereby agree as follows:
1. The rental to be paid by Lessee to Lessor for the CS&Y Parcel shall be
paid in the amounts and at the times set forth in paragraph 2 of the Second
Amendment until the Phase II C of O Date. Commencing on the Phase II C of O
Date, the following provision shall control the amount of rental to be paid
which provision shall supersede the provisions concerning rental during the term
of the Lease as contained in paragraphs 3(a), (b), and (c) of the Lease,
paragraph 1 of the First Amendment and paragraph 2 of the Second Amendment.
RENTAL DURING TERM OF LEASE:
---------------------------
(a) Commencing on the Phase II C of O Date, and for the balance of the
term of the Lease, the rental for the CS&Y Parcel shall be either the
amount provided for in subparagraph (i), or subparagraph (ii) set forth
below, whichever is greater.
-3-
LAW OFFICES OF
HENDERSON & NELSON
164 HUBBARD WAY
SUITE 8
RENO, NEVADA 89505-2670
<PAGE>
(i) There shall be a guaranteed minimum annual rent in the sum of Four
Hundred Thousand Dollars ($400,000) (hereinafter referred to as "Basic
Rental"). This Basic Rental shall not be subject to any adjustment based
on the Consumer Price Index or otherwise during the remaining term of
this Lease.
(ii) A sum equal to three percent (3%) of the Gross Gaming Revenues for
the first Six Million, Five Hundred Thousand Dollars ($6,500,000) of
such Gross Gaming Revenues, one percent (1%) of the Gross Gaming
Revenues in excess of Six Million Five Hundred Thousand Dollars
($6,500,000), up to Thirty-five Million Dollars ($35,000,000),and one-
half of one percent (.50%) of Gross Gaming Revenues in excess of Thirty-
five Million Dollars ($35,000,000), up to Fifty Million Dollars
($50,000,000), and one-forth of one percent (.25%) of Gross Gaming
Revenues in excess of Fifty Million Dollars ($50,000,000) up to Seventy-
five Million Dollars ($75,000,000), and one-tenth of one percent (.1%)
of all Gross Gaming Revenues in excess of Seventy-five Million Dollars
($75,000,000). In addition to the foregoing, for a period of five (5)
years commencing January 1, 1985, Lessee shall pay an additional one-
fourth of one percent (.25%) of all Gross Gaming Revenues in excess of
Thirty-five Million Dollars ($35,000,000) up to Forty Million Dollars
($40,000,000). "Gross Gaming Revenues" shall be defined as all gaming
revenues received by Lessee from all gaming operations on the Eldorado
Block Property including future expansions thereon that may be
undertaken by Lessee, but shall not include, for example, any gaming
revenues realized by Lessee from the Fourth Street Parking Property or
any other gaming activities conducted by Lessee on any location other
than the Eldorado Block Property. Gross Gaming Revenues for the purposes
of this Third Amendment shall be computed as follows:
The total of all amounts received from gaming operations on the
Eldorado Block Property, as winnings, less the total of all amounts paid
out, from gaming operations on the Eldorado Block Property, as losses.
In computing winnings, no revenue shall be recognized on non-cash
promotional items, or uncollected credit play. In computing losses, no
deductions shall be allowed
-4-
LAW OFFICES OF
HENDERSON & NELSON
164 HUBBARD WAY
SUITE B
RENO, NEVADA 89502
<PAGE>
for non-cash promotional payout or for the provision of
anticipated payouts on progressive slot machines. Additionally, a
deduction will be allowed for uncollected returned checks which
were cashed for gaming purposes.
(b) The rental payments due under paragraph (a) above shall be paid as
follows:
(i) The Basic Rental payable under subparagraph (a)(i) shall be
payable in monthly instalments in the amount of Thirty-Three
Thousand Three Hundred Thirty Three and 33/100 Dollars
($33,333.33).
(ii) To the extent that the amount payable under subparagraph (a)
(ii) above is greater than the amount payable under subparagraph
(a)(i) for any calendar year, the difference shall be payable
within ninety (90) days after the end of each calendar year.
(c) Lessee shall make available for inspection by Lessor's duly
authorized agent a copy of all gaming tax reports filed with the State
of Nevada for the purposes of determining Gross Gaming Revenues and
copies of the result of any audits of the gaming revenue by
representatives of the State of Nevada. In addition, the independent
auditors of the Lessee shall provide the Lessor written confirmation
after the completion of their examination of Lessee's financial
statements for each year, that their opinion on the financial statements
was unqualified, or if their opinion was qualified in any respect
related to the Gross Gaming Revenues, the independent auditors shall
provide the reasons for such qualification to the Lessor. The Lessor
may, at any time and at its own expense, obtain its own independent
audit of the Gross Gaming Revenues, provided that it does not interfere
with the conduct of normal business operations by the Lessee or the
audits which are in progress by the State of Nevada or the Lessee's
independent auditors.
2. Paragraph 7 entitled "Improvements and Repairs" on pages 3, 4 and 5, and
paragraph 29 entitled "Security" on page 19 of the Lease, paragraph 2 on pages
3, 4, and 5 of the First Amendment, and paragraph 4 on pages 4 and 5 of the
Second Amendment are hereby deleted in their entirety and the following
provisions shall fully amend, supersede and be substituted for such provisions:
IMPROVEMENTS, REPAIRS, SECURITY AND SUBORDINATION:
-------------------------------------------------
It is the intention of Lessee to construct the Phase II Project and
other income
-5-
LAW OFFICES OF
HENDERSON & NELSON
164 HUBBARD WAY
SUITE 8
<PAGE>
producing improvements on the Eldorado Block Property, and the nature, extent
and use of such improvements, if made, shall be in the discretion of Lessee. All
improvements, alterations, additions, deletions, modifications and repairs to
the Eldorado Block Property shall be at the sole cost of Lessee and Lessee
agrees to pay for all labor and materials used, and said improvements shall be
the property of Lessee during the term of the Lease. All improvements on the
Eldorado Block Property shall be the property of Lessee during the term of the
Lease. On termination of the Lease, Lessor shall have an undivided two-thirds
(2/3) interest and Lessee shall have an undivided one-third (1/3) interest in
the total of all improvements then existing on the CS&Y Parcel and Shell
Property taken as a whole and considered as one entity without regard to the
physical characteristics of the improvements then existing on either the CS&Y
Parcel or the Shell Property when considered separately. Lessor shall have no
right, title or interest to any of the Eldorado Block Property (except for the
CS&Y Parcel) other than the right to receive rentals as provided in paragraph 1
hereinabove during the term of the Lease and upon termination of the Lease shall
have no right, title or interest in any of the Eldorado Block Property except
for the CS&Y Parcel and the Shell Property as provided hereinabove.
Improvements to the CS&Y Parcel shall not be removed therefrom, unless the same
shall be rebuilt or replaced with improvements of equal or greater value, or
unless the removal shall be for the economic betterment of the Eldorado Hotel
and Casino facility.
Lessee will comply at its sole expense with all requirements of public
authorities. The expenses of all repairs, alterations or improvements heretofore
or hereafter ordered by any public authority relative to the Eldorado Block
Property shall be the responsibility of Lessee and paid for by it. This covenant
shall apply not only to incidental repairs, alterations or improvements required
by public authorities, but also to those of substantial or structural nature.
It shall also apply to safety requirements by public authorities.
Lessee shall have the right to secure a loan or loans, from time to time during
the term of this Lease, by a first mortgage or first deed of trust encumbering
the Eldorado Block Property and such other property or properties owned by
Lessee which Lessee may elect, in its discretion, to so encumber. Such loan or
loans may be for any purpose in
-6-
LAW OFFICES OF
HENDERSON & NELSON
164 HUBBARD WAY
SUITE A
RENO, NEVADO 89502
<PAGE>
the sole and absolute discretion of Lessee and need not be for the
purpose of making improvements, alterations or construction on
the CS&Y Parcel or any other portion of the Eldorado Block
Property. This Lease and the CS&Y Parcel and the Shell Property
shall be automatically subordinated to such first mortgage or
first deed of trust without any further act of Lessor and Lessor
hereby consents thereto so long as the aggregate principal amount
secured by such first mortgage or first deed of trust does not
exceed the principal sum of Fifty Million Dollars ($50,000,000).
Lessee shall further have the right to secure a loan or loans,
from time to time during the term of this Lease, with an aggregate
principal amount in excess of Fifty Million Dollars ($50,000,000),
secured by a first mortgage or first deed of trust encumbering the
Eldorado Block Property and such other property or properties
owned by Lessee which Lessee may elect, in its discretion, to so
encumber and the CS&Y Parcel and the Shell Property shall be
automatically subordinated to such first mortgage or first deed of
trust without any further act of Lessor and Lessor hereby consents
thereto on the following terms and conditions:
(a) That Lessee shall have commenced or is about to
commence construction of the Phase II Project.
(b) That the aggregate principal amount to which the Lease
is subordinated as provided hereinabove be limited to
Seventy-Five Million Dollars ($75,000,000) or sixty percent
(60%) of the Fair Market Value of the Eldorado Block
Property, together with any other property or properties
which Lessee in its sole discretion encumbers as additional
security for the loan or loans, whichever is greater. "Fair
Market Value" as used herein shall mean the value which is
agreed upon by Lessor and Lessee as being the Fair Market
Value of the Eldorado Block Property, together with such
other property or properties which Lessee may encumber as
additional security for the loan or loans. If Lessor and
Lessee are unable to agree on the Fair Market Value, an
M.A.I. designated appraiser shall be mutually selected by
Lessor and Lessee who shall appraise the Eldorado Block
Property together with such other property or properties
to be encumbered by Lessee as additional collateral for
such financing. The M.A.I. appraiser's determination of
Fair Market Value shall be based upon the income method,
market
-7-
LAW OFFICES OF
HENDERSON & NELSON
164 HUBBARD WAY
SUITE B
RENO, NV 89502
<PAGE>
approach or replacement value, whichever is higher, and such
determination shall be deemed the Fair Market Value for the
purposes of this provision and shall be binding upon Lessor
and Lessee.
(c) To the extent by which the financing to which the CS&Y
Parcel and Shell Property is subordinated exceeds the
principal sum of $50,000,000, Lessee shall pay to Lessor,
in addition to the rental set forth in paragraph 1 herein-
above, an annual subordination fee ("Subordination Fee") to
be determined and paid as follows:
Commencing on the Phase II C of O Date, Three Thousand,
Five Hundred Dollars ($3,500) per annum, or prorata propor-
tion thereof if for less than a full calendar year, shall be
paid for each One Million Dollars ($1,000,000), or prorata
proportion thereof (rounded to the nearest thousandth), by
which the outstanding balance of the principal owing on such
financing exceeds $50,000,000, which Subordination Fee shall
be payable quarterly, in arrears, based on the daily average
of the unpaid principal balance (rounded to the nearest
thousandth) outstanding on such financing in excess of
$50,000,000 during the preceding calendar quarterly period.
Lessor agrees to execute and deliver any such first mortgage or
first deed of trust or any other documents or instruments that may
be required by a lender to effectuate the subordination of this
Lease and the encumbrance of the CS&Y Parcel and the Shell
Property as provided hereinabove. Such financing shall be at a
prevailing rate of interest, shall not extend beyond the term of
the Lease and shall be with a financial institution authorized to
do business in the State of Nevada or a group of recognized
financial institutions for which a financial institution
authorized to do business in the State of Nevada is acting as
lead bank or agent bank for the purpose of providing funds for
such financing. After July 1, 2007, the automatic subordination
as set forth hereinabove shall continue so long as the repayment
schedule of such financing is based upon an amortization which
will cause such financing to be fully paid by the expiration date
of the term of this Lease. All other subordinations, other than as
provided in this Third Amendment, will require the written
approval of Lessor.
-8-
LAW OFFICES OF
HENDERSON & NELSON
104 HUBBARD WAY
SUITE H
RENO, NEVADA
<PAGE>
3. Lessor consents that at such time as the Parking Garage is
constructed on the Petricciani Property that Lessee may procure the release of
the Fourth Street Parking Property from any first mortgage or first deed of
trust or other security documents that may also encumber the Eldorado Block
Property.
4. All other terms and conditions of the Lease, Addendum, First
Amendment and Second Amendment, except as otherwise provided herein or
inconsistent with the terms and conditions set forth herein, shall remain in
full force and effect.
IN WITNESS WHEREOF, Lessor and Lessee have caused this Third Amendment
to be executed as of the day and year first above written.
LESSOR: LESSEE:
C.S.&Y. ASSOCIATES, ELDORADO HOTEL ASSOCIATES
/s/ George L. Siri, Jr. By: Recreational Enterprises,
- ------------------------------ Inc., a Nevada
George L. Siri, Jr. corporation,
/s/ Susan B. Siri By /s/ Donald L. Carano
- ------------------------------ ---------------------------
Susan B. Siri Donald L. Carano
/s/ George Yori By: Hotel-Casino Management,
- ------------------------------ Inc., a Nevada
George Yori corporation
/s/ Genevieve Yori By /s/ Raymond J. Poncia, Jr.
- ------------------------------ ---------------------------
Genevieve Yori Raymond J. Poncia, Jr.
/s/ Lena M. Carano
- ------------------------------
Lena M. Carano, Executrix
of the Estate of William Carano
/s/ Lena M. Carano
- ------------------------------
Lena M. Carano
/s/ Donald L. Carano
- ------------------------------
Donald L. Carano
/s/ Donald L. Carano
- ------------------------------
Donald L. Carano, Trustee
for the Sonja Carano Trust
/s/ Mildred Carano Lewis
- ------------------------------
Mildred Carano Lewis
LAW OFFICES OF
HENDERSON & NELSON
164 HUBBARD WAY
SUITE A
RENO, NEVADA
-9-
<PAGE>
STATE OF NEVADA )
) SS
County of Washoe )
On this 5th day of January, 1988, personally appeared before me, a
Notary Public, GEORGE L. SIRI, JR., known to me to be the person described
in and who acknowledged that he executed the foregoing instrument.
/s/ Christine L. Gerwin
---------------------------
Notary Public
[SEAL OF NOTARY PUBLIC APPEARS HERE]
STATE OF NEVADA )
)SS
County of Washoe )
On this 5th day of January, 1988, personally appeared before me, a
Notary Public, SUSAN B. SIRI, known to me to be the person described in and
who acknowledged that she executed the foregoing instrument.
/s/ Christine L. Gerwin
---------------------------
Notary Public
[SEAL OF NOTARY PUBLIC APPEARS HERE]
STATE OF NEVADA )
)SS
County of Washoe )
On this 5th day of January, 1988, personally appeared before me, a
Notary Public, GEORGE YORI, known to me to be the person described in and
who acknowledged that she executed the foregoing instrument.
/s/ Robert B. MacKay
---------------------------
Notary Public
[SEAL OF NOTARY PUBLIC APPEARS HERE]
STATE OF NEVADA )
)SS
County of Washoe )
On this 5th day of January, 1988, personally appeared before me, a
Notary Public, GENEVIEVE YORI, known to me to be the person described in and
who acknowledged that she executed the foregoing instrument.
/s/ Robert B. MacKay
---------------------------
Notary Public
[SEAL OF NOTARY PUBLIC APPEARS HERE]
-10-
LAW OFFICES OF
HENDERSON & NELSON
164 HUBBARD WAY
SUITE A
RENO, NEVADA
<PAGE>
STATE OF NEVADA )
)ss
County of Washoe )
On this 28th day of December, 1987, personally appeared before me, a
---- --------
Notary Public, LENA M. CARANO, known to me to be the person described in and who
acknowledged that she executed the foregoing instrument.
/s/ Robert B. MacKay
------------------------------------
Notary Public
[NOTARY PUBLIC SEAL APPEARS HERE]
STATE OF NEVADA )
)ss
County of Washoe )
On this 24th day of December, 1987, personally appeared before me, a
---- --------
Notary Public, DONALD L. CARANO, known to me to be the person described in and
who acknowledged that he executed the foregoing instrument.
/s/ Robert B. MacKay
------------------------------------
Notary Public
[NOTARY PUBLIC SEAL APPEARS HERE]
STATE OF CALIFORNIA )
)ss
County of Cortra Costa )
On this 11th day of January, 1988, personally appeared before me, a
---- -------
Notary Public, MILDRED CARANO LEWIS, known to me to be the person described in
and who acknowledged that she executed the foregoing instrument.
[NOTARY PUBLIC SEAL APPEARS HERE] /s/ Eleanor M. Sinton
------------------------------------
Notary Public
STATE OF )
)ss
County of )
On this 18th day of January, 1988, personally appeared before me, a
---- -------
Notary Public, RAYMOND J. PONCIA, JR., known to me to be the person described in
and who acknowledged that he executed the foregoing instrument.
[NOTARY PUBLIC SEAL APPEARS HERE] /s/ E. Kay Vierra
------------------------------------
Notary Public
LAW OFFICES OF
HENDERSON & NELSON
164 HUBBARD WAY
SUITE A
RENO, NEVADA
-11-
<PAGE>
EXHIBIT 10.7
1994 PERFORMANCE AND APPRECIATION RIGHTS PLAN
<PAGE>
TABLE OF CONTENTS
ARTICLE I
Identification of the Plan................................................ 1
ARTICLE II
Definitions............................................................... 1
ARTICLE III
Administration of the Plan................................................ 3
ARTICLE IV
Participation............................................................. 3
ARTICLE V
Performance Right and Appreciation Right Grants........................... 4
5.1 Power to Grant Performance and/or Appreciation Rights............ 4
5.2 Cessation of Performance Right................................... 4
5.3 Appreciation Right Valuation..................................... 4
5.4 Vesting.......................................................... 4
5.5 Mandatory Exercise............................................... 5
ARTICLE VI
General Provisions........................................................ 5
6.1 Written Agreement................................................ 5
6.2 Limitations on Exercise and Transferability...................... 5
6.3 Exercise Procedure............................................... 6
6.4 Payment.......................................................... 6
6.5 Withholding of Taxes............................................. 7
6.6 Subdivision or Combination of Partnership Units.................. 7
6.7 Rights of Key Employees.......................................... 7
6.8 Amendment, Suspension and Termination of this Plan............... 7
6.9 Amendment, Modification and Cancellation of Performance
and/or Appreciation Rights....................................... 7
6.10 Indemnification.................................................. 8
ELDORADO HOTEL ASSOCIATES LIMITED PARTNERSHIP
EXHIBIT A
ELDORADO HOTEL ASSOCIATES LIMITED PARTNERSHIP
i
<PAGE>
ELDORADO HOTEL ASSOCIATES LIMITED PARTNERSHIP
1995 PERFORMANCE AND APPRECIATION RIGHTS PLAN
ARTICLE I
IDENTIFICATION OF THE PLAN
--------------------------
This plan was adopted by the general partners of Eldorado Hotel Associates
Limited Partnership (the "Company") effective for the fiscal year commencing
January 1, 1995, and shall be known as the Eldorado Performance and
Appreciation Rights Plan (the "Plan"). The purpose of this Plan is (i) to
advance the best interests of the Company by providing certain executives and
other key employees of the Company who have a substantial responsibility for its
management and growth with significant additional incentives and rewards to
promote the financial success of the Company and (ii) to provide incentives and
rewards which may be used to induce and attract able persons to enter into, or
remain in, the employ of the Company, its Affiliates, its divisions and/or its
related ventures. Donald L. Carano, the senior executive officer of the
Company, has elected not to participate in the Plan in order to have the full
benefits of the Plan enjoyed by the key executives who are now primarily
responsible for the success of the Company. The adoption and implementation of
----------------------------------
this Plan and the granting of any Performance and/or Appreciation Rights (as
- ----------------------------------------------------------------------------
defined below) hereunder are subject to the Nevada Gaming Commission's approval
- -------------------------------------------------------------------------------
and/or State Gaming Control Board as may be necessary to comply with the Nevada
- -------------------------------------------------------------------------------
Gaming Control Act and the regulations promulgated thereunder.
- -------------------------------------------------------------
ARTICLE II
DEFINITIONS
-----------
For purposes of this Plan, the following terms shall have the meanings set
forth below:
"Affiliate" shall mean an affiliate of the Company and includes
----------
Recreational Enterprises, Inc., a Nevada corporation; Hotel-Casino Management,
Inc., a Nevada corporation; Eldorado; Eldorado LLC; Project "C"; and any
consolidated or unconsolidated entity affiliated with the Company.
"Appreciation Right" shall mean the right, upon exercise, to receive the
-------------------
excess of the value of .00001 Partnership Unit as of the date of exercise (the
"Exercise Price" as denominated below) over the value of .00001 Partnership Unit
(subject to adjustment as provided in Section 6.6 below) as of the Grant Date
(the "Base Price"). The difference between the Exercise Price and the Base
Price under an Appreciation Right shall be referred to as the "Appreciation
Amount."
<PAGE>
"Code" shall mean the Internal Revenue Code of 1986, as amended, and any
----
successor statute.
"Committee" shall mean a committee of consisting of Donald L. Carano and
---------
two (2) other individuals selected by the general partners of the Company to
administer the Plan.
"Company" shall mean Eldorado Hotel & Associates Limited Partnership, a
-------
Nevada limited partnership.
"Consolidated Net Operating Income" shall mean, for any period, the net
---------------------------------
operating income (or loss) of the Company on a consolidated basis for such
period determined in accordance with generally accepted accounting principles,
consistently applied; provided that in determining Consolidated Net Operating
Income hereunder, on gains and losses from the sale or other disposition of
assets outside of the ordinary course of business, extraordinary items, and the
portion of the Performance and/or Appreciation Rights reflected as an expense on
the Company's consolidated income statement for such period (all as determined
in accordance with generally accepted accounting principles, consistently
applied) shall be excluded (to the extent otherwise included therein).
"Eldorado" shall mean Eldorado Hotel & Casino, a division of the Company.
--------
"Eldorado LLC" shall mean Eldorado Limited Liability Company, a Nevada
-------------
limited liability company. The Company owns 89.74% percent of Eldorado LLC.
"Funded Indebtedness" shall mean indebtedness for borrowed money having a
-------------------
maturity date of more than one year from the date of determination (including
the current portion thereof); provided that Funded Indebtedness shall not
include the aggregate principal amount of any junior subordinated non-negotiable
non-recourse promissory notes issued to any key employees pursuant to Section
6.4 below.
"Independent Third Party" shall mean any person who, immediately prior to
-----------------------
the contemplated transaction, does not own in the aggregate in excess of 5% of
the Company's Partnership Units (a "5% Owner"), who is not controlling,
controlled by or under common control with any such 5% Owner and who is not the
spouse or descendent (by birth or adoption) of any such 5% Owner and/or such
other persons.
"Partnership Units" shall mean the Company's Partnership Units of which
-----------------
there are a total of one hundred (100) units currently issued and outstanding.
"Performance Right" shall mean the right upon exercise, to receive between
-----------------
the Grant Date and the Exercise Date an amount equal to the total distributions
to the partners of the Company for the prior fiscal quarter of the Company
divided by 10,000,000. The amount distributable by the Company under a
Performance Right shall be referred to as the "Performance Amount."
2
<PAGE>
"Project C" shall mean the joint venture between Eldorado L.L.C. and a
----------
subsidiary of Circus Circus Enterprises, Inc.
"Public Offering" shall mean the sale of equity securities of the Company
---------------
in an underwritten public offering registered under the Securities Act of 1933,
as amended.
"Sale of the Company" shall mean the sale of the Company or Eldorado to an
-------------------
Independent Third Party or group of Independent Third Parties pursuant to which
such party or parties acquire (a) Partnership Units of the Company or Eldorado
possessing the voting power under normal circumstances to elect a majority of
the Company's or Eldorado's capital stock, or (b) all or substantially all of
the Company's or Eldorado's assets determined on a consolidated basis.
ARTICLE III
ADMINISTRATION OF THE PLAN
--------------------------
This Plan shall be administered by the Committee. Subject to the
limitations of this Plan and any key employee's PAR Agreement (as defined
below), the Committee shall have the sole and complete authority to: (i) select
key employees (as defined below), (ii) grant Performance and/or Appreciation
Rights in such forms and amounts as it shall determine, (iii) impose such
limitations, restrictions and conditions upon such Performance and/or
Appreciation Rights as it shall deem appropriate, (iv) interpret this Plan and
adopt, amend and rescind administrative guidelines and other rules and
regulations relating to this Plan, (v) correct any defect or omission or
reconcile any inconsistency in this Plan or in any Performance and/or
Appreciation Right granted hereunder and (vi) make all other determinations and
take all other actions necessary or advisable for the implementation and
administration of this Plan. The Committee's determinations on matters within
its authority shall be conclusive and binding upon the key employees, the
Company and all other persons. All expenses associated with the administration
of this Plan shall be borne by the Company. Except as set forth hereunder, the
Company or an Affiliate of the Company has no duty or obligation to fund or
secure the benefits payable to key employee's hereunder.
ARTICLE IV
PARTICIPATION
-------------
A person shall be eligible to be granted Performance and/or Appreciation
Rights under this Plan only if on the proposed Grant Date (as defined in Section
5.1 of this Plan) for such Performance and/or Appreciation Rights, such person
is an executive or other key employee of the Company or an Affiliate of the
Company as determined by the Committee. Such persons shall be known as "key
employees" for the purposes of this Plan.
3
<PAGE>
ARTICLE V
PERFORMANCE RIGHT AND APPRECIATION RIGHT GRANTS
-----------------------------------------------
5.1 Power to Grant Performance and/or Appreciation Rights. The Committee
-----------------------------------------------------
shall have the right and the power to grant at any time to any key employee
performance and/or appreciation rights ("Performance and/or Appreciation
Rights"). The maximum number of Performance Rights which may be granted
hereunder shall not exceed 1,000,000 in any event. The maximum number of
Appreciation Rights which may be granted hereunder shall not exceed 1,000,000 in
any event. The combination of one Performance Right and one Appreciation Right
is intended to represent the economic equivalent of ownership of .00001
percentage of one Partnership Unit; provided, however, that Performance and/or
Appreciation Rights will not entitle the holders thereof to any rights in, or to
own or control any, Partnership Units. The date on which any Performance and/or
Appreciation Rights are granted to any key employee shall be the "Grant Date"
with respect to such Performance and/or Appreciation Rights.
5.2 Cessation of Performance Right. Upon the key employee's exercise of
------------------------------
the Appreciation Right or termination/cessation of the key employee's
employment, the key employee shall have no further right to exercise or receive
any benefit from any Performance Right granted to such employee thereafter.
5.3 Appreciation Right Valuation. The Base Price for each Appreciation
----------------------------
Right shall be $__________________ (subject to adjustment as provided in Section
6.6 below). The Exercise Price for each Appreciation Right , as of any date
shall equal (i) (A) the product of 8.0 multiplied by the sum of the Company's
Consolidated Operating Net Income for its most recently completed twelve month
period ("TTM") as reflected on the Company's consolidated income statements for
such TTM before giving effect to interest expense, provisions for federal, state
or local income taxes, depreciation and amortization of goodwill and other
intangibles (all as determined in accordance with generally accepted accounting
principles, consistently applied), less (B) the outstanding principal amount of
----
all Funded Indebtedness reflected on the liability side of the Company's
consolidated balance sheet as of the end of the Company's TTM and any accrued
unpaid amounts under Performance Rights granted under the Plan, divided by (ii)
10,000,000 which amount represents the Partnership Units denominated in the form
of the combination of Performance and Appreciation Rights (One Partnership Unit
is equivalent to the combination of 100,000 Performance Rights and 100,000
Appreciation Rights).
5.4 Vesting. The Committee shall determine the date on which each
-------
Performance Right or Appreciation Right shall vest and become exercisable and
may differentiate between the vesting of the Performance Right and the vesting
of the Appreciation Right granted under the Plan. Performance and/or
Appreciation Rights may vest and become exercisable in one or more installments,
upon the happening of certain events, upon the passage of a specified period of
time, upon the fulfillment of certain conditions or upon the achievement by the
Company or any of its operating units of certain performance goals, as the
Committee shall decide in each case when the Performance and/or Appreciation
Rights are granted. In the event of Public Offering or Sale of the Company,
the Committee may provide, in its discretion, that all Performance and/or
Appreciation
4
<PAGE>
Rights or Performance and/or Appreciation Rights granted to certain key
employees immediately vest.
5.5 Mandatory Exercise. In the event of a Sale of the Company or a Public
------------------
Offering of the Company's equity securities, the Committee may provide, in its
discretion, that all Performance and/or Appreciation Rights shall become
immediately exercisable by any key employees who are employed by the Company or
an Affiliate at the time of the sale of the company or a Public Offering and
that all Performance and/or Appreciation Rights shall terminate if not exercised
as of the date of the Sale of the Company or a Public Offering or other
prescribed period of time.
ARTICLE VI
GENERAL PROVISIONS
------------------
6.1 Written Agreement. Any and all Performance and/or Appreciation Rights
-----------------
granted hereunder to a key employee shall be embodied in a written agreement (a
"Plan Agreement") which shall be signed by the key employee and by the Chief
Executive Officer of the Company for and in the name and on behalf of the
Company. Such Plan Agreement shall contain provisions setting forth the terms
and conditions of such Performance and/or Appreciation Rights and shall be
subject to the terms and conditions of this Plan. Such Plan Agreement may, but
need not be, in the form of an employment agreement between the key employee and
the Company.
6.2 Limitations on Exercise and Transferability. Except as otherwise set
-------------------------------------------
forth, Performance and/or Appreciation Rights may not be transferred, assigned,
conveyed or encumbered other than by will or the laws of descent and
distribution or to a trust created solely for the benefit of a key employee
and/or such key employee's spouse and descendants (a "Family Trust"). During
the lifetime of a key employee, Performance and/or Appreciation Rights may be
exercised only by such key employee (or his legal guardian or legal
representative or by the trustee of his Family Trust). In the event of the
death of a key employee, exercise of Performance and/or Appreciation Rights
granted hereunder shall be made only:
(i) by the executor or administrator of the estate of the deceased
key employee or the person or person to whom the deceased key employee's
rights under the Performance and/or Appreciation Rights shall pass by will
or the laws of descent and distribution or by the trustee of the deceased
key employee's Family Trust; and
(ii) to the extent that the deceased key employee was entitled thereto
at the date of his death, unless otherwise provided by the Board in such
key employee's Plan Agreement.
The Committee, in its full, absolute, and unfettered discretion, may allow
Performance and/or Appreciation Rights to transferred by key employee to the key
employee's spouse, to the key employee's children, to an irrevocable trust held
for the exclusive benefit of the key employee's spouse and/or children, or to a
limited partnership or limited liability company whose partners or
5
<PAGE>
members consist solely of the key employee, the key employee's spouse and/or the
key employee's children; provided, however, the key employee shall bear all
costs and expenses associated with such transfer, including gaming licensing and
investigation expenses, the Company shall have the absolute right to withhold
taxes in accordance with Section 6.5 hereof as compensation paid to such key
employee, and the key employee shall remain wholly and personally liable for the
reporting of income and payment of taxes thereon in accordance with applicable
federal income tax laws despite such transfer.
6.3 Exercise Procedure. At any time prior to expiration and subject
------------------
to the terms and conditions of each key employee's Plan Agreement and any
applicable vesting schedule, the key employee's exercise of a Performance Right
may be made at anytime after full vesting of the Performance Right under the
Plan Agreement and such exercise of the Performance Right will be assumed to
remain in effect until (i) exercise of any Appreciation Right by the such key
employee or termination or cessation of the key employee's employment with the
Company or an Affiliate, any key employee may exercise all or any portion of his
vested Performance and/or Appreciation Rights by delivery of written notice to
the Company addressed to the attention of the Company's Chief Financial Officer.
Upon termination or cessation of employment with the Company, the key employee
shall only be entitled to exercise Appreciation Rights to the extent of the
vesting of such Appreciation Right to such date.
6.4 Payment. Within 30 days of the later of (i) receipt of the
-------
written notice described in Section 6.3 above and (ii) preparation by the
Company or its independent accountants of the consolidated financial statements
for the Company's most recently completed TTM, the Company will deliver the
excess of the Appreciation Amount to the key employee (or his heirs, etc.) in
immediately available funds. Within thirty (30) days of the end of each quarter
of the Company's fiscal year, the Company will deliver the Performance Amount
to the key employee (or his heirs, etc.) in immediately available funds.
Alternatively, if in the sole and absolute judg ment and discretion of the
Committee, the payment of such amount would result in material detriment to the
Company's financial condition at such time, or if the payment of such amount is
not permitted under any loan agreement, instrument or other agreement to which
the Company or an Affiliate is subject or by which it is bound, then in lieu of
such payment, the Company may issue to such key employee one or more junior
subordinated non-negotiable promissory notes in an aggregate principal amount
equal to the Appreciation Amount or the Performance Amount, as the case may be;
provided that, if the receipt of any such junior subordinated non-negotiable
promissory note or notes by any key employee results or would result in any
taxable income to such key employee, the Company will pay to such key employee
the minimum amounts of cash from the Performance Amount and/or Appreciation
Amount then due necessary to satisfy such key employee's resulting federal and
state income tax obligations, and the aggregate principal amount of such junior
subordinated non-negotiable promissory note or notes will be reduced by such
amount. The principal amount of such junior unsecured subordinated non-
negotiable promissory notes will be payable in no more than eight equal annual
installments beginning on the first anniversary of the date of issuance and will
bear interest, payable quarterly in arrears and on the date of the final payment
of principal, at a rate equal to 7% per annum. Such junior unsecured
subordinated non-negotiable promissory notes will be in the form of Exhibit A
attached hereto. In the event a Public Offering of the Company and in lieu of
the payment provisions for the Performance and/or Appreciation Rights set forth
above, the
6
<PAGE>
Committee, in its sole and absolute discretion, may, at its option, elect to pay
the Appreciation Amount and/or the Performance Amount, as the case may be, in
the form of "restricted" equity securities valued at the midpoint of the per
share price range set forth in its initial filing with the Securities and
Exchange Commission the class of equity security to be issued.
6.5 Withholding of Taxes. The Company shall be entitled, if the
--------------------
Committee deems it necessary or desirable, to withhold from any employee (or
secure payment from such key employee in lieu of withholding) such key
employee's share of any withholding or other tax due from the Company with
respect to any payment due upon exercise or grant of any Performance Right or
Appreciation Right and the Company may defer such delivery unless indemnified to
its satisfaction.
6.6 Subdivision or Combination of Partnership Units. If the Company
-----------------------------------------------
at any time subdivides (by any recapitalization or otherwise) the Partnership
Units into a greater number of Partnership Units, the Base Price in effect
immediately prior to such subdivision will be proportionately reduced and the
number of Performance and/or Appreciation Rights under this Plan (both issued
and unissued) will be proportionately increased. If the Company at any time
combines the Partnership Units into a smaller number of Partnership Units, the
Base Price in effect immediately prior to such combination will be
proportionately increased and the number of Performance and/or Appreciation
Rights under this Plan (both issued and unissued) will be proportionately
decreased. Corresponding adjustments shall be made to the determination of the
Performance Amounts, if necessary.
6.7 Rights of Key Employees. Notwithstanding anything to the
-----------------------
contrary expressed or implied in this Plan or in any key employee's Plan
Agreement, as long as there exists an employment or similar agreement between
any key employee and the Company or an Affiliate, such key employee's employment
with the Company and/or an Affiliate, as the case may be, will be governed by
the terms and conditions of such employment or similar agreement, and will not
be affected by the terms of this Plan or such key employee's Plan Agreement.
6.8 Amendment, Suspension and Termination of this Plan. The Company
--------------------------------------------------
may suspend or terminate this Plan or any portion hereof at any time and may
amend it, from time to time, in such respects as the Company may deem advisable;
provided, however, that no such amendment, suspension or termination shall
impair the rights of key employees under outstanding Performance and/or
Appreciation Rights without the consent of the key employees affected thereby.
No Performance and/or Appreciation Rights shall be granted hereunder after the
fifth anniversary of the adoption of this Plan.
6.9 Amendment, Modification and Cancellation of Performance and/or
--------------------------------------------------------------
Appreciation Rights. The Committee may amend or modify any Performance and/or
- -------------------
Appreciation Right in any manner to the extent that the Committee would have had
the authority under this Plan initially to grant such Performance and/or
Appreciation Right. No such amendment or modification shall impair the rights
of any key employee under any Performance and/or Appreciation Right without the
consent of such key employee. With the key employee's consent, the Committee
may
7
<PAGE>
cancel any Performance and/or Appreciation Right and issue a new Performance
and/or Appreciation Right to such key employee.
6.10 Indemnification. In addition to such other rights of
---------------
indemnification as they may have as members of the Committee, the members of the
Committee shall be indemnified by the Company against all costs and expenses
reasonably incurred by them in connection with any action, suit or proceeding to
which they or any of them may be party by reason of any action taken or failure
to act under or in connection with this Plan or any Performance and/or
Appreciation Right granted hereunder, and against all amounts paid by them in
settlement thereof (provided such settlement is approved by independent legal
counsel selected by the Company) or paid by them in satisfaction of a judgment
in any such action, suit or proceeding; provided, however, that any such
Committee member shall be entitled to the indemnification rights set forth in
this Section 6.10 only if such member has acted in good faith and in a manner
that such member reasonably believed to be in or not opposed to the best
interests of the Company and, with respect to any criminal action or proceeding,
had no reasonable cause to believe that such conduct was unlawful; and further
provided that upon the institution of any such action, suit or proceeding a
Committee member shall give the Company written notice thereof and an
opportunity, at its own expense, to hand and defend the same before such
Committee member undertakes to handle and defend it on his own behalf.
8
<PAGE>
EXHIBIT 10.8
ELDORADO HOTEL CASINO
---------------------
DEFERRED COMPENSATION PLAN
--------------------------
This Plan is hereby adopted as of the date last below written by the
ELDORADO HOTEL ASSOCIATES LIMITED PARTNERSHIP, a Nevada limited partnership,
with its principal offices in Reno, Nevada (the "Employer") for the benefit of
certain of its employees.
WITNESSETH:
WHEREAS, the Employer operates a hotel and casino in Reno, Nevada; and
WHEREAS, the Employer desires to provide certain benefits for a select
group of its management or highly compensated employees from this date forward
until such employees' retirement or prior termination of employment; and
WHEREAS, the employees have rendered meritorious and faithful service to
the Employer and it is anticipated that the employees will perform further
services for the Employer.
NOW, THEREFORE, the Employer hereby adopts a Deferred Compensation Plan
for the benefit of certain of its employees on the terms and conditions set
forth herein:
Definition of Terms
-------------------
Certain words and phrases are defined when first used in later paragraphs
of this Deferred Compensation Plan. In addition, the following words and phrases
when used herein, unless the context clearly requires otherwise, shall have the
following respective meanings:
Eldorado Hotel Casino
Deferred Compensation Plan Page 1
<PAGE>
(a) CEO. "CEO" means Donald L. Carano, President of Recreational
---
Enterprises, Inc., the 55% majority general partner of the Employer.
(b) Employee. "Employee" means an employee who is highly compensated or is
--------
a management employee of the Employer and who is designated by the CEO for
participation in the benefits of the Plan. "Employees" shall mean all
employees covered by the Plan.
(c) Employer. "Employer" means Eldorado Hotel Associates Limited
--------
Partnership, a Nevada limited partnership.
(d) Fiscal Year or Year. "Fiscal Year" or "Year" (unless otherwise
-------------------
specified) means the Employer's fiscal year as now constituted or as it may
be changed hereafter from time to time.
(e) Plan. "Plan" means this Deferred Compensation Plan as it may be
----
amended from time to time.
(f) Retirement. "Retirement" means retirement at or after attaining age
----------
60.
Designation of Employees
------------------------
Prior to the end of each Fiscal Year, the CEO shall specify the name of
each Employee, if any, who shall be entitled to participate in the Plan for each
such Year.
Duties
------
The Employees shall continue to be employed by the Employer in such
positions, for such terms, and at such rate of compensation as may be determined
from time to time by the Employer. The Employees shall at all times during their
Eldorado Hotel Casino
Deferred Compensation Plan Page 2
<PAGE>
respective terms of employment, devote their full time, energy, skill and best
efforts to the affairs of the Employer. Neither the Employer nor any Employee
shall be limited in any way in terminating the employment relationship between
Employee and the Employer as a result of the adoption of this Plan, provided
that neither the termination of such employment relationship or of this Plan
shall terminate the Employer's obligations to the Employees hereunder with
respect to the payment of benefits provided for herein.
Plan Contributions
------------------
The Employer shall make a contribution to the Plan each Fiscal Year. The
amount so contributed shall be deposited in a trust established simultaneously
herewith (the "Trust") for the benefit of the Employees. The Trustee of the
Trust shall establish and maintain separate accounts for each Employee
participating in the Plan.
The annual contribution made by the Employer to the Trust on behalf of
each Employee participating hereunder for any given Fiscal Year shall be
determined by the CEO in his sole discretion. After the CEO has determined the
contribution to be made for any given Fiscal Year, he shall deliver a schedule
to the Trustee of Trust which sets forth the name of each Employee participating
hereunder for such Fiscal Year and the corresponding contribution to be
allocated to the account maintained for such Employee under the Trust ("Deferred
Compensation Account") for such Fiscal Year. Such schedule shall also include
any additional information requested by the Trustee of the Trust or required by
the Trust Agreement.
Vesting
-------
Each Employee covered by the plan shall vest 20 percent per Year in the
amount contributed to his Deferred Compensation
Eldorado Hotel Casino
Deferred Compensation Plan Page 3
<PAGE>
Account each Year so that he becomes 100 percent vested in the amount credited
to his Deferred Compensation Account in any given year after the expiration of
five years from the date such amount was so contributed. For example, an
Employee will be 100 percent vested in 1990 contributions in 1994 and will be
100 percent vested in 1991 contributions in 1995. Employees shall vest in
earnings on any given Year's contribution allocation in a like manner.
The foregoing notwithstanding, an Employee shall become 100 percent
vested in all amounts credited to his Deferred Compensation Account upon
Retirement, death, permanent disability, or termination of employment with the
Employer for any reason other than fraud. In addition, an Employee shall become
100 percent vested in all amounts credited to his Deferred Compensation Account
upon a sale of all or substantially all of the assets of the Employer or if the
Carano family ceases to have majority ownership or control of the Employer.
Disability
----------
In the event an Employee is certified as being "permanently disabled,"
the employment relationship between the Employer and such Employee shall
thereupon be deemed to have terminated due to disability for purposes of this
Plan, and the Employer shall have no further obligation hereunder other than the
payment of benefits in the manner provided herein.
For purposes of this Plan, the term "permanently disabled" or "permanent
disability" shall mean an Employee's inability to adequately perform his
assigned duties on behalf of the Employer by reason of accident, physical or
mental illness, infirmity or other similar causes for a continuous period of six
months. Such disability shall be certified by a duly licensed physician. In the
event that the Employer and the Employee disagree, each shall select a duly
licensed physician to examine the Employee, and the
Eldorado Hotel Casino
Deferred Compensation Plan Page 4
<PAGE>
two so selected physicians shall appoint a third duly licensed physician to
examine the Employee, in which case the findings of the majority shall control.
The costs involved in such examinations shall be borne equally by the Employer
and the Employee. It is understood that an Employee's occasional sickness or
other incapacity of short duration may not result in the Employee's becoming
"permanently disabled"; however, any such illness or incapacity may constitute
"permanent disability" if such illness or incapacity is prolonged, considering
the time requirement set forth above.
Distribution of Benefits
------------------------
An Employee shall commence receiving a distribution of his vested
Deferred Compensation Account on the first business day of the second month
after the Employee's death, permanent disability, Retirement, or, if the
Employee terminates employment with the Employer for reasons other than death or
disability prior to the Employee's attainment of age 60, attainment of age 60,
whichever first occurs (the "Distribution Commencement Date"). The foregoing
notwithstanding, the CEO, in his sole discretion, may decide to make a
distribution to an Employee who terminates employment with the Employer prior to
the attainment of age 60 for reasons other than death or disability, at a date
earlier than the Employee's attainment of age 60.
All nonvested amounts allocated to an Employee's Deferred Compensation
Account shall be forfeited as of the Distribution Commencement Date. All such
forfeited amounts shall revert to the Employer as of the Distribution
Commencement Date.
An Employee's Deferred Compensation Account shall be distributed in
annual installments commencing on the Distribution Commencement Date. The
installment period shall equal a number of years equal to the Employee's life
expectancy as of the Distribution Commencement Date. In the event a distribution
of
Eldorado Hotel Casino
Deferred Compensation Plan Page 5
<PAGE>
benefits is to be made as a result of the death of an Employee, the installment
period shall be determined based upon the life expectancy of the Employee as if
the Employee was still alive at the Distribution Commencement Date.
In the event an Employee dies prior to commencing to receive a distribution
of benefits under this Plan, the Employee's Deferred Compensation Account shall
be distributed to the Employee's beneficiary (as described below) in the manner
in which benefits would have been distributed to the Employee had the Employee
survived. In the event an Employee dies after commencing to receive benefits
hereunder, the Employer shall pay to the Employee's beneficiary the remaining
sums due and owing to the Employee in the same manner in which payments would
have been made to the Employee had he survived.
Notwithstanding anything contained herein to the contrary, the CEO, in his
sole discretion, may decide to make a distribution to an Employee in
installments over a shorter period of time than that otherwise provided for
hereunder or in the form of a lump sum distribution.
Beneficiary
-----------
To designate a beneficially or beneficiaries to receive any amounts due
under this Plan, an Employee shall file with the Employer a dated written notice
specifying the name, address, and relationship to the Employee of such
beneficiary. Any such designation may be changed by the Employee by his filing
of a new, later dated written notice with the Employer.
If no named beneficiary shall survive the Employee, or if the Employee
fails to designate a beneficiary, any payments due under the Plan shall be made
in the following order of priority to:
Eldorado Hotel Casino
Deferred Compensation Plan Page 6
<PAGE>
* The Employee's surviving spouse;
* The Employee's surviving children, including adopted children, in
equal shares; or
* The legal representative of the Employee's estate.
In the event a person receiving benefits under this Plan after the
Employee's death dies while receiving such payments, the remaining payments due
such person shall be paid to the legal representative of such person's estate.
Withholding
-----------
All payments made pursuant to the Plan shall be less such amounts as are
required to be withheld by law.
Offset for Obligations to the Employer
--------------------------------------
If, at such time as an Employee becomes entitled to benefits under the
Plan, such Employee has any debt, obligation or other liability representing an
amount owing to the Employer, and if such debt, obligation, or other liability
is due and owing at the time distribution is due hereunder, the Employer may
offset the amount owing against the amount of benefits otherwise distributable
hereunder.
Determination of Benefits
-------------------------
Except as otherwise specifically provided in this Plan or the Trust, the
Employer shall make all determinations as to rights to benefits under the Plan.
Subject to and in compliance with the specific procedures contained in the
applicable regulations under the Employee Retirement Income Security Act of
1974, as amended: (i) any decision by the Employer denying a claim by the
Employee or the Employee's beneficiary for benefits under this Plan shall
Eldorado Hotel Casino
Deferred Compensation Plan Page 7
<PAGE>
be stated in writing and delivered or mailed to the Employee or such
beneficiary; (ii) each such notice shall set forth the specific reasons for the
denial, written to the best of the Employer's ability in a manner that may be
understood without legal or actuarial counsel; and (iii) the Employer shall
afford a reasonable opportunity to the Employee or such beneficiary for a full
and fair review of the decision denying such claim.
Hardship Benefit
----------------
In the event an Employee suffers a financial hardship (as hereinafter
defined) the Employer may, if the CEO deems advisable in his sole and absolute
discretion, distribute to or utilize on behalf of the Employee as a hardship
benefit (the "Hardship Benefit") any portion of the Employee's Deferred
Compensation Account up to, but not in excess of, the vested portion of such
Deferred Compensation Account to which the Employee would have been entitled as
of the date a Hardship Benefit is distributed or utilized. Any Hardship Benefit
shall be distributed or utilized at such times as the CEO shall determine, and
the Employee's Deferred compensation Account shall be reduced by the amount so
distributed and/or utilized. "Financial hardship" shall mean dire, unseen,
financial emergency of the Employee which cannot be reasonably relieved by
reimbursement by insurance or otherwise, liquidation of the Employee's assets to
the extent that such liquidation would not in itself cause a financial hardship,
and which is caused by temporary or permanent disability or incapacity, medical
or educational expenses, the purchase or maintenance of a residence, or a
material reduction in family income.
Administration
--------------
The CEO shall have the full power and right to delegate authority to
interpret, construe and administer the Plan. The interpretation and
construction of the Plan by the CEO and any
Eldorado Hotel Casino
Deferred Compensation Plan Page 8
<PAGE>
action taken hereunder shall be binding and conclusive upon all parties in
interest. The CEO shall not, in any event, be liable to any person for any
action taken or omitted to be taken in connection with the interpretation,
construction or administration of the Plan, so long as such action or omission
to act be made in good faith.
Exclusivity of Benefits
-----------------------
Except as otherwise provided herein, benefits payable under the Plan shall
be independent of, and in addition to, any benefits payable under any other
agreement or arrangement for compensation or otherwise that may exist from time
to time between the Employer and the Employees, or any other compensation or
benefits by the Employer to an Employee. The Plan shall not be deemed to
constitute a contract of employment between the Employer and any Employee, nor
shall any provision hereof restrict the right of the Employer to terminate its
employment relationship with any Employee, or restrict the right of an Employee
to terminate such Employee's relationship with the Employer.
Unsecured Promise To Pay
------------------------
Employee and any other person who may receive benefits hereunder on behalf
of an Employee shall have no claim to the Employee's Deferred Compensation
Account until the occurrence of one of the events entitling the Employee to such
benefits. Payments to an Employee or an Employee's beneficiary hereunder shall
be made from the assets of the Trust. However, the assets of the Trust shall be
subject to the claims of the Employer's general creditors in the event of
insolvency or bankruptcy of the Employer and, to the extent any person acquires
the right to receive payment from the Employer under the terms of the Plan, such
right shall be no greater than the right of any unsecured general creditor of
the Employer.
Eldorado Hotel Casino
Deferred Compensation Plan Page 9
<PAGE>
Non-Transferability
-------------------
It is expressly agreed that neither any Employee, any Employee's spouse, or
any other beneficiary of an Employee shall have any right to commute, sell,
assign, transfer, encumber or otherwise dispose of the right to receive payments
hereunder, which payments and the rights thereto are expressly made
nonassignable and nontransferable, and in the event of any attempted assignment
or transfer by an Employee, an Employee's spouse or any other beneficiary of an
Employee, the Employer shall have no further liability hereunder to such
Employee.
General Provisions
------------------
This Plan may be terminated, amended, or modified in any manner by the
Employer, provided that no such termination, amendment, or modification shall
adversely affect the rights of any Employee covered by the Plan as such rights
exist at the time of such termination, amended, or modification.
The rights and obligations of the Employees under this Plan shall inure to
the benefit of and shall be binding upon the heirs and legal representatives of
the Employees.
This Plan shall be interpreted, construed, and governed according to the
laws of the state of Nevada.
If any one or more provisions of this Plan are found to be invalid,
illegal, or unenforceable in any respect, the validity, legality, and
enforceability of the remaining provisions hereof shall not in any way be
affected or impaired thereby. In addition, should any one or more of the
provisions of this Plan be found to be partially enforceable, then it shall be
enforced to that extent.
Eldorado Hotel Casino
Deferred Compensation Plan Page 10
<PAGE>
Any notice, demand, or communication in connection with this Plan shall be
given in writing and shall be either personally delivered or shall, if given by
mail, be sent registered or certified mail, return receipt requested, postage
prepaid. Any notice transmitted by mail shall be sent to the last known
residence of the Employee of which the Employer has written notice or to the
Employer's principal office in Reno, Nevada. Notices personally given shall be
deemed to have been given when received, and notices sent by mail shall be
deemed to have been given on the day after they are received by the United
States Postal Service.
This Plan embodies the entire arrangement regarding the subject matter
hereof, and there are no other agreements, covenants, representations,
understandings, obligations, oral or written, with respect to the subject matter
of this Plan.
The section headings contained in this Plan are for convenience only and
shall in no manner by construed to limit or defined the terms of this Plan.
IN WITNESS WHEREOF, the Employer has executed this Plan as of the 1st day
of December, 1990.
EMPLOYER: ELDORADO HOTEL ASSOCIATES
LIMITED PARTNERSHIP, a Nevada
Limited Partnership
By: /s/ Donald L. Carano
----------------------------------
Donald L. Carano, CEO
Eldorado Hotel Casino
Deferred Compensation Plan Page 11
<PAGE>
EXHIBIT 10.9
ELDORADO HOTEL CASINO
---------------------
DEFERRED COMPENSATION PLAN TRUST AGREEMENT
------------------------------------------
This Trust Agreement is hereby made and entered into as of the date last
below written by and between the ELDORADO HOTEL ASSOCIATES LIMITED PARTNERSHIP,
a limited partnership with offices in Reno, Nevada (the "Grantor") and Donald L.
Carano (the "Trustee").
WITNESSETH:
WHEREAS, the Grantor desires to create a trust (the "Trust") of the
property described in Schedule A attached hereto and incorporated herein by
reference, together with such monies, securities and other assets as the Trustee
may hereafter at any time hold or acquire hereunder (said property, monies,
securities and other assets hereinafter referred to collectively as the "Trust
Fund"); and
WHEREAS, the Grantor has as of the date hereof established a Deferred
Compensation Plan for the benefit of a select group of management or highly
compensated employees of the Grantor (hereinafter collectively the "Employees"
or individually the "Employee"); and
WHEREAS, the Grantor desires to establish the Trust Fund to hold and invest
the amount which are to be contributed pursuant to the Deferred Compensation
Plan.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the Grantor agrees to execute such further instruments as
shall be necessary to vest the Trustee with full title to the property described
in Schedule A.
Eldorado Hotel Casino Trust Agreement Page 1
<PAGE>
and the Trustee agrees to hold the Trust Fund in trust for the following uses
and purposes and subject to the terms and conditions hereinafter set forth.
Transfer of Assets
------------------
The Grantor hereby assigns, transfers, and sets over to the Trustee the
properties specified and described in Schedule A attached hereto and
incorporated by reference herein, and all additional contributions made by the
Grantor pursuant to the Deferred Compensation Plan, the receipt of which
property is hereby acknowledged by the Trustee, upon the express terms and
conditions and with the powers and limitations hereinafter conferred and set
forth.
Investment of Trust Fund
------------------------
During the term of this Trust Agreement, the Trustee shall manage, invest
and reinvest the Trust Fund and shall collect and invest the income thereof,
which income shall become part of the Trust Fund.
Individual Accounts
------------------
The Trustee shall establish and maintain an individual account (the
"Deferred Compensation Account") for each Employee covered by the Deferred
Compensation Plan. The Trustee shall credit to each such Employee's Deferred
Compensation Account that amount of the contributions made by the Grantor to the
Trust each year as directed by the Grantor.
Contributions and Payments
--------------------------
Each time the Grantor makes a contribution to the Trust Fund, the Grantor
shall provide the Trustee with a list (the "Allocation Schedule") indicating (i)
the name, address of record
Eldorado Hotel Casino Trust Agreement Page 2
<PAGE>
and social security number of each Employee to be covered by such
contribution, (ii) the amount of such contribution allocable to each listed
Employee and (iii) such other information as may be required to facilitate
payments to the Employees by the Trustee.
The amount of each contribution to the Trust Fund that is attributable to a
listed Employee as indicated on the accompanying Allocation Schedule shall be
allocated to the Employee's Deferred Compensation Account.
The value of each Employee's Deferred Compensation Account shall be
adjusted as of each date on which the Grantor makes a contribution to the
Trust Fund or the date the Trustee is required to make a payment to an
Employee or an Employee's beneficiary, but not less frequently than annually
as of the last day of the Grantor's fiscal year, to reflect the effect of
contributions received and all other transactions of the preceding period.
Such adjustment shall be made by (i) deducting the total of all payments made
from an Employee's Deferred Compensation Account during such period, (ii)
adding the total amount of all such contributions allocated to the Employee's
Deferred Compensation Account and (iii) adding or deducting, as the case may
be, such proportion of each such other item as the value of the Employee's
Deferred Compensation Account as of the beginning of the period bears to the
total value of all Deferred Compensation Accounts of all Employees as of the
beginning of the period. Such valuation shall be conclusive and binding upon
all persons having an interest in the Trust Fund. Vesting in income credited
to an Employee's Deferred Compensation Account shall be the same percentage
as the Employee's vested interest in the contribution to which such income is
attributable. For this purpose, income credited to an Employee's Deferred
Compensation Account for any given year shall be attributed to each
contribution made on behalf of such Employee pro rata based on the dollar
amount of each such contribution.
Eldorado Hotel Casino Trust Agreement Page 3
<PAGE>
Individual Statements
---------------------
As soon as practicable after the last day of each fiscal year of the
Grantor, the Trustee will deliver to each Employee who has a Deferred
Compensation Account a statement reflecting the condition of his Deferred
Compensation Account in the Trust as of that date. No Employee shall have the
right to inspect the records reflecting the account of any other Employee who
has a Trust account. The amount to be distributed to the Employee shall be
determined by the Grantor in accordance with the Deferred Compensation Plan.
Distribution from the Trust Fund
--------------------------------
The Trustee shall make a distribution of an Employee's vested Deferred
Compensation Account at the time and in the manner directed by the Grantor in
accordance with the Deferred Compensation Plan.
In the event a distribution is to be made as a result of the death of an
Employee, the Trustee shall make distribution to the beneficiary designated by
the Employee or, if the Employee failed to make a beneficiary designation, to
such person or persons as the Grantor shall direct pursuant to the provisions of
the Deferred Compensation Plan.
No Responsibility for Grantor Action
------------------------------------
The Trustee shall have no obligation or responsibility with respect to any
action required by the Deferred Compensation Plan to be taken by the Grantor or
any Employee covered thereunder, nor for the failure of any of the foregoing
persons to act or make any payment or contribution, or to otherwise provide any
benefit contemplated under the Deferred Compensation Plan. In addition, the
Trustee shall not be required to collect any contribution required under the
Deferred Compensation Plan, or to
Eldorado Hotel Casino Trust Agreement Page 4
<PAGE>
determine the correctness of the amount of any Grantor contribution. The
Trustee need not inquire into or be responsible for any action or failure to act
on the part of any individual other than the Trustee. In making distributions,
the Trustee shall be entitled to rely on the amount designated by the Grantor to
be distributed.
Trust Powers
------------
To carry out the purposes of the Trust created under this Trust Agreement,
and subject to any limitations stated elsewhere in this Trust Agreement, the
Trustee is vested with the following powers with respect to the Trust Fund and
any part of it, in addition to those powers now or hereafter conferred by law:
(a) To continue to hold any property and to operate at the risk of
the Trust Fund any business received or acquired under the trust by the Trustee
as long as the Trustee shall deem advisable.
(b) To manage, control, grant options on, sell (for cash or on
deferred payments), convey, exchange, partition, divide, improve, and repair
Trust property.
(c) To lease Trust property for terms within or beyond the terms of
the Trust and for any purpose, including exploration for and removal of gas,
oil, and other minerals; and to enter into community oil leases, pooling, and
unitization agreements.
(d) To borrow and lend money, and to encumber or hypothecate Trust
property by mortgage, deed of trust, pledge, or otherwise.
Eldorado Hotel Casino Trust Agreement Page 5
<PAGE>
(e) To carry, at the expense of the Trust, insurance of such kinds
and in such amounts as the Trustee shall deem advisable to protect the Trust
Fund and the Trustee against any hazard.
(f) To commence or defend such litigation with respect to the Trust
Fund or defend such litigation with respect to the Trust Fund or property of the
Trust Fund as the Trustee may deem advisable, at the expense of the Trust.
(g) To compromise or otherwise adjust any claims or litigation
against or in favor of the Trust.
(h) To invest and reinvest the Trust Fund in every kind of property,
real, personal, or mixed, (including life insurance policies on the life of any
Employee covered by the Deferred Compensation Plan) and every kind of
investment, specifically including, but not by way of limitation, corporate
obligations of every kind, stocks (preferred or common), shares of investment
trusts, investment companies, mutual funds, savings accounts, and mortgage
participations, which men of prudence, discretion and intelligence acquire for
their own account.
(i) With respect securities held the Trust Fund, to have all the
rights, powers and privileges of an owner, including, but not by way of
limitation, the power to vote, give proxies, and pay assessments; to participate
in voting trusts, pooling agreements, foreclosures, reorganizations,
consolidations, mergers, liquidations, sales, and leases, and incident to such
participation to deposit securities with and transfer title to any protective or
other committee on such terms as the Trustee may deem advisable; and to exercise
or sell stock subscription or conversion rights.
(j) To employ such accountants, attorneys, investment counsel and
other persons as the Trustee may deem advisable in
Eldorado Hotel Casino Trust Agreement Page 6
<PAGE>
the administration of the Trust Fund and to pay such individuals out of the
Trust Fund such compensation as the Trustee may deem proper.
(k) In any case in which the Trustee is required, pursuant to the
provisions of this Trust Agreement, to divide any Trust property into parts or
shares for the purpose of distribution, or otherwise, the Trustee is authorized,
in his absolute discretion, to make the divisions and distribution in kind,
including undivided interests in any property, or partly in kind and partly in
cash, and for this purpose to make such sales of the Trust Fund property as the
Trustee may deem necessary on such terms and conditions as the Trustee shall see
fit.
(l) No person dealing with the Trustee shall be required to inquire
into the necessity or propriety of any transaction or into the application of
any money or property paid or delivered to them.
Taxes
-----
Any taxes levied or assessed upon the Trust fund shall be paid by the
Trustee out of the Trust Fund. The Trustee shall if requested by the Grantor,
or may in its sole discretion, contest the validity of taxes in any manner
deemed appropriate by the Grantor, Grantor's counsel, the Trustee or counsel for
the Trustee but at Grantor's expense, and only if the Trustee has received an
indemnity bond or other security satisfactory to it to pay any such expenses. In
the alternative, the Grantor may itself contest the validity of any such taxes.
The Trustee shall consult with the Grantor prior to taking any action it is
permitted to take under this provision with respect to taxes.
Eldorado Hotel Casino Trust Agreement Page 7
<PAGE>
Resignation of Trustee
----------------------
The Trustee shall have the right to resign at any time upon thirty (30)
days prior written notice delivered to the Grantor. Upon the death,
resignation, or disqualification of the Trustee, the Grantor shall select a
successor Trustee, provided that no individual successor Trustee shall be an
Employee covered by the Deferred Compensation Plan.
Settlement of Trustee's Account
-------------------------------
The Trustee shall be entitled at any time to a judicial settlement of his
account. The Trustee may at any time settle his account by agreement with the
Grantor. The approval thereof by the Grantor shall be conclusively binding upon
all parties in interest under this Trust Agreement whether or not then in being,
or whether then or thereafter entitled to any portion of any such share. Such
settlement of the Trustee's account shall be with like effect as a judgment of a
court having jurisdiction, judicially settling such account in an action in
which the Trustee and persons having or claiming any interest in the Trust Fund
were a party; the approval of such account shall constitute a full discharge and
release of the Trustee and the estate of any deceased Trustee for whom such
account is rendered from all further liabilities, responsibility and
accountability with respect to the acts and transactions of such trustee set
forth in said account, both as to income and principal.
Trustee Compensation
--------------------
Except as otherwise agreed by the Grantor, The Trustee shall not be
entitled to receive any compensation for his services in the administration of
the Trust Fund; except he shall be entitled to reimbursement for such reasonable
sums as he makes in connection with his duties as Trustee.
Eldorado Hotel Casino Trust Agreement Page 8
<PAGE>
Acceptance of Trust
-------------------
The Trustee hereby accepts the trust created by this Trust Agreement and
agrees to carry out the provisions hereof according to the best of his ability.
The Trustee shall not be liable for any loss of depreciation in the value of the
Trust Fund occurring by reason or error of judgement in making any sale,
investment or reinvestment, or in continuing to hold in trust any property
herewith or hereafter transferred to the Trustee of any investment or
reinvestment hereafter made, unless he shall have failed to act in good faith or
with reasonable care. The Trustee shall not be required to furnish any bond or
security for the performance of his duties hereunder.
Gender
------
Wherever necessary or appropriate, the use herein of any gender shall be
deemed to include the other gender an the use herein of either the singular of
plural shall be deemed to include the other.
Nonassignability
----------------
The interest of any beneficiary, including any Employee covered by the
Deferred Compensation Plan, in the income or principal of the Trust Fund shall
not be subject to the assignment, alienation, pledge, attachment, or claims of
creditors, and shall not otherwise be voluntarily or involuntarily alienated or
encumbered by such individual.
State Law
---------
This Trust Agreement shall be construed in accordance with the laws of the
State of Nevada.
Eldorado Hotel Casino Trust Agreement Page 9
<PAGE>
Irrevocability
--------------
The Grantor hereby declares that this Trust Agreement and the Trust Fund
and beneficial interests, whether vested or contingent, hereby created shall
be irrevocable and that the Grantor shall hereafter stand without power at any
time to alter, amend, revoke, change, or annul any of the provisions herein
contained or any of the vested or contingent beneficial interests affected
thereby, whether pursuant to a statute of the State of Nevada, or a decision
of its courts, or otherwise. The foregoing notwithstanding, the Grantor may
from time to time amend or modify the provisions of this Trust Agreement upon
obtaining the prior written consent of the Trustee and the Employees who have
Trust accounts. The Trust shall terminate when all Deferred Compensation
Accounts have been distributed in their entirety.
Grantor Creditors Rights
------------------------
Notwithstanding anything contained herein to the contrary, the assets of
the Trust Fund shall be subject to the claims of the creditors of the Grantor
in the event of insolvency or bankruptcy of the Grantor as if the assets here-
in were general assets of the Grantor.
Section Headings
----------------
The section headings contained in this Trust Agreement are for convenience
only and shall in no manner be construed to limit or define the terms of this
Trust Agreement.
Entire Agreement
----------------
This Trust Agreement embodies the entire agreement and understanding
between the parties hereto, and there are no other
Eldorado Hotel Casino Trust Agreement Page 10
<PAGE>
agreements, covenants, representations, understandings, obligations, oral or
written, with respect to the subject matter of this Agreement.
Waiver
------
Waiver by either party of any breach or violation of any provision of this
Trust Agreement shall not operate as or be construed to be a waiver of any
subsequent breach hereunder.
Notice
------
Any notice, consent or demand required or permitted to be given under the
provisions of this Trust Agreement shall be in writing, and shall be signed by
the party giving or making the same. If such notice, consent or demand is mailed
to a party hereto, it shall be sent by United States certified mail, postage
prepaid, addressed to such party's last known address. The date of such mailing
shall be deemed the date of notice, consent or demand. Either party may change
the address to which notice is to be sent by giving notice of the change of
address in the manner aforesaid.
Inurement
---------
This Trust Agreement shall be binding upon and inure to the benefit of the
Grantor and its successor and assigns, and the Trustee and the Trustee's
successors.
Eldorado Hotel Casino Trust Agreement Page 11
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Trust Agreement as of
the 1st day of December, 1990.
--- -------- --
GRANTOR ELDORADO HOTEL ASSOCIATES
LIMITED PARTNERSHIP
By: Donald L. Carano
-------------------------
Title: CEO
----------------------
TRUSTEE: ____________________________
Eldorado Hotel Casino Trust Agreement Page 12
<PAGE>
EXHIBIT 12
COMPUTATION OF RATIOS
EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
PRO FORMA
DATA
FOR THE
THIRTEEN TWELVE
MONTHS MONTHS
ENDED YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30, ENDED
DECEMBER 31, ---------------------------------- ------------------------- JUNE 30,
1991 1992 1993 1994 1995 1995 1996 1996(1)
------------ ------- ------- ------- ------- ------------ ------------ -----------
(DOLLARS IN THOUSANDS)
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed charges
Interest expense, net... $ 7,776 $ 6,385 $ 4,979 $ 2,967 $ 5,093 $ 1,239 $ 4,519 $12,233
Capitalized interest.... 0 0 253 2,140 2,742 2,148 157 --
Amortization expense.... 263 190 202 287 243 117 132 258
Rent interest expense... 587 265 310 248 248 112 98 234
------- ------- ------- ------- ------- ------------ ------------ -------
Fixed charges........... $ 8,626 $ 6,840 $ 5,744 $ 5,642 $ 8,326 $ 3,616 $ 4,906 $12,725
======= ======= ======= ======= ======= ============ ============ =======
Rent expense (operating
leases)................ 1,778 802 939 751 751 340 298 709
Factor(2)............... 33% 33% 33% 33% 33% 33% 33% 33%
------- ------- ------- ------- ------- ------------ ------------ -------
Rent interest expense... 587 265 310 248 248 112 98 234
======= ======= ======= ======= ======= ============ ============ =======
Pretax income........... 26,923 29,547 30,293 30,635 23,934 13,818 8,107 14,364
Fixed charges........... 8,626 6,840 5,744 5,642 8,326 3,616 4,906 12,725
Capitalized interest.... 0 0 (253) (2,140) (2,742) (2,148) (157) --
------- ------- ------- ------- ------- ------------ ------------ -------
Earnings................ $35,549 $36,387 $35,784 $34,137 $29,518 $ 15,286 $ 12,856 $27,089
======= ======= ======= ======= ======= ============ ============ =======
Ratio................... 4.12x 5.32x 6.23x 6.05x 3.55x 4.23x 2.62x 2.13x
</TABLE>
- --------
(1) Adjusted to give effect to the issuance of the Senior Subordinated Notes
due 2006 and the application of the net proceeds therefrom, as if such
transactions had occurred as of June 30, 1995.
(2) Estimate of percent of lease payment that is interest.
EBITDA TO CASH INTEREST EXPENSE
<TABLE>
<CAPTION>
PRO FORMA DATA
FOR THE
TWELVE MONTHS ENDED
JUNE 30, 1996(1)
---------------------
(DOLLARS IN THOUSANDS)
<S> <C>
EBITDA............................................. $40,797
Cash Interest Expense.............................. 12,233
Ratio.............................................. 3.34x
</TABLE>
- --------
(1) Adjusted to give effect to the issuance of the Senior Subordinated Notes
due 2006 and the application of the net proceeds therefrom, as if such
transactions had occurred as of June 30, 1995.
<PAGE>
TOTAL DEBT TO EBITDA
<TABLE>
<CAPTION>
PRO FORMA DATA
AS OF
JUNE 30, 1996(1)
----------------
(DOLLARS IN THOUSANDS)
<S> <C>
Current portion of long-term debt.................. $ 1,433
========
Long-term debt, less current portion
Credit facility.................................. $ 17,190
Senior Subordinated Notes due 2006............... 100,000
Other long-term debt............................. 3,965
--------
$121,155
========
Total debt..................................... $122,588
========
<CAPTION>
PRO FORMA DATA
FOR THE
TWELVE MONTHS
ENDED JUNE 30,
1996(1)
--------------
(DOLLARS IN THOUSANDS)
<S> <C>
EBITDA............................................. $40,797
Ratio.............................................. 3.00x
</TABLE>
- --------
(1) Adjusted to give effect to the issuance of the Senior Subordinated Notes
due 2006 and the application of the net proceeds therefrom, as if such
transactions had occurred as of June 30, 1995.
<PAGE>
EXHIBIT 21
LIST OF SUBSIDIARIES
Eldorado Resorts LLC
Eldorado Capital Corp., a Nevada corporation (100%-owned by the Company)
Eldorado Limited Liability Company, a Nevada limited-liability company
(76.7647%-owned by the Company)
Silver Legacy Joint Venture, a Nevada general partnership (50%-owned by
Eldorado Limited Liability Company)
Eldorado Capital Corp.
None
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports and to all references to our Firm included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
Las Vegas, Nevada
September 9, 1996
<PAGE>
EXHIBIT 25
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM T-1
----------
STATEMENT OF ELIGIBILITY AND QUALIFICATION UNDER THE
TRUST INDENTURE ACT OF 1939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE
----------
/ / CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(B)(2)
FLEET NATIONAL BANK
---------------------------------------------------------
(Exact name of trustee as specified in its charter)
Not applicable 04-317415
- ------------------------------- -----------------------------
(State of incorporation (I.R.S. Employer
if not a national bank) Identification No.)
One Monarch Place, Springfield, MA 01102
- ---------------------------------------- -----------------------------
(Address of principal executive offices) (Zip Code)
Pat Beaudry, 777 Main Street, Hartford, CT 06115 (203) 728-2065
--------------------------------------------------------------
(Name, address and telephone number of agent for service)
Eldorado Resorts LLC
Eldorado Capital Corp.
---------------------------------------------------
(Exact name of obligor as specified in its charter)
Nevada 88-0367075
- ------------------------------- -----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
345 North Virginia Street
Reno, Nevada 89501
- ---------------------------------------- -----------------------------
(Address of principal executive offices) (Zip Code)
10-1/2% Senior Subordinated Notes due 2006
------------------------------------------------------------------
(Title of the indenture securities)
<PAGE>
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject,
The Comptroller of the Currency,
Washington, D.C.
Federal Reserve Bank of Boston
Boston, Massachusetts
Federal Deposit Insurance Corporation
Washington, D.C.
(b) Whether it is authorized to exercise
corporate trust powers:
The trustee is so authorized.
Item 2. Affiliations with obligor and underwriter. If the obligor or
any underwriter for the obligor is an affiliate of the trustee,
describe each such affiliation.
None with respect to the trustee.
Item 16. List of exhibits.
List below all exhibits filed as a part of this statement of
eligibility and qualification.
(1) A copy of the Articles of Association of the trustee as
now in effect.
(2) A copy of the Certificate of Authority of the trustee
to do business.
(3) A copy of the Certification of Fiduciary Powers of the
trustee.
(4) A copy of the By-Laws of the trustee as now in effect.
(5) Consent of the trustee required by Section 321(b)
of the Act.
(6) A copy of the latest Consolidated Reports of Condition
and Income of the trustee published pursuant to law or
the requirements of its supervising or examining authority.
NOTES
In as much as this Form T-1 is filed prior to the ascertainment by the trustee
of all facts on which to base answers to Item 2, the answers to said Items are
based upon imcomplete information. Said Items may, however, be considered
correct unless amended by an amendment to this Form T-1.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939,
the trustee, Fleet National Bank, a national banking association organized and
existing under the laws of the United States, has duly caused this statement of
of eligibility and qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of Hartford, and State of
Connecticut, on the 15th day of July, 1996.
FLEET NATIONAL BANK,
AS TRUSTEE
By: /s/Michael M. Hopkins
-------------------------
Its Vice President
<PAGE>
EXHIBIT 1
ARTICLES OF ASSOCIATION
OF
FLEET NATIONAL BANK
FIRST. The title of this Association, which shall carry on the business of
banking under the laws of the United States, shall be "Fleet National Bank."
SECOND. The main office of the Association shall be in Springfield, Hampden
County Commonwealth of Massachusetts. The general business of the Association
shall be conducted at its main office and its branches.
THIRD. The board of directors of this Association shall consist of not less
than five (5) nor more than twenty-five (25) shareholders, the exact number of
directors within such minimum and maximum limits to be fixed and determined
from time to time by resolution of a majority of the full board of directors or
by resolution of the shareholders at any annual or special meeting thereof.
Unless otherwise provided by the laws of the United States, any vacancy in the
board of directors for any reason, including an increase in the number thereof,
may be filled by action of the board of directors.
FOURTH. The annual meeting of the shareholders for the election of directors
and the transaction of whatever other business may be brought before said
meeting shall be held at the main office or such other place as the board of
directors may designate, on the day of each year specified therefore in the
bylaws, but if no election is held on that day, it may be held on any
subsequent day according to the provisions of law; and all elections shall be
held according to such lawful regulations as may be prescribed by the board of
directors.
FIFTH. The authorized amount of capital stock of this Association shall be
eight million five hundred thousand (8,500,000) shares of which three million
five hundred thousand (3,500,000) shares shall be common stock with a
par value of six and 25/100 dollars ($6.25) each, and of which five million
(5,000,000) shares without par value shall be preferred stock. The capital
stock may be increased or decreased from time to time, in accordance with
the provisions of the laws of the United States.
No holder of shares of the capital stock of any class of the Association shall
have any pre-emptive or preferential right of subscription to any shares of any
class of stock of the Association, whether now or hereafter authorized, or to
any obligations convertible into stock of the Association, issued or sold, nor
any right of subscription to any thereof other than such, if any, as the board
of directors, in its discretion, may from time to time determine and at such
price as the board of directors may from time to time fix.
<PAGE>
The board of directors of the Association is authorized, subject to limitations
prescribed by law and the provisions of this Article, to provide for the
issuance from time to time in one or more series of any number of the preferred
shares, and to establish the number of shares be included in each series, and
to fix the designation, relative rights, preferences, qualifications and
limitations of the shares of each such series. The authority of the board of
directors with respect to each series shall include, but not be limited to,
determination of the following:
a. The number of shares constituting that series and the distinctive
designation of that series;
b. The dividend rate on the shares of that series, whether dividends shall be
cumulative, and, if so, from which date or dates, and whether they shall be
payable in preference to, or in another relation to, the dividends payable
to any other class or classes or series of stock;
c. Whether that series shall have voting rights, in addition to the voting
rights provided by law, and, if so, the terms of such voting rights;
d. Whether that series shall have conversion or exchange privileges, and,
if so, the terms and conditions of such conversion or exchange, including
provision for the adjustment of the conversion or exchange rate in such
events as the board of directors shall determine;
e. Whether or not the shares of that series shall be redeemable, and, if so,
the terms and conditions of such redemption, including the manner of
selecting shares for redemption if less than all shares are to be redeemed,
the date or dates upon or after which they shall be redeemable, and the
amount per share payable in case of redemption, which amount may vary under
different conditions and at different redemption dates;
f. Whether that series shall be entitled to the benefit of a sinking fund to
be applied to the purchase or redemption of shares of that series, and, if
so, the terms and amounts of such sinking fund;
g. The right of the shares of that series to the benefit of conditions and
restrictions upon the creation of indebtedness of the Association or any
subsidiary, upon the issue of any additional stock (including additional
shares of such series or of any other series) and upon the payment of
dividends or the making of other distributions on, and the purchase,
redemption or other acquisition by the Association or any subsidiary of
any outstanding stock of the Association;
h. The right of the shares of that series in the event of voluntary or
involuntary liquidation, dissolution or winding up of the Association and
whether such rights shall be in preference to, or in another relation to,
the comparable rights of any other class or classes or series of stock; and
i. Any other relative, participating, optional or other special rights,
qualifications, limitations or restrictions of that series.
Shares of any series of preferred stock which have been redeemed (whether
through the operation of a sinking fund or otherwise) or which, if convertible
or exchangeable, have been converted into or exchanged for shares of stock of
any other class or classes shall have the status of authorized and unissued
shares of preferred stock of the same series and may be reissued as a part of
the series of which they were originally a part or may be reclassified and
reissued as part of a new series of preferred stock to be created by resolution
or resolutions of the board of directors or as part of any other series or
preferred stock, all subject to the conditions and the restrictions adopted by
the board of directors providing for the issue of any series of preferred
stock and by the provisions of any applicable law.
Subject to the provisions of any applicable law, or except as otherwise
provided by the resolution or resolutions providing for the issue of any series
of preferred stock, the holders of outstanding shares of common stock shall
exclusively possess voting power for the election of directors and for all
purposes, each holder of record of shares of common stock being entitled to one
vote for each share of common stock standing in his name on the books of the
Association.
Except as otherwise provided by the resolution or resolutions providing for the
issue of any series of preferred stock, after payment shall have been made to
the holders of preferred stock of the full amount of dividends to which they
shall be entitled pursuant to the resolution or resolutions providing for the
issue of any other series of preferred stock, the holders of common stock shall
be entitled, to the exclusion of the holders of preferred stock of any and all
series, to receive such dividends as from time to time may be declared by the
board of directors.
Except as otherwise provided by the resolution or resolutions for the issue
of any series of preferred stock, in the event of any liquidation, dissolution
or winding up of the Association, whether voluntary or involuntary, after
payment shall have been made to the holders of preferred stock of the full
amount to which they shall be entitled pursuant to the resolution or
resolutions providing for the issue of any series of preferred stock the
holders of common stock shall be entitled, to the exclusion of the holders of
preferred stock of any and all series, to share, ratable according to the
number of shares of common stock held by them, in all remaining assets of the
Association available for distribution to its shareholders.
The number of authorized shares of any class may be increased or decreased by
the affirmative vote of the holders of a majority of the stock of the
Association entitled to vote.
<PAGE>
SIXTH. The board of directors shall appoint one of its members president of
this Association, who shall be chairman of the board, unless the board appoints
another director to be the chairman. The board of directors shall have the
power to appoint one or more vice presidents; and to appoint a secretary and
such other officers and employees as may be required to transact the business
of this Association.
The board of directors shall have the power to define the duties of the
officers and employees of the Association; to fix the salaries to be paid to
them; to dismiss them; to require bonds from them and to fix the penalty
thereof; to regulate the manner in which any increase of the capital of the
Association shall be made; to manage and administer the business and affairs of
the Association; to make all bylaws that it may be lawful for them to make; and
generally to do and perform all acts that it may be legal for a board of
directors to do and perform.
SEVENTH. The board of directors shall have the power to change the location of
the main office to any other place within the limits of the City of Hartford,
Connecticut, without the approval of the shareholders but subject to the
approval of the Comptroller of the Currency; and shall have the power to
establish or change the location of any branch or branches of the Association
to any other location, without the approval of the shareholders but subject to
the approval of the Comptroller of the Currency.
EIGHTH. The corporate existence of this Association shall continue until
terminated in accordance with the laws of the United States.
NINTH. The board of directors of this Association, or any three or more
shareholders owning, in the aggregate, not less than ten percent (10%) of the
stock of this Association, may call a special meeting of shareholders at any
time. Unless otherwise provided by the laws of the United States, a notice of
the time, place and purpose of every annual and special meeting of the
shareholders shall be given by first class mail, postage prepaid, mailed at
least ten (10) days prior to the date of such meeting to each shareholder of
record at his address as shown upon the books of this Association.
TENTH. (a) Right to Indemnification. Each person who was or is made a party
or is threatened to be made a party to any threatened, pending or completed
action, suit, or proceeding, whether civil, criminal, administrative, or
investigative (hereinafter a "proceeding"), by reason of the fact that he or
she is or was a director, officer or employee of the Association or is or was
serving at the request of the Association as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, limited
liability company, trust, or other enterprise, including service with respect
to an employee benefit plan, shall be indemnified and held harmless by the
Association to the fullest extent authorized by the law of the state in which
the Association's ultimate parent company is incorporated, except as provided
in subsection (b). The aforesaid indemnity shall protect the indemnified
person against all expense, liability and loss (including attorney's fees,
judgements, fines ERISA excise taxes or penalties, and amounts paid in
settlement) reasonably incurred by such person in connection with such a
proceeding. Such indemnification shall continue as to a person who has ceased
to be a director, officer or employee and shall inure to the benefit of his or
her heirs, executors, and administrators, but shall only cover such person's
period of service with the Association. The Association may, by action of its
Board of Directors, grant rights to indemnification to agents of the
Association and to any director, officer, employee or agent of any of its
subsidiaries with the same scope and effect as the foregoing indemnification
of directors and officers.
(b) Restrictions on Indemnification. Notwithstanding the foregoing, (i) no
person shall be indemnified hereunder by the Association against expenses,
penalties, or other payments incurred in an administrative proceeding or action
instituted by a federal bank regulatory agency which proceeding or action
results in a final order assessing civil money penalties against that person,
requiring affirmative action by that person in the form of payments to the
Association, or removing or prohibiting that person from service with the
Association, and any advancement of expenses to that person in that proceeding
must be repaid; and (ii) no person shall be indemnified hereunder by the
Association and no advancement of expenses shall be made to any person
hereunder to the extent such indemnification or advancement of expenses would
violate or conflict with any applicable federal statute now or hereafter in
force or any applicable final regulation or interpretation now or hereafter
adopted by the Office of the Comptroller of the Currency ("OCC") or the Federal
Deposit Insurance Corporation ("FDIC"). The Association shall comply with any
requirements imposed on it by any such statue or regulation in connection with
any indemnification or advancement of expenses hereunder by the Association.
With respect to proceedings to enforce a claimant's rights to indemnification,
the Association shall indemnify any such claimant in connection with such a
proceeding only as provided in subsection (d) hereof.
(c) Advancement of Expenses. The conditional right to indemnification
conferred in this section shall be a contract right and shall include the
right to be paid by the Association the reasonable expenses (including
attorney's fees) incurred in defending a proceeding in advance of its final
disposition (an "advancement of expenses"); provided, however, that an
advancement of expenses shall be made only upon (i) delivery to the Association
of a binding written undertaking by or on behalf of the person receiving the
advancement to repay all amounts so advanced if it is ultimately determined
that such person is not entitled to be indemnified in such proceeding,
including if such proceeding results in a final order assessing civil money
penalties against that person, requiring affirmative action by that person
in the form of payments to the Association, or removing or prohibiting that
person from service with the Association, and (ii) compliance with any other
actions or determinations required by applicable law, regulation or OCC or FDIC
interpretation to be taken or made by the Board of Directors of the Association
or other persons prior to an advancement of expenses. The Association shall
cease advancing expenses at any time its Board of Directors believes that any
of the prerequisites for advancement of expenses are no longer being met.
(d) Right of Claimant to Bring Suit. If a claim under subsection (a) of the
section is not paid in full by the Association within thirty (30) days after
written claim has been received by the Association, the claimant may at any time
thereafter bring suit against the Association to recover the unpaid amount
of the claim. If successful in whole or in part in any such suit, or in a
suit brought by the Association to recover an advancement of expenses pursuant
to the terms of an undertaking, the claimant shall be entitled to be paid also
the expense of prosecuting or defending such claim. It shall be a defense to
any such action brought by the claimant to enforce a right to indemnification
hereunder (other than an action brought to enforce a claim for an advancement
of expenses where the required undertaking, if any, has been tendered to the
Association) that the claimant has not met any applicable standard for
indemnification under the law of the state in which the Association's ultimate
parent company is incorporated. In any suit brought by the Association to
recover an advancement of expenses pursuant to the terms of an undertaking, the
Association shall be entitled to recover such expenses upon a final
adjudication that the claimant has not met any applicable standard for
indemnification standard for indemnification under the law of the state in
which the Association's ultimate parent company is incorporated.
(e) Non-Exclusivity of Rights. The rights to indemnification and the
advancement of expenses conferred in this section shall not be exclusive of any
other right which any person may have or hereafter acquired under any statute,
agreement, vote of stockholders or disinterested directors or otherwise.
(f) Insurance. The Association may purchase, maintain, and make payment or
reimbursement for reasonable premiums on, insurance to protect itself and any
director, officer, employee or agent of the Association or another corporation,
partnership, joint venture, trust or other enterprise against any expense,
liability or loss, whether or not the Association would have the power to
indemnify such person against such expense, liability or loss under the law of
the state in which the Association's ultimate parent company is incorporated;
provided however, that such insurance shall explicitly exclude insurance
coverage for a final order of a federal bank regulatory agency assessing civil
money penalties against an Association director, officer, employee or agent.
ELEVENTH. These articles of association may be amended at any regular or
special meeting of the shareholders by the affirmative vote of the holders of a
majority of the stock of this Association, unless the vote of the holders of
greater amount of stock is required by law, and in that case by the vote of the
holders of such greater amount. The notice of any shareholders' meeting at
which an amendment to the articles of association of this Association is to be
considered shall be given as hereinabove set forth.
I hereby certify that the articles of association of this Association, in their
entirety, are listed above in items first through eleventh.
Secretary/Assistant Secretary
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Dated at , as of .
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Revision of February 15, 1996
<PAGE>
EXHIBIT 2
[LOGO]
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COMPTROLLER OF THE CURRENCY
ADMINISTRATOR OF NATIONAL BANKS
- --------------------------------------------------------------------------------
Washington, D.C. 20219
CERTIFICATE
I, Eugene A. Ludwig, Comptroller of the Currency, do hereby certify
that:
(1) The Comptroller of the Currency, pursuant to Revised Statutes
324, et seq., as amended, 12 U.S.C. 1, et seq., as amended, has possession,
custody and control of all records pertaining to the chartering, regulation and
supervision of all National Banking Associations.
(2) "Fleet National Bank of Connecticut", Hartford, Connecticut,
(Charter No. 1338), is a National Banking Association formed under the
laws of the United States and is authorized thereunder to transact the
business of banking on the date of this Certificate.
IN TESTIMONY WHEREOF, I have hereunto
subscribed my name and caused my seal of
office to be affixed to these presents at
the Treasury Department, in the City of
Washington and District of Columbia, this
4th day of April, 1996.
/s/ EUGENE A. LUDWIG
----------------------------------
Comptroller of the Currency
<PAGE>
EXHIBIT 2
[LOGO]
- --------------------------------------------------------------------------------
COMPTROLLER OF THE CURRENCY
ADMINISTRATOR OF NATIONAL BANKS
- --------------------------------------------------------------------------------
Washington, D.C. 20219
Certification of Fiduciary Powers
I, Eugene A. Ludwig, Comptroller of the Currency, do hereby certify
the records in this Office evidence "Fleet National Bank of Connecticut",
Hartford, Connecticut, (Charter No. 1338), was granted, under the hand
and seal of the Comptroller, the right to act in all fiduciary capacities
authorized under the provisions of The Act of Congress approved
September 28, 1962, 76 Stat. 668, 12 U.S.C. 92a. I further certify the
authority so granted remains in full force and effect.
IN TESTIMONY WHEREOF, I have hereunto
subscribed my name and caused my seal of
Office of the Comptroller of the Currency
to be affixed to these presents at the
Treasury Department, in the City of
Washington and District of Columbia, this
4th day of April, 1996.
/s/ EUGENE A. LUDWIG
----------------------------------
Comptroller of the Currency
<PAGE>
EXHIBIT 4
AMENDED AND RESTATED BY-LAWS OF
FLEET NATIONAL BANK
ARTICLE I
MEETINGS OF SHAREHOLDERS
Section 1. Annual Meeting. The regular annual meeting of the shareholders for
the election of Directors and the transaction of any other business that may
properly come before the meeting shall be held at the Main Office of the
Association, or such other place as the Board of Directors may designate, on
the fourth Thursday of April in each year at 1:15 o'clock in the afternoon
unless some other hour of such day is fixed by the Board of Directors.
If, from any cause, an election of Directors is not made on such day, the Board
of Directors shall order the election to be held on some subsequent day, of
which special notice shall be given in accordance with the provisions of law,
and of these bylaws.
Section 2. Special Meetings. Special meetings of the shareholders may be called
at any time by the Board of Directors, the President, or any shareholders
owning not less than twenty-five percent (25%) of the stock of the Association.
Section 3. Notice of Meetings of Shareholders. Except as otherwise provided
by law, notice of the time and place of annual or special meetings of the
shareholders shall be mailed, postage prepaid, at least ten (10) days before
the date of the meeting to each shareholder of record entitled to vote thereat
at his address as shown upon the books of the Association; but any failure to
mail such notice to any shareholder or any irregularity therein, shall not
affect the validity of such meeting or of any of the proceedings thereat.
Notice of a special meeting shall also state the purpose of the meeting.
Section 4. Quorum; Adjourned Meetings. Unless otherwise provided by law, a
quorum for the transaction of business at every meeting of the shareholders
shall consist of not less than two-fifths (2/5) of the outstanding capital
stock represented in person or by proxy; less than such quorum may adjourn the
meeting to a future time. No notice need be given of an adjourned annual or
special meeting of the shareholders if the adjournment be to a definite place
and time.
Section 5. Votes and Proxies. At every meeting of the shareholders, each
share of the capital stock shall be entitled to one vote except as otherwise
provided by law. A majority of the votes cast shall decide every question
or matter submitted to the shareholder at any meeting, unless otherwise
provided by law or by the Articles of Association or these By-laws. Share-
holders may vote by proxies duly authorized in writing and filed with the
Cashier, but no officer, clerk, teller or bookeeper of the Association may act
as a proxy.
<PAGE>
Section 6. Nominations to Board of Directors. At any meeting of shareholders
held for the election of Directors, nominations for election to the Board of
Directors may be made, subject to the provisions of this section, by any share-
holder of record of any outstanding class of stock of the Association entitled
to vote for the election of Directors. No person other than those whose names
are stated as proposed nominees in the proxy statement accompanying the notice
of the meeting may be nominated as such meeting unless a shareholder shall have
given to the President of the Association and to the Comptroller of the
Currency, Washington, DC written notice of intention to nominate such other
person mailed by certified mail or delivered not less than fourteen (14) days
nor more than fifty (50) days prior to the meeting of shareholders at which
such nomination is to be made; provided, however, that if less than twenty-one
(21) days' notice of such meeting is given to shareholders, such notice of
intention to nominate shall be mailed by certified mail or delivered to said
President and said Comptroller on or before the seventh day following the day
on which the notice of such meeting was mailed. Such notice of intention to
nominate shall contain the following information to the extent known to the
notifying shareholder: (a) the name and address of each proposed nominee; (b)
the principal occupation of each proposed nominee; (c) the total number of
shares of capital stock of the Association that will be voted for each proposed
nominee; (d) the name and residence address of the notifying shareholder; and
(e) the number of shares of capital stock of the Association owned by the
notifying shareholder. In the event such notice is given, the proposed nominee
may be nominated either by the shareholder giving such notice or by any other
shareholder present at the meeting at which such nomination is to be made.
Such notice may contain the names of more than one proposed nominee, and if
more than one is named, any one or more of those named may be nominated.
Section 7. Action Taken Without a Shareholder Meeting. Any action requiring
shareholder approval or consent may be taken without a meeting and without
notice of such meeting by written consent of the shareholders.
ARTICLE II
DIRECTORS
Section 1. Number. The Board of Directors shall consist of such number of
shareholders, not less than five (5) nor more than twenty-five (25), as from
time to time shall be determined by a majority of the votes to which all of its
shareholders are at the time entitled, or by the Board of Directors as
hereinafter provided.
Section 2. Mandatory Retirement for Directors. No person shall be elected a
director who has attained the age of 68 and no person shall continue to serve
as a director after the date of the first meeting of the stockholders of the
Association held on or after the date on which such person attains the age of
68; provided, however, that any director serving on the Board as of December
15, 1995 who has attanined the age of 65 on or prior to such date shall be
permitted to continue to serve as a director until the date of the first
meeting of the stockholders of the Association held on or after the date on
which such person attains the age of 70.
-2-
<PAGE>
Section 3. General Powers. The Board of Directors shall exercise all the
coporate powers of the Association, except as expressly limited by law, and
shall have the control, management, direction and dispositon of all its
property and affairs.
Section 4. Annual Meeting. Immediately following a meeting of shareholders
held for the election of Directors, the Cashier shall notify the directors-
elect who may be present of their election and they shall then hold a meeting
at the Main Office of the Association, or such other place as the Board of
Directors may designate, for the purpose of taking their oaths, organizing the
new Board, electing officers and transacting any other business that may come
before such meeting.
Section 5. Regular Meeting. Regular meetings of the Board of Directors shall
be held without notice at the Main Office of the Association, or such other
place as the Board of Directors may designate, at such dates and times as the
Board shall determine. If the day designated for a regular meeting falls on a
legal holiday, the meeting shall be held on the next business day.
Section 6. Special Meetings. A special meeting of the Board of Directors may
be called at anytime upon the written request of the Chairman of the Board, the
President, or of two Directors, stating the purpose of the meeting. Notice of
the time and place shall be given not later than the day before the date of the
meeting, by mailing a notice to each Director at his last known address, by
delivering such notice to him personally, or by telephoning.
Section 7. Quorum; Votes. A majority of the Board of Directors at the time
holding office shall constitute a quorum for the transaction of all business,
except when otherwise provided by law, but less than a quorum may adjourn
a meeting from time to time, and the meeting may be held, as adjourned, without
further notice. If a quorum is present when a vote is taken, the affirmative
vote of a majority of Directors present is the act of the Board of Directors.
Section 8. Action by Directors Without a Meeting. Any action requiring
Director approval or consent may be taken without a meeting and without notice
of such meeting by written consent of all the Directors.
Section 9. Telephonic Participation in Directors' Meetings. A Director or
member of a Committee of the Board of Directors may participate in a meeting of
the Board or of such Committee may participate in a meeting of the Board or of
such Committee by means of a conference telephone or similar communications
equipment enabling all Directors participating in the meeting to hear one
another, and participation in such a meeting shall constitute presence in person
at such a meeting.
Section 10. Vacancies. Vacancies in the Board of Directors may be filled by
the remaining members of the Board at any regular or special meeting of the
Board.
Section 11. Interim Appointments. The Board of Directors shall, if the share-
holders at any meeting for the election of Directors have determined a number
of Directors less than twenty-five (25), have the power, by affirmative vote of
the majority of all the Directors, to increase such number of Directors to not
more than twenty-five (25) and to elect Directors to fill the resulting
vacancies and to serve until the next annual meeting of shareholders or the
next election of Directors; provided, however, that the number of Directors
shall not be so increased by more than two (2) if the number last determined
by shareholders was fifteen (15) or less, or increased by more than four (4) if
the number last determined by shareholders was sixteen (16) or more.
Section 12. Fees. The Board of Directors shall fix the amount and direct the
payment of fees which shall be paid to each Director for attendance at any
meeting of the Board of Directors or of any Committees of the Board.
ARTICLE III
COMMITTEES OF THE BOARD
Section 1. Executive Committee. The Board of Directors shall appoint from its
members an Executive Committee which shall consist of such number of persons as
the Board of Directors shall determine; the Chairman of the Board and the
President shall be members ex-officio of the Executive Committee with full
voting power. The Chairman of the Board or the President may from time to time
appoint from the Board of Directors as temporary additional members of the
Executive Committee, with full voting powers, not more than two members to serve
for such periods as the Chairman of the Board or the President may determine.
The Board of Directors shall designate a member of the Executive Committee to
serve as Chairman thereof. A meeting of the Executive Committee may be called
at any time upon the written request of the Chairman of the Board, the President
or the Chairman of the Executive Committee, stating the purpose of the meeting.
Not less than twenty four hours' notice of said meeting shall be given to each
member of the Committee personally, by telephoning, or by mail. The Chairman of
the Executive Committee or, in his absence, a member of the Committee chosen by
a majority of the members present shall preside at meetings of the Executive
Committee.
-3-
<PAGE>
The Executive Committee shall possess and may exercise all the powers of the
Board when the Board is not in session except such as the Board, only, by law,
is authorized to exercise; it shall keep minutes of its acts and proceedings
and cause same to be presented and reported at every regular meeting and at any
special meeting of the Board including specifically, all its actions relating
to loans and discounts.
All acts done and powers and authority conferred by the Executive Committee,
from time to time, within the scope of its authority, shall be deemed to be,
and may be certified as being, the acts of and under the authority of the
Board.
Section 2. Risk Management Committee. The Board shall appoint from its
members a Risk Management Committee which shall consist of such number as the
Board shall determine. The Board shall designate a member of the Risk
Management Committee to serve as Chairman thereof. It shall be the duty of the
Risk Management Committee to (a) serve as the channel of communication with
management and the Board of Directors of Fleet Financial Group, Inc. to assure
that formal processes supported by management information systems are in place
for the identification, evaluation and management of significant risks inherent
in or associated with lending activities, the loan portfolio, asset-liablity
management, the investment portfolio, trust and investment advisory activities,
the sale of nondeposit investment products and new products and services and
such additional activities or functions as the Board may determine from time
to time; (b) assure the formulation and adoption of policies approved by the
Risk Management Committee or Board governing lending activities, management of
the loan portfolio, the maintenance of an adequate allowance for loan and lease
losses, asset-liability management, the investment portfolio, the retail
sale of non-deposit investment products, new products and services and such
additional activities or functions as the Board may determine from time to time
(c) assure that a comprehensive independent loan review program is in place for
the early detection of problem loans and review significant reports of the loan
review department, management's responses to those reports and the risk
attributed to unresolved issues; (d) subject to control of the Board, exercise
general supervision over trust activities, the investment of trust funds, the
disposition of trust investments and the acceptance of new trusts and the terms
of such acceptance, and (e) perform such additional duties and exercise such
additional powers of the Board as the Board may determine from time to time.
Section 3. Audit Committee. The Board shall appoint from its members and
Audit Committee which shall consist of such number as the Board shall determine
no one of whom shall be an active officer or employee of the Association or
Fleet Financial Group, Inc. or any of its affiliates. In addition, members of
the Audit Committee must not (i) have served as an officer or employee of the
Association or any of its affiliates at any time during the year prior to their
appointment; or (ii) own, control, or have owned or controlled at any time
during the year prior to appointment, ten percent (10%) or more of any
outstanding class of voting securities of the Association. At least two (2)
members of the Audit Committee must have significant executive, professional,
educational or regulatory experience in financial, auditing, accounting,
or banking matters. No member of the Audit Commitee may have significant
direct or indirect credit or other relationships with the Association, the
termination of which would materially adversely affect the Association's
financial condition or results of operations.
The Board shall designate a member of the Audit Committee to serve as Chairman
thereof. It shall be the duty of the Audit Committee to (a) cause a continuous
audit and examination to be made on its behalf into the affairs of the
Association and to review the results of such examination; (b) review
significant reports of the internal auditing department, management's responses
to those reports and the risk attributed to unresolved issues; (c) review the
basis for the reports issued under Section 112 of The Federal Deposit Insurance
Corporation Improvement Act of 1991; (d) consider, in consultation with the
independent auditor and an internal auditing executive, the adequacy of the
Association's internal controls, including the resolution of identified material
weakness and reportable conditions; (e) review regulatory communications
received from any federal or state agency with supervisory jurisdiction or
other examining authority and monitor any needed corrective action by
management; (f) ensure that a formal system of internal controls is in place
for maintaining compliance with laws and regulations; (g) cause an audit of the
Trust Department at least once during each calendar year and within 15 months
of the last such audit or, in liew thereof, adopt a continuous audit system and
report to the Board each calendar year and within 15 months of the previous
report on the performance of such audit function; and (h) perform such
additional duties and exercise such additional powers of the Board as the Board
may determine from time to time.
The Audit Committee may consult with internal counsel and retain its own
outside counsel without approval (prior or otherwise) from the Board or
management and obligate the Association to pay the fees of such counsel.
-4-
<PAGE>
Section 4. Community Affairs Committee. The Board shall appoint from its
members a Community Affairs Committee which shall consist of such number as the
Board shall determine. The Board shall designate a member of the Community
Affairs Committee to serve as Chairman thereof. It shall be the duty of the
Commmunity Affairs Committee to (a) oversee compliance by the Association with
the Community Reinvestment Act of 1977, as amended, and the regulations
promulgated thereunder; and (b) perform such additional duties and exercise such
additional powers of the Board as the Board may determine from time to time.
Section 5. Regular Meetings. Except for the Executive Committee which shall
meet on an ad hoc basis as set forth in Section 1 of this Article, regular
meetings of the Committees of the Board of Directors shall be held, without
notice, at such time and place as the Committee or the Board of Directors may
appoint and as often as the business of the Association may require.
Section 6. Special Meetings. A Special Meeting of any of the Committees of
the Board of Directors may be called upon the written request of the Chairman
of the Board or the President, or of any two members of the respective
Committee, stating the purpose of the meeting. Not less than twenty-four
hours' notice of such special meeting shall be given to each member of the
Committee personally, by telephoning, or by mail.
Section 7. Emergency Meetings. An Emergency Meeting of any of the Committees
of the Board of Directors may be called at the request of the Chairman of the
Board or the President, who shall state that an emergency exists, upon not
less than one hour's notice to each member of the Committee personally or by
telephoning.
Section 8. Action Taken Without a Committee Meeting. Any Committee of the
Board of Directors may take action without a meeting and without notice of such
meeting by resolution assented to in writing by all members of such Committee.
Section 9. Quorum. A majority of a Committee of the Board of Directors shall
constitute a quorum for the transaction of any business at any meeting of such
Committee. If a quorum is not available, the Chairman of the Board or the
President shall have power to make temporary appointments to a Committee of-
members of the Board of Directors, to act in the place and stead of members who
temporarily cannot attend any such meeting; provided, however, that any
temporary appointment to the Audit Committee must meet the requirements for
members of that Committee set forth in Section 3 of this Article.
Section 10. Record. The committes of the Board of Directors shall keep a
record of their respective meetings and proceedings which shall be presented
at the regular meeting of the Board of Directors held in the calendar month
next following the meetings of the Committees. If there is no regular Board
of Directors meeting held in the calendar month next following the meeting of
a Committee, then such Committee's records shall be presented at the next
regular Board of Directors meeting held in a month subsequent to such Committee
meeting.
Section 11. Changes and Vacancies. The Board of Directors shall have power
to change the members of any Committee at any time and to fill vacancies on any
Committee; provided, however, that any newly appointed member of the Audit
Committee must meet the requirements for members of that Committee set forth in
Section 3 of this Article.
Section 12. Other Committees. The Board of Directors may appoint, from time
to time, other committees of one or more persons, for such purposes and with
such powers as the Board may determine.
ARTICLE IV
WAIVER OF NOTICE OF MEETINGS
Section 1. Waiver. Whenever notice is required to be given to any shareholder,
Director, or member of a Committee of the Board of Directors, such notice may
be waived in writing either before or after such meeting by any shareholder,
Director or Committee member respectively, as the case may be, who may be
entitled to such notice; and such notice will be deemed to be waived by
attendance at any such meeting.
-5-
<PAGE>
ARTICLE V
OFFICERS AND AGENTS
Section 1. Officers. The Board shall appoint a Chairman of the Board and a
President, and shall have the power to appoint one or more Executive Vice
Presidents, one or more Senior Vice Presidents, one or more Vice Presidents, a
Cashier, a Secretary, an Auditor, a Controller, one or more Trust Officers and-
such other officers as are deemed necessary or desirable for the proper
transaction of business of the Association. The Chairman of the Board and the
President shall be appointed from members of the Board of Directors. Any two
or more offices, except those of President and Cashier, or Secretary, may be
held by the same person. The Board may, from time to time, by resolution
passed by a majority of the entire Board, designate one or more officers of the
Association or of an affiliate or of Fleet Financial Group, Inc. with power to
appoint one or more Vice Presidents and such other officers of the Association
below the level of Vice President as the officer or officers designated in such
resolution deem necessary or desirable for the proper transaction of the
business of the Association.
Section 2. Chairman of the Board. The chairman of the Board shall preside at
all meetings of the Board of Directors. Subject to definition by the Board of
Directors, he shall have general executive powers and such specific powers and
duties as from time to time may be conferred upon or assigned to him by the
Board of Directors.
Section 3. President. The President shall preside at all meetings of the
Board of Directors if there be no Chairman or if the Chairman be absent.
Subject to definition by the Board of Directors, he shall have general
executive powers and such specific powers and duties as from time to time may
be conferred upon or assigned to him by the Board of Directors.
-6-
<PAGE>
Section 4. Cashier and Secretary. The Cashier shall be the Secretary of the
Board and of the Executive Committee, and shall keep accurate minutes of their
meetings and of all meetings of the shareholders. He shall attend to the
giving of all notices required by these By-laws. He shall be custodian of the
corporate seal, records, documents and papers of the Association. He shall
have such powers and perform such duties as pertain by law or regulation to the
office of Cashier, or as are imposed by these By-laws, or as may be delegated
to him from time to time by the Board of Directors, the Chairman of the Board
or the President.
Section 5. Auditor. The Auditor shall be the chief auditing officer of the
Association. He shall continuously examine the affairs of the Association and
from time to time shall report to the Board of Directors. He shall have such
powers and perform such duties as are conferred upon, or assigned to him by
these By-laws, or as may be delegated to him from time to time by the Board
of Directors.
Section 6. Officers Seriatim. The Board of Directors shall designate from
time to time not less than two officers who shall in the absence or disability
of the Chairman or President or both, succeed seriatim to the duties and
responsibilities of the Chairman and President respectively.
Section 7. Clerks and Agents. The Board of Directors may appoint, from time
to time, such clerks, agents and employees as it may deem advisable for the
prompt and orderly transaction of the business of the Association, define
their duties, fix the salaries to be paid them and dismiss them. Subject to
the authority of the Board of Directors, the Chairman of the Board or the
President, or any other officer of the Association authorized by either of them
may appoint and dismiss all or any clerks, agents and employees and prescribe
their duties and the conditions of their employment, and from time to time
fix their compensation.
Section 8. Tenure. The Chairman of the Board of Directors and the President
shall, except in the case of death, resignation, retirement or disqualification
under these By-laws, or unless removed by the affirmative vote of at least two-
thirds of all of the members of the Board of Directors, hold office for the
term of one year or until their respective successors are appointed. Either
of such officers appointed to fill a vacancy occurring in an unexpired term
shall serve for such unexpired term of such vacancy. All other officers,
clerks, agents, attorneys-in-fact and employees of the Association shall hold
office during the pleasure of the Board of Directors or of the officer or
committee appointing them respectively.
ARTICLE VI
TRUST DEPARTMENT
Section 1. General Powers and Duties. All fiduciary powers of the Association
shall be exercised through the Trust Department, subject to such regulations as
the Comptroller of the Currency shall from time to time establish. The Trust
Department shall be to placed under the management and immediate supervision
of an officer or officers appointed by the Board of Directors. The duties of
all officers of the Trust Department shall be to cause the policies and
instructions of the Board and the Risk Management Committee with respect to the
trusts under their supervision to be carried out, and to supervise the due
performance of the trusts and agencies entrusted to the Association and under
their supervision, in accordance with law and in accordance with the terms of
such trusts and agencies.
-7-
<PAGE>
ARTICLE VII
BRANCH OFFICES
Section 1. Establishment. The Board of Directors shall have full power to
establish, to discontinue, or, from time to time, to change the location of any
branch office, subject to such limitations as may be provided by law.
Section 2. Supervision and Control. Subject to the general supervision and
control of the Board of Directors, the affairs of branch offices shall be
under the immediate supervision and control of the President or of such other
officer or officers, employee or employees, or other individuals as the Board
of Directors may from time to time determine, with such powers and duties as
the Board of Directors may confer upon or assign to him or them.
ARTICLE VIII
SIGNATURE POWERS
Section 1. Authorization. The power of officers, employees, agents and
attorneys to sign on behalf of and to affix the seal of the Association shall
be prescribed by the Board of Directors or by the Executive Committee or by
both; provided that the President is authorized to restrict such power of any
officer, employee, agent or attorney to the business of a specific department
or departments, or to a specific branch office or branch offices. Facsimile
signatures may be authorized.
-8-
<PAGE>
ARTICLE IX
STOCK CERTIFICATES AND TRANSFERS
Section 1. Stock Records. The Trust Department shall have custody of the
stock certificate books and stock ledgers of the Association, and shall make
all transfers of stock, issue certificates thereof and disburse dividends
declared thereon.
Section 2. Form of Certificate. Every shareholder shall be entitled to a
certificate conforming to the requirements of law and otherwise in such form
as the Board of Directors may approve. The certificates shall state on the
face thereof that the stock is transferable only on the books of the
Association and shall be signed by such officers as may be prescribed from time
to time by the Board of Directors or Executive Committee. Facsimile signatures
may be authorized.
Section 3. Transfers of Stock. Transfers of stock shall be made only on the
books of the Association by the holder in person, or by attorney duly
authorized in writing, upon surrender of the certificate therefor properly
endorsed, or upon the surrender of such certificate accompanied by a properly
executed written assignment of the same, or a written power of attorney to
sell, assign or transfer the same or the shares represented thereby.
Section 4. Lost Certificate. The Board of Directors or Executive Committee
may order a new certificate to be issued in place of a certificate lost or
destroyed, upon proof of such loss or destruction and upon tender to the
Association by the shareholder, of a bond in such amount and with or without
surety, as may be ordered, indemnifying the Association against all liability,
loss, cost and damage by reason of such loss or destruction and the issuance
of a new certificate.
Section 5. Closing Transfer Books. The Board of Directors may close the
transfer books for a period not exceeding thirty days preceding any regular
or special meeting of the shareholders, or the day designated for the payment
of a dividend or the allotment of rights. In lieu of closing the transfer
books the Board of Directors may fix a day and hour not more than thirty days
prior to the day of holding any meeting of the shareholders, or the day
designated for the payment of a dividend, or the day designated for the
allotment of rights, or the day when any change of conversion or exchange of
capital stock is to go into effect, as the day as of which shareholders
entitled to notice of and to vote at such meetings or entitled to such dividend
or to such allotment of rights or to exercise the rights in respect of any
such change, conversion or exchange of capital stock, shall be determined, and
only such shareholders as shall be shareholders of record on the day and hour
so fixed shall be entitled to notice of and to vote at such meeting or to
receive payment of such dividend or to receive such allotment of rights or to
exercise such rights, as the case may be.
ARTICLE X
THE CORPORATE SEAL
Section 1. Seal. The following is an impression of the seal of the
Association adopted by the Board of Directors.
ARTICLE XI
BUSINESS HOURS
Section 1. Business Hours. The main office of this Association and each
branch office thereof shall be open for business on such days, and for such
hours as the Chairman, or the President, or any Executive Vice President, or
such other officer as the Board of Directors shall from time to time
designate, may determine as to each office to conform to local custom and
convenience, provided that any one or more of the main and branch offices or
certain departments thereof may be open for such hours as the President, or
such other officer as the Board of Directors shall from time to time designate,
may determine as to each office or department on any legal holiday on which
work is not prohibited by law, and provided further that any one or more of
the main and branch offices or certain departments thereof may be ordered
closed or open on any day for such hours as to each office or department as
the President, or such other officer as the Board of Directors shall from time
to time designate, subject to applicable laws regulations, may determine when
such action may be required by reason of disaster or other emergency condition.
ARTICLE IX
CHANGES IN BY-LAWS
Section 1. Amendments. These By-laws may be amended upon vote of a majority
of the entire Board of Directors at any meeting of the Board, provided ten (10)
day's notice of the proposed amendment has been given to each member of the
Board of Directors. No amendment may be made unless the By-law, as amended, is
consistent with the requirements of law and of the Articles of Association.
These By-laws may also be amended by the Association's shareholders.
A true copy
Attest:
Secretary/Assistant Secretary
- ---------------------------------------
Dated at , as of .
--------------------------------------- ----------------------
Revision of January 11, 1993
-9-
<PAGE>
EXHIBIT 5
CONSENT OF THE TRUSTEE
REQUIRED BY SECTION 321(b)
OF THE TRUST INDENTURE ACT OF 1939
The undersigned, as Trustee under the Indenture to be entered into between
Eldorado Resorts LLC and Fleet National Bank, as Trustee,
does hereby consent that, pursuant to Section 321(b) of the Trust Indenture
Act of 1939, reports of examinations with respect to the undersigned by Federal,
State, Territorial or District authorities may be furnished by such authorities
to the Securities and Exchange Commission upon request therefor.
FLEET NATIONAL BANK,
AS TRUSTEE
By /s/ Michael M. Hopkins
-------------------------------
Its: Vice President
Dated:
<PAGE>
Board of Governors of the Federal Reserve System
OMB Number: 7100-0036
Federal Deposit Insurance Corporation
OMB Number: 3064-0052
Office of the Comptroller of the Currency
OMB Number: 1557-0081
Expires March 31, 1999
Federal Financial Institutions Examination Council
- --------------------------------------------------------------------------------
[FEDERAL FINANCIAL Please refer to page i, [1]
INSTITUTIONS EXAMINATION Table of Contents, for
COUNCIL LOGO] the required disclosure
of estimated burden.
- --------------------------------------------------------------------------------
CONSOLIDATED REPORTS OF CONDITION AND INCOME FOR
A BANK WITH DOMESTIC AND FOREIGN OFFICES--FFIEC 031
(960630)
REPORT AT THE CLOSE OF BUSINESS JUNE 30, 1996 -----------
(RCRI 9999)
This report is required by law: 12 U.S.C. Section 324 (State member banks);
12 U.S.C. Section 1817 (State nonmember banks); and 12 U.S.C. Section 161
(National banks).
This report form is to be filed by banks with branches and consolidated
subsidiaries in U.S. territories and possessions, Edge or Agreement
subsidiaries, foreign branches, consolidated foreign subsidiaries, or
International Banking Facilities.
- --------------------------------------------------------------------------------
NOTE: The Reports of Condition and Income must be signed by an authorized
officer and the Report of Condition must be attested to by not less than two
directors (trustees) for State nonmember banks and three directors for State
member and National banks.
I, Giro S. DeRosa, Vice President
-----------------------------------------------------------------------------
Name and Title of Officer Authorized to Sign Report
of the named bank do hereby declare that these Reports of Condition and
Income (including the supporting schedules) have been prepared in conformance
with the instructions issued by the appropriate Federal regulatory authority
and are true to the best of my knowledge and belief.
/s/ Giro DeRosa
- --------------------------------------------------------------------------------
Signature of Officer Authorized to Sign Report
July 25, 1996
- --------------------------------------------------------------------------------
Date of Signature
The Reports of Condition and Income are to be prepared in accordance with
Federal regulatory authority instructions. NOTE: These instructions may in
some cases differ from generally accepted accounting principles.
We, the undersigned directors (trustees), attest to the correctness of this
Report of Condition (including the supporting schedules) and declare that it has
been examined by us and to the best of our knowledge and belief has been
prepared in conformance with the instructions issued by the appropriate Federal
regulatory authority and is true and correct.
/s/
- --------------------------------------------------------------------------------
Director (Trustee)
/s/
- --------------------------------------------------------------------------------
Director (Trustee)
/s/
- --------------------------------------------------------------------------------
Director (Trustee)
- --------------------------------------------------------------------------------
For Banks Submitting Hard Copy Report Forms:
State Member Banks: Return the original and one copy to the appropriate Federal
Reserve District Bank.
State Nonmember Banks: Return the original only in the special return address
envelope provided. If express mail is used in lieu of the special return
address envelope, return the original only to the FDIC, c/o Quality Data
systems, 2127 Espey Court, Suite 204, Crofton, MD 21114.
National Banks: Return the original only in the special return address envelope
provided. If express mail is used in lieu of the special return address
envelope, return the original only to the FDIC, c/o Quality Data Systems, 2127
Espey Court, Suite 204, Crofton, MD 21114.
- --------------------------------------------------------------------------------
FDIC Certificate Number | 0 | 2 | 4 | 9 | 9 | Banks should affix
--------------------- the address label
(RCRI 90150) in this space.
CALL NO. 196 31 06-30-96
STAR: 25-0590 00327 STCERT: 25-02490
FLEET NATIONAL BANK
ONE MONARCH PLACE
SPRINGFIELD, MA 01102
Board of Governors of the Federal Reserve System, Federal Deposit
Insurance Corporation, Office of the Comptroller of the Currency
<PAGE>
FOR BANKS SUBMITTING HARD COPY REPORT FORMS:
STATE MEMBER BANKS: Return the original and one copy to the appropriate Federal
Reserve District Bank.
STATE NONMEMBER BANKS: Return the original only in the special return address
envelope provided. If express mail is used in lieu of the special return address
envelope, return the original only to the FDIC, c/o Quality Data Systems, 2127
Espey Court, Suite 204, Crofton, MD 21114.
NATIONAL BANKS: Return the original only in the special return address envelope
provided. If express mail is used in lieu of the special return address
envelope, return the original only to the FDIC, c/o Quality Data Systems, 2127
Espey Court, Suite 204, Crofton, MD 21114.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
___ ___
FDIC Certificate Number | 0 | 2 | 4 | 9 | 9 | | Banks should affix the address label in this space. |
______________________
(RCRI 9050) CALL NO. 196 31 06-30-96
STBK: 25-0590 00327 STCERT: 25-02499
FLEET NATIONAL BANK
ONE MONARCH PLACE
SPRINGFIELD, MA 01102
|___ ___|
</TABLE>
Board of Governors of the Federal Reserve System, Federal Deposit Insurance
Corporation, Office of the Comptroller of the Currency
<PAGE>
FFIEC 031
Page i
/2/
Consolidated Reports of Condition and Income for
A Bank With Domestic and Foreign Offices
________________________________________________________________________________
TABLE OF CONTENTS
SIGNATURE PAGE Cover
REPORT OF INCOME
Schedule RI--Income Statement...........................................RI-1,2,3
Schedule RI-A--Changes in Equity Capital....................................RI-4
Schedule RI-B--Charge-offs and Recoveries and
Changes in Allowance for Loan and Lease
Losses..................................................................RI-4,5
Schedule RI-C--Applicable Income Taxes by
Taxing Authority..........................................................RI-5
Schedule RI-D--Income from
International Operations..................................................RI-6
Schedule RI-E--Explanations...............................................RI-7,8
REPORT OF CONDITION
Schedule RC--Balance Sheet................................................RC-1,2
Schedule RC-A--Cash and Balances Due
From Depository Institutions..............................................RC-3
Schedule RC-B--Securities...............................................RC-3,4,5
Schedule RC-C--Loans and Lease Financing
Receivables:
Part I. Loans and Leases..............................................RC-6,7
Part II. Loans to Small Businesses and
Small Farms (included in the forms for
June 30 only).....................................................RC-7a,7b
Schedule RC-D--Trading Assets and Liabilities
(to be completed only by selected banks)..................................RC-8
Schedule RC-E--Deposit Liabilities....................................RC-9,10,11
Schedule RC-F--Other Assets................................................RC-11
Schedule RC-G--Other Liabilities...........................................RC-11
Schedule RC-H--Selected Balance Sheet Items for
Domestic Offices.........................................................RC-12
Schedule RC-I--Selected Assets and Liabilities
of IBFs..................................................................RC-13
Schedule RC-K--Quarterly Averages..........................................RC-13
Schedule RC-L--Off-Balance Sheet Items...............................RC-14,15,16
Schedule RC-M--Memoranda................................................RC-17,18
Schedule RC-N--Past Due and Nonaccrual Loans,
Leases, and Other Assets..............................................RC-19,20
Schedule RC-O--Other Data for Deposit
Insurance Assessments.................................................RC-21,22
Schedule RC-R--Regulatory Capital.......................................RC-23,24
Optional Narrative Statement Concerning the
Amounts Reported in the Reports of
Condition and Income.....................................................RC-25
Special Report (TO BE COMPLETED BY ALL BANKS)
Schedule RC-J--Repricing Opportunities (sent only to
and to be completed only by savings banks)
DISCLOSURE OF ESTIMATED BURDEN
The estimated average burden associated with this information collection is
32.2 hours per respondent and is estimated to vary from 15 to 230 hours per
response, depending on individual circumstances. Burden estimates include the
time for reviewing instructions, gathering and maintaining data in the required
form, and completing the information collection, but exclude the time for
compiling and maintaining business records in the normal course of a
respondent's activities. Comments concerning the accuracy of this burden
estimate and suggestions for reducing this burden should be directed to the
Office of Information and Regulatory Affairs, Office of Management and Budget,
Washington, D.C. 20503, and to one of the following:
Secretary
Board of Governors of the Federal Reserve System
Washington, D.C. 20551
Legislative and Regulatory Analysis Division
Office of the Comptroller of the Currency
Washington, D.C. 20219
Assistant Executive Secretary
Federal Deposit Insurance Corporation
Washington, D.C. 20429
For information or assistance, National and State nonmember banks should
contact the FDIC's Call Reports Analysis Unit, 550 17th Street, NW, Washington,
D.C. 20429, toll free on (800) 688-FDIC (3342), Monday through Friday between
8:00 a.m. and 5:00 p.m., Eastern time. State member banks should contact their
Federal Reserve District Bank.
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RI-1
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
Consolidated Report of Income
for the period January 1, 1996 - June 30, 1996
All Report of Income schedules are to be reported on a calendar year-to-date
basis in thousands of dollars.
<TABLE>
<CAPTION>
Schedule RI--Income Statement _________
| I480 |
______________________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
______________________________________________________________________________________________|_____________________|
<S> <C> <C>
1. Interest income: | ////////////////// |
a. Interest and fee income on loans: | ////////////////// |
(1) In domestic offices: | ////////////////// |
(a) Loans secured by real estate .................................................. | 4011 616,395 | 1.a.(1)(a)
(b) Loans to depository institutions .............................................. | 4019 588 | 1.a.(1)(b)
(c) Loans to finance agricultural production and other loans to farmers ........... | 4024 286 | 1.a.(1)(c)
(d) Commercial and industrial loans ............................................... | 4012 562,807 | 1.a.(1)(d)
(e) Acceptances of other banks .................................................... | 4026 261 | 1.a.(1)(e)
(f) Loans to individuals for household, family, and other personal expenditures: | ////////////////// |
(1) Credit cards and related plans ............................................ | 4054 9,643 | 1.a.(1)(f)(1)
(2) Other ..................................................................... | 4055 97,346 | 1.a.(1)(f)(2)
(g) Loans to foreign governments and official institutions ........................ | 4056 0 | 1.a.(1)(g)
(h) Obligations (other than securities and leases) of states and political | ////////////////// |
subdivisions in the U.S.: | ////////////////// |
(1) Taxable obligations ....................................................... | 4503 0 | 1.a.(1)(h)(1)
(2) Tax-exempt obligations .................................................... | 4504 5,232 | 1.a.(1)(h)(2)
(i) All other loans in domestic offices ........................................... | 4058 84,576 | 1.a.(1)(i)
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs ..................... | 4059 1,981 | 1.a.(2)
b. Income from lease financing receivables: | ////////////////// |
(1) Taxable leases .................................................................... | 4505 75,341 | 1.b.(1)
(2) Tax-exempt leases ................................................................. | 4307 791 | 1.b.(2)
c. Interest income on balances due from depository institutions:(1) | ////////////////// |
(1) In domestic offices ............................................................... | 4105 914 | 1.c.(1)
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs ..................... | 4106 142 | 1.c.(2)
d. Interest and dividend income on securities: | ////////////////// |
(1) U.S. Treasury securities and U.S. Government agency and corporation obligations ... | 4027 209,142 | 1.d.(1)
(2) Securities issued by states and political subdivisions in the U.S.: | ////////////////// |
(a) Taxable securities ............................................................ | 4506 0 | 1.d.(2)(a)
(b) Tax-exempt securities ......................................................... | 4507 2,953 | 1.d.(2)(b)
(3) Other domestic debt securities .................................................... | 3657 12,164 | 1.d.(3)
(4) Foreign debt securities ........................................................... | 3658 3,348 | 1.d.(4)
(5) Equity securities (including investments in mutual funds) ......................... | 3659 10,212 | 1.d.(5)
e. Interest income from trading assets.................................................... | 4069 360 | 1.e.
______________________
</TABLE>
____________
(1) Includes interest income on time certificates of deposit not held for
trading.
3
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RI-2
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
Schedule RI--Continued
<TABLE>
<CAPTION>
________________
Dollar Amounts in Thousands | Year-to-date |
___________________________________________________________________________________ ______________
<S> <C> <C>
1. Interest income (continued) | RIAD Bil Mil Thou |
f. Interest income on federal funds sold and securities purchased | ////////////////// |
under agreements to resell in domestic offices of the bank and of | ////////////////// |
its Edge and Agreement subsidiaries, and in IBFs .................... | 4020 24,925 | 1.f.
g. Total interest income (sum of items 1.a through 1.f) ................ | 4107 1,719,407 | 1.g.
2. Interest expense: | ////////////////// |
a. Interest on deposits: | ////////////////// |
(1) Interest on deposits in domestic offices: | ////////////////// |
(a) Transaction accounts (NOW accounts, ATS accounts, and | ////////////////// |
telephone and preauthorized transfer accounts) .............. | 4508 8,583 | 2.a.(1)(a)
(b) Nontransaction accounts: | ////////////////// |
(1) Money market deposit accounts (MMDAs) ................... | 4509 133,915 | 2.a.(1)(b)(1)
(2) Other savings deposits .................................. | 4511 26,678 | 2.a.(1)(b)(2)
(3) Time certificates of deposit of $100,000 or more ........ | 4174 88,690 | 2.a.(1)(b)(3)
(4) All other time deposits ................................. | 4512 214,225 | 2.a.(1)(b)(4)
(2) Interest on deposits in foreign offices, Edge and Agreement | ////////////////// |
subsidiaries, and IBFs .......................................... | 4172 50,022 | 2.a.(2)
b. Expense of federal funds purchased and securities sold under | ////////////////// |
agreements to repurchase in domestic offices of the bank and of | ////////////////// |
its Edge and Agreement subsidiaries, and in IBFs .................... | 4180 152,094 | 2.b.
c. Interest on demand notes issued to the U.S. Treasury, trading | ////////////////// |
liabilities, and other borrowed money ............................... | 4185 121,525 | 2.c.
d. Interest on mortgage indebtedness and obligations under | ////////////////// |
capitalized leases .................................................. | 4072 361 | 2.d.
e. Interest on subordinated notes and debentures ....................... | 4200 26,110 | 2.e.
f. Total interest expense (sum of items 2.a through 2.e) ............... | 4073 822,203 | 2.f.
___________________________
3. Net interest income (item 1.g minus 2.f) ............................... | ////////////////// | RIAD 4074 | 897,204 | 3.
___________________________
4. Provisions: | ////////////////// |
___________________________
a. Provision for loan and lease losses ................................. | ////////////////// | RIAD 4230 | 21,672 | 4.a.
b. Provision for allocated transfer risk ............................... | ////////////////// | RIAD 4243 | 0 | 4.b.
___________________________
5. Noninterest income: | ////////////////// |
a. Income from fiduciary activities .................................... | 4070 144,614 | 5.a.
b. Service charges on deposit accounts in domestic offices ............. | 4080 111,736 | 5.b.
c. Trading revenue (must equal Schedule RI, sum of Memorandum | ////////////////// |
items 8.a through 8.d)............................................... A220 10,646 5.c.
d. Other foreign transaction gains (losses) ............................ | 4076 247 | 5.d.
e. Not applicable | ////////////////// |
f. Other noninterest income: | ////////////////// |
(1) Other fee income ................................................ | 5407 372,950 | 5.f.(1)
(2) All other noninterest income* ................................... | 5408 211,593 | 5.f.(2)
___________________________
g. Total noninterest income (sum of items 5.a through 5.f) ............. | ////////////////// | RIAD 4079 | 851,786 | 5.g.
6. a. Realized gains (losses) on held-to-maturity securities .............. | ////////////////// | RIAD 3521 | 1 | 6.a.
b. Realized gains (losses) on available-for-sale securities ............ | ////////////////// | RIAD 3196 | 16,126 | 6.b.
___________________________
7. Noninterest expense: | ////////////////// |
a. Salaries and employee benefits ...................................... | 4135 322,146 | 7.a.
b. Expenses of premises and fixed assets (net of rental income) | ////////////////// |
(excluding salaries and employee benefits and mortgage interest) .... | 4217 114,912 | 7.b.
c. Other noninterest expense* .......................................... | 4092 631,554 | 7.c.
___________________________
d. Total noninterest expense (sum of items 7.a through 7.c) ............ | ////////////////// | RIAD 4093 | 1,068,612 | 7.d.
___________________________
8. Income (loss) before income taxes and extraordinary items and other | ////////////////// |
___________________________
adjustments (item 3 plus or minus items 4.a, 4.b, 5.g, 6.a, 6.b, and 7.d)| ////////////////// | RIAD 4301 | 674,833 | 8.
9. Applicable income taxes (on item 8) .................................... | ////////////////// | RIAD 4302 | 280,303 | 9.
___________________________
10. Income (loss) before extraordinary items and other adjustments | ////////////////// |
___________________________
(item 8 minus 9) ....................................................... | ////////////////// | RIAD 4300 | 394,530 | 10.
_________________________________________________
</TABLE>
____________
*Describe on Schedule RI-E--Explanations.
4
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RI-3
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
Schedule RI--Continued
<TABLE>
<CAPTION>
________________
| Year-to-date |
______ ______________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
___________________________________________________________________________________ ______________
<S> <C> <C>
11. Extraordinary items and other adjustments: | ////////////////// |
a. Extraordinary items and other adjustments, gross of income taxes* . | 4310 0 | 11.a.
b. Applicable income taxes (on item 11.a)* ........................... | 4315 0 | 11.b.
c. Extraordinary items and other adjustments, net of income taxes | ////////////////// |__________________________
(item 11.a minus 11.b) ............................................ | ////////////////// | RIAD 4320 | 0 | 11.c.
12. Net income (loss) (sum of items 10 and 11.c) ......................... | ////////////////// | RIAD 4340 | 394,530 | 12.
_________________________________________________
<CAPTION>
__________
| I481 |
_______________
Memoranda | Year-to-date |
______ ______________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
______________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Interest expense incurred to carry tax-exempt securities, loans, and leases acquired after | ////////////////// |
August 7, 1986, that is not deductible for federal income tax purposes .......................... | 4513 1,798 | M.1.
2. Income from the sale and servicing of mutual funds and annuities in domestic offices | ////////////////// |
(included in Schedule RI, item 8) ............................................................... | 8431 20,910 | M.2.
3.-4. Not applicable | ////////////////// |
5. Number of full-time equivalent employees on payroll at end of current period (round to | //// Number |
nearest whole number) ........................................................................... | 4150 9,852 | M.5.
6. Not applicable | ////////////////// |
7. If the reporting bank has restated its balance sheet as a result of applying push down | //// MM DD YY |
accounting this calendar year, report the date of the bank's acquisition ........................ | 9106 00/00/00 | M.7.
8. Trading revenue (from cash instruments and off-balance sheet derivative instruments) | ////////////////// |
(sum of Memorandum items 8.a through 8.d must equal Schedule RI, item 5.c): | //// Bil Mil Thou |
a. Interest rate exposures ...................................................................... | 8757 1,428 | M.8.a.
b. Foreign exchange exposures ................................................................... | 8758 9,218 | M.8.b.
c. Equity security and index exposures .......................................................... | 8759 0 | M.8.c.
d. Commodity and other exposures ................................................................ | 8760 0 | M.8.d.
9. Impact on income of off-balance sheet derivatives held for purposes other than trading: | ////////////////// |
a. Net increase (decrease) to interest income.....................................................| 8761 (5,575)| M.9.a.
b. Net (increase) decrease to interest expense ...................................................| 8762 (5,752)| M.9.b.
c. Other (noninterest) allocations ...............................................................| 8763 (172)| M.9.c.
10. Credit losses on off-balance sheet derivatives (see instructions).................................| A251 0 | M.10.
</TABLE>
____________
*Describe on Schedule RI-E--Explanations.
5
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RI-4
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
Schedule RI-A--Changes in Equity Capital
<TABLE>
<CAPTION>
Indicate decreases and losses in parentheses. _________
| I483 |
_____________________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
______________________________________________________________________________________________________|____________________|
<S> <C> <C>
1. Total equity capital originally reported in the December 31, 1995, Reports of Condition | ////////////////// |
and Income ...................................................................................... | 3215 1,342,473 | 1.
2. Equity capital adjustments from amended Reports of Income, net* ................................. | 3216 0 | 2.
3. Amended balance end of previous calendar year (sum of items 1 and 2) ............................ | 3217 1,342,473 | 3.
4. Net income (loss) (must equal Schedule RI, item 12) ............................................. | 4340 394,530 | 4.
5. Sale, conversion, acquisition, or retirement of capital stock, net .............................. | 4346 0 | 5.
6. Changes incident to business combinations, net .................................................. | 4356 4,161,079 | 6.
7. LESS: Cash dividends declared on preferred stock ................................................ | 4470 0 | 7.
8. LESS: Cash dividends declared on common stock ................................................... | 4460 490,634 | 8.
9. Cumulative effect of changes in accounting principles from prior years* (see instructions | ////////////////// |
for this schedule) .............................................................................. | 4411 0 | 9.
10. Corrections of material accounting errors from prior years* (see instructions for this schedule) | 4412 0 | 10.
11. Change in net unrealized holding gains (losses) on available-for-sale securities ................ | 8433 (46,607)| 11.
12. Foreign currency translation adjustments ........................................................ | 4414 0 | 12.
13. Other transactions with parent holding company* (not included in items 5, 7, or 8 above) ........ | 4415 (1,003,722)| 13.
14. Total equity capital end of current period (sum of items 3 through 13) (must equal Schedule RC, | ////////////////// |
item 28) ........................................................................................ | 3210 4,357,119 | 14.
______________________
</TABLE>
____________
*Describe on Schedule RI-E--Explanations.
Schedule RI-B--Charge-offs and Recoveries and Changes
in Allowance for Loan and Lease Losses
Part I. Charge-offs and Recoveries on Loans and Leases
Part I excludes charge-offs and recoveries through
the allocated transfer risk reserve.
<TABLE>
<CAPTION>
__________
| I486 |
__________________________________________
| (Column A) | (Column B) |
| Charge-offs | Recoveries |
____________________ ____________________
| Calendar year-to-date |
_________________________________________
Dollar Amounts in Thousands | RIAD Bil Mil Thou | RIAD Bil Mil Thou |
______________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
1. Loans secured by real estate: | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ......................................... | 4651 35,701 | 4661 8,412 | 1.a.
b. To non-U.S. addressees (domicile) ..................................... | 4652 0 | 4662 0 | 1.b.
2. Loans to depository institutions and acceptances of other banks: | ////////////////// | ////////////////// |
a. To U.S. banks and other U.S. depository institutions .................. | 4653 0 | 4663 0 | 2.a.
b. To foreign banks ...................................................... | 4654 0 | 4664 0 | 2.b.
3. Loans to finance agricultural production and other loans to farmers ...... | 4655 2 | 4665 22 | 3.
4. Commercial and industrial loans: | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ......................................... | 4645 38,139 | 4617 19,005 | 4.a.
b. To non-U.S. addressees (domicile) ..................................... | 4646 0 | 4618 102 | 4.b.
5. Loans to individuals for household, family, and other personal | ////////////////// | ////////////////// |
expenditures: | ////////////////// | ////////////////// |
a. Credit cards and related plans ........................................ | 4656 1,137 | 4666 733 | 5.a.
b. Other (includes single payment, installment, and all student loans) ... | 4657 7,864 | 4667 2,681 | 5.b.
6. Loans to foreign governments and official institutions ................... | 4643 0 | 4627 0 | 6.
7. All other loans .......................................................... | 4644 826 | 4628 541 | 7.
8. Lease financing receivables: | ////////////////// | ////////////////// |
a. Of U.S. addressees (domicile) ......................................... | 4658 3,729 | 4668 3,241 | 8.a.
b. Of non-U.S. addressees (domicile) ..................................... | 4659 0 | 4669 0 | 8.b.
9. Total (sum of items 1 through 8) ......................................... | 4635 87,398 | 4605 34,737 | 9.
___________________________________________
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RI-5
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
Schedule RI-B--Continued
Part I. Continued
Memoranda
<TABLE>
<CAPTION>
__________________________________________
| (Column A) | (Column B) |
| Charge-offs | Recoveries |
____________________ ____________________
| Calendar year-to-date |
_________________________________________
Dollar Amounts in Thousands | RIAD Bil Mil Thou | RIAD Bil Mil Thou |
______________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
1-3. Not applicable | ////////////////// | ////////////////// |
4. Loans to finance commercial real estate, construction, and land | ////////////////// | ////////////////// |
development activities (not secured by real estate) included in | ////////////////// | ////////////////// |
Schedule RI-B, part I, items 4 and 7, above .............................. | 5409 383 | 5410 1,374 | M.4.
5. Loans secured by real estate in domestic offices (included in | ////////////////// | ////////////////// |
Schedule RI-B, part I, item 1, above): | ////////////////// | ////////////////// |
a. Construction and land development ..................................... | 3582 189 | 3583 253 | M.5.a.
b. Secured by farmland ................................................... | 3584 145 | 3585 131 | M.5.b.
c. Secured by 1-4 family residential properties: | ////////////////// | ////////////////// |
(1) Revolving, open-end loans secured by 1-4 family residential | ////////////////// | ////////////////// |
properties and extended under lines of credit ..................... | 5411 2,650 | 5412 108 | M.5.c.(1)
(2) All other loans secured by 1-4 family residential properties ...... | 5413 13,892 | 5414 1,231 | M.5.c.(2)
d. Secured by multifamily (5 or more) residential properties ............. | 3588 837 | 3589 395 | M.5.d.
e. Secured by nonfarm nonresidential properties .......................... | 3590 17,988 | 3591 6,294 | M.5.e.
|_________________________________________|
</TABLE>
Part II. Changes in Allowance for Loan and Lease Losses
<TABLE>
<CAPTION>
_____________________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
___________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Balance originally reported in the December 31, 1995, Reports of Condition and Income.......... | 3124 266,943 | 1.
2. Recoveries (must equal part I, item 9, column B above) ........................................ | 4605 34,737 | 2.
3. LESS: Charge-offs (must equal part I, item 9, column A above) ................................. | 4635 87,398 | 3.
4. Provision for loan and lease losses (must equal Schedule RI, item 4.a)......................... | 4230 21,672 | 4.
5. Adjustments* (see instructions for this schedule) ................................ ............ | 4815 636,497 | 5.
6. Balance end of current period (sum of items 1 through 5) (must equal Schedule RC, | ////////////////// |
item 4.b) ..................................................................................... | 3123 872,451 | 6.
|____________________|
</TABLE>
____________
*Describe on Schedule RI-E--Explanations.
Schedule RI-C--Applicable Income Taxes by Taxing Authority
Schedule RI-C is to be reported with the December Report of Income.
<TABLE>
<CAPTION>
| I489 | -
____________ ________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
___________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Federal ....................................................................................... | 4780 N/A | 1.
2. State and local................................................................................ | 4790 N/A | 2.
3. Foreign ....................................................................................... | 4795 N/A | 3.
4. Total (sum of items 1 through 3) (must equal sum of Schedule RI, items 9 and 11.b) ............ | 4770 N/A | 4.
____________________________| |
5. Deferred portion of item 4 ........................................ | RIAD 4772 | N/A | ////////////////// | 5.
__________________________________________________
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: Fleet National Bank Call Date: 6/30/96 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RI-6
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
Schedule RI-D--Income from International Operations
For all banks with foreign offices, Edge or Agreement subsidiaries, or IBFs
where international operations account for more than 10 percent of total
revenues, total assets, or net income.
Part I. Estimated Income from International Operations
<TABLE>
<CAPTION>
__________
| I492 | -
______ ________
| Year-to-date |
______ ______________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
_________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Interest income and expense booked at foreign offices, Edge and Agreement subsidiaries, | ////////////////// |
and IBFs: | ////////////////// |
a. Interest income booked ................................................................... | 4837 N/A | 1.a.
b. Interest expense booked .................................................................. | 4838 N/A | 1.b.
c. Net interest income booked at foreign offices, Edge and Agreement subsidiaries, and IBFs | ////////////////// |
(item 1.a minus 1.b) ..................................................................... | 4839 N/A | 1.c.
2. Adjustments for booking location of international operations: | ////////////////// |
a. Net interest income attributable to international operations booked at domestic offices .. | 4840 N/A | 2.a.
b. Net interest income attributable to domestic business booked at foreign offices .......... | 4841 N/A | 2.b.
c. Net booking location adjustment (item 2.a minus 2.b) ..................................... | 4842 N/A | 2.c.
3. Noninterest income and expense attributable to international operations: | ////////////////// |
a. Noninterest income attributable to international operations .............................. | 4097 N/A | 3.a.
b. Provision for loan and lease losses attributable to international operations ............. | 4235 N/A | 3.b.
c. Other noninterest expense attributable to international operations ....................... | 4239 N/A | 3.c.
d. Net noninterest income (expense) attributable to international operations (item 3.a | ////////////////// |
minus 3.b and 3.c) ....................................................................... | 4843 N/A | 3.d.
4. Estimated pretax income attributable to international operations before capital allocation | ////////////////// |
adjustment (sum of items 1.c, 2.c, and 3.d) ................................................. | 4844 N/A | 4.
5. Adjustment to pretax income for internal allocations to international operations to reflect | ////////////////// |
the effects of equity capital on overall bank funding costs ................................. | 4845 N/A | 5.
6. Estimated pretax income attributable to international operations after capital allocation | ////////////////// |
adjustment (sum of items 4 and 5) ........................................................... | 4846 N/A | 6.
7. Income taxes attributable to income from international operations as estimated in item 6 .... | 4797 N/A | 7.
8. Estimated net income attributable to international operations (item 6 minus 7) .............. | 4341 N/A | 8.
______________________
<CAPTION>
Memoranda ______________________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
_________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Intracompany interest income included in item 1.a above ..................................... | 4847 N/A | M.1.
2. Intracompany interest expense included in item 1.b above .................................... | 4848 N/A | M.2.
______________________
</TABLE>
Part II. Supplementary Details on Income from International Operations Required
by the Departments of Commerce and Treasury for Purposes of the U.S.
International Accounts and the U.S. National Income and Product Accounts
<TABLE>
<CAPTION>
________________
| Year-to-date |
______ ______________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
_________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Interest income booked at IBFs .............................................................. | 4849 N/A | 1.
2. Interest expense booked at IBFs ............................................................. | 4850 N/A | 2.
3. Noninterest income attributable to international operations booked at domestic offices | ////////////////// |
(excluding IBFs): | ////////////////// |
a. Gains (losses) and extraordinary items ................................................... | 5491 N/A | 3.a.
b. Fees and other noninterest income ........................................................ | 5492 N/A | 3.b.
4. Provision for loan and lease losses attributable to international operations booked at | ////////////////// |
domestic offices (excluding IBFs) ........................................................... | 4852 N/A | 4.
5. Other noninterest expense attributable to international operations booked at domestic offices | ////////////////// |
(excluding IBFs) ............................................................................ | 4853 N/A | 5.
______________________
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: Fleet National Bank Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RI-7
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
Schedule RI-E--Explanations
Schedule RI-E is to be completed each quarter on a calendar year-to-date basis.
Detail all adjustments in Schedules RI-A and RI-B, all extraordinary items and
other adjustments in Schedule RI, and all significant items of other noninterest
income and other noninterest expense in Schedule RI. (See instructions for
details.)
<TABLE>
<CAPTION>
__________
| I495 | -
______ ________
| Year-to-date |
______ ______________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. All other noninterest income (from Schedule RI, item 5.f.(2)) | ////////////////// |
Report amounts that exceed 10% of Schedule RI, item 5.f.(2): | ////////////////// |
a. Net gains on other real estate owned ..................................................... | 5415 0 | 1.a.
b. Net gains on sales of loans .............................................................. | 5416 0 | 1.b.
c. Net gains on sales of premises and fixed assets .......................................... | 5417 0 | 1.c.
Itemize and describe the three largest other amounts that exceed 10% of | ////////////////// |
Schedule RI, item 5.f.(2): | ////////////////// |
_____________
d. | TEXT 4461 | Income on Mortgages Held for Resale | 4461 81,194 | 1.d.
e. | TEXT 4462 | Gain From Branch Divestitures | 4462 77,976 | 1.e.
___________
f. | TEXT 4463 |______________________________________________________________________________| 4463 | 1.f.
_____________
2. Other noninterest expense (from Schedule RI, item 7.c): | ////////////////// |
a. Amortization expense of intangible assets ................................................ | 4531 135,939 | 2.a.
Report amounts that exceed 10% of Schedule RI, item 7.c: | ////////////////// |
b. Net losses on other real estate owned .................................................... | 5418 0 | 2.b.
c. Net losses on sales of loans ............................................................. | 5419 0 | 2.c.
d. Net losses on sales of premises and fixed assets ......................................... | 5420 0 | 2.d.
Itemize and describe the three largest other amounts that exceed 10% of | ////////////////// |
Schedule RI, item 7.c: | ////////////////// |
_____________
e. | TEXT 4464 | Intercompany Corporate Support Function Charges | 4464 143,184 | 2.e.
___________
f. | TEXT 4467 | Intercompany Data Processing & Programming Charges | 4467 158,034 | 2.f.
___________
g. | TEXT 4468 |______________________________________________________________________________| 4468 | 2.g.
_____________
3. Extraordinary items and other adjustments (from Schedule RI, item 11.a) and | ////////////////// |
applicable income tax effect (from Schedule RI, item 11.b) (itemize and describe | ////////////////// |
all extraordinary items and other adjustments): | ////////////////// |
_____________
a. (1) | TEXT 4469 |__________________________________________________________________________| 4469 | 3.a.(1)
_____________
(2) Applicable income tax effect | RIAD 4486 | | ////////////////// | 3.a.(2)
_____________ ____________________________
b. (1) | TEXT 4487 |__________________________________________________________________________| 4487 | 3.b.(1)
_____________
(2) Applicable income tax effect | RIAD 4488 | | ////////////////// | 3.b.(2)
_____________ ____________________________
c. (1) | TEXT 4489 |__________________________________________________________________________| 4489 | 3.c.(1)
_____________
(2) Applicable income tax effect | RIAD 4491 | | ////////////////// | 3.c.(2)
____________________________
4. Equity capital adjustments from amended Reports of Income (from Schedule RI-A, | ////////////////// |
item 2) (itemize and describe all adjustments): | ////////////////// |
_____________
a. | TEXT 4492 |______________________________________________________________________________| 4492 | 4.a.
___________
b. | TEXT 4493 |______________________________________________________________________________| 4493 | 4.b.
_____________
5. Cumulative effect of changes in accounting principles from prior years (from | ////////////////// |
Schedule RI-A, item 9) (itemize and describe all changes in accounting principles): | ////////////////// |
_____________
a. | TEXT 4494 |______________________________________________________________________________| 4494 | 5.a.
___________
b. | TEXT 4495 |______________________________________________________________________________| 4495 | 5.b.
_____________
6. Corrections of material accounting errors from prior years (from Schedule RI-A, | ////////////////// |
item 10) (itemize and describe all corrections): | ////////////////// |
_____________
a. | TEXT 4496 | 4496 | 6.a.
___________|______________________________________________________________________________
b. | TEXT 4497 4497 | 6.b.
____________|____________________________________________________________________________________________________
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: Fleet National Bank Call Date: 6/30/96 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RI-8
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
Schedule RI-E--Continued
<TABLE>
<CAPTION>
________________
| Year-to-date |
______ ______________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
<S> <C> <C>
7. Other transactions with parent holding company (from Schedule RI-A, item 13) | ////////////////// |
(itemize and describe all such transactions): | ////////////////// |
_____________
a. | TEXT 4498 | Fleet National Bank Surplus Distribution to FFG | 4498 (1,003,722) | 7.a.
__________________________________________________________________________________________| |
b. | TEXT 4499 | | 4499 | 7.b.
___________________________________________________________________________________________
8. Adjustments to allowance for loan and lease losses (from Schedule RI-B, part II, | ////////////////// |
item 5) (itemize and describe all adjustments): | ////////////////// |
_____________ | |
a. | TEXT 4521 | 12/31/95 Ending Balance of Pooled Entities | 4521 | 8.a.
___________________________________________________________________________________________| |
b. | TEXT 4522 | | 4522 | 8.b.
___________________________________________________________________________________________| |
____________________
9. Other explanations (the space below is provided for the bank to briefly describe, | I498 | I499 | -
______________________
at its option, any other significant items affecting the Report of Income):
___
No comment |X| (RIAD 4769)
___
Other explanations (please type or print clearly):
(TEXT 4769)
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: Fleet National Bank Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RC-1
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
Consolidated Report of Condition for Insured Commercial
and State-Chartered Savings Banks for June 30, 1996
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of the
quarter.
Schedule RC--Balance Sheet
<TABLE>
<CAPTION> __________
| C400 | -
____________ ________
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
<S> <C> <C>
ASSETS | ////////////////// |
1. Cash and balances due from depository institutions (from Schedule RC-A): | ////////////////// |
a. Noninterest-bearing balances and currency and coin(1) ................................... | 0081 4,130,928 | 1.a.
b. Interest-bearing balances(2) ............................................................ | 0071 46,521 | 1.b.
2. Securities: | ////////////////// |
a. Held-to-maturity securities (from Schedule RC-B, column A) .............................. | 1754 257,441 | 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D) ............................ | 1773 7,250,067 | 2.b.
3. Federal funds sold and securities purchased under agreements to resell in domestic offices | ////////////////// |
of the bank and of its Edge and Agreement subsidiaries, and in IBFs: | ////////////////// |
a. Federal funds sold ...................................................................... | 0276 17,428 | 3.a.
b. Securities purchased under agreements to resell ......................................... | 0277 0 | 3.b.
4. Loans and lease financing receivables: ____________________________| ////////////////// |
a. Loans and leases, net of unearned income (from Schedule RC-C) | RCFD 2122 | 31,278,251 | ////////////////// | 4.a.
b. LESS: Allowance for loan and lease losses ................... | RCFD 3123 | 872,451 | ////////////////// | 4.b.
c. LESS: Allocated transfer risk reserve ....................... | RCFD 3128 | 0 | ////////////////// | 4.c.
____________________________
d. Loans and leases, net of unearned income, | ////////////////// |
allowance, and reserve (item 4.a minus 4.b and 4.c) ..................................... | 2125 30,405,800 | 4.d.
5. Trading assets (from schedule RC-D )........................................................ | 3545 71,354 | 5.
6. Premises and fixed assets (including capitalized leases) ................................... | 2145 534,844 | 6.
7. Other real estate owned (from Schedule RC-M) ............................................... | 2150 34,546 | 7.
8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M) ... | 2130 0 | 8.
9. Customers' liability to this bank on acceptances outstanding ............................... | 2155 16,634 | 9.
10. Intangible assets (from Schedule RC-M) ..................................................... | 2143 2,283,414 | 10.
11. Other assets (from Schedule RC-F) .......................................................... | 2160 3,978,638 | 11.
12. Total assets (sum of items 1 through 11) ................................................... | 2170 49,027,615 | 12.
______________________
</TABLE>
____________
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
11
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-2
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
Schedule RC--Continued
<TABLE>
<CAPTION> ___________________________
Dollar Amounts in Thousands | ///////// Bil Mil Thou |
_______________________________________________________________________________________________ _________________________
<S> <C> <C>
LIABILITIES | /////////////////////// |
13. Deposits: | /////////////////////// |
a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, | /////////////////////// |
part I) ............................................................................... | RCON 2200 34,110,580 | 13.a.
____________________________
(1) Noninterest-bearing(1) ................................ | RCON 6631 10,202,036 | /////////////////////// | 13.a.(1)
(2) Interest-bearing ...................................... | RCON 6636 23,908,544 | /////////////////////// | 13.a.(2)
____________________________
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E, | /////////////////////// |
part II) .............................................................................. | RCFN 2200 1,745,663 | 13.b.
____________________________
(1) Noninterest-bearing ................................... | RCFN 6631 400 | /////////////////////// | 13.b.(1)
(2) Interest-bearing ...................................... | RCFN 6636 1,745,263 | /////////////////////// | 13.b.(2)
____________________________
14. Federal funds purchased and securities sold under agreements to repurchase in domestic | /////////////////////// |
offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs: | /////////////////////// |
a. Federal funds purchased ............................................................... | RCFD 0278 4,302,800 | 14.a.
b. Securities sold under agreements to repurchase ........................................ | RCFD 0279 566,036 | 14.b.
15. a. Demand notes issued to the U.S. Treasury .............................................. | RCON 2840 14,411 | 15.a.
b. Trading liabilities (from Schedule RC-D) .............................................. | RCFD 3548 57,446 | 15.b.
16. Other borrowed money: | /////////////////////// |
a. With a remaining maturity of one year or less.......................................... | RCFD 2332 487,435 | 16.a.
b. With a remaining maturity of more than one year........................................ | RCFD 2333 893,259 | 16.b.
17. Mortgage indebtedness and obligations under capitalized leases ........................... | RCFD 2910 11,561 | 17.
18. Bank's liability on acceptances executed and outstanding ................................. | RCFD 2920 16,634 | 18.
19. Subordinated notes and debentures ........................................................ | RCFD 3200 1,213,219 | 19.
20. Other liabilities (from Schedule RC-G) ................................................... | RCFD 2930 1,251,452 | 20.
21. Total liabilities (sum of items 13 through 20) ........................................... | RCFD 2948 44,670,496 | 21.
| /////////////////////// |
22. Limited-life preferred stock and related surplus ......................................... | RCFD 3282 0 | 22.
EQUITY CAPITAL | /////////////////////// |
23. Perpetual preferred stock and related surplus ............................................ | RCFD 3838 125,000 | 23.
24. Common stock ............................................................................. | RCFD 3230 19,487 | 24.
25. Surplus (exclude all surplus related to preferred stock).................................. | RCFD 3839 2,551,927 | 25.
26. a. Undivided profits and capital reserves ................................................ | RCFD 3632 1,693,408 | 26.a.
b. Net unrealized holding gains (losses) on available-for-sale securities ................ | RCFD 8434 (32,703)| 26.b.
27. Cumulative foreign currency translation adjustments ...................................... | RCFD 3284 0 | 27.
28. Total equity capital (sum of items 23 through 27) ........................................ | RCFD 3210 4,357,119 | 28.
29. Total liabilities, limited-life preferred stock, and equity capital (sum of items 21, 22, | /////////////////////// |
and 28) .................................................................................. | RCFD 3300 49,027,615 | 29.
___________________________
</TABLE>
Memorandum
To be reported only with the March Report of Condition.
<TABLE>
<CAPTION>
1. Indicate in the box at the right the number of the statement below that best describes the Number
most comprehensive level of auditing work performed for the bank by independent external __________________
auditors as of any date during 1995 ............................................................... | RCFD 6724 N/A | M.1.
__________________
<S> <C>
1 = Independent audit of the bank conducted in accordance 4 = Directors' examination of the bank performed by other
with generally accepted auditing standards by a certified external auditors (may be required by state chartering
public accounting firm which submits a report on the bank authority)
2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by external
conducted in accordance with generally accepted auditing auditors
standards by a certified public accounting firm which 6 = Compilation of the bank's financial statements by external
submits a report on the consolidated holding company auditors
(but not on the bank separately) 7 = Other audit procedures (excluding tax preparation work)
3 = Directors' examination of the bank conducted in 8 = No external audit work
accordance with generally accepted auditing standards
by a certified public accounting firm (may be required by
state chartering authority)
</TABLE>
____________
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
12
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-3
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
Schedule RC-A--Cash and Balances Due From Depository Institutions
Exclude assets held for trading.
<TABLE>
<CAPTION>
__________
| C405 | -
_________________________________ ________
| (Column A) | (Column B) |
| Consolidated | Domestic |
| Bank | Offices |
____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCON Bil Mil Thou |
_____________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
1. Cash items in process of collection, unposted debits, and currency and | ////////////////// | ////////////////// |
coin .................................................................... | 0022 3,402,522 | ////////////////// | 1.
a. Cash items in process of collection and unposted debits .............. | ////////////////// | 0020 2,655,163 | 1.a.
b. Currency and coin .................................................... | ////////////////// | 0080 747,539 | 1.b.
2. Balances due from depository institutions in the U.S. ................... | ////////////////// | 0082 500,301 | 2.
a. U.S. branches and agencies of foreign banks (including their IBFs) ... | 0083 0 | ////////////////// | 2.a.
b. Other commercial banks in the U.S. and other depository institutions | ////////////////// | ////////////////// |
in the U.S. (including their IBFs) ................................... | 0085 500,373 | ////////////////// | 2.b.
3. Balances due from banks in foreign countries and foreign central banks .. | ////////////////// | 0070 7,902 | 3.
a. Foreign branches of other U.S. banks ................................. | 0073 690 | ////////////////// | 3.a.
b. Other banks in foreign countries and foreign central banks ........... | 0074 7,948 | ////////////////// | 3.b.
4. Balances due from Federal Reserve Banks ................................. | 0090 265,916 | 0090 0 | 4.
5. Total (sum of items 1 through 4) (total of column A must equal | ////////////////// | ////////////////// |
Schedule RC, sum of items 1.a and 1.b) .................................. | 0010 4,177,449 | 0010 4,176,641 | 5.
___________________________________________
<CAPTION>
______________________
Memorandum Dollar Amounts in Thousands | RCON Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Noninterest-bearing balances due from commercial banks in the U.S. (included in item 2, | ////////////////// |
column B above) .............................................................................. | 0050 453,780 | M.1.
______________________
</TABLE>
Schedule RC-B--Securities
Exclude assets held for trading.
<TABLE>
<CAPTION>
_______
| C410 | -
___________________________________________________________________________ ________
| Held-to-maturity | Available-for-sale |
_________________________________________ _________________________________________
| (Column A) | (Column B) | (Column C) | (Column D) |
| Amortized Cost | Fair Value | Amortized Cost | Fair Value(1) |
____________________ ____________________ ____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
______________________________________ ____________________ ____________________ ____________________ ____________________
<S> <C> <C> <C> <C> <C>
1. U.S. Treasury securities ......... | 0211 250 | 0213 250 | 1286 1,274,624 | 1287 1,252,546 | 1.
2. U.S. Government agency | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
and corporation obligations | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
(exclude mortgage-backed | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
securities): | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
a. Issued by U.S. Govern- | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
ment agencies(2) .............. | 1289 0 | 1290 0 | 1291 0 | 1293 0 | 2.a.
b. Issued by U.S. | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
Government-sponsored | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
agencies(3) ................... | 1294 0 | 1295 0 | 1297 498 | 1298 505 | 2.b.
_____________________________________________________________________________________
</TABLE>
_____________
(1) Includes equity securities without readily determinable fair values at
historical cost in item 6.c, column D.
(2) Includes Small Business Administration "Guaranteed Loan Pool Certificates,"
U.S. Maritime Administration obligations, and Export-Import Bank
participation certificates.
(3) Includes obligations (other than mortgage-backed securities) issued by the
Farm Credit System, the Federal Home Loan Bank System, the Federal Home
Loan Mortgage Corporation, the Federal National Mortgage Association, the
Financing Corporation, Resolution Funding Corporation, the Student Loan
Marketing Association, and the Tennessee Valley Authority.
13
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-4
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
Schedule RC-B--Continued
<TABLE>
<CAPTION>
_____________________________________________________________________________________
| Held-to-maturity | Available-for-sale |
_________________________________________ _________________________________________
| (Column A) | (Column B) | (Column C) | (Column D) |
| Amortized Cost | Fair Value | Amortized Cost | Fair Value(1) |
____________________ ____________________ ____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
____________________________________ ____________________ ____________________ ____________________ ____________________
<S> <C> <C> <C> <C>
3. Securities issued by states | ////////////////// |/ //////////////// | ////////////////// | ///////////////// |
and political subdivisions | ////////////////// |////////////////// | ////////////////// | ///////////////// |
in the U.S.: | ////////////////// |////////////////// | ////////////////// | ///////////////// |
a. General obligations ......... | 1676 150,357 |1677 150,242 | 1678 0 | 1679 0 | 3.a.
b. Revenue obligations ......... | 1681 8,887 |1686 8,889 | 1690 0 | 1691 0 | 3.b.
c. Industrial development | ////////////////// |////////////////// | ////////////////// | ///////////////// |
and similiar obligations .....| 1694 0 |1695 0 | 1696 0 | 1697 0 | 3.c.
4. Mortgage-backed | ////////////////// |////////////////// | ////////////////// | ///////////////// |
securities (MBS): | ////////////////// |////////////////// | ////////////////// | ///////////////// |
a. Pass-through securities: | ////////////////// |////////////////// | ////////////////// | ///////////////// |
(1) Guaranteed by | ////////////////// |////////////////// | ////////////////// | ///////////////// |
GNMA ....................... | 1698 0 |1699 0 | 1701 861,176 | 1702 852,929 | 4.a.(1)
(2) Issued by FNMA | ////////////////// |////////////////// | ////////////////// | ///////////////// |
and FHLMC ................. | 1703 908 |1705 908 | 1706 4,854,605 | 1707 4,831,023 | 4.a.(2)
(3) Other pass-through | ////////////////// |////////////////// | ///////////////////| ///////////////// |
secruities ................. | 1709 4 |1710 4 | 1711 0 | 1713 0 | 4.a.(3)
b. Other mortgage-backed | ////////////////// |////////////////// | ////////////////// | ///////////////// |
securities (include CMO's, | ////////////////// |////////////////// | ////////////////// | ///////////////// |
REMICs, and stripped | ////////////////// |////////////////// | ////////////////// | ///////////////// |
MBS): | ////////////////// |////////////////// | ////////////////// | ///////////////// |
(1) Issued or guaranteed | ////////////////// |////////////////// | ////////////////// | ///////////////// |
by FNMA, FHLMC, | ////////////////// |////////////////// | ////////////////// | ///////////////// |
or GNMA ............... | 1714 0 |1715 0 | 1716 0 | 1717 0 | 4.b.(1)
(2) Collateralized | ////////////////// |////////////////// | ////////////////// | ///////////////// |
by MBS issued or | ////////////////// |////////////////// | ////////////////// | ///////////////// |
guaranteed by FNMA, | ////////////////// |////////////////// | ////////////////// | ///////////////// |
FHLMC, or GNMA ........ | 1718 0 |1719 0 | 1731 0 | 1732 0 | 4.b.(2)
(3) All other mortgage- | ////////////////// |////////////////// | ////////////////// | //////////////// |
backed securities ..... | 1733 0 |1734 0 | 1735 518 | 1736 518 | 4.b.(3)
5. Other debt securities: | ////////////////// |////////////////// | ////////////////// | ///////////////// |
a. Other domestic debt | ////////////////// |////////////////// | ////////////////// | ///////////////// |
securities.................. | 1737 0 |1738 0 | 1739 817 | 1741 812 | 5.a.
b. Foreign debt | ////////////////// |////////////////// | ////////////////// | ///////////////// |
securities ................. | 1742 97,035 |1743 78,878 | 1744 0 | 1746 0 | 5.b.
6. Equity securities: | ////////////////// |////////////////// | ////////////////// | ///////////////// |
a. Investments in mutual | ////////////////// |////////////////// | ////////////////// | ///////////////// |
funds ...................... | ////////////////// |////////////////// | 1747 0 | 1748 0 | 6.a.
b. Other equity securities | ////////////////// |////////////////// | ////////////////// | ///////////////// |
with readily determin- | ////////////////// |////////////////// | ////////////////// | ///////////////// |
able fair values ........... | ////////////////// |////////////////// | 1749 0 | 1751 0 | 6.b.
c. All other equity | ////////////////// |////////////////// | ////////////////// | ///////////////// |
securities (1) ............. | ////////////////// |////////////////// | 1752 311,734 | 1753 311,734 | 6.c.
7. Total (sum of items 1 | ////////////////// |////////////////// | ////////////////// | ///////////////// |
through 6) (total of | ////////////////// |////////////////// | ////////////////// | ///////////////// |
column A must equal | ////////////////// |////////////////// | ////////////////// | ///////////////// |
Schedule RC, item 2.a) | ////////////////// |////////////////// | ////////////////// | ///////////////// |
(total of column D must | ////////////////// |////////////////// | ////////////////// | ///////////////// |
equal Schedule RC, | ////////////////// |////////////////// | ////////////////// | ///////////////// |
item 2.b) ..................... | 1754 257,441 | 1771 239,171 | 1772 7,303,972 | 1773 7,250,067 | 7.
|__________________________________________________________________________________|
</TABLE>
____________
1) Includes equity securities without readily determinable fair values at
historical cost in item 6.c, column D.
14
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-5
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
Schedule RC-B--Continued
<TABLE>
<CAPTION>
___________
Memoranda | C412 | -
___________ _________
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Pledged securities(2) ......................................................................... | 0416 2,308,912 | M.1.
2. Maturity and repricing data for debt securities(2),(3),(4) (excluding those in | ////////////////// |
nonaccrual status): | ////////////////// |
a. Fixed rate debt securities with a remaining maturity of: | ////////////////// |
(1) Three months or less ................................................................... | 0343 72,490 | M.2.a.(1)
(2) Over three months through 12 months .................................................... | 0344 77,125 | M.2.a.(2)
(3) Over one year through five years ....................................................... | 0345 2,734,577 | M.2.a.(3)
(4) Over five years ........................................................................ | 0346 2,925,207 | M.2.a.(4)
(5) Total fixed rate debt securities (sum of Memorandum items 2.a.(1) through 2.a.(4)) ..... | 0347 5,809,399 | M.2.a.(5)
b. Floating rate debt securities with a repricing frequency of: | ////////////////// |
(1) Quarterly or more frequently ........................................................... | 4544 531,365 | M.2.b.(1)
(2) Annually or more frequently, but less frequently than quarterly ........................ | 4545 855,010 | M.2.b.(2)
(3) Every five years or more frequently, but less frequently than annually ................. | 4551 0 | M.2.b.(3)
(4) Less frequently than every five years .................................................. | 4552 0 | M.2.b.(4)
(5) Total floating rate debt securities (sum of Memorandum items 2.b.(1) through 2.b.(4)) .. | 4553 1,386,375 | M.2.b.(5)
c. Total debt securities (sum of Memorandum items 2.a.(5) and 2.b.(5)) (must equal total debt | ////////////////// |
securities from Schedule RC-B, sum of items 1 through 5, columns A and D, minus nonaccrual | ////////////////// |
debt securities included in Schedule RC-N, item 9, column C) ............................... | 0393 7,195,774 | M.2.c.
3. Not applicable | ////////////////// |
4. Held-to-maturity debt securities restructured and in compliance with modified terms (included | ////////////////// |
in Schedule RC-B, items 3 through 5, column A, above) ......................................... | 5365 0 | M.4.
5. Not applicable | ////////////////// |
6. Floating rate debt securities with a remaining maturity of one year or less(2),(4) (included in | ////////////////// |
Memorandum items 2.b(1) through 2.b.(4) above)................................................. | 5519 3,700 | M.6.
7. Amortized cost of held-to-maturity securities sold or transferred to available-for-sale or | ////////////////// |
trading securities during the calendar year-to-date (report the amortized cost at date of sale | ////////////////// |
or transfer ................................................................................... | 1778 0 | m.7.
8. High-risk mortgage securities (included in the held-to-maturity and available-for-sale | ////////////////// |
accounts in Schedule RC-B, item 4.b): | ////////////////// |
a. Amortized cost ............................................................................. | 8780 0 | M.8.a.
b. Fair Value ................................................................................. | 8781 0 | M.8.b.
9. Structured notes (included in the held-to-maturity and available-for-sale accounts in | ////////////////// |
Schedule RC-B, items 2, 3, and 5): | ////////////////// |
a. Amortized cost ............................................................................. | 8782 0 | M.9.a.
b. Fair Value ................................................................................. | 8783 0 | M.9.b.
----------------------
</TABLE>
____________
(2) Includes held-to-maturity securities at amortized cost and
available-for-sale securities at fair value.
(3) Exclude equity securities, e.g., investments in mutual funds, Federal
Reserve stock, common stock, and preferred stock.
(4) Memorandum items 2 and 6 are not applicable to savings banks that must
complete supplemental Schedule RC-J.
15
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 6/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-6
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
Schedule RC-C--Loans and Lease Financing Receivables
Part I. Loans and Leases
<TABLE>
<CAPTION>
_________
Do not deduct the allowance for loan and lease losses from amounts | C415 | -
reported in this schedule. Report total loans and leases, net of unearned _________________________________|________|
income. Exclude assets held for trading. | (Column A) | (Column B) |
| Consolidated | Domestic |
| Bank | Offices |
____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCON Bil Mil Thou |
_____________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
1. Loans secured by real estate ........................................... | 1410 11,754,916 | ////////////////// | 1.
a. Construction and land development ................................... | ////////////////// | 1415 433,880 | 1.a.
b. Secured by farmland (including farm residential and other | ////////////////// | ////////////////// |
improvements) ....................................................... | ////////////////// | 1420 2,172 | 1.b
c. Secured by 1-4 family residential properties: | ////////////////// | ////////////////// |
(1) Revolving, open-end loans secured by 1-4 family residential | ////////////////// | ////////////////// |
properties and extended under lines of credit ................... | ////////////////// | 1797 2,022,596 | 1.c.(1)
(2) All other loans secured by 1-4 family residential properties: | ////////////////// | ////////////////// |
(a) Secured by first liens ...................................... | ////////////////// | 5367 4,418,239 | 1.c.(2)(a)
(b) Secured by junior liens ..................................... | ////////////////// | 5368 492,952 | 1.c.(2)(b)
d. Secured by multifamily (5 or more) residential properties ........... | ////////////////// | 1460 559,373 | 1.d.
e. Secured by nonfarm nonresidential properties ........................ | ////////////////// | 1480 3,825,704 | 1.e.
2. Loans to depository institutions: | ////////////////// | ////////////////// |
a. To commercial banks in the U.S. ..................................... | ////////////////// | 1505 143,682 | 2.a.
(1) To U.S. branches and agencies of foreign banks .................. | 1506 0 | ////////////////// | 2.a.(1)
(2) To other commercial banks in the U.S. ........................... | 1507 143,682 | ////////////////// | 2.a.(2)
b. To other depository institutions in the U.S. ........................ | 1517 0 | 1517 12,345 | 2.b.
c. To banks in foreign countries ....................................... | ////////////////// | 1510 672 | 2.c.
(1) To foreign branches of other U.S. banks ......................... | 1513 149 | ////////////////// | 2.c.(1)
(2) To other banks in foreign countries ............................. | 1516 523 | ////////////////// | 2.c.(2)
3. Loans to finance agricultural production and other loans to farmers .... | 1590 5,889 | 1590 5,889 | 3.
4. Commercial and industrial loans: | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ....................................... | 1763 12,446,547 | 1763 12,402,858 | 4.a.
b. To non-U.S. addressees (domicile) ................................... | 1764 83,521 | 1764 54,074 | 4.b.
5. Acceptances of other banks: | ////////////////// | ////////////////// |
a. Of U.S. banks ....................................................... | 1756 0 | 1756 0 | 5.a.
b. Of foreign banks .................................................... | 1757 0 | 1757 0 | 5.b.
6. Loans to individuals for household, family, and other personal | ////////////////// | ////////////////// |
expenditures (i.e., consumer loans) (includes purchased paper) ......... | ////////////////// | 1975 2,217,352 | 6.
a. Credit cards and related plans (includes check credit and other | ////////////////// | ////////////////// |
revolving credit plans) ............................................. | 2008 161,652 | ////////////////// | 6.a.
b. Other (includes single payment, installment, and all student loans).. | 2011 2,055,700 | ////////////////// | 6.b.
7. Loans to foreign governments and official institutions (including | ////////////////// | ////////////////// |
foreign central banks) ................................................. | 2081 0 | 2081 0 | 7.
8. Obligations (other than securities and leases) of states and political | ////////////////// | ////////////////// |
subdivisions in the U.S. (includes nonrated industrial development | ////////////////// | ////////////////// |
obligations) ........................................................... | 2107 167,100 | 2107 167,100 | 8.
9. Other loans ............................................................ | 1563 2,146,172 | ////////////////// | 9.
a. Loans for purchasing or carrying securities (secured and unsecured).. | ////////////////// | 1545 156,275 | 9.a.
b. All other loans (exclude consumer loans) ............................ | ////////////////// | 1564 1,989,897 | 9.b.
10. Lease financing receivables (net of unearned income) ................... | ////////////////// | 2165 2,300,055 | 10.
a. Of U.S. addressees (domicile) ....................................... | 2182 2,300,055 | ////////////////// | 10.a.
b. Of non-U.S. addressees (domicile) ................................... | 2183 0 | ////////////////// | 10.b.
11. LESS: Any unearned income on loans reflected in items 1-9 above ........ | 2123 0 | 2123 0 | 11.
12. Total loans and leases, net of unearned income (sum of items 1 through | ////////////////// | ////////////////// |
10 minus item 11) (total of column A must equal Schedule RC, item 4.a).. | 2122 31,278,251 | 2122 31,205,115 | 12.
___________________________________________
</TABLE>
16
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page: RC-7
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
Schedule RC-C--Continued
Part I. Continued
<TABLE>
<CAPTION> ___________________________________________
| (Column A) | (Column B) |
| Consolidated | Domestic |
Memoranda | Bank | Offices |
____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCON Bil Mil Thou |
_____________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
1. Commercial paper included in Schedule RC-C, part I, above .............. | 1496 0 | 1496 0 | M.1.
2. Loans and leases restructured and in compliance with modified terms | ////////////////// | ////////////////// |
(included in Schedule RC-C, part I, above and not reported as past due | ////////////////// | ////////////////// |
or nonaccrual in Schedule RC-N, Memorandum item 1): | ////////////////// | ////////////////// |
a. Loans secured by real estate: | ////////////////// | ////////////////// |
(1) To U.S. addressees (domicile) ................................... | 1687 511 | M.2.a.(1)
(2) To non-U.S. addressees (domicile) ............................... | 1689 0 | M.2.a.(2)
b. All other loans and all lease financing receivables (exclude loans | ////////////////// |
to individuals for household, family, and other personal expenditures)| 8691 0 | M.2.b.
c. Commercial and industrial loans to and lease financing receivables | ////////////////// |
of non-U.S. addressees (domicile) included in Memorandum item 2.b | ////////////////// |
above ............................................................... | 8692 0 | M.2.c.
3. Maturity and repricing data for loans and leases(1) (excluding those | ////////////////// |
in nonaccrual status): | ////////////////// |
a. Fixed rate loans and leases with a remaining maturity of: | ////////////////// |
(1) Three months or less ............................................ | 0348 10,215,575 | M.3.a.(1)
(2) Over three months through 12 months ............................. | 0349 369,421 | M.3.a.(2)
(3) Over one year through five years ................................ | 0356 3,479,742 | M.3.a.(3)
(4) Over five years ................................................. | 0357 5,791,166 | M.3.a.(4)
(5) Total fixed rate loans and leases (sum of | ////////////////// |
Memorandum items 3.a.(1) through 3.a.(4)) ....................... | 0358 19,855,904 | M.3.a.(5)
b. Floating rate loans with a repricing frequency of: | ////////////////// |
(1) Quarterly or more frequently .................................... | 4554 8,960,876 | M.3.b.(1)
(2) Annually or more frequently, but less frequently than quarterly . | 4555 1,848,295 | M.3.b.(2)
(3) Every five years or more frequently, but less frequently than | ////////////////// |
annually ........................................................ | 4561 250,031 | M.3.b.(3)
(4) Less frequently than every five years ........................... | 4564 12,721 | M.3.b.(4)
(5) Total floating rate loans (sum of Memorandum items 3.b.(1) | ////////////////// |
through 3.b.(4)) ................................................ | 4567 11,071,923 | M.3.b.(5)
c. Total loans and leases (sum of Memorandum items 3.a.(5) and 3.b.(5)) | ////////////////// |
(must equal the sum of total loans and leases, net, from | ////////////////// |
Schedule RC-C, part I, item 12, plus unearned income from | ////////////////// |
Schedule RC-C, part I, item 11, minus total nonaccrual loans and | ////////////////// |
leases from Schedule RC-N, sum of items 1 through 8, column C) ...... | 1479 30,927,827 | M.3.c.
d. FLOATING RATE LOANS WITH A REMAINING MATURITY OF ONE YEAR OR LESS | ////////////////// |
(INCLUDED IN MEMORANDUM ITEMS 3.b.(1) THROUGH 3.b.(4) ABOVE)......... | A246 1,543,411 | M.3.d.
4. Loans to finance commercial real estate, construction, and land | ////////////////// |
development activities (NOT SECURED BY REAL ESTATE) included in | ////////////////// |
Schedule RC-C, part I, items 4 and 9, column A, page RC-6(2) ........... | 2746 271,706 | M.4.
5. Loans and leases held for sale (included in Schedule RC-C, part I, | ////////////////// |
above .................................................................. | 5369 0 | M.5.
| ////////////////// |_____________________
6. Adjustable rate closed-end loans secured by first liens on 1-4 family | ////////////////// | RCON Bil Mil Thou |
residential properties (included in Schedule RC-C, part I, item | ////////////////// | ___________________|
1.c.(2)(a), column B, page RC-6) ....................................... | ////////////////// | 5370 1.655.898 | M.6.
|_________________________________________|
</TABLE>
_____________________________
(1) Memorandum item 3 is not applicable to savings banks that must complete
supplememtal Schedule RC-J.
(2) Exclude loans secured by real estate that are included in Schedule RC-C,
part I, item 1, column A.
17
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 6/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-7a
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
Schedule RC-C--Continued
Part II. Loans to Small Businesses and Small Farms
Schedule RC-C, Part II is to be reported only with the June Report of Condition.
Report the number and amount currently outstanding as of June 30 of business
loans with "original amounts" of $1,000,000 or less and farm loans with
"original amounts" of $500,000 or less. The following guidelines should be used
to determine the "original amount" of a loan: (1) For loans drawn down under
lines of credit or loan commitments, the "original amount" of the loan is the
size of the line of credit or loan commitment when the line of credit or loan
commitment was most recently approved, extended, or renewed prior to the report
date. However, if the amount currently outstanding as of the report date exceeds
this size, the "original amount" is the amount currently outstanding on the
report date. (2) For loan participations and syndications, the "original amount"
of the loan participation or syndication is the entire amount of the credit
originated by the lead lender. (3) For all other loans, the "original amount" is
the total amount of the loan at origination or the amount currently outstanding
as of the report date, whichever is larger.
Loans to Small Businesses
<TABLE>
<S> <C>
1. Indicate in the appropriate box at the right whether all or substantially all of the dollar volume
of your bank's "Loans secured by nonfarm nonresidential properties" in domestic offices reported
in Schedule RC-C, part I, item 1.e, column B, and all or substantially all of the dollar volume
of your bank's "Commercial and industrial loans to U.S. addressees" in domestic offices reported __________
in Schedule RC-C, part I, item 4.a, column B, have original amounts of $100,000 or less (If your ________| C415 | -
bank has no loans outstanding in both of these two loan categories, place an "X" in the box | RCON YES NO|
marked "NO" and go to Item 5; otherwise, see instructions for further information.)............. | 6999 | |///| x | 1.
___________________
If YES, complete items 2.a and 2.b below, skip items 3 and 4, and go to item 5.
If NO and your bank has loans outstanding in either loan category, skip
items 2.a and 2.b, complete items 3 and 4 below, and go to item 5. _____________________
| Number of Loans |
2. Report the total number of loans currently outstanding for each of the |____________________|
following Schedule RC-C, part I, loan categories: | RCON |/////////// |
a. "Loans secured by nonfarm nonresidential properties" in domestic | ////////////////// |
offices reported in Schedule RC-C, part I, item 1.e, column B....... | 5562 N/A | 2.a.
b. "Commercial and industrial loans to U.S. addressees" in domestic | ////////////////// |
offices reported in Schedule RC-C, part I, item 4.a, column B ...... | 5563 N/A | 2.b.
______________________
<CAPTION>
___________________________________________
| (Column A) | (Column B) |
| | Amount |
| | Currently |
| Number of Loans | Outstanding |
____________________ ____________________
Dollar Amounts in Thousands | RCON | ///////////| RCON Bil Mil Thou |
_____________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
3. Number and amount currently outstanding of "Loans secured by nonfarm | /////////////////////////////////////// | 1.
nonresidential properties" in domestic offices reported in Schedule RC-C | /////////////////////////////////////// | 1.a.
part I item 1.e, column B (sum of items 3.a through 3.c must be less | /////////////////////////////////////// |
or equal to Schedule RC-C, part I, item 1.e, column B): | /////////////////////////////////////// | 1.b
a. With original amounts of $100,000 or less ........................... | 5564 1,988 | 5565 76,370 | 3.a.
b. With original amounts of more than $100,000 through $250,000 ........ | 5566 2,805 | 5567 332,639 | 3.b.
c. With original amounts of more than $250,000 through $1,000,000 ...... | 5568 2,736 | 5569 952,476 | 3.c.
4. Number and amount currently outstanding of "Commercial and industrial | /////////////////////////////////////// |
loans to U.S. addressees" in domestic offices reported in Schedule RC-C, | /////////////////////////////////////// |
part I, item 4.a, column B (sum of items 4.a through 4.c must be less | /////////////////////////////////////// |
than or equal to Schedule RC-C, part I, item 4.a, column B): | /////////////////////////////////////// |
a. With original amounts of $100,000 or less ........................... | 5570 11,433 | 5571 337,759 | 4.a.
b. With original amounts of more than $100,000 through $250,000 ........ | 5572 2,127 | 5573 228,713 | 4.b.
c. With original amounts of more than $250,000 through $1,000,000 ...... | 5574 1,968 | 5575 601,126 | 4.c.
___________________________________________
</TABLE>
17a
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 6/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-7b
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
Schedule RC-C -- Continued
Part II. Continued
Agricultural Loans to Small Farms
<TABLE>
<S> <C> <C>
5. Indicate in the appropriate box at the right whether all or substantially all of the
dollar volume of your bank's "Loans secured by farmland (including farm residential
and other improvements)" in domestic offices reported in Schedule RC-C, part I, item
1.b, column B, and all or substantially all of the dollar volume of your bank's
"Loans to finance agricultural production and other loans to farmers" in domestic
offices reported in Schedule RC-C, part I, item 3, column B, have original amounts
of $100,000 or less (If your bank has no loans outstanding in both of these two YES NO
loan categories, place an "X" in the box marked "NO" and do not complete items 7 _______________________
and 8; otherwise, see instructions for further information.)................................... | 6860 | | /// | X | 5.
|_____________________|
</TABLE>
If YES, complete items 6.a and 6.b below and do not complete items 7 and 8. If
NO and your bank has loans outstanding in either loan category, skip items 6.a
and 6.b and complete items 7 and 8 below.
<TABLE>
<S> <C>
______________________
| Number of Loans |
6. Report the total number of loans currently outstanding for each of the |____________________|
following Schedule RC-C, part I, loan categories: | RCON |//////////// |
a. "Loans secured by farmland (including farm residential and other |______| |
improvements)" in domestic offices reported in Schedule RC-C, part I, | ////////////////// |
item 1.b, column B........................................................ | 5576 N/A | 6.a.
b. "Loans to finance agricultural production and other loans to farmers" in | ////////////////// |
domestic offices reported in Schedule RC-C, part I, item 3, column B...... | 5577 N/A | 6.b.
|____________________|
<CAPTION>
<S> <C> <C>
_____________________________________________
| (Column A) | (Column B) |
| | Amount |
| | Currently |
| Number of Loans | Outstanding |
|_____________________|______________________|
Dollar Amounts in Thousands | RCON |/////////////| RCON Bil Mil Thou |
________________________________________________________________________________| ______| |_____________________ |
7. Number and amount currently outstanding of "Loans secured by farmland | ////////////////////////////////////////// |
(including farm residential and other improvements)" in domestic offices | ////////////////////////////////////////// |
reported in Schedule RC-C, part I, item 1.b, column B (sum of items 7.a | ////////////////////////////////////////// |
through 7.c must be less than or equal to Schedule RC-C, part I, item 1.b, | ////////////////////////////////////////// |
column B): | ////////////////////////////////////////// |
a. With original amounts of $100,000 or less............................... | 5578 18 | 5579 292 | 7.a.
b. With original amounts of more than $100,000 through $250,000............ | 5580 8 | 5581 850 | 7.b.
c. With original amounts of more than $250,000 through $500,000............ | 5582 4 | 5583 1,030 | 7.c.
8. Number and amount currently outstanding of "Loans to finance agricultural | ////////////////////////////////////////// |
production and other loans to farmers" in domestic offices reported in | ////////////////////////////////////////// |
Schedule RC-C, part I, item 3, column B (sum of items 8.a through 8.c | ////////////////////////////////////////// |
must be less than or equal to Schedule RC-C, part I, item 3, column B): | ////////////////////////////////////////// |
a. With original amounts of $100,000 or less............................... | 5584 46 | 5585 992 | 8.a.
b. With original amounts of more than $100,000 through $250,000............ | 5586 17 | 5587 1,877 | 8.b.
c. With original amounts of more than $250,000 through $500,000............ | 5588 4 | 5589 1,054 | 8.c.
|_____________________|______________________|
</TABLE>
17b
<PAGE>
<TABLE>
<S> <C> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-8
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
Schedule RC-D--Trading Assets and Liabilities
Schedule RC-D is to be completed only by banks with $1 billion or more in total
assets or with $2 billion or more in par/notional amount of off-balance sheet
derivative contracts (as reported in Schedule RC-L, items 14.a through 14.e,
columns A through D).
<TABLE>
<CAPTION>
__________
| C420 |
__________________________
Dollar Amounts in Thousands | ////////// Bil Mil Thou|
__________________________________________________________________________________________________| ________________________|
<S> <C> <C>
ASSETS | /////////////////////// |
1. U.S. Treasury securities in domestic offices ................................................ | RCON 3531 0 | 1.
2. U.S. Government agency and corporation obligations in domestic offices (exclude mortgage- | /////////////////////// |
backed securities) .......................................................................... | RCON 3532 0 | 2.
3. Securities issued by states and political subdivisions in the U.S. in domestic offices ...... | RCON 3533 0 | 3.
4. Mortgage-backed securities (MBS) in domestic offices: | /////////////////////// |
a. Pass-through securities issued or guaranteed by FNMA, FHLMC, or GNMA ..................... | RCON 3534 0 | 4.a.
b. Other mortgage-backed securities issued or guaranteed by FNMA, FHLMC, or GNMA | /////////////////////// |
(include CMOs, REMICs, and stripped MBS) ................................................. | RCON 3535 0 | 4.b.
c. All other mortgage-backed securities ......................................................| RCON 3536 0 | 4.c.
5. Other debt securities in domestic offices ................................................... | RCON 3537 0 | 5.
6. Certificates of deposit in domestic offices ................................................. | RCON 3538 0 | 6.
7. Commercial paper in domestic offices ........................................................ | RCON 3539 0 | 7.
8. Bankers acceptances in domestic offices ..................................................... | RCON 3540 0 | 8.
9. Other trading assets in domestic offices .................................................... | RCON 3541 0 | 9.
10. Trading assets in foreign offices ........................................................... | RCFN 3542 0 | 10.
11. Revaluation gains on interest rate, foreign exchange rate, and other commodity and equity | /////////////////////// |
contracts: | /////////////////////// |
a. In domestic offices ...................................................................... | RCON 3543 66,696 | 11.a.
b. In foreign offices ....................................................................... | RCFN 3544 4,658 | 11.b.
12. Total trading assets (sum of items 1 through 11) (must equal Schedule RC, item 5) ........... | RCFD 3545 71,354 | 12.
___________________________
___________________________
| ///////// Bil Mil Thou |
LIABILITIES | ________________________|_
13. Liability for short positions ............................................................... | RCFD 3546 0 | 13.
14. Revaluation losses on interest rate, foreign exchange rate, and other commodity and equity | /////////////////////// |
contracts ................................................................................... | RCFD 3547 57,446 | 14.
15. Total trading liabilities (sum of items 13 and 14) (must equal Schedule RC, item 15.b) ...... | RCFD 3548 57,446 | 15.
___________________________
</TABLE>
18
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-9
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
Schedule RC-E--Deposit Liabilities
Part I. Deposits in Domestic Offices
<TABLE>
<CAPTION> __________
| C425 | -
______________________________________________________ ________
| | Nontransaction |
| Transaction Accounts | Accounts |
_________________________________________ ____________________
| (Column A) | (Column B) | (Column C) |
| Total transaction | Memo: Total | Total |
| accounts (including| demand deposits | nontransaction |
| total demand | (included in | accounts |
| deposits) | column A) | (including MMDAs) |
____________________ ____________________ ____________________
Dollar Amounts in Thousands | RCON Bil Mil Thou | RCON Bil Mil Thou | RCON Bil Mil Thou |
__________________________________________________________ ____________________ ____________________ ____________________
<S> <C> <C> <C> <C>
Deposits of: | ////////////////// | ////////////////// | ////////////////// |
1. Individuals, partnerships, and corporations .......... | 2201 8,615,650 | 2240 8,158,203 | 2346 22,594,478 | 1.
2. U.S. Government ...................................... | 2202 58,650 | 2280 58,605 | 2520 42,512 | 2.
3. States and political subdivisions in the U.S. ........ | 2203 818,151 | 2290 706,072 | 2530 702,686 | 3.
4. Commercial banks in the U.S. ......................... | 2206 836,005 | 2310 836,005 | 2550 771 | 4.
5. Other depository institutions in the U.S. ............ | 2207 221,571 | 2312 221,571 | 2349 2,968 | 5.
6. Banks in foreign countries ........................... | 2213 18,445 | 2320 18,445 | 2236 0 | 6.
7. Foreign governments and official institutions | ////////////////// | ////////////////// | ////////////////// |
(including foreign central banks) .................... | 2216 108 | 2300 108 | 2377 0 | 7.
8. Certified and official checks ........................ | 2330 198,585 | 2330 198,585 | ////////////////// | 8.
9. Total (sum of items 1 through 8) (sum of | ////////////////// | ////////////////// | ////////////////// |
columns A and C must equal Schedule RC, | ////////////////// | ////////////////// | ////////////////// |
item 13.a) ........................................... | 2215 10,767,165 | 2210 10,197,594 | 2385 23,343,415 | 9.
________________________________________________________________
<CAPTION>
______________________
Memoranda Dollar Amounts in Thousands | RCON Bil Mil Thou |
____________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Selected components of total deposits (i.e., sum of item 9, columns A and C): | ////////////////// |
a. Total Individual Retirement Accounts (IRAs) and Keogh Plan accounts ......................... | 6835 2,735,425 | M.1.a.
b. Total brokered deposits ..................................................................... | 2365 1,636,611 | M.1.b.
c. Fully insured brokered deposits (included in Memorandum item 1.b above): | ////////////////// |
(1) Issued in denominations of less than $100,000 ........................................... | 2343 2,350 | M.1.c.(1)
(2) Issued EITHER in denominations of $100,000 OR in denominations greater than $100,000 | ////////////////// |
and participated out by the broker in shares of $100,000 or less ........................ | 2344 1,634,261 | M.1.c.(2)
d. MATURITY DATA FOR BROKERED DEPOSITS: | ////////////////// |
(1) BROKERED DEPOSITS ISSUED IN DENOMINATIONS OF LESS THAN $100,000 WITH A REMAINING | ////////////////// |
MATURITY OF ONE YEAR OR LESS (INCLUDED IN MEMORANDUM ITEM 1.c.(1) ABOVE)................. | A243 171 | M.1.d.(1)
(2) BROKERED DEPOSITS ISSUED IN DENOMINATIONS OF $100,000 OR MORE WITH A REMAINING | ////////////////// |
MATURITY OF ONE YEAR OR LESS (INCLUDED IN MEMORANDUM ITEM 1.b ABOVE)..................... | A244 509,265 | M.1.d.(2)
e. Preferred deposits (uninsured deposits of states and political subdivisions in the U.S. | ////////////////// |
reported in item 3 above which are secured or collateralized as required under state law) ... | 5590 457,587 | M.1.e.
2. Components of total nontransaction accounts (sum of Memoranda items 2.a through 2.d must | ////////////////// |
equal item 9, column C above): | ////////////////// |
a. Savings deposits: | ////////////////// |
(1) Money market deposit accounts (MMDAs) ................................................... | 6810 10,738,339 | M.2.a.(1)
(2) Other savings deposits (excludes MMDAs) ................................................. | 0352 2,655,659 | M.2.a.(2)
b. Total time deposits of less than $100,000 ................................................... | 6648 7,247,099 | M.2.b.
c. Time certificates of deposit of $100,000 or more ............................................ | 6645 2,702,318 | M.2.c.
d. Open-account time deposits of $100,000 or more .............................................. | 6646 0 | M.2.d.
3. All NOW accounts (included in column A above) .................................................. | 2398 569,571 | M.3.
4. Not applicable
______________________
</TABLE>
19
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-10
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
Schedule RC-E--Continued
Part I. Continued
Memoranda (continued)
<TABLE>
<CAPTION>
_________________________________________________________________________________________________________________________________
______________________
Dollar Amounts in Thousands | RCON Bil Mil Thou |
___________________________________________________________________________________________________ ____________________
<S> <C> <C>
5. Maturity and repricing data for time deposits of less than $100,000 (sum of | ////////////////// |
Memorandum items 5.a.(1) through 5.b.(3) must equal Memorandum item 2.b above):(1) | ////////////////// |
a. Fixed rate time deposits of less than $100,000 with a remaining maturity of: | ////////////////// |
(1) Three months or less.................................................................... | A225 1,684,248 | M.5.a.(1)
(2) Over three months through 12 months..................................................... | A226 3,493,722 | M.5.a.(2)
(3) Over one year........................................................................... | A227 2,002,999 | M.5.a.(3)
b. Floating rate time deposits of less than $100,000 with a repricing frequency of: | ////////////////// |
(1) Quarterly or more frequently............................................................ | A228 66,130 | M.5.b.(1)
(2) Annually or more frequently, but less frequently than quarterly......................... | A229 0 | M.5.b.(2)
(3) Less frequently than annually........................................................... | A230 0 | M.5.b.(3)
c. Floating rate time deposits of less than $100,000 with a remaining maturity of | ////////////////// |
one year or less (included in Memorandum items 5.b.(1) through 5.b.(3) above)............... | A231 45,084 | M.5.c.
6. Maturity and repricing data for time deposits of $100,000 or more (i.e., time certificates | ////////////////// |
of deposit of $100,000 or more and open-account time deposits of $100,000 or more) | ////////////////// |
(sum of Memorandum items 6.a.(1) through 6.b.(4) must equal the sum of Memorandum | ////////////////// |
items 2.c and 2.d above):(1) | ////////////////// |
a. Fixed rate time deposits of $100,000 or more with a remaining maturity of: | ////////////////// |
(1) Three months or less ................................................................... | A232 534,657 | M.6.a.(1)
(2) Over three months through 12 months .................................................... | A233 754,429 | M.6.a.(2)
(3) Over one year through five years ....................................................... | A234 1,282,541 | M.6.a.(3)
(4) Over five years ........................................................................ | A235 36,761 | M.6.a.(4)
b. Floating rate time deposits of $100,000 or more with a repricing frequency of: | ////////////////// |
(1) Quarterly or more frequently ........................................................... | A236 31,182 | M.6.b.(1)
(2) Annually or more frequently, but less frequently than quarterly ........................ | A237 37,950 | M.6.b.(2)
(3) Every five years or more frequently, but less frequently than annually ................. | A238 24,798 | M.6.b.(3)
(4) Less frequently than every five years .................................................. | A239 0 | M.6.b.(4)
c. Floating rate time deposits of $100,000 or more with a remaining maturity of | ////////////////// |
one year or less (included in Memorandum items 6.b.(1) through 6.b.(4) above)............... | A240 19,186 | M.6.c.
______________________
</TABLE>
_______________
(1) Memorandum items 5 and 6 are not applicable to savings banks that must
complete supplemental Schedule RC-J.
20
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 6/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-11
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
Schedule RC-E--Continued
Part II. Deposits in Foreign Offices (including Edge and
Agreement subsidiaries and IBFs)
<TABLE>
<CAPTION>
______________________
Dollar Amounts in Thousands | RCFN Bil Mil Thou |
___________________________________________________________________________________________________ ____________________
<S> <C> <C>
Deposits of: | ////////////////// |
1. Individuals, partnerships, and corporations ................................................... | 2621 1,730,162 | 1.
2. U.S. banks (including IBFs and foreign branches of U.S. banks) ................................ | 2623 0 | 2.
3. Foreign banks (including U.S. branches and agencies of foreign banks, including their IBFs).... | 2625 0 | 3.
4. Foreign governments and official institutions (including foreign central banks) ............... | 2650 0 | 4.
5. Certified and official checks ................................................................. | 2330 0 | 5.
6. All other deposits ............................................................................ | 2668 15,501 | 6.
7. Total (sum of items 1 through 6) (must equal Schedule RC, item 13.b) .......................... | 2200 1,745,663 | 7.
Memorandum
Dollar Amounts in Thousands |RCFN Bil Mil Thou |
________________________________________________________________________________________________________________________
1. Time deposits with a remaining maturity of one year or less (included in Part II, item 7 above) |A245 1,745,263 | M.1.
______________________
</TABLE>
Schedule RC-F--Other Assets
<TABLE>
<CAPTION>
__________
| C430 | -
_________________ ________
Dollar Amounts in Thousands | ////////// Bil Mil Thou |
__________________________________________________________________________________________________ _________________________
<S> <C> <C>
1. Income earned, not collected on loans ........................................................ | RCFD 2164 167,538 | 1.
2. Net deferred tax assets(1) ................................................................... | RCFD 2148 0 | 2.
3. Excess residential mortgage servicing fees receivable ........................................ | RCFD 5371 134,288 | 3.
4. Other (itemize and describe amounts that exceed 25% of this item)............................. | RCFD 2168 3,676,812 | 4.
_____________ ___________________________
a. | TEXT 3549 | Mortgages held for Resale | RCFD 3549 | 1,858,683 | /////////////////////// | 4.a.
_________________________________________________________________| | | |
___________
b. | TEXT 3550 |____________________________________________________| RCFD 3550 | | /////////////////////// | 4.b.
___________
c. | TEXT 3551 |____________________________________________________| RCFD 3551 | | /////////////////////// | 4.c.
_____________
___________________________
5. Total (sum of items 1 through 4) (must equal Schedule RC, item 11) ........................... | RCFD 2160 3,978,638 | 5.
___________________________
<CAPTION>
Memorandum ___________________________
Dollar Amounts in Thousands | ////////// Bil Mil Thou |
__________________________________________________________________________________________________ _________________________
<S> <C> <C>
1. Deferred tax assets disallowed for regulatory capital purposes ............................... | RCFD 5610 0 | M.1.
___________________________
</TABLE>
Schedule RC-G--Other Liabilities
<TABLE>
<CAPTION>
__________
| C435 | -
_________________ ________
Dollar Amounts in Thousands | ////////// Bil Mil Thou |
__________________________________________________________________________________________________ _________________________
<S> <C> <C>
1. a. Interest accrued and unpaid on deposits in domestic offices(2) ............................ | RCON 3645 58,011 | 1.a.
b. Other expenses accrued and unpaid (includes accrued income taxes payable) ................. | RCFD 3646 594,954 | 1.b.
2. Net deferred tax liabilities(1) .............................................................. | RCFD 3049 119,644 | 2.
3. Minority interest in consolidated subsidiaries ............................................... | RCFD 3000 0 | 3.
4. Other (itemize and describe amounts that exceed 25% of this item)............................. | RCFD 2938 478,843 | 4.
_____________ ___________________________
a. | TEXT 3552 |____________________________________________________| RCFD 3552 | | /////////////////////// | 4.a.
___________
b. | TEXT 3553 |____________________________________________________| RCFD 3553 | | /////////////////////// | 4.b.
___________
c. | TEXT 3554 |____________________________________________________| RCFD 3554 | | /////////////////////// | 4.c.
_____________
___________________________
5. Total (sum of items 1 through 4) (must equal Schedule RC, item 20) ........................... | RCFD 2930 1,251,452 | 5.
</TABLE>
____________
(1) See discussion of deferred income taxes in Glossary entry on "income taxes."
(2) For savings banks, include "dividends" accrued and unpaid on deposits.
21
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-12
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
Schedule RC-H--Selected Balance Sheet Items for Domestic Offices
<TABLE>
<CAPTION>
__________
| C440 | -
____________ ________
| Domestic Offices |
____________________
Dollar Amounts in Thousands | RCON Bil Mil Thou |
_____________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Customers' liability to this bank on acceptances outstanding .................................... | 2155 16,634 | 1.
2. Bank's liability on acceptances executed and outstanding ........................................ | 2920 16,634 | 2.
3. Federal funds sold and securities purchased under agreements to resell .......................... | 1350 17,428 | 3.
4. Federal funds purchased and securities sold under agreements to repurchase ...................... | 2800 4,868,836 | 4.
5. Other borrowed money ............................................................................ | 3190 1,380,694 | 5.
EITHER | ////////////////// |
6. Net due from own foreign offices, Edge and Agreement subsidiaries, and IBFs ..................... | 2163 N/A | 6.
OR | ////////////////// |
7. Net due to own foreign offices, Edge and Agreement subsidiaries, and IBFs ....................... | 2941 1,669,058 | 7.
| ////////////////// |
8. Total assets (excludes net due from foreign offices, Edge and Agreement subsidiaries, and IBFs) . | 2192 48,946,123 | 8.
| ////////////////// |
9. Total liabilities (excludes net due to foreign offices, Edge and Agreement subsidiaries, and IBFs)| 3129 42,919,946 | 9.
______________________
</TABLE>
Items 10-17 include held-to-maturity and available-for-sale securities in
domestic offices.
<TABLE>
<CAPTION>
______________________
| RCON Bil Mil Thou |
____________________
<S> <C> <C>
10. U.S. Treasury securities ....................................................................... | 1779 1,252,796 | 10.
11. U.S. Government agency and corporation obligations (exclude mortgage-backed | ////////////////// |
securities) .................................................................................... | 1785 505 | 11.
12. Securities issued by states and political subdivisions in the U.S. ............................. | 1786 159,244 | 12.
13. Mortgage-backed securities (MBS): | ////////////////// |
a. Pass-through securities: | ////////////////// |
(1) Issued or guaranteed by FNMA, FHLMC, or GNMA ............................................ | 1787 5,684,860 | 13.a.(1)
(2) Other pass-through securities ........................................................... | 1869 4 | 13.a.(2)
b. Other mortgage-backed securities (include CMOs, REMICs, and stripped MBS): | ////////////////// |
(1) Issued or guaranteed by FNMA, FHLMC, or GNMA ............................................ | 1877 0 | 13.b.(1)
(2) All other mortgage-backed securities..................................................... | 2253 518 | 13.b.(2)
14. Other domestic debt securities ................................................................. | 3159 812 | 14.
15. Foreign debt securities ........................................................................ | 3160 97,035 | 15.
16. Equity securities: | ////////////////// |
a. Investments in mutual funds ................................................................. | 3161 0 | 16.a.
b. Other equity securities with readily determinable fair values ............................... | 3162 0 | 16.b.
c. All other equity securities ................................................................. | 3169 311,734 | 16.c.
17. Total held-to-maturity and available-for-sale securities (sum of items 10 through 16) .......... | 3170 7,507,508 | 17.
______________________
</TABLE>
Memorandum (to be completed only by banks with IBFs and other "foreign" offices)
<TABLE>
<CAPTION>
______________________
Dollar Amounts in Thousands | RCON Bil Mil Thou |
_____________________________________________________________________________________________________ ____________________
<S> <C> <C>
EITHER | ////////////////// |
1. Net due from the IBF of the domestic offices of the reporting bank .............................. | 3051 0 | M.1.
OR | ////////////////// |
2. Net due to the IBF of the domestic offices of the reporting bank ................................ | 3059 N/A | M.2.
______________________
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-13
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
Schedule RC-I--Selected Assets and Liabilities of IBFs
To be completed only by banks with IBFs and other "foreign" offices.
<TABLE>
<CAPTION>
__________
| C445 | -
____________ ________
Dollar Amounts in Thousands | RCFN Bil Mil Thou |
<S> <C>
_____________________________________________________________________________________________________ ____________________
1. Total IBF assets of the consolidated bank (component of Schedule RC, item 12) ................. | 2133 0 | 1.
2. Total IBF loans and lease financing receivables (component of Schedule RC-C, part I, item 12, | ////////////////// |
column A) ..................................................................................... | 2076 0 | 2.
3. IBF commercial and industrial loans (component of Schedule RC-C, part I, item 4, column A) .... | 2077 0 | 3.
4. Total IBF liabilities (component of Schedule RC, item 21) ..................................... | 2898 0 | 4.
5. IBF deposit liabilities due to banks, including other IBFs (component of Schedule RC-E, | ////////////////// |
part II, items 2 and 3) ....................................................................... | 2379 0 | 5.
6. Other IBF deposit liabilities (component of Schedule RC-E, part II, items 1, 4, 5, and 6) ..... | 2381 0 | 6.
______________________
</TABLE>
Schedule RC-K--Quarterly Averages (1)
<TABLE>
<CAPTION>
__________
| C455 | -
_________________ ________
Dollar Amounts in Thousands | ///////// Bil Mil Thou |
_______________________________________________________________________________________________ _________________________
ASSETS | /////////////////////// |
<S> <C> <C>
1. Interest-bearing balances due from depository institutions .............................. | RCFD 3381 10,737 | 1.
2. U.S. Treasury securities and U.S. Government agency and corporation obligations(2) ...... | RCFD 3382 6,349,267 | 2.
3. Securities issued by states and political subdivisions in the U.S.(2) ................... | RCFD 3383 155,938 | 3.
4. a. Other debt securities(2) ............................................................. | RCFD 3647 98,458 | 4.a.
b. Equity securities(3) (includes investments in mutual funds and Federal Reserve stock). | RCFD 3648 347,675 | 4.b.
5. Federal funds sold and securities purchased under agreements to resell in domestic | /////////////////////// |
offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs ............. | RCFD 3365 812,114 | 5.
6. Loans: | ///////////////////// // |
a. Loans in domestic offices: | /////////////////////// |
(1) Total loans ...................................................................... | RCON 3360 31,884,320 | 6.a.(1)
(2) Loans secured by real estate ..................................................... | RCON 3385 14,940,513 | 6.a.(2)
(3) Loans to finance agricultural production and other loans to farmers .............. | RCON 3386 5,935 | 6.a.(3)
(4) Commercial and industrial loans .................................................. | RCON 3387 12,923,362 | 6.a.(4)
(5) Loans to individuals for household, family, and other personal expenditures ...... | RCON 3388 2,224,980 | 6.a.(5)
b. Total loans in foreign offices, Edge and Agreement subsidiaries, and IBFs ............ | RCFN 3360 70,458 | 6.b.
7. Trading assets .......................................................................... | RCFD 3401 105,824 | 7.
8. Lease financing receivables (net of unearned income) .................................... | RCFD 3484 2,231,479 | 8.
9. Total assets (4) ........................................................................ | RCFD 3368 52,282,230 | 9.
LIABILITIES | /////////////////////// |
10. Interest-bearing transaction accounts in domestic offices (NOW accounts, ATS accounts, | /////////////////////// |
and telephone and preauthorized transfer accounts) (exclude demand deposits) ............ | RCON 3485 965,535 | 10.
11. Nontransaction accounts in domestic offices: | /////////////////////// |
a. Money market deposit accounts (MMDAs) ................................................ | RCON 3486 9,210,475 | 11.a.
b. Other savings deposits ............................................................... | RCON 3487 3,907,216 | 11.b.
c. Time certificates of deposit of $100,000 or more ..................................... | RCON 3345 2,653,452 | 11.c.
d. All other time deposits .............................................................. | RCON 3469 7,513,443 | 11.d.
12. Interest-bearing deposits in foreign offices, Edge and Agreement subsidiaries, and IBFs.. | RCFN 3404 1,765,593 | 12.
13. Federal funds purchased and securities sold under agreements to repurchase in domestic | /////////////////////// |
offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs ............. | RCFD 3353 6,363,286 | 13.
14. Other borrowed money .................................................................... | RCFD 3355 2,670,145 | 14.
___________________________
</TABLE>
_______________
(1) For all items, banks have the option of reporting either (1) an average of
daily figures for the quarter, or
(2) an average of weekly figures (i.e., the Wednesday of each week of the
quarter).
(2) Quarterly averages for all debt securities should be based on amortized
cost.
(3) Quarterly averages for all equity securities should be based on historical
cost.
(4) The quarterly average for total assets should reflect all debt securities
(not held for trading) at amortized cost, equity securities with readily
determinable fair values at the lower of cost or fair value, and equity
securities without readily determinable fair values at historical cost.
23
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-14
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
Schedule RC-L--Off-Balance Sheet Items
Please read carefully the instructions for the preparation of Schedule RC-L.
Some of the amounts reported in Schedule RC-L are regarded as volume indicators
and not necessarily as measures of risk.
<TABLE>
<CAPTION>
__________
| C460 | -
____________ ________
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
____________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Unused commitments: | ////////////////// |
a. Revolving, open-end lines secured by 1-4 family residential properties, e.g., home | ////////////////// |
equity lines ............................................................................... | 3814 1,637,875 | 1.a.
b. Credit card lines .......................................................................... | 3815 32,940 | 1.b.
c. Commercial real estate, construction, and land development: | ////////////////// |
(1) Commitments to fund loans secured by real estate ....................................... | 3816 648,369 | 1.c.(1)
(2) Commitments to fund loans not secured by real estate ................................... | 6550 383,022 | 1.c.(2)
d. Securities underwriting .................................................................... | 3817 0 | 1.d.
e. Other unused commitments ................................................................... | 3818 18,626,522 | 1.e.
2. Financial standby letters of credit and foreign office guarantees ............................. | 3819 2,337,268 | 2.
___________________________
a. Amount of financial standby letters of credit conveyed to others | RCFD 3820 | 158,029 | ////////////////// | 2.a.
___________________________
3. Performance standby letters of credit and foreign office guarantees ........................... | 3821 175,703 | 3.
a. Amount of performance standby letters of credit conveyed to | ////////////////// |
___________________________
others .......................................................... | RCFD 3822 | 12,580 | ////////////////// | 3.a.
___________________________
4. Commercial and similar letters of credit ...................................................... | 3411 176,335 | 4.
5. Participations in acceptances (as described in the instructions) conveyed to others by | ////////////////// |
the reporting bank ............................................................................ | 3428 16,524 | 5.
6. Participations in acceptances (as described in the instructions) acquired by the reporting | ////////////////// |
(nonaccepting) bank ........................................................................... | 3429 7,409 | 6.
7. Securities borrowed ........................................................................... | 3432 0 | 7.
8. Securities lent (including customers' securities lent where the customer is indemnified | ////////////////// |
against loss by the reporting bank) ........................................................... | 3433 0 | 8.
9. Loans transferred (i.e., sold or swapped) with recourse that have been treated as sold for | ////////////////// |
Call Report purposes: | ////////////////// |
a. FNMA and FHLMC residential mortgage loan pools: | ////////////////// |
(1) Outstanding principal balance of mortgages transferred as of the report date ........... | 3650 246,244 | 9.a.(1)
(2) Amount of recourse exposure on these mortgages as of the report date ................... | 3651 246,244 | 9.a.(2)
b. Private (nongovernment-issued or -guaranteed) residential mortgage loan pools: | ////////////////// |
(1) Outstanding principal balance of mortgages transferred as of the report date ........... | 3652 33,550 | 9.b.(1)
(2) Amount of recourse exposure on these mortgages as of the report date ................... | 3653 33,550 | 9.b.(2)
c. Farmer Mac agricultural mortgage loan pools: | ////////////////// |
(1) Outstanding principal balance of mortgages transferred as of the report date ........... | 3654 0 | 9.c.(1)
(2) Amount of recourse exposure on these mortgages as of the report date ................... | 3655 0 | 9.c.(2)
d. Small business obligations transferred with recourse under Section 208 of the | ////////////////// |
Riegle Community Development and Regulatory Improvement Act of 1994: | ////////////////// |
(1) Outstanding principal balance of small business obligations transferred | ////////////////// |
as of the report date................................................................... | A249 0 | 9.d.(1)
(2) Amount of retained recourse on these obligations as of the report date.................. | A250 0 | 9.d.(2)
10. When-issued securities: | ////////////////// |
a. Gross commitments to purchase .............................................................. | 3434 0 | 10.a.
b. Gross commitments to sell .................................................................. | 3435 0 | 10.b.
11. Spot foreign exchange contracts ............................................................... | 8765 622,366 | 11.
12. All other off-balance sheet liabilities (exclude off-balance sheet derivatives) (itemize and | ////////////////// |
describe each component of this item over 25% of Schedule RC, item 28, "Total equity capital") | 3430 0 | 12.
a. | TEXT 3555 |______________________________________________________| RCFD 3555 | | ////////////////// | 12.a.
b. | TEXT 3556 |______________________________________________________| RCFD 3556 | | ////////////////// | 12.b.
___________
c. | TEXT 3557 |______________________________________________________| RCFD 3557 | | ////////////////// | 12.c.
_____________
d. | TEXT 3558 |______________________________________________________| RCFD 3558 | | ////////////////// | 12.d.
_____________ _______________________________________________
<CAPTION>
Dollar Amounts in Thousands RCFD Bil Mil Thou
_________________________________________________________________________________________________________________________
<S> <C> <C>
13. All other off-balance sheet assets (exclude off-balance sheet derivatives) (itemize and | ////////////////// |
describe each component of this item over 25% of Schedule RC,item 28,"Total equity capital") | 5591 0 | 13.
_____________ __________________________
a. | TEXT 5592 |______________________________________________________| RCFD 5592 | | ////////////////// | 13.a.
___________
b. | TEXT 5593 |______________________________________________________| RCFD 5593 | | ////////////////// | 13.b.
___________
c. | TEXT 5594 |______________________________________________________| RCFD 5594 | | ////////////////// | 13.c.
_____________
d. | TEXT 5595 |______________________________________________________| RCFD 5595 | | ////////////////// | 13.d.
_____________
________________________________________________
</TABLE>
24
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-15
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
</TABLE>
Schedule RC-L -- Continued
<TABLE>
<CAPTION>
_____________
| C461 | -
_________________________________________ ____________________________|___________|
| (Column A) | (Column B) | (Column C) | (Column D) |
| Interest Rate | Foreign Exchange | Equity Derivative | Commodity and other|
| Contracts | Contracts | Contracts | Contracts |
|___________________|____________________|____________________|____________________|
Dollar Amounts in Thousands |Tril Bil Mil Thou | Tril Bil Mil Thou | Tril Bil Mil Thou | Tril Bil Mil Thou |
_______________________________________________________________________________________________________________________|
<S> <C> <C> <C> <C> <C>
| Off-balance Sheet Derivatives | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
| Position Indicators | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
____________________________________| ///////////////// | ////////////////// | ////////////////// | ////////////////// |
14. Gross amounts (e.g., notional | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
amounts) (for each column, sum of | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
items 14.a through 14.e must equal | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
sum of items 15, 16.a, and 16.b): |___________________|____________________|___________________ |____________________|
a. Futures contracts ............. | 1,229,392 | 0 | 0 | 36,486 | 14.a.
|___________________|____________________|____________________|____________________|
| RCFD 8693 | RCFD 8694 | RCFD 8695 | RCFD 8696 |
|___________________|____________________|____________________|____________________|
b. Forward contracts ............. | 2,576,500 | 1,931,682 | 0 | 21,832 | 14.b.
|___________________|____________________|____________________|____________________|
| RCFD 8697 | RCFD 8698 | RCFD 8699 | RCFD 8700 |
|___________________|____________________|____________________|____________________|
c. Exchange-traded option contracts:| ///////////////// | ////////////////// | ////////////////// | ////////////////// |
|___________________|____________________|____________________|____________________|
(1) Written options .......... | 0 | 0 | 0 | 0 | 14.c.(1)
|___________________|____________________|____________________|____________________|
| RCFD 8701 | RCFD 8702 | RCFD 8703 | RCFD 8704 |
|___________________|____________________|____________________|____________________|
(2) Purchased options ........ | 450,000 | 0 | 0 | 2,206 | 14.c.(2)
|___________________|____________________|____________________|____________________|
| RCFD 8705 | RCFD 8706 | RCFD 8707 | RCFD 8708 |
|___________________|____________________|____________________|____________________|
d. Over-the-counter option contracts: | //////////////////| ///////////////// | ///////////////// | //////////////// |
(1) Written options .......... | 1,324,980 | 3,887 | 0 | 0 | 14.d.(1)
|___________________|____________________|____________________|____________________|
| RCFD 8709 | RCFD 8710 | RCFD 8711 | RCFD 8712 |
|___________________|____________________|____________________|____________________|
(2) Purchased options ........ | 10,131,934 | 3,887 | 0 | 0 | 14.d.(2)
|___________________|____________________|____________________|____________________|
| RCFD 8713 | RCFD 8714 | RCFD 8715 | RCFD 8716 |
|___________________|____________________|____________________|____________________|
e. Swaps ............................ | 19,502,262 | 0 | 0 | 0 | 14.e.
|___________________|____________________|____________________|____________________|
| RCFD 3450 | RCFD 3826 | RCFD 8719 | RCFD 8720 |
|___________________|____________________|____________________|____________________|
15. Total gross notional amount of | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
derivative contracts held for | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
trading ......................... | 3,386,305 | 1,939,456 | 0 | 2,206 | 15.
|___________________|____________________|____________________|____________________|
| RCFD A126 | RFD A127 | RCFD 8723 | RCFD 8724 |
|___________________|____________________|____________________|____________________|
16. Total gross notional amount of | ///////////////// | //////////////// | ///////////////// | ////////////////// |
derivative contracts held for | ///////////////// | ///////////////// | ///////////////// | ////////////////// |
purposes other than trading: | ///////////////// | ///////////////// | ///////////////// | ////////////////// |
|___________________|____________________|____________________|____________________|
a. Contracts marked to market ... | 4,202,500 | 0 | 0 | 36,486 | 16.a.
|___________________|____________________|____________________|____________________|
| RCFD 8725 | RCFD 8726 | RCF 8727 | RCFD 8728 |
|___________________|____________________|____________________|____________________|
b. Contracts not marked to market | 27,626,263 | 0 | 0 | 21,832 | 16.b.
|___________________|____________________|____________________|____________________|
| RCFD 8729 | RCFD 8730 | RFD 8731 | RCFD 8732 |
|___________________|____________________|____________________|____________________|
</TABLE>
25
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-16
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
</TABLE>
Schedule RC-L -- Continued
<TABLE>
<CAPTION>
_________________________________________ _________________________________________
| (Column A) | (Column B) | (Column C) | (Column D) |
Dollar Amounts in Thousands | Interest Rate | Foreign Exchange | Equity Derivative | Commodity and other|
___________________________________| Contracts | Contracts | Contracts | Contracts |
| Off-balance Sheet Derivatives |___________________|____________________|____________________|____________________|
| Position Indicators |RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
|_____________________________________________________________________________________________________________________|
<S> <C> <C> <C> <C> <C>
17. Gross fair values of | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
derivative contracts: | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
a. Contracts held for | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
trading: | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
(1) Gross positive | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value ................... | 8733 29,782 | 8734 41,523 | 8735 0 | 8736 58 | 17.a.(1)
(2) Gross negative | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value ................... | 8737 20,932 | 8738 36,511 | 8739 0 | 8740 0 | 17.a.(2)
b. Contracts held for | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
purposes other than | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
trading that are marked | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
to market: | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
(1) Gross positive | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value ................... | 8741 524 | 8742 0 | 8743 0 | 8744 1,452 | 17.b.(1)
(2) Gross negative | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value ................... | 8745 2,834 | 8746 0 | 8747 0 | 8748 0 | 17.b.(2)
c. Contracts held for | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
purposes other than | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
trading that are not | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
marked to market: | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
(1) Gross positive | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value .................. | 8749 64,085 | 8750 0 | 8751 0 | 8752 100 | 17.c.(1)
(2) Gross negative | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value ................... | 8753 111,703 | 8754 0 | 8755 0 | 8756 0 | 17.c.(2)
|__________________________________________________________________________________|
<CAPTION>
______________________
Memoranda Dollar Amounts in Thousands | RCFD Bil Mil Thou |
_________________________________________________________________________________________________________________________
<S> <C> <C>
1. -2. Not applicable | ////////////////// |
3. Unused commitments with an original maturity exceeding one year that are reported in | ////////////////// |
Schedule RC-L, items 1.a through 1.e, above (report only the unused portions of commitments | ////////////////// |
that are fee paid or otherwise legally binding) ................................................ | 3833 16,829,602 | M.3.
a. Participations in commitments with an original maturity | ////////////////// |
exceeding one year conveyed to others ................................|RCFD 3834 | 1,310,691 | ////////////////// | M.3.a.
________________________
4. To be completed only by banks with $1 billion or more in total assets: | ////////////////// |
Standby letters of credit and foreign office guarantees (both financial and performance) issued | ////////////////// |
to non-U.S. addressees (domicile) included in Schedule RC-L, items 2 and 3, above .............. | 3377 341,139 | M.4.
5. Installment loans to individuals for household, family, and other personal expenditures that | ////////////////// |
have been securitized and sold without recourse (with servicing retained), amounts outstanding | ////////////////// |
by type of loan: | ////////////////// |
a. Loans to purchase private passenger automobiles (to be completed for the | ////////////////// |
September report only)....................................................................... | 2741 N/A | M.5.a.
b. Credit cards and related plans (TO BE COMPLETED QUARTERLY)................................... | 2742 0 | M.5.b.
c. All other consumer installment credit (including mobile home loans)(to be completed for the | ////////////////// |
September report only........................................................................ | 2743 N/A | M.5.c
|____________________|
</TABLE>
26
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-17
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
</TABLE>
<TABLE>
<CAPTION>
_____________
| C465 |
_________|___________|
Schedule RC-M--Memoranda | |
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
______________________________________________________________________________________________________|____________________|
<S> <C> <C>
1. Extensions of credit by the reporting bank to its executive officers, directors, principal | ////////////////// |
shareholders, and their related interests as of the report date: | ////////////////// |
a. Aggregate amount of all extensions of credit to all executive officers, directors, principal | ////////////////// |
shareholders and their related interests ..................................................... | 6164 605,294 | 1.a.
b. Number of executive officers, directors, and principal shareholders to whom the amount of all | ////////////////// |
extensions of credit by the reporting bank (including extensions of credit to | ////////////////// |
related interests) equals or exceeds the lesser of $500,000 or 5 percent Number | ////////////////// |
___________________________| ////////////////// |
of total capital as defined for this purpose in agency regulations. | RCFD 6165 | 24 | ////////////////// |
___________________________| ////////////////// | 1.b.
2. Federal funds sold and securities purchased under agreements to resell with U.S. branches | ////////////////// |
and agencies of foreign banks(1) (included in Schedule RC, items 3.a and 3.b) .................... | 3405 0 | 2.
3. Not applicable. | ////////////////// |
4. Outstanding principal balance of 1-4 family residential mortgage loans serviced for others | ////////////////// |
(include both retained servicing and purchased servicing): | ////////////////// |
a. Mortgages serviced under a GNMA contract ...................................................... | 5500 28,855,729 | 4.a.
b. Mortgages serviced under a FHLMC contract: | ////////////////// |
(1) Serviced with recourse to servicer ........................................................ | 5501 55,604 | 4.b.(1)
(2) Serviced without recourse to servicer ..................................................... | 5502 32,340,522 | 4.b.(2)
c. Mortgages serviced under a FNMA contract: | ////////////////// |
(1) Serviced under a regular option contract .................................................. | 5503 190,640 | 4.c.(1)
(2) Serviced under a special option contract .................................................. | 5504 38,282,672 | 4.c.(2)
d. Mortgages serviced under other servicing contracts ............................................ | 5505 8,508,320 | 4.d.
5. To be completed only by banks with $1 billion or more in total assets: | ////////////////// |
Customers' liability to this bank on acceptances outstanding (sum of items 5.a and 5.b must | ////////////////// |
equal Schedule RC, item 9): | ////////////////// |
a. U.S. addressees (domicile) .................................................................... | 2103 16,297 | 5.a.
b. Non-U.S. addressees (domicile) ................................................................ | 2104 337 | 5.b.
6. Intangible assets: | ////////////////// |
a. Mortgage servicing rights ..................................................................... | 3164 1,483,959 | 6.a.
b. Other identifiable intangible assets: | ////////////////// |
(1) Purchased credit card relationships ....................................................... | 5506 0 | 6.b.(1)
(2) All other identifiable intangible assets .................................................. | 5507 126,463 | 6.b.(2)
c. Goodwill ...................................................................................... | 3163 672,992 | 6.c.
d. Total (sum of items 6.a through 6.c) (must equal Schedule RC, item 10) ........................ | 2143 2,283,414 | 6.d.
e. Amount of intangible assets (included in item 6.b.(2) above) that have been grandfathered or | ////////////////// |
are otherwise qualifying for regulatory capital purposes ...................................... | 6442 0 | 6.e.
7. Mandatory convertible debt, net of common or perpetual preferred stock dedicated to | ////////////////// |
redeem the debt ...................................................................................| 3295 75,000 | 7.
______________________
</TABLE>
- ------------
(1) Do not report federal funds sold and securities purchased under agreements
to resell with other commercial banks in the U.S. in this item.
27
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-18
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
</TABLE>
Schedule RC-M--Continued
<TABLE>
<CAPTION>
________________________
Dollar Amounts in Thousands | Bil Mil Thou|
_____________________________________________________________________________________________ |_______________________|
<S> <C> <C>
8. a. Other real estate owned: | /////////////////////// |
(1) Direct and indirect investments in real estate ventures ......................... | RCFD 5372 0 | 8.a.(1)
(2) All other real estate owned: | /////////////////////// |
(a) Construction and land development in domestic offices ....................... | RCON 5508 4,537 | 8.a.(2)(a)
(b) Farmland in domestic offices ................................................ | RCON 5509 0 | 8.a.(2)(b)
(c) 1-4 family residential properties in domestic offices ....................... | RCON 5510 8,067 | 8.a.(2)(c)
(d) Multifamily (5 or more) residential properties in domestic offices .......... | RCON 5511 740 | 8.a.(2)(d)
(e) Nonfarm nonresidential properties in domestic offices ....................... | RCON 5512 21,202 | 8.a.(2)(e)
(f) In foreign offices .......................................................... | RCFN 5513 0 | 8.a.(2)(f)
(3) Total (sum of items 8.a.(1) and 8.a.(2)) (must equal Schedule RC, item 7) ....... | RCFD 2150 34,546 | 8.a.(3)
b. Investments in unconsolidated subsidiaries and associated companies: | /////////////////////// |
(1) Direct and indirect investments in real estate ventures ......................... | RCFD 5374 0 | 8.b.(1)
(2) All other investments in unconsolidated subsidiaries and associated companies ... | RCFD 5375 0 | 8.b.(2)
(3) Total (sum of items 8.b.(1) and 8.b.(2)) (must equal Schedule RC, item 8) ....... | RCFD 2130 0 | 8.b.(3)
c. Total assets of unconsolidated subsidiaries and associated companies ................ | RCFD 5376 0 | 8.c.
9. Noncumulative perpetual preferred stock and related surplus included in Schedule RC, | /////////////////////// |
item 23, "Perpetual preferred stock and related surplus" ............................... | RCFD 3778 125,000 | 9.
10. Mutual fund and annuity sales in domestic offices during the quarter (include | /////////////////////// |
proprietary, private label, and third party products): | /////////////////////// |
a. Money market funds .................................................................. | RCON 6441 55,245 | 10.a.
b. Equity securities funds ............................................................. | RCON 8427 108,359 | 10.b.
c. Debt securities funds ............................................................... | RCON 8428 13,250 | 10.c.
d. Other mutual funds .................................................................. | RCON 8429 0 | 10.d.
e. Annuities ........................................................................... | RCON 8430 102,292 | 10.e.
f. Sales of proprietary mutual funds and annuities (included in items 10.a through | /////////////////////// |
10.e. above) ........................................................................... | RCON 8784 150,100 | 10.f.
_________________________
<CAPTION>
_________________________________________________________________________________________________________________________________
| |
______________________
|Memorandum Dollar Amounts in Thousands | RCFD Bil Mil Thou | |
_________________________________________________________________________________________________ ____________________
<S> <C> <C>
|1. Interbank holdings of capital instruments (to be completed for the December report only): | ////////////////// | |
| a. Reciprocal holdings of banking organizations' capital instruments ........................ | 3836 N/A | M.1.a. |
| b. Nonreciprocal holdings of banking organizations' capital instruments ..................... | 3837 N/A | M.1.b. |
______________________
| |
_________________________________________________________________________________________________________________________________
</TABLE>
28
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-19
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
Schedule RC-N--Past Due and Nonaccrual Loans, Leases,
and Other Assets
<TABLE>
<CAPTION>
The FFIEC regards the information reported in __________
all of Memorandum item 1, in items 1 through 10, | C470 | -
column A, and in Memorandum items 2 through 4, ______________________________________________________ ________
column A, as confidential. | (Column A) | (Column B) | (Column C) |
| Past due | Past due 90 | Nonaccrual |
| 30 through 89 | days or more | |
| days and still | and still | |
| accruing | accruing | |
____________________ ____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
______________________________________________________ ____________________ ____________________ ____________________
<S> <C> <C> <C> <C>
1. Loans secured by real estate: | ////////////////// | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ................ | 1245 | 1246 71,390 | 1247 223,962 | 1.a.
b. To non-U.S. addressees (domicile) ............ | 1248 | 1249 0 | 1250 0 | 1.b.
2. Loans to depository institutions and | ///// | ////////////////// | ////////////////// |
acceptances of other banks: | ///// | ////////////////// | ////////////////// |
a. To U.S. banks and other U.S. depository | ///// | ////////////////// | ////////////////// |
institutions ................................. | 5377 | 5378 0 | 5379 0 | 2.a.
b. To foreign banks ............................. | 5380 | 5381 0 | 5382 0 | 2.b.
3. Loans to finance agricultural production and | ///// | ////////////////// | ////////////////// |
other loans to farmers .......................... | 1594 | 1597 385 | 1583 531 | 3.
4. Commercial and industrial loans: | ///// | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ................ | 1251 | 1252 11,945 | 1253 108,334 | 4.a.
b. To non-U.S. addressees (domicile) ............ | 1254 | 1255 0 | 1256 0 | 4.b.
5. Loans to individuals for household, family, and | ///// | ////////////////// | ////////////////// |
other personal expenditures: | ///// | ////////////////// | ///////////////// |
a. Credit cards and related plans ............... | 5383 | 5384 1,187 | 5385 669 | 5.a.
b. Other (includes single payment, installment, | ///// | ////////////////// | ////////////////// |
and all student loans) ....................... | 5386 | 5387 22,600 | 5388 8,465 | 5.b.
6. Loans to foreign governments and official | ///// | ////////////////// | ////////////////// |
institutions .................................... | 5389 | 5390 0 | 5391 0 | 6.
7. All other loans ................................. | 5459 | 5460 14,909 | 5461 1,919 | 7.
8. Lease financing receivables: | ///// | ////////////////// | ////////////////// |
a. Of U.S. addressees (domicile) ................ | 1257 | 1258 95 | 1259 6,544 | 8.a.
b. Of non-U.S. addressees (domicile) ............ | 1271 | 1272 0 | 1791 0 | 8.b.
9. Debt securities and other assets (exclude other | ///// | ////////////////// | ////////////////// |
real estate owned and other repossessed assets) . | 3505 | 3506 0 | 3507 85,778 | 9.
________________________________________________________________
===============================================================================================================================
</TABLE>
Amounts reported in items 1 through 8 above include guaranteed and unguaranteed
portions of past due and nonaccrual loans and leases. Report in item 10 below
certain guaranteed loans and leases that have already been included in the
amounts reported in items 1 through 8.
<TABLE>
<CAPTION>
________________________________________________________________
| RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
____________________ ____________________ ____________________
<S> <C> <C> <C> <C>
10. Loans and leases reported in items 1 | | | |
through 8 above which are wholly or partially | ///// | ////////////////// | ////////////////// |
guaranteed by the U.S. Government ............... | 5612 | 5613 18,447 | 5614 21,415 | 10.
a. Guaranteed portion of loans and leases | ///// | ////////////////// | ////////////////// |
included in item 10 above .................... | 5615 | 5616 18,250 | 5617 16,952 | 10.a.
________________________________________________________________
</TABLE>
29
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-20
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
Schedule RC-N--Continued
<TABLE>
<CAPTION>
__________
| C473 | -
______________________________________________________ ________
| (Column A) | (Column B) | (Column C) |
| Past due | Past due 90 | Nonaccrual |
| 30 through 89 | days or more | |
| days and still | and still | |
Memoranda | accruing | accruing | |
____________________ ____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
______________________________________________________ ____________________ ____________________ ____________________
<S> <C> <C> <C> <C>
1. Restructured loans and leases included in | ///// | /////////////////// | ///////////////// |
Schedule RC-N, items 1 through 8, above (and not | ///// | //// | |
reported in Schedule RC-C, part I, Memorandum | ///// | //// | |
item 2) ......................................... | 1658 | 1659 | | M.1.
2. Loans to finance commercial real estate, | ///// | //// | |
construction, and land development activities | ///// | //// | |
(not secured by real estate) included in | ///// | /////////////////// | ///////////////// |
Schedule RC-N, items 4 and 7, above ............. | 6558 | 6559 826 | 6560 7,043 | M.2.
|____________________|____________________ |___________________
3. Loans secured by real estate in domestic offices | RCON | RCON Bil Mil Thou | RCON Bil Mil Thou|
|___________________ |____________________ ____________________
(included in Schedule RC-N, item 1, above): | ///// | ////////////////// | ////////////////// |
a. Construction and land development ............ | 2759 | 2769 1,100 | 3492 26,422 | M.3.a.
b. Secured by farmland .......................... | 3493 | 3494 161 | 3495 0 | M.3.b.
c. Secured by 1-4 family residential properties: | ///// | ////////////////// | ////////////////// |
(1) Revolving, open-end loans secured by | ///// | ////////////////// | ////////////////// |
1-4 family residential properties and | ///// | ////////////////// | ////////////////// |
extended under lines of credit ........... | 5398 | 5399 5,114 | 5400 17,374 | M.3.c.(1)
(2) All other loans secured by 1-4 family | ///// | ////////////////// | ////////////////// |
residential properties ................... | 5401 | 5402 58,079 | 5403 75,430 | M.3.c.(2)
d. Secured by multifamily (5 or more) | ///// | ////////////////// | ////////////////// |
residential properties ....................... | 3499 | 3500 521 | 3501 12,491 | M.3.d.
e. Secured by nonfarm nonresidential properties . | 3502 | 3503 6,415 | 3504 92,245 | M.3.e.
________________________________________________________________
<CAPTION>
___________________________________________
| (Column A) | (Column B) |
| Past due 30 | Past due 90 |
| through 89 days | days or more |
____________________ ____________________
| RCFD Bil Mil Thou | RCFD Bil Mil Thou |
____________________ ____________________
<S> <C> <C> <C>
4. Interest rate, foreign exchange rate, and other | ///// | ////////////////// |
commodity and equity contracts: | ///// | ////////////////// |
a. Book value of amounts carried as assets ...... | 3522 | 3528 0 | M.4.a.
b. Replacement cost of contracts with a | ///// | ////////////////// |
positive replacement cost .................... | 3529 | 3530 0 | M.4.b.
___________________________________________
</TABLE>
30
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-21
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
<CAPTION>
______________________
Schedule RC-O--Other Data for Deposit Insurance Assessments | C475 |
|____________________|
Dollar Amounts in Thousands | RCON Bil Mil Thou |
___________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Unposted debits (see instructions): | ////////////////// |
a. Actual amount of all unposted debits ...................................................... | 0030 216 | 1.a.
OR | ////////////////// |
b. Separate amount of unposted debits: | ////////////////// |
(1) Actual amount of unposted debits to demand deposits ................................... | 0031 N/A | 1.b.(1)
(2) Actual amount of unposted debits to time and savings deposits(1) ...................... | 0032 N/A | 1.b.(2)
2. Unposted credits (see instructions): | ////////////////// |
a. Actual amount of all unposted credits ..................................................... | 3510 216 | 2.a.
OR | ////////////////// |
b. Separate amount of unposted credits: | ////////////////// |
(1) Actual amount of unposted credits to demand deposits .................................. | 3512 N/A | 2.b.(1)
(2) Actual amount of unposted credits to time and savings deposits(1) ..................... | 3514 N/A | 2.b.(2)
3. Uninvested trust funds (cash) held in bank's own trust department (not included in total | ////////////////// |
deposits in domestic offices) ................................................................ | 3520 101,763 | 3.
4. Deposits of consolidated subsidiaries in domestic offices and in insured branches in | ////////////////// |
Puerto Rico and U.S. territories and possessions (not included in total deposits): | ////////////////// |
a. Demand deposits of consolidated subsidiaries .............................................. | 2211 206,111 | 4.a.
b. Time and savings deposits(1) of consolidated subsidiaries ................................. | 2351 20,089 | 4.b.
c. Interest accrued and unpaid on deposits of consolidated subsidiaries ...................... | 5514 8 | 4.c.
5. Deposits in insured branches in Puerto Rico and U.S. territories and possessions: | ////////////////// |
a. Demand deposits in insured branches (included in Schedule RC-E, Part II) .................. | 2229 0 | 5.a.
b. Time and savings deposits(1) in insured branches (included in Schedule RC-E, Part II) ..... | 2383 0 | 5.b.
c. Interest accrued and unpaid on deposits in insured branches | ////////////////// |
(included in Schedule RC-G, item 1.b) ..................................................... | 5515 0 | 5.c.
______________________
______________________
Item 6 is not applicable to state nonmember banks that have not been authorized by the | ////////////////// |
Federal Reserve to act as pass-through correspondents. | ////////////////// |
6. Reserve balances actually passed through to the Federal Reserve by the reporting bank on | ////////////////// |
behalf of its respondent depository institutions that are also reflected as deposit liabilities| ////////////////// |
of the reporting bank: | ////////////////// |
a. Amount reflected in demand deposits (included in Schedule RC-E, item 4 or 5, column B)..... | 2314 0 | 6.a.
b. Amount reflected in time and savings deposits(1) (included in Schedule RC-E, Part I, | ////////////////// |
item 4 or 5, column A or C, but not column B).............................................. | 2315 0 | 6.b.
7. Unamortized premiums and discounts on time and savings deposits:(1) | ////////////////// |
a. Unamortized premiums ...................................................................... | 5516 769 | 7.a.
b. Unamortized discounts ..................................................................... | 5517 0 | 7.b.
______________________
_______________________________________________________________________________________________________________________________
| |
|8. To be completed by banks with "Oakar deposits." |
______________________
| Total "Adjusted Attributable Deposits" of all institutions acquired under Section 5(d)(3) of | ////////////////// | |
| the Federal Deposit Insurance Act (from most recent FDIC Oakar Transaction Worksheet(s)) .... | 5518 2,188,589 | 8. |
______________________
| |
_______________________________________________________________________________________________________________________________
______________________
9. Deposits in lifeline accounts ................................................................ | 5596 ///////////// | 9.
10. Benefit-responsive "Depository Institution Investment Contracts" (included in total | ////////////////// |
deposits in domestic offices) ................................................................ | 8432 0 | 10.
______________________
</TABLE>
______________
(1) For FDIC insurance assessment purposes, "time and savings deposits" consists
of nontransaction accounts and all transaction accounts other than demand
deposits.
31
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-22
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
Schedule RC-O--Continued
<TABLE>
<CAPTION>
Dollar Amounts in Thousands | RCON Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
<S> <C> <C>
11. Adjustments to demand deposits in domestic offices reported in Schedule RC-E for | ////////////////// |
certain reciprocal demand balances: | ////////////////// |
a. Amount by which demand deposits would be reduced if reciprocal demand balances | ////////////////// |
between the reporting bank and savings associations were reported on a net basis | ////////////////// |
rather than a gross basis in Schedule RC-E .................................................. | 8785 0 | 11.a.
b. Amount by which demand deposits would be increased if reciprocal demand balances | ////////////////// |
between the reporting bank and U.S. branches and agencies of foreign banks were | ////////////////// |
reported on a gross basis rather than a net basis in Schedule RC-E .......................... | A181 0 | 11.b.
c. Amount by which demand deposits would be reduced if cash items in process of | ////////////////// |
collection were included in the calculation of net reciprocal demand balances between | ////////////////// |
the reporting bank and the domestic offices of U.S. banks and savings associations | ////////////////// |
in Schedule RC-E ............................................................................ | A182 0 | 11.c.
____________________
Memoranda (to be completed each quarter except as noted) Dollar Amounts in Thousands | RCON Bil Mil Thou |
_____________________________________________________________________ ___________________________|____________________|
1. Total deposits in domestic offices of the bank (sum of Memorandum it ems 1.a. (1) and | ////////////////// |
1.b.(1) must equal Schedule RC, item 13.a): | ////////////////// |
a. Deposits accounts of $100,000 or less: | ////////////////// |
(1) amount of deposit accounts of $100,000 or less ....................................... | 2702 19,755,631 | M.1.a.(1)
(2) Number of deposit accounts of $100,000 or less (to be Number | ////////////////// |
completed for the June report only) .............................|RCON 3779 3,742,107 | ////////////////// | M.1.a.(2)
b. Deposit accounts of more than $100,000: | ////////////////// |
(1) Amount of deposit accounts of more than $100,000 ..................................... | 2710 14,354,949 | M.1.b.(1)
Number | ////////////////// |
(2) Number of deposit accounts of more than $100,000 ................|RCON 2722 27,062 | ////////////////// | M.1.b.(2)
2. Estimated amount of uninsured deposits in domestic offices of the bank:
a. An estimate of your bank's uninsured deposits can be determined by mutiplying the
number of deposit accounts of more than $100,000 reported in Memorandum item 1.b.(2)
above by $100,000 and subtracting the result from the amount of deposit accounts of
more than $100,000 reported in Memorandum item 1.b.(1) above.
Indicate in the appropriate box at the right whether your bank has a method or
procedure for determining a better estimate of uninsured deposits than the ____________YES_______NO__
estimated described above .................................................................. | 6861| |///| x | M.2.a.
____________________
b. If the box marked YES has been checked, report the estimate of uninsured deposits |RCON Bil Mil Thou|
determined by using your bank's method or procedure .................................... | 5597 N/A | M.2.b.
_____________________________________________________________________________________________________________________________
| C477 | -
Person to whom questions about the Reports of Condition and Income should be directed: __________
PAMELA S. FLYNN, VICE PRESIDENT (401) 278-5194
___________________________________________________________________________________ ______________________________________
Name and Title (TEXT 8901) Area code and phone number (TEXT 8902)
</TABLE>
32
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-23
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
Schedule RC-R--Regulatory Capital
This schedule must be completed by all banks as follows: Banks that reported
total assets of $1 billion or more in Schedule RC, item 12, for June 30, 1995,
must complete items 2 through 9 and Memoranda items 1 and 2. Banks with assets
of less than $1 billion must complete items 1 through 3 below or Schedule RC-R
in its entirety, depending on their response to item 1 below.
<TABLE>
<S> <C>
____________
| C480 | -
1. Test for determining the extent to which Schedule RC-R must be completed. To be completed _____|__________|
only by banks with total assets of less than $1 billion. Indicate in the appropriate | YES NO |
box at the right whether the bank has total capital greater than or equal to eight percent___________ _______________
of adjusted total assets ............................................................... | RCFD 6056 | |////| | 1.
_____________________________
</TABLE>
For purposes of this test, adjusted total assets equals total assets less
cash, U.S. Treasuries, U.S. Government agency obligations, and 80 percent of
U.S. Government-sponsored agency obligations plus the allowance for loan and
lease losses and selected off-balance sheet items as reported on Schedule RC-
L (see instructions). If the box marked YES has been checked, then the bank
only has to complete items 2 and 3 below. If the box marked NO has been
checked, the bank must complete the remainder of this schedule. A NO response
to item 1 does not necessarily mean that the bank's actual risk-based capital
ratio is less than eight percent or that the bank is not in compliance with
the risk-based capital guidelines.
<TABLE>
<CAPTION>
___________________________________________
| (Column A) | (Column B) |
|Subordinated Debt(1)| Other |
_________________________________________________________________ | and Intermediate | Limited- |
| NOTE: All banks are required to complete items 2 and 3 below | | Term Preferred | Life Capital |
| See optional worksheet for items 3.a through 3.f. | | Stock | Instruments |
|________________________________________________________________| ____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
______________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
2. Subordinated debt(1) and other limited-life capital instruments (original | | |
weighted average maturity of at least five years) with a remaining | | |
maturity of: | | |
a. One year or less ...................................................... | 3780 25,737 | 3786 0 | 2.a.
b. Over one year through two years ....................................... | 3781 737 | 3787 0 | 2.b.
c. Over two years through three years .................................... | 3782 10,745 | 3788 0 | 2.c.
d. Over three years through four years ................................... | 3783 0 | 3789 0 | 2.d.
e. Over four years through five years .................................... | 3784 0 | 3790 0 | 2.e.
f. Over five years ....................................................... | 3785 1,101,000 | 3791 0 | 2.f.
3. Amounts used in calculating regulatory capital ratios (report amounts | ////////////////// | ////////////////// |
determined by the bank for its own internal regulatory capital analyses): | ////////////////// | RCFD Bil Mil Thou |
a. Tier 1 capital......................................................... | ////////////////// | 8274 3,590,367 | 3.a.
b. Tier 2 capital......................................................... | ////////////////// | 8275 1,755,646 | 3.b.
c. Total risk-based capital............................................... | ////////////////// | 3792 5,346,013 | 3.c.
d. Excess allowance for loan and lease losses............................. | ////////////////// | A222 297,250 | 3.d.
e. Risk-weighted assets................................................... | ////////////////// | A223 45,718,856 | 3.e.
f. "Average total assets"................................................. | ////////////////// | A224 51,482,775 | 3.f.
___________________________________________
| (Column A) | (Column B) |
Items 4-9 and Memoranda items 1 and 2 are to be completed | Assets | Credit Equiv- |
by banks that answered NO to item 1 above and | Recorded | alent Amount |
by banks with total assets of $1 billion or more. | on the | of Off-Balance |
| Balance Sheet | Sheet Items(2) |
____________________ ____________________
| RCFD Bil Mil Thou | RCFD Bil Mil Thou |
____________________ ____________________
4. Assets and credit equivalent amounts of off-balance sheet items assigned | | |
to the Zero percent risk category: | ////////////////// | ////////////////// |
a. Assets recorded on the balance sheet: | ////////////////// | ////////////////// |
(1) Securities issued by, other claims on, and claims unconditionally | ////////////////// | ////////////////// |
guaranteed by, the U.S. Government and its agencies and other | ////////////////// | ////////////////// |
OECD central governments .......................................... | 3794 2,147,648 | ////////////////// | 4.a.(1)
(2) All other ......................................................... | 3795 1,115,265 | ////////////////// | 4.a.(2)
b. Credit equivalent amount of off-balance sheet items ................... | ////////////////// | 3796 101,488 | 4.b.
___________________________________________
</TABLE>
_____
(1) Exclude mandatory convertible debt reported in Schedule RC-M, item 7.
(2) Do not report in column B the risk-weighted amount of assets reported in
column A.
33
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-24
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
Schedule RC-R--Continued
<TABLE>
<CAPTION>
___________________________________________
| (Column A) | (Column B) |
| Assets | Credit Equiv- |
| Recorded | alent Amount |
| on the | of Off-Balance |
| Balance Sheet | Sheet Items(1) |
____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
______________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
5. Assets and credit equivalent amounts of off-balance sheet items | ////////////////// | ////////////////// |
assigned to the 20 percent risk category: | ////////////////// | ////////////////// |
a. Assets recorded on the balance sheet: | ////////////////// | ////////////////// |
(1) Claims conditionally guaranteed by the U.S. Government and its | ////////////////// | ////////////////// |
agencies and other OECD central governments ....................... | 3798 714,375 | ////////////////// | 5.a.(1)
(2) Claims collateralized by securities issued by the U.S. Govern- | ////////////////// | ////////////////// |
ment and its agencies and other OECD central governments; by | ////////////////// | ////////////////// |
securities issued by U.S. Government-sponsored agencies; and | ////////////////// | ////////////////// |
by cash on deposit ................................................ | 3799 0 | ////////////////// | 5.a.(2)
(3) All other ......................................................... | 3800 8,774,345 | ////////////////// | 5.a.(3)
b. Credit equivalent amount of off-balance sheet items ................... | ////////////////// | 3801 791,065 | 5.b.
6. Assets and credit equivalent amounts of off-balance sheet items | ////////////////// | ////////////////// |
assigned to the 50 percent risk category: | ////////////////// | ////////////////// |
a. Assets recorded on the balance sheet .................................. | 3802 5,265,173 | ////////////////// | 6.a.
b. Credit equivalent amount of off-balance sheet items ................... | ////////////////// | 3803 409,680 | 6.b.
7. Assets and credit equivalent amounts of off-balance sheet items | ////////////////// | ////////////////// |
assigned to the 100 percent risk category: | ////////////////// | ////////////////// |
a. Assets recorded on the balance sheet .................................. | 3804 31,799,547 | ////////////////// | 7.a.
b. Credit equivalent amount of off-balance sheet items ................... | ////////////////// | 3805 10,122,631 | 7.b.
8. On-balance sheet asset values excluded from the calculation of the | ////////////////// | ////////////////// |
risk-based capital ratio(2) .............................................. | 3806 83,713 | ////////////////// | 8.
9. Total assets recorded on the balance sheet (sum of | ////////////////// | ////////////////// |
items 4.a, 5.a, 6.a, 7.a, and 8, column A)(must equal Schedule RC, | ////////////////// | ////////////////// |
item 12 plus items 4.b and 4.c) .......................................... | 3807 49,900,066 | ////////////////// | 9.
___________________________________________
<CAPTION>
Memoranda
______________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
1.Current credit exposure across all off-balance sheet derivative contracts covered by the | ///////////////// |
risked-based capital standards .................................................................| 8764 135,825| M.1.
|___________________|
_____________________________________________________________________
| With a remaining maturity of |
|____________________________________________________________________|
| (Column A) | (Column B) | (Column C) |
| | | |
| One year or less | Over one year | Over five years |
| | through five years | |
|______________________|______________________|______________________|
|RCFD Tril Bil Mil Thou|RCFD Tril Bil Mil Thou|RCFD Tril Bil Mil Thou|
|______________________|______________________|______________________|
2. Notional principal amounts of | | | |
off-balance sheet derivative contracts(3):| | | |
a. Interest rate contracts ................. | 3809 8,320,956 | 8766 18,597,686 | 8767 801,055 | M.2.a.
b. Foreign exchange contracts .............. | 3812 1,578,420 | 8769 101,907 | 8770 0 | M.2.b.
c. Gold contracts .......................... | 8771 15,291 | 8772 0 | 8773 0 | M.2.c.
d. Other precious metals contracts ......... | 8774 8,748 | 8775 0 | 8776 0 | M.2.d.
e. Other commodity contracts ............... | 8777 0 | 8778 0 | 8779 0 | M.2.e.
f. Equity derivative contracts ............. | A000 0 | A001 0 | A002 0 | M.2.f.
|____________________________________________________________________|
</TABLE>
_________________
1) Do not report in column B the risk-weighted amount of
assets reported in column A.
2) Include the difference between the fair value and the amortized cost of
available-for-sale securities in item 8 and report the amortized cost of these
securities in items 4 through 7 above. Item 8 also includes on-balance sheet
asset values (or portions thereof) of off-balance sheet interest rate, foreign
exchange rate, and commodity contracts and those contracts (e.g., futures
contracts) not subject to risk-based capital. Exclude from item 8 margin
accounts and accrued receivables as well as any portion of the allowance for
loan and lease losses in excess of the amount that may be included in Tier 2
capital. 3) Exclude foreign exchange contracts with an original maturity of 14
days or less and all futures contracts.
34
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK
Address: ONE MONARCH PLACE Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
City, State, Zip: SPRINGFIELD, MA 01102 Page RC-25
FDIC Certificate No.: 02499
</TABLE>
Optional Narrative Statement Concerning the Amounts
Reported in the Reports of Condition and Income
at close of business on June 30, 1996
FLEET NATIONAL BANK SPRINGFIELD , MASSACHUSETTS
- ------------------- ----------------- -------------
Legal Title of Bank City State
The management of the reporting bank may, if it wishes, submit a brief
narrative statement on the amounts reported in the Reports of Condition and
Income. This optional statement will be made available to the public, along
with the publicly available data in the Reports of Condition and Income, in
response to any request for individual bank report data. However, the
information reported in column A and in all of Memorandum item 1 of Schedule
RC-N is regarded as confidential and will not be released to the public.
BANKS CHOOSING TO SUBMIT THE NARRATIVE STATEMENT SHOULD ENSURE THAT THE
STATEMENT DOES NOT CONTAIN THE NAMES OR OTHER IDENTIFICATIONS OF INDIVIDUAL
BANK CUSTOMERS, REFERENCES TO THE AMOUNTS REPORTED IN THE CONFIDENTIAL ITEMS
IN SCHEDULE RC-N, OR ANY OTHER INFORMATION THAT THEY ARE NOT WILLING TO HAVE
MADE PUBLIC OR THAT WOULD COMPROMISE THE PRIVACY OF THEIR CUSTOMERS. Banks
choosing not to make a statement may check the "No comment" box below and
should make no entries of any kind in the space provided for the narrative
statement; i.e., DO NOT enter in this space such phrases as "No statement,"
"Not applicable," "N/A," "No comment," and "None."
The optional statement must be entered on this sheet. The statement should
not exceed 100 words. Further, regardless of the number of words, the
statement must not exceed 750 characters, including punctuation, indentation,
and standard spacing between words and sentences. If any submission should
exceed 750 characters, as defined, it will be truncated at 750 characters with
no notice to the submitting bank and the truncated statement will appear as the
bank's statement both on agency computerized records and in computer-file
releases to the public.
All information furnished by the bank in the narrative statement must be
accurate and not misleading. Appropriate efforts shall be taken by the
submitting bank to ensure the statement's accuracy. The statement must be
signed, in the space provided below, by a senior officer of the bank who
thereby attests to its accuracy.
If, subsequent to the original submission, material changes are submitted for
the data reported in the Reports of Condition and Income, the existing
narrative statement will be deleted from the files, and from disclosure; the
bank, at its option, may replace it with a statement, under signature,
appropriate to the amended data.
The optional narrative statement will appear in agency records and in release
to the public exactly as submitted (or amended as described in the preceding
paragraph) by the management of the bank (except for the truncation of
statements exceeding the 750-character limit described above). THE STATEMENT
WILL NOT BE EDITED OR SCREENED IN ANY WAY BY THE SUPERVISORY AGENCIES FOR
ACCURACY OR RELEVANCE. DISCLOSURE OF THE STATEMENT SHALL NOT SIGNIFY THAT ANY
FEDERAL SUPERVISORY AGENCY HAS VERIFIED OR CONFIRMED THE ACCURACY OF THE
INFORMATION CONTAINED THEREIN. A STATEMENT TO THIS EFFECT WILL APPEAR ON ANY
PUBLIC RELEASE OF THE OPTIONAL STATEMENT SUBMITTED BY THE MANAGEMENT OF THE
REPORTING BANK.
__________________________________________________________________________
No comment |X| (RCON 6979) | c471 | C472 |-
BANK MANAGEMENT STATEMENT (please type or print clearly):
(TEXT 6980)
/s/__Gero DeRosa_______________________________ ___7/25/96________
Signature of Executive Officer of Bank Date of Signature
35
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM S-4
REGISTRATION STATEMENT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001022644
<NAME> ELDORADO RESORTS LLC
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 4,784
<SECURITIES> 0
<RECEIVABLES> 5,875
<ALLOWANCES> 660
<INVENTORY> 2,358
<CURRENT-ASSETS> 14,783
<PP&E> 208,259
<DEPRECIATION> 58,561
<TOTAL-ASSETS> 218,813
<CURRENT-LIABILITIES> 31,182
<BONDS> 100,315
0
0
<COMMON> 0
<OTHER-SE> 82,675
<TOTAL-LIABILITY-AND-EQUITY> 218,813
<SALES> 0
<TOTAL-REVENUES> 70,800
<CGS> 0
<TOTAL-COSTS> 38,468
<OTHER-EXPENSES> 5,067
<LOSS-PROVISION> 480
<INTEREST-EXPENSE> 4,651
<INCOME-PRETAX> 8,107
<INCOME-TAX> 0
<INCOME-CONTINUING> 8,107
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,107
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE>
EXHIBIT 99.1
LETTER OF TRANSMITTAL
To Tender for Exchange
10 1/2% Senior Subordinated Notes due 2006
of
ELDORADO RESORTS LLC
AND
ELDORADO CAPITAL CORP.
Pursuant to the Prospectus dated , 199
- -------------------------------------------------------------------------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON , 199 (THE "EXPIRATION DATE"), UNLESS THE EXCHANGE OFFER
IS EXTENDED BY THE ISSUERS IN THEIR SOLE DISCRETION, IN WHICH CASE THE TERM
"EXPIRATION DATE" SHALL MEAN THE LATEST DATE AND TIME TO WHICH THE EXCHANGE
OFFER IS EXTENDED. TENDERS MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M., NEW
YORK CITY TIME, ON THE EXPIRATION DATE.
-------------------------------------------------------------------------------
The Exchange Agent is:
Fleet National Bank
By Mail: By Hand:
Fleet National Bank Fleet National Bank
Corporate Trust Operations Corporate Trust Operations
777 Main Street, Lower Level 777 Main Street, Lower Level
CTMO 0224 Hartford, Connecticut 06115
Hartford, Connecticut 06115 Attention: Patricia Williams
Attention: Patricia Williams
By Facsimile:
(860) 986-7908
Confirm by Telephone:
(860) 986-2910
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS SET FORTH IN THIS
LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF
TRANSMITTAL IS COMPLETED.
<PAGE>
The undersigned acknowledges receipt of the Prospectus dated , 199 (the
"Prospectus"), of Eldorado Resorts LLC, a Nevada limited-liability company
(the "Company"), and Eldorado Capital Corp., a Nevada corporation ("Capital"
and, together with the Company, the "Issuers"), and this Letter of Transmittal
(the "Letter of Transmittal"), which together with the Prospectus constitutes
the Issuers' offer (the "Exchange Offer") to exchange $1,000 principal amount
of its 10 1/2% Senior Subordinated Notes due 2006 (the "Exchange Notes") for
each $1,000 principal amount of its outstanding 10 1/2% Senior Subordinated
Notes due 2006 (the "Private Notes"). Recipients of the Prospectus should read
the requirements described in such Prospectus with respect to eligibility to
participate in the Exchange Offer. Capitalized terms used but not defined
herein have the meaning given to them in the Prospectus.
The undersigned hereby tenders the Private Notes described in the box
entitled "Description of Private Notes" below pursuant to the terms and
conditions described in the Prospectus and this Letter of Transmittal. The
undersigned is the registered owner of all such Private Notes and the
undersigned represents that it has received from each beneficial owner of such
Private Notes (each a "Beneficial Owner") a duly completed and executed form
of "Instruction to Registered Holder from Beneficial Owner" accompanying this
Letter of Transmittal, instructing the undersigned to take the action
described in this Letter of Transmittal.
This Letter of Transmittal is to be used by a holder of Private Notes (i)
if certificates representing Private Notes are to be forwarded herewith, (ii) if
delivery of Private Notes is to be made by book-entry transfer to the Exchange
Agent's account at The Depository Trust Company ("DTC"), pursuant to the
procedures set forth in the section of the Prospectus entitled "The Exchange
Offer--Procedures for Tendering" or (iii) if a tender is made pursuant to the
guaranteed delivery procedures in the section of the Prospectus entitled "The
Exchange Offer--Guaranteed Delivery Procedures."
The undersigned hereby represents and warrants that the information received
from the Beneficial Owners is accurately reflected in the boxes entitled
"Beneficial Owner(s)--Residence" and "Beneficial Owner(s)--Purchaser Status."
Any Beneficial Owner whose Private Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact such registered holder of Private Notes promptly and
instruct such registered holder of Private Notes to tender on behalf of the
Beneficial Owner. If such Beneficial Owner wishes to tender on its own behalf,
such Beneficial Owner must, prior to completing and executing this Letter of
Transmittal and delivering its Private Notes, either make appropriate
arrangements to register ownership of the Private Notes in such Beneficial
Owner's name or obtain a properly completed bond power from the registered
holder of Private Notes. The transfer of record ownership may take
considerable time.
In order to properly complete this Letter of Transmittal, a holder of
Private Notes must (i) complete the box entitled "Description of Private
Notes," (ii) complete the boxes entitled "Beneficial Owner(s)--Residence" and
"Beneficial Owner(s)--Purchaser Status," (iii) if appropriate, check and
complete the boxes relating to book-entry transfer, guaranteed delivery,
Special Issuance Instructions and Special Delivery Instructions, (iv) sign the
Letter of Transmittal by completing the box entitled "Sign Here" and (v)
complete the Substitute Form W-9. Each holder of Private Notes should
carefully read the detailed instructions below prior to completing the Letter
of Transmittal.
Holders of Private Notes who desire to tender their Private Notes for
exchange and (i) whose Private Notes are not immediately available or (ii) who
cannot deliver their Private Notes, this Letter of Transmittal and all other
documents required hereby to the Exchange Agent on or prior to the Expiration
Date, must tender the Private Notes pursuant to the guaranteed delivery
procedures set forth in the section of the Prospectus entitled "The Exchange
Offer--Guaranteed Delivery Procedures." See Instruction 2.
Holders of Private Notes who wish to tender their Private Notes for
exchange must complete columns (1) through (3) in the box below entitled
"Description of Private Notes," and sign the box below entitled "Sign Here." If
only those columns are completed, such holder of Private Notes will have
tendered for exchange all Private Notes listed in column (3) below. If the
holder of Private Notes wishes to tender for exchange less than all of such
Private Notes, column (4) must be completed in full. In such case, such holder
of Private Notes should refer to Instruction 5.
2
<PAGE>
DESCRIPTION OF PRIVATE NOTES
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
(1) (2) (3) (4)
PRINCIPAL
AMOUNT
TENDERED
FOR
PRIVATE AGGREGATE EXCHANGE
NOTE PRINCIPAL (MUST
NAME(S) AND ADDRESS(ES) OF REGISTERED NUMBER(S) AMOUNT BE IN
HOLDER(S) OF PRIVATE NOTE(S), EXACTLY AS NAME(S) (ATTACH REPRESENTED INTEGRAL
APPEAR(S) ON PRIVATE NOTE CERTIFICATE(S) SIGNED LIST BY MULTIPLES
(PLEASE FILL IN, IF BLANK) IF NECESSARY) CERTIFICATE(S)/1/ OF $1,000)/2/
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
----------------------------------------------------------------
----------------------------------------------------------------
----------------------------------------------------------------
----------------------------------------------------------------
----------------------------------------------------------------
----------------------------------------------------------------
----------------------------------------------------------------
----------------------------------------------------------------
----------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
</TABLE>
(1) Unless indicated in the column "Principal Amount Tendered For Exchange,"
any tendering holder of 10 1/2% Senior Subordinated Notes due 2006 will be
deemed to have tendered the entire aggregate principal amount represented
by the column labelled "Aggregate Principal Amount Represented by
Certificate(s)."
(2) The minimum permitted tender is $1,000 in principal amount of 10 1/2%
Senior Subordinated Notes due 2006. All other tenders must be in integral
multiples of $1,000.
3
<PAGE>
[ ] CHECK HERE IF TENDERED PRIVATE NOTES ARE ENCLOSED HEREWITH.
[ ] CHECK HERE IF TENDERED PRIVATE NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND
COMPLETE THE FOLLOWING (FOR USE BY ELIGIBLE INSTITUTIONS (AS HEREINAFTER
DEFINED) ONLY):
Name of Tendering Institution:
------------------------------------------
Account Number:
---------------------------------------------------------
Transaction Code Number:
------------------------------------------------
[ ] CHECK HERE IF TENDERED PRIVATE NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY ENCLOSED HEREWITH AND COMPLETE THE FOLLOWING
(FOR USE BY ELIGIBLE INSTITUTIONS ONLY):
Name of Registered Holder of Private Note(s):
---------------------------
Date of Execution of Notice of Guaranteed Delivery:
---------------------
Window Ticket Number (if available):
------------------------------------
Name of Institution which Guaranteed Delivery:
--------------------------
Account Number (if delivered by book-entry transfer):
-------------------
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:
-------------------------------------------------------------------
Address:
----------------------------------------------------------------
----------------------------------------------------------------
4
<PAGE>
- ----------------------------------- ------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 6, 7 AND 8) (SEE INSTRUCTIONS 1, 6, 7 AND 8)
To be completed ONLY (i) if the To be completed ONLY if the Ex-
Exchange Notes issued in exchange change Notes issued in exchange
for Private Notes, certificates for Private Notes, certificates
for Private Notes in a principal for Private Notes in a principal
amount not exchanged for Exchange amount not exchanged for Exchange
Notes, or Private Notes (if any) Notes, or Private Notes (if any)
not tendered for exchange, are to not tendered for exchange, are to
be issued in the name of someone be mailed or delivered (i) to
other than the undersigned or someone other than the under-
(ii) if Private Notes tendered by signed or (ii) to the undersigned
book-entry transfer which are not at an address other than the ad-
exchanged are to be returned by dress shown below the
credit to an account maintained undersigned's signature.
at DTC.
Issue to: Mail or deliver to:
Name Name
----------------------------- -----------------------------
(PLEASE PRINT) (PLEASE PRINT)
Address Address
-------------------------- --------------------------
-------------------------- --------------------------
-------------------------- --------------------------
(INCLUDE ZIP CODE) (INCLUDE ZIP CODE)
---------------------------------- ----------------------------------
(TAX IDENTIFICATION NO. OR SOCIAL (TAX IDENTIFICATION NO. OR SOCIAL
SECURITY NO.) SECURITY NO.)
Credit Private Notes not
exchanged and delivered by book-
entry transfer to DTC account set
forth below:
----------------------------------
(ACCOUNT NUMBER)
5
<PAGE>
- --------------------------------------------------------------------------------
BENEFICIAL OWNER(S)--RESIDENCE
- --------------------------------------------------------------------------------
State of Domicile/Principal Place of Principal Amount of Private Notes Held
Business of Each Beneficial Owner of for Account of Beneficial Owner(s)
Private Notes
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BENEFICIAL OWNER(S)--PURCHASER STATUS
- --------------------------------------------------------------------------------
The Beneficial Owner of each of the Private Notes described herein is (check
the box that applies):
[ ] A "Qualified Institutional Buyer" (as defined in Rule 144A under the
Securities Act)
[ ] An "Institutional Accredited Investor" (as defined in Rule 501(a)(1),
(2), (3) or (7) under the Securities Act)
[ ] A non "U.S. person" (as defined in Regulation S of the Securities Act)
that purchased the Private Notes outside the United States in accordance
with Rule 904 of the Securities Act
[ ] Other (describe)
-----------------------------------------------------
-----------------------------------------------------
- --------------------------------------------------------------------------------
6
<PAGE>
SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
LADIES AND GENTLEMEN:
Pursuant to the offer by Eldorado Resorts LLC, a Nevada limited-liability
company (the "Company"), and Eldorado Capital Corp., a Nevada corporation
("Capital" and, together with the Company, the "Issuers"), upon the terms and
subject to the conditions set forth in the Prospectus dated , 199 (the
"Prospectus") and this Letter of Transmittal (the "Letter of Transmittal"),
which together with the Prospectus constitutes the Issuers' offer (the
"Exchange Offer") to exchange $1,000 principal amount of its 10 1/2% Senior
Subordinated Notes due 2006 (the "Exchange Notes") for each $1,000 principal
amount of its outstanding 10 1/2% Senior Subordinated Notes due 2006 (the
"Private Notes"), the undersigned hereby tenders to the Issuers for exchange
the Private Notes indicated above.
By executing this Letter of Transmittal and subject to and effective upon
acceptance for exchange of the Private Notes tendered for exchange herewith,
the undersigned will have irrevocably sold, assigned, transferred and
exchanged, to the Issuers, all right, title and interest in, to and under all
of the Private Notes tendered for exchange hereby, and hereby will have
appointed the Exchange Agent as the true and lawful agent and attorney-in-fact
(with full knowledge that the Exchange Agent also acts as agent of the
Issuers) of such holder of Private Notes with respect to such Private Notes,
with full power of substitution to (i) deliver certificates representing such
Private Notes, or transfer ownership of such Private Notes on the account
books maintained by DTC (together, in any such case, with all accompanying
evidences of transfer and authenticity), to the Issuers, (ii) present and
deliver such Private Notes for transfer on the books of the Issuers and (iii)
receive all benefits and otherwise exercise all rights and incidents of
beneficial ownership with respect to such Private Notes, all in accordance
with the terms of the Exchange Offer. The power of attorney granted in this
paragraph shall be deemed to be irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that (i) the undersigned is
the owner, (ii) has a net long position within the meaning of Rule 14e-4
("Rule 14e-4") under the Securities Exchange Act, as amended, equal to or
greater than the principal amount of Private Notes tendered hereby, (iii) the
tender of such Private Notes complies with Rule 14e-4 (to the extent that Rule
14e-4 is applicable to such exchange), (iv) the undersigned has full power and
authority to tender, exchange, assign and transfer the Private Notes and (v)
that when such Private Notes are accepted for exchange by the Issuers, the
Issuers will acquire good and marketable title thereto, free and clear of all
liens, restrictions, charges and encumbrances and not subject to any adverse
claims. The undersigned will, upon receipt, execute and deliver any additional
documents deemed by the Exchange Agent or the Issuers to be necessary or
desirable to complete the exchange, assignment and transfer of the Private
Notes tendered for exchange hereby.
By tendering, the undersigned hereby further represents to the Issuers that
(i) the Exchange Notes to be acquired by the undersigned in exchange for the
Private Notes tendered hereby and any beneficial owner(s) of such Private
Notes in connection with the Exchange Offer will be acquired by the
undersigned and such beneficial owner(s) in the ordinary course of business of
the undersigned, (ii) the undersigned have no arrangement or understanding
with any person to participate in the distribution of the Exchange Notes,
(iii) the undersigned and each beneficial owner acknowledge and agree that any
person who is a broker-dealer registered under the Exchange Act or is
participating in the Exchange Offer for the purpose of distributing the
Exchange Notes must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction of the Exchange Notes acquired by such person and cannot rely on
the position of the staff of the Commission set forth in certain no-action
letters, (iv) the undersigned and each beneficial owner understand that a
secondary resale transaction described in clause (iii) above and any resales
of Exchange Notes obtained by the undersigned in exchange for the Private
Notes acquired by the undersigned directly from the Issuers should be covered
by an effective registration statement containing the selling securityholder
information required by Item 507 or Item 508, as applicable, of Regulation S-K
of the
7
<PAGE>
Commission and (vi) neither the undersigned nor any beneficial owner is an
"affiliate," as defined under Rule 405 under the Securities Act, of either of
the Issuers. If the undersigned is a broker-dealer that will receive Exchange
Notes for its own account in exchange for Private Notes that were acquired as
a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such Exchange Notes; however,
by so acknowledging and by delivering a prospectus, the undersigned will not
be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
For purposes of the Exchange Offer, the Issuers will be deemed to have
accepted for exchange, and to have exchanged, validly tendered Private Notes,
if, as and when the Issuers give oral or written notice thereof to the
Exchange Agent. Tenders of Private Notes for exchange may be withdrawn at any
time prior to 5:00 p.m., New York City time, on the Expiration Date. See "The
Exchange Offer--Withdrawal of Tenders" in the Prospectus. Any Private Notes
tendered by the undersigned and not accepted for exchange will be returned to
the undersigned at the address set forth above unless otherwise indicated in
the box above entitled "Special Delivery Instructions" as promptly as
practicable after the Expiration Date.
The undersigned acknowledges that the Issuers' acceptance of Private Notes
validly tendered for exchange pursuant to any one of the procedures described
in the section of the Prospectus entitled "The Exchange Offer" and in the
instructions hereto will constitute a binding agreement between the
undersigned and the Issuers upon the terms and subject to the conditions of
the Exchange Offer.
Unless otherwise indicated in the box entitled "Special Issuance
Instructions," please return any Private Notes not tendered for exchange in
the name(s) of the undersigned. Similarly, unless otherwise indicated in the
box entitled "Special Delivery Instructions," please mail any certificates for
Private Notes not tendered or exchanged (and accompanying documents, as
appropriate) to the undersigned at the address shown below the undersigned's
signature(s). In the event that both "Special Issuance Instructions" and
"Special Delivery Instructions" are completed, please issue the certificates
representing the Exchange Notes issued in exchange for the Private Notes
accepted for exchange in the name(s) of, and return any Private Notes not
tendered for exchange or not exchanged to, the person(s) so indicated. The
undersigned recognizes that the Issuers have no obligation pursuant to the
"Special Issuance Instructions" and "Special Delivery Instructions" to
transfer any Private Notes from the name of the holder of Private Note(s)
thereof if the Issuers do not accept for exchange any of the Private Notes so
tendered for exchange or if such transfer would not be in compliance with any
transfer restrictions applicable to such Private Note(s).
IN ORDER TO VALIDLY TENDER PRIVATE NOTES FOR EXCHANGE, HOLDERS OF PRIVATE
NOTES MUST COMPLETE, EXECUTE, AND DELIVER THIS LETTER OF TRANSMITTAL.
Except as stated in the Prospectus, all authority herein conferred or agreed
to be conferred shall survive the death, incapacity, or dissolution of the
undersigned, and any obligation of the undersigned hereunder shall be binding
upon the heirs, personal representatives, successors and assigns of the
undersigned. Except as otherwise stated in the Prospectus, this tender for
exchange of Private Notes is irrevocable.
8
<PAGE>
- --------------------------------------------------------------------------------
SIGN HERE
- --------------------------------------------------------------------------------
(Signature(s) of Owner(s))
Date: , 199
Must be signed by the registered holder(s) of Private Notes exactly as
name(s) appear(s) on certificate(s) representing the Private Notes or on a
security position listing or by person(s) authorized to become registered
Private Note holder(s) by certificates and documents transmitted herewith. If
signature is by trustees, executors, administrators, guardians, attorneys-in-
fact, officers of corporations or others acting in a fiduciary or representative
capacity, please provide the following information. (See Instruction 6).
Name(s):
-----------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please Print)
Capacity (full title):
---------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Address:
-----------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Include Zip Code)
Principal place of business (if different from address listed above):
----------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Include Zip Code)
Area Code and Telephone No.: ( )
--------------------------------------------------
Tax Identification Nos. or Social Security Nos.:
-------------------------------
Please complete Substitute Form W-9
GUARANTEE OF SIGNATURE(S)
(Signature(s) must be guaranteed if required by Instruction 1)
Authorized Signature:
----------------------------------------------------------
Dated:
-------------------------------------------------------------------------
Name and Title:
----------------------------------------------------------------
(Please Print)
Name of Firm:
----------------------------------------------------------------
9
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
10
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, all
signatures on this Letter of Transmittal must be guaranteed by an institution
which is (1) a member firm of a registered national securities exchange or of
the National Association of Securities Dealers, Inc., (2) a commercial bank or
trust company having an office or correspondent in the United States, or (3)
an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under
the Securities Exchange Act of 1934, as amended, which is a member of one of
the following recognized Signature Guarantee Programs (an "Eligible
Institution"):
a. The Securities Transfer Agents Medallion Program (STAMP)
b. The New York Stock Exchange Medallion Signature Program (MSP)
c. The Stock Exchange Medallion Program (SEMP)
Signatures on this Letter of Transmittal need not be guaranteed (i) if this
Letter of Transmittal is signed by the registered holder(s) of the Private
Notes tendered herewith and such registered holder(s) have not completed the
box entitled "Special Issuance Instructions" or the box entitled "Special
Delivery Instructions" on this Letter of Transmittal or (ii) if such Private
Notes are tendered for the account of an Eligible Institution. IN ALL OTHER
CASES, ALL SIGNATURES MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION.
2. DELIVERY OF THIS LETTER OF TRANSMITTAL AND PRIVATE NOTES; GUARANTEED
DELIVERY PROCEDURES. This Letter of Transmittal is to be completed by holders
of Private Notes (i) if certificates are to be forwarded herewith or (ii) if
tenders are to be made pursuant to the procedures for tender by book-entry
transfer or guaranteed delivery set forth in the section of the Prospectus
entitled "The Exchange Offer." Certificates for all physically tendered
Private Notes or any timely confirmation of a book-entry transfer (a "Book-
Entry Confirmation"), as well as a properly completed and duly executed copy
of this Letter of Transmittal or facsimile hereof, and any other documents
required by this Letter of Transmittal, must be received by the Exchange Agent
at its address set forth on the cover of this Letter of Transmittal prior to
5:00 p.m., New York City time, on the Expiration Date. Holders of Private
Notes who elect to tender Private Notes and (i) whose Private Notes are not
immediately available or (ii) who cannot deliver the Private Notes, this
Letter of Transmittal or other required documents to the Exchange Agent prior
to 5:00 p.m., New York City time, on the Expiration Date, must tender their
Private Notes according to the guaranteed delivery procedures set forth in the
Prospectus. Holders may have such tender effected if: (a) such tender is made
through an Eligible Institution; (b) prior to 5:00 p.m., New York City time,
on the Expiration Date, the Exchange Agent has received from such Eligible
Institution a properly completed and duly executed Notice of Guaranteed
Delivery, setting forth the name and address of the holder of such Private
Notes, the certificate number(s) of such Private Notes and the principal
amount of Private Notes tendered for exchange, stating that tender is being
made thereby and guaranteeing that, within five New York Stock Exchange
trading days after the Expiration Date, this Letter of Transmittal (or a
facsimile thereof), together with the certificate(s) representing such Private
Notes (or a Book-Entry Confirmation), in proper form for transfer, and any
other documents required by this Letter of Transmittal, will be deposited by
such Eligible Institution with the Exchange Agent; and (c) a properly executed
Letter of Transmittal (or a facsimile hereof), as well as the certificate(s)
for all tendered Private Notes in proper form for transfer or a Book-Entry
Confirmation, together with any other documents required by this Letter of
Transmittal, are received by the Exchange Agent within five New York Stock
Exchange trading days after the Expiration Date.
11
<PAGE>
THE METHOD OF DELIVERY TO THE EXCHANGE AGENT OF PRIVATE NOTES, THIS LETTER
OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF
THE HOLDER. EXCEPT AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE DEEMED
MADE ONLY WHEN ACTUALLY RECEIVED OR CONFIRMED BY THE EXCHANGE AGENT. INSTEAD
OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN OVERNIGHT OR HAND
DELIVERY SERVICE, PROPERLY INSURED. IF DELIVERY IS BY MAIL, REGISTERED MAIL
WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT
BEFORE THE EXPIRATION DATE. NEITHER THIS LETTER OF TRANSMITTAL NOR ANY PRIVATE
NOTES SHOULD BE SENT TO THE ISSUERS. HOLDERS MAY REQUEST THEIR RESPECTIVE
BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE
ABOVE TRANSACTIONS FOR SUCH HOLDERS.
No alternative, conditional or contingent tenders will be accepted. All
tendering holders of Private Notes, by execution of this Letter of Transmittal
(or facsimile hereof, if applicable), waive any right to receive notice of the
acceptance of their Private Notes for exchange.
3. INADEQUATE SPACE. If the space provided in the box entitled "Description
of Private Notes" above is inadequate, the certificate numbers and principal
amounts of the Private Notes being tendered should be listed on a separate
signed schedule affixed hereto.
4. WITHDRAWALS. A tender of Private Notes may be withdrawn at any time prior
to 5:00 p.m., New York City time, on the Expiration Date by delivery of
written or facsimile notice of withdrawal to the Exchange Agent at the address
set forth on the cover of this Letter of Transmittal. To be effective, a
notice of withdrawal of Private Notes must (i) specify the name of the person
who tendered the Private Notes to be withdrawn (the "Depositor"), (ii)
identify the Private Notes to be withdrawn (including the certificate number
or numbers and aggregate principal amount of such Private Notes) and (iii) be
signed by the holder of Private Notes in the same manner as the original
signature on the Letter of Transmittal by which such Private Notes were
tendered (including any required signature guarantees). All questions as to
the validity, form and eligibility (including time of receipt) of such notices
will be determined by the Issuers in their sole discretion, whose
determination shall be final and binding on all parties. Any Private Notes so
withdrawn will thereafter be deemed not validly tendered for purposes of the
Exchange Offer and no Exchange Notes will be issued with respect thereto
unless the Private Notes so withdrawn are validly retendered. Properly
withdrawn Private Notes may be retendered by following one of the procedures
described in the section of the Prospectus entitled "The Exchange Offer--
Procedures for Tendering" at any time prior to 5:00 p.m., New York City time,
on the Expiration Date.
5. PARTIAL TENDERS. Tenders of Private Notes will be accepted only in
integral multiples of $1,000 principal amount. If a tender for exchange is to
be made with respect to less than the entire principal amount of any Private
Notes, fill in the principal amount of Private Notes which are tendered for
exchange in column (4) of the box entitled "Description of Private Notes," as
more fully described in the footnotes thereto. In case of a partial tender for
exchange, a new certificate, in fully registered form, for the remainder of
the principal amount of the Private Notes, will be sent to the holders of
Private Notes unless otherwise indicated in the appropriate box on this Letter
of Transmittal as promptly as practicable after the expiration or termination
of the Exchange Offer.
6. SIGNATURES ON THIS LETTER OF TRANSMITTAL, ASSIGNMENT AND ENDORSEMENTS.
(a) The signature(s) of the holder of Private Notes on this Letter of
Transmittal must correspond with the name(s) as written on the face of the
Private Notes without alternation, enlargement or any change whatsoever.
(b) If tendered Private Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal.
12
<PAGE>
(c) If any tendered Private Notes are registered in different names on
several certificates, it will be necessary to complete, sign and submit as
many separate copies of this Letter of Transmittal and any necessary or
required documents as there are different registrations or certificates.
(d) When this Letter of Transmittal is signed by the holder of the Private
Notes listed and transmitted hereby, no endorsements of Private Notes or bond
powers are required. If, however, Private Notes not tendered or not accepted,
are to be issued or returned in the name of a person other than the holder of
Private Notes, then the Private Notes transmitted hereby must be endorsed or
accompanied by a properly completed bond power, in a form satisfactory to the
Issuers, in either case signed exactly as the name(s) of the holder of Private
Notes appear(s) on the Private Notes. Signatures on such Private Notes or bond
powers must be guaranteed by an Eligible Institution (unless signed by an
Eligible Institution).
(e) If this Letter of Transmittal or Private Notes or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity,
such persons should so indicate when signing, and unless waived by the
Issuers, evidence satisfactory to the Issuers of their authority to so act
must be submitted with this Letter of Transmittal.
(f) If this Letter of Transmittal is signed by a person other than the
registered holder of Private Notes listed, the Private Notes must be endorsed
or accompanied by a properly completed bond power, in either case signed by
such registered holder exactly as the name(s) of the registered holder of
Private Notes appear(s) on the certificates. Signatures on such Private Notes
or bond powers must be guaranteed by an Eligible Institution (unless signed by
an Eligible Institution).
7. TRANSFER TAXES. Except as set forth in this Instruction 7, the Issuers
will pay all transfer taxes, if any, applicable to the exchange of Private
Notes pursuant to the Exchange Offer. If, however, a transfer tax is imposed
for any reason other than the exchange of the Private Notes pursuant to the
Exchange Offer, then the amount of any such transfer taxes (whether imposed on
the registered holder or any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemptions
therefrom is not submitted with this Letter of Transmittal, the amount of such
transfer taxes will be billed directly to such tendering holder.
8. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If the Exchange Notes are to
be issued, or if any Private Notes not tendered for exchange are to be issued
or sent to someone other than the holder of Private Notes or to an address
other than that shown above, the appropriate boxes on this Letter of
Transmittal should be completed. Holders of Private Notes tendering Private
Notes by book-entry transfer may request that Private Notes not accepted be
credited to such account maintained at DTC as such holder of Private Notes may
designate.
9. IRREGULARITIES. All questions as to the validity, form, eligibility
(including time of receipt), compliance with conditions, acceptance and
withdrawal of tendered Private Notes will be determined by the Issuers in
their sole discretion, which determination will be final and binding. The
Issuers reserve the absolute right to reject any and all Private Notes not
properly tendered or any Private Notes the Issuers' acceptance of which would,
in the opinion of counsel for the Issuers, be unlawful. The Issuers also
reserve the right to waive any defects, irregularities or conditions of tender
as to particular Private Notes. The Issuers' interpretation of the terms and
conditions of the Exchange Offer (including the instructions in the Letter of
Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Private Notes must be
cured within such time as the Issuers shall determine. Although the Issuers
intend to notify holders of defects or irregularities with respect to tenders
of Private Notes, neither the Issuers, the Exchange Agent nor any other person
shall incur any liability for failure to give such notification. Tenders of
Private Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any Private Notes received by the
Exchange Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering holders, unless otherwise provided in this Letter of
Transmittal, as soon as practicable following the Expiration Date.
10. WAIVER OF CONDITIONS. The Issuers reserve the absolute right to waive,
amend or modify certain of the specified conditions as described under "The
Exchange Offer--Conditions" in the Prospectus in the case of any Private Notes
tendered (except as otherwise provided in the Prospectus).
13
<PAGE>
11. MUTILATED, LOST, STOLEN OR DESTROYED PRIVATE NOTES. Any tendering holder
whose Private Notes have been mutilated, lost, stolen or destroyed should
contact the Exchange Agent at the address listed below for further
instructions:
Fleet National Bank
Corporate Trust Operations
777 Main Street, Lower Level
CTMO 0224
Hartford, Connecticut 06115
(860) 986-2910
12. REQUESTS FOR INFORMATION OR ADDITIONAL COPIES. Requests for information
or for additional copies of the Prospectus and this Letter of Transmittal may
be directed to the Exchange Agent at the address or telephone number set forth
on the cover of this Letter of Transmittal.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE THEREOF, IF
APPLICABLE) TOGETHER WITH CERTIFICATES, OR CONFIRMATION OF BOOK-ENTRY OR THE
NOTICE OF GUARANTEED DELIVERY, AND ALL OTHER REQUIRED DOCUMENTS MUST BE
RECEIVED BY THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE
EXPIRATION DATE.
IMPORTANT TAX INFORMATION
Under current federal income tax law, a holder of Private Notes whose
tendered Private Notes are accepted for exchange may be subject to backup
withholding unless the holder provides the Issuers (as payor), through the
Exchange Agent, with either (i) such holder's correct taxpayer identification
number ("TIN") on Substitute Form W-9 attached hereto, certifying that the TIN
provided on Substitute Form W-9 is correct (or that such holder of Private
Notes is awaiting a TIN) and that (A) the holder of Private Notes has not been
notified by the Internal Revenue Service that he or she is subject to backup
withholding as a result of a failure to report all interest or dividends or
(B) the Internal Revenue Service has notified the holder of Private Notes that
he or she is no longer subject to backup withholding or (ii) an adequate basis
for exemption from backup withholding. If such holder of Private Notes is an
individual, the TIN is such holder's social security number. If the Exchange
Agent is not provided with the correct taxpayer identification number, the
holder of Private Notes may be subject to certain penalties imposed by the
Internal Revenue Service.
Certain holders of Private Notes (including, among others, all corporations
and certain foreign individuals) are not subject to these backup withholding
and reporting requirements. Exempt holders of Private Notes should indicate
their exempt status on Substitution Form W-9. A foreign individual may qualify
as an exempt recipient by submitting to the Exchange Agent a properly
completed Internal Revenue Service Form W-8 (which the Exchange Agent will
provide upon request) signed under penalty of perjury, attesting to the
holder's exempt status. See the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 (the "Guidelines") for
additional instructions.
If backup withholding applies, the Issuers are required to withhold 31% of
any payment made to the holder of Private Notes or other payee. Backup
withholding is not an additional federal income tax. Rather, the federal
income tax liability of persons subject to backup withholding will be reduced
by the amount of tax withheld. If withholding results in an overpayment of
taxes, a refund may be obtained from the Internal Revenue Service.
The holder of Private Notes is required to give the Exchange Agent the TIN
(e.g., social security number or employer identification number) of the record
owner of the Private Notes. If the Private Notes are held in more than one
name or are not held in the name of the actual owner, consult the enclosed
Guidelines for additional guidance regarding which number to report.
14
<PAGE>
INSTRUCTION TO REGISTERED HOLDER
FROM BENEFICIAL OWNER
OF 10 1/2% SENIOR SUBORDINATED NOTES DUE 2006
OF ELDORADO RESORTS LLC AND ELDORADO CAPITAL CORP.
The undersigned hereby acknowledges receipt of the Prospectus dated ,
199 (the "Prospectus") of Eldorado Resorts LLC, a Nevada limited-liability
company (the "Company"), and Eldorado Capital Corp., a Nevada corporation
("Capital" and, together with the Company, the "Issuers"), and the
accompanying Letter of Transmittal (the "Letter of Transmittal"), that
together constitute the Issuers' offer (the "Exchange Offer"). Capitalized
terms used but not defined herein have the meanings ascribed to them in the
Prospectus.
This will instruct you, the registered holder, as to the action to be taken
by you relating to the Exchange Offer with respect to the 10 1/2% Senior
Subordinated Notes due 2006 (the "Private Notes") held by you for the account
of the undersigned.
The aggregate face amount of the Private Notes held by you for the account
of the undersigned is (fill in amount):
$_________ of the Private Notes.
With respect to the Exchange Offer, the undersigned hereby instructs you
(check appropriate box):
[ ] To TENDER the following Private Notes held by you for the account of
the undersigned (insert principal amount of Private Notes to be tendered, if
any):
$_________ of the Private Notes.
[ ] NOT to TENDER any Private Notes held by you for the account of the
undersigned.
If the undersigned instructs you to tender the Private Notes held by you for
the account of the undersigned, it is understood that you are authorized (a)
to make, on behalf of the undersigned (and the undersigned, by its signature
below, hereby makes to you), the representations and warranties contained in
the Letter of Transmittal that are to be made with respect to the undersigned
as a beneficial owner of the Private Notes, including but not limited to the
representations that (i) the undersigned's principal residence is in the state
of (fill in state)____________, (ii) the undersigned is acquiring the Exchange
Notes in the ordinary course of business of the undersigned, (iii) the
undersigned has no arrangement or understanding with any person to participate
in the distribution of Exchange Notes, (iv) the undersigned acknowledges that
any person who is a broker-dealer registered under the Exchange Act or is
participating in the Exchange Offer for the purpose of distributing the
Exchange Notes must comply with the registration and prospectus delivery
requirements of the Securities Act of 1933, as amended, in connection with a
secondary resale transaction of the Exchange Notes acquired by such person and
cannot rely on the position of the Staff of the Securities and Exchange
Commission (the "Commission") set forth in certain no-action letters (See the
section of the Prospectus entitled "The Exchange Offer--Resale of the Exchange
Notes"), (v) the undersigned understands that a secondary resale transaction
described in clause (iv) above and any resales of Exchange Notes obtained by
the undersigned in exchange for the Private Notes acquired by the undersigned
directly from the Issuers should be covered by an effective registration
statement containing the selling securityholder information required by Item
507 or Item 508, if applicable, of Regulation S-K of the Commission, (vi) the
undersigned is not an "affiliate," as defined in Rule 405 under the Securities
Act, of either of the Issuers, and (vii) if the undersigned is a broker-dealer
that will receive Exchange Notes for its own account in exchange for Private
Notes that were acquired as a result of market-making activities or other
trading activities, it acknowledges that it will deliver a prospectus meeting
the requirements of the Securities Act in connection with any resale of such
Exchange Notes; however, by so acknowledging and by delivering a prospectus,
the undersigned will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act; (b) to agree, on behalf of the undersigned,
as set forth in the Letter of Transmittal; and (c) to take such other action
as necessary under the Prospectus or the Letter of Transmittal to effect the
valid tender of Private Notes.
15
<PAGE>
The purchaser status of the undersigned is (check the box that applies):
[ ] A "Qualified Institutional Buyer" (as defined in Rule 144A under the
Securities Act)
[ ] An "Institutional Accredited Investor" (as defined in Rule 501(a)(1), (2),
(3) or (7) under the Securities Act)
[ ] A non "U.S. person" (as defined in Regulation S of the Securities Act) that
purchased the Private Notes outside the United States in accordance with
Rule 904 of the Securities Act
[ ] Other (describe)
-----------------------------------------------------------
- --------------------------------------------------------------------------------
SIGN HERE
Name of Beneficial Owner(s):
---------------------------------------------------
- --------------------------------------------------------------------------------
Signature(s):
------------------------------------------------------------------
- --------------------------------------------------------------------------------
Name(s) (please print):
--------------------------------------------------------
- --------------------------------------------------------------------------------
Address:
-----------------------------------------------------------------------
- --------------------------------------------------------------------------------
Principal place of business (if different from address listed above):
----------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Telephone Number(s):
-----------------------------------------------------------
- --------------------------------------------------------------------------------
Taxpayer Identification Number(s) or Social Security Number(s):
----------------
- --------------------------------------------------------------------------------
Date:
--------------------------------------------------------------------------
- --------------------------------------------------------------------------------
16
<PAGE>
- --------------------------------------------------------------------------------
PAYER'S NAME:
----------------------------
- -------------------------------------------------------------------------------
SUBSTITUTE
FORM W-9
Department of the Treasury Internal Revenue Service
Payer's Request for Taxpayer Identification Number ("TIN")
PART 1--PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT AND CERTIFY BY SIGNING AND
DATING BELOW
- ------------------------------------------------------------------------------
Social Security Number
OR
- ------------------------------------------------------------------------------
Employer Identification Number
PART 2--
Certification Under Penalties of Perjury, I certify that:
(1) The number shown on this form is my current TIN (or I am waiting for a
number to be issued to me) and
(2) I am not subject to backup withholding either because I have not been
notified by the Internal Revenue Service (the "IRS") that I am subject to
backup withholding as a result of a failure to report all interest or
dividends, or the IRS has notified me that I am no longer subject to backup
withholding.
PART 3
Awaiting
TIN [ ]
Certificate instructions--You must cross out item (2) in Part 2 above if you
have been notified by the IRS that you are subject to backup withholding
because of underreporting interest or dividends on your tax return. However, if
after being notified by the IRS that you are subject to backup withholding you
receive another notification from the IRS stating that you are no longer subject
to backup withholding, do not cross out item (2).
SIGNATURE DATE
------------------------------- --------------------------------
NAME
--------------------------------------------------------------------------
ADDRESS
-----------------------------------------------------------------------
CITY STATE ZIP CODE
-------------------------------- ------------- ------------
- -------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENT MADE TO YOU PURSUANT TO THE EXCHANGE OFFER.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
17
<PAGE>
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU
CHECK THE BOX IN PART 3 OF SUBSTITUTE FORM W-9
- --------------------------------------------------------------------------------
PAYOR'S NAME: FLEET NATIONAL BANK
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (a) I have mailed or
delivered an application to receive a taxpayer identification number to
the appropriate Internal Revenue Service Center or Social Security
Administration Office or (b) I intend to mail or deliver such an
application in the near future. I understand that if I do not provide a
taxpayer identification number with 60 days, 31% of all reportable
payments made to me thereafter will be withheld until I provide such a
number.
_______________________________________________ __________
Signature Date
- --------------------------------------------------------------------------------
18
<PAGE>
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
WITH RESPECT TO
10 1/2% SENIOR SUBORDINATED NOTES DUE 2006
THIS FORM, OR ONE SUBSTANTIALLY EQUIVALENT HERETO, MUST BE USED BY ANY
HOLDER OF 10 1/2% SENIOR SUBORDINATED NOTES DUE 2006 (THE "PRIVATE NOTES")
OF ELDORADO RESORTS LLC, A NEVADA LIMITED-LIABILITY COMPANY (THE
"COMPANY"), AND ELDORADO CAPITAL CORP., A NEVADA CORPORATION ("CAPITAL"
AND, TOGETHER WITH THE COMPANY, THE "ISSUERS"), WHO WISHES TO TENDER
PRIVATE NOTES PURSUANT TO THE ISSUERS' EXCHANGE OFFER, AS DEFINED IN THE
PROSPECTUS DATED , 199 (THE "PROSPECTUS") AND (i) WHOSE PRIVATE
NOTES ARE NOT IMMEDIATELY AVAILABLE OR (ii) WHO CANNOT DELIVER SUCH
PRIVATE NOTES OR ANY OTHER DOCUMENTS REQUIRED BY THE LETTER OF TRANSMITTAL
ON OR BEFORE THE EXPIRATION DATE (AS DEFINED IN THE PROSPECTUS) OR (iii)
WHO CANNOT COMPLY WITH THE BOOK-ENTRY TRANSFER PROCEDURE ON A TIMELY
BASIS. SUCH FORM MAY BE DELIVERED BY FACSIMILE TRANSMISSION, MAIL OR HAND
DELIVERY TO THE EXCHANGE AGENT. SEE "THE EXCHANGE OFFER--GUARANTEED
DELIVERY PROCEDURES" IN THE PROSPECTUS.
ELDORADO RESORTS LLC
AND
ELDORADO CAPITAL CORP.
NOTICE OF GUARANTEED DELIVERY
To: Fleet National Bank, the Exchange Agent
<TABLE>
<CAPTION>
<S> <C>
By Mail: By Hand:
Fleet National Bank Fleet National Bank
Corporate Trust Operations Corporate Trust Operations
777 Main Street, Lower Level 777 Main Street, Lower Level
CTMO 0224 Hartford, Connecticut 06115
Hartford, Connecticut 06115 Attention: Patricia Williams
Attention: Patricia Williams
</TABLE>
By Facsimile:
(860) 986-7908
Confirm by Telephone:
(860) 986-2910
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION VIA A FACSIMILE NUMBER OTHER THAN AS SET FORTH
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to the Issuers upon the terms and subject to
the conditions set forth in the Prospectus and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount of
Private Notes specified below pursuant to the guaranteed delivery procedures
set forth under the caption "The Exchange Offer--Guaranteed Delivery
Procedures" in the Prospectus. By so tendering, the undersigned does hereby
make, at and as of the date hereof, the representations and warranties of a
tendering holder of Private Notes set forth in the Letter of Transmittal. The
undersigned hereby tenders the Private Notes listed below:
<TABLE>
<S> <C>
- ----------------------------------------------------------------------------------
CERTIFICATE NUMBERS
(IF AVAILABLE) PRINCIPAL AMOUNT TENDERED
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
</TABLE>
All authority herein conferred or agreed to be conferred shall survive the
death, incapacity, or dissolution of the undersigned and every obligation of
the undersigned hereunder shall be binding upon the heirs, personal
representatives, successors and assigns of the undersigned.
If Private Notes will be SIGN HERE
tendered by book-entry
transfer:
-------------------------------------
SIGNATURE(S)
Name of Tendering Institution:
- ----------------------------------- -------------------------------------
The Depository Trust -------------------------------------
Company NAME(S) (PLEASE PRINT)
Account No.:
-----------------------
-------------------------------------
-------------------------------------
ADDRESS
-------------------------------------
ZIP CODE
-------------------------------------
AREA CODE AND TELEPHONE NO.
DATE:
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2
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a participant in a Recognized Signature Guarantee Medallion
Program, guarantees deposit with the Exchange Agent of the Letter of
Transmittal (or facsimile thereof), together with the Private Notes tendered
hereby in proper form for transfer, or confirmation of the book-entry transfer
of such Private Notes into the Exchange Agent's account at The Depository
Trust Company, pursuant to the procedure for book-entry transfer set forth in
the Prospectus, and any other required documents, all by 5:00 p.m., New York
City time, on the fifth New York Stock Exchange trading day following the
Expiration Date (as defined in the Prospectus).
SIGN HERE
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NAME OF FIRM
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AUTHORIZED SIGNATURE
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NAME (PLEASE PRINT)
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ADDRESS
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ZIP CODE
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AREA CODE AND TELEPHONE NO.
DATE:
--------------------------------
DO NOT SEND CERTIFICATES FOR PRIVATE NOTES WITH THIS FORM. ACTUAL SURRENDER OF
CERTIFICATES FOR PRIVATE NOTES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED
BY, A COPY OF THE PREVIOUSLY EXECUTED LETTER OF TRANSMITTAL.
3
<PAGE>
INSTRUCTIONS
1. DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY. A properly completed and
duly executed copy of this Notice of Guaranteed Delivery and any other
documents required by this Notice of Guaranteed Delivery must be received by
the Exchange Agent at one of its addresses set forth on the cover hereof prior
to the Expiration Date. The method of delivery of this Notice of Guaranteed
Delivery and all other required documents to the Exchange Agent is at the
election and risk of the holder but, except as otherwise provided below, the
delivery will be deemed made only when actually received by the Exchange
Agent. Instead of delivery by mail, it is recommended that holders use an
overnight or hand delivery service, properly insured. If such delivery is by
mail, it is recommended that the holder use properly insured, registered mail
with return receipt requested. For a full description of the guaranteed
delivery procedures, see the Prospectus under the caption "The Exchange
Offer--Guaranteed Delivery Procedures." In all cases, sufficient time should
be allowed to assure timely delivery. No Notice of Guaranteed Delivery should
be sent to the Issuers.
2. SIGNATURE ON THIS NOTICE OF GUARANTEED DELIVERY; GUARANTEE OF
SIGNATURES. If this Notice of Guaranteed Delivery is signed by the registered
holder(s) of the Private Notes referred to herein, then the signature must
correspond with the name(s) as written on the face of the Private Notes
without alteration, enlargement or any change whatsoever.
If this Notice of Guaranteed Delivery is signed by a person other than the
registered holder(s) of any Private Notes listed, this Notice of Guaranteed
Delivery must be accompanied by a properly completed bond power signed as the
name of the registered holder(s) appear(s) on the face of the Private Notes
without alteration, enlargement or any change whatsoever.
If this Notice of Guaranteed Delivery is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing, and, unless waived by the Issuers, evidence
satisfactory to the Issuers of their authority so to act must be submitted
with this Notice of Guaranteed Delivery.
3. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to the
Exchange Offer or the procedure for consenting and tendering as well as
requests for assistance or for additional copies of the Prospectus, the Letter
of Transmittal and this Notice of Guaranteed Delivery, may be directed to the
Exchange Agent at the address set forth on the cover hereof or to your broker,
dealer, commercial bank or trust company.
4
<PAGE>
EXHIBIT 99.3
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.-- Social Security numbers have nine digits separated by two hyphens,
i.e., 000-00-0000. Employer identification numbers have nine digits separated
by only one hyphen, i.e, 00-0000000. The table below will help determine the
number to give the payer.
- ----------------------------------- -----------------------------------
<TABLE>
<CAPTION>
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- --------------------------------------------
<S> <C>
1. Individual The individual
2. Two or more individuals The actual owner
(joint account) of the account
or, if combined
funds, the first
individual on
the account(1)
3. Husband and wife (joint The actual owner
account) of the account
or, if joint
funds, either
person(1)
4. Custodian account of a The minor(2)
minor (Uniform Gift to
Minors Act)
5. Adult and minor (joint The adult or, if
account) the minor is the
only
contributor, the
minor(1)
6. Account in the name of The ward, minor
guardian or committee or incompetent
for a designated ward, person(3)
minor or incompetent
person
7.a. The usual revocable The grantor-
savings trust account trustee(1)
(grantor is also
trustee)
b. So-called trust account The actual
that is not a legal or owner(1)
valid trust under
State law
8. Sole proprietorship The owner(4)
- --------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
GIVE THE EMPLOYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
---
<S> <C>
9. A valid trust, estate The legal
or pension trust entity(5)
10. Corporate The corporation
11. Religious, charitable The organization
or educational
organization
12. Partnership account The partnership
held in the name of the
business
13. Association, club or The organization
other tax-exempt
organization
14. A broker or registered The broker or
nominee nominee
15. Account with the The public
Department of entity
Agriculture in the name
of a public entity
(such as a State or
local government,
school district or
prison) that receives
agricultural program
payments
---
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) The name of the owner must be shown.
(5) List first and circle the name of the legal trust, estate or pension trust.
Do not furnish the identification number of the personal representative or
trustee unless the legal entity itself is not designated in the account
title.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card (for
individuals), or Form SS-4, Application for Employer Identification Number (for
businesses and all other entities), at the local office of the Social Security
Administration or the Internal Revenue Service and apply for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees generally exempted from backup withholding on payments include the
following:
. A corporation
. A financial institution.
. An organization exempt from tax under Section 501(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), or an individual retirement
plan.
. The United States or any agency or instrumentality thereof.
. The State, the District of Columbia, a possession of the United States or
any political subdivision or instrumentality thereof.
. A foreign government, a political subdivision of a foreign government or
any agency or instrumentality thereof.
. An international organization or any agency or instrumentality thereof.
. A dealer in securities or commodities required to register in the United
States or a possession thereof.
. A real estate investment trust.
. A common trust fund operated by a bank under Section 584(a) of the Code.
. An entity registered at all times during the tax year under the Investment
Company Act of 1940.
. A foreign central bank of issue.
Payments of dividends and patronage dividends generally not subject to backup
withholding include the following:
. Payments to nonresident aliens subject to withholding under Section 1441
of the Code.
. Payments to partnerships not engaged in a trade or business in the United
States and which have at least one nonresident partner.
. Payments of patronage dividends were the amount received is not paid in
money.
. Payments made by certain foreign organizations.
Payments of interest generally not subject to backup withholding include the
following:
. Payments of interest on obligations issued by individuals. Note: Payees
may be subject to backup withholding if this interest is $600 or more and
is paid in the course of the payer's trade or business and the payee has
not provided his or her correct taxpayer identification number to the
payer.
. Payments of tax-exempt interest (including exempt-interest dividends under
Section 852 of the Code).
. Payments described in Section 6049(b)(5) of the Code to nonresident
aliens.
. Payments on tax-free covenant bonds under Section 1451 of the Code.
. Payments made by certain foreign organizations.
Exempt payees described above must still complete the Substitute Form W-9
enclosed herewith to avoid possible erroneous backup withholding. FILE
SUBSTITUTE FORM W-9 WITH THE PAYER, REMEMBERING TO CERTIFY YOUR TAXPAYER
IDENTIFICATION NUMBER ON THE FORM AND WRITE "EXEMPT" ON THE FACE OF THE FORM.
Payments that are not subject to information reporting are also not subject to
backup withholding. For details, see the regulations under Sections 6041,
6041A(a), 6042, 6044, 6045, 6049, 6050A and 6050N of the Code.
PRIVACY ACT NOTICE--Section 6109 of the Code requires most recipients of
dividend, interest or other payments to give taxpayer identification numbers to
payers who must report the payments to the IRS. The IRS uses the numbers for
identification purposes and to held verify the accuracy of the recipient's tax
return. Payers must be given the numbers whether or not recipients are required
to file tax returns. Payers must generally withhold 31% of taxable interest,
dividend and certain other payments to a payee who does not furnish a taxpayer
identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER--If you fail
to furnish your correct taxpayer identification number to a payer, you are
subject to a penalty of $50 for each such failure unless your failure is
due to reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING--If you
make a false statement with no reasonable basis which results in no
imposition of backup imposition of withholding, you are subject to a
penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION--Willfully falsifying
certifications or affirmations may subject you to criminal penalties
including fines and/or imprisonment.
FOR ADDITIONAL INFORMATION
CONTACT YOUR TAX CONSULTANT OR
THE INTERNAL REVENUE SERVICE.
