<PAGE>
EXHIBIT (b)
CONFIDENTIAL
COMMITMENT LETTER
April 16, 2000
PH Casino Resorts, Inc.
c/o Harveys Casino Resorts
Highway 50
P.O. Box 128
Stateline, Nevada 89449
Attention: Charles W. Scharer, President
Re: $900,000,000 Senior Secured Credit Facility for the
---------------------------------------------------
Acquisition of Pinnacle Entertainment, Inc.
-------------------------------------------
Gentlemen:
Description of Transaction
--------------------------
You have advised us that PH Casino Resorts, Inc., a Delaware corporation
(the "Company") and a newly formed wholly owned, direct subsidiary of Harveys
Casino Resorts, a Nevada corporation ("Harveys"), intends to (i) cause its newly
formed, wholly owned, direct subsidiary ("Pinnacle Acquisition Co.") to merge
(the "Pinnacle Merger") with and into Pinnacle Entertainment, Inc., a Delaware
corporation ("Pinnacle"), with Pinnacle being the surviving corporation, as a
result of which all of Pinnacle's outstanding common stock (except the Equity
Rollover referred to below) will be converted into the right to receive $24.00
per share (or aggregate cash consideration of approximately $661.2 million)
together with proceeds from contingent value rights described below, (ii) cause
the surviving corporation of the Pinnacle Merger to assume approximately $28.1
million of the outstanding indebtedness of Pinnacle and its subsidiaries
(collectively, the "Acquisition"), (ii) refinance approximately $350.0 million
of Pinnacle's 9.25% subordinated notes, approximately $125.0 million of
Pinnacle's 9.50% subordinated notes, approximately $191.4 million of
indebtedness under Harveys' existing credit facility and approximately $150.0
million of Harveys' 10.625% subordinated notes (collectively, the
"Refinancing"), and (iii) cause Harveys Acquisition Corporation, a Delaware
corporation and a newly formed, wholly owned direct subsidiary of the Company,
to merge with Harveys, resulting in Harveys being the surviving corporation and
a wholly owned direct subsidiary of the Company (the "HCR Merger" and together
with the Pinnacle Merger and the Refinancing, the "Transaction"). The
Transaction will be accomplished through the issuance of approximately $550.0
million in unsecured subordinated
1
<PAGE>
notes (the "Subordinated Notes"), the incurrence of the senior secured bank
financing described below and the conversion into common stock of the Company of
(a) approximately $71.0 million of Harveys' PIK preferred stock issued to Colony
Capital, Inc. or one of its affiliates, including accumulated dividends (the
"Equity Conversion"), and (b) approximately $50.0 million of the common equity
of key shareholders of Pinnacle (the "Equity Rollover").
We understand that the Pinnacle Merger will be accomplished pursuant to an
agreement and plan of merger (the "Merger Agreement") among Pinnacle, the
Company and Pinnacle Acquisition Co. In addition, contingent value rights will
allow the shareholders of Pinnacle to receive up to one dollar ($1) per share of
additional consideration based upon the net realized proceeds from the sale of a
97 acre parcel of land located in Inglewood (the "Inglewood Sale"), which amount
may be adjusted in accordance with the Merger Agreement. Following the
consummation of the Transaction, all of the outstanding capital stock of the
Company will be owned by certain affiliates of Colony Capital, Inc. and the
management of Harveys and Pinnacle, and all of the outstanding capital stock of
Harveys and Pinnacle will be owned by the Company.
We understand and agree that the Company may, at its option, restructure
the Transaction into an alternative structure whereby Pinnacle is merged with
and into a wholly owned direct or indirect subsidiary of Harveys, with Pinnacle
being the surviving corporation (the "Alternate Transaction"); provided that in
the Agents' (as defined below) reasonable judgment the structure of the credit
support and the subordination of the Subordinated Notes is not materially
different from the Transaction. We agree that our commitment is equally
applicable to the Transaction and the Alternate Transaction. In the event that
the Company elects to pursue the Alternate Transaction, we will upon the
Company's request, negotiate in good faith to amend this Letter to reflect the
Alternate Transaction.
You have further advised us that the proceeds from the Subordinated Notes,
a portion of the proceeds from the senior secured bank financing, the Equity
Conversion, the Equity Rollover and excess cash on the balance sheet of Harveys
and Pinnacle will be used to consummate the Transaction and to pay related
tender fees of approximately $47.4 million (based on current assumptions,
including a closing date of December 31, 2000, subject to change) and
transaction costs of approximately $35.0 million (based on current assumptions,
including a closing date of December 31, 2000, subject to change).
Description of Senior Secured Credit Facility
---------------------------------------------
You have advised us that in connection with the Transaction, the Company
will require senior secured bank financing consisting of a $200.0 million five-
year term loan A credit facility (the "Term Loan A"), a $500.0 million six-year
term loan B credit facility (the "Term Loan B"; and together with the Term Loan
A, the "Term Loan Facility") and a $200.0 million five-year revolving credit
facility (the "Revolver"; and together with the Term Loan Facility, the "Credit
Facility"). A portion of the Revolver will be made available for the issuance
of letters of credit in an amount of $15.0 million plus (a) an additional amount
available solely for the existing $45.0 million letter of credit for Bluffs Run,
and (b) an additional amount available solely for the issuance of an
approximately $27.0 million letter of credit to support Pinnacle's obligation
to make distributions to its former shareholders from the Inglewood sale. In
addition, up to
2
<PAGE>
$15.0 million of the Revolver will be made available for swingline loans. You
have further advised us that on the date of the initial funding of the Credit
Facility (the "Closing Date"), the Company will use all of the proceeds of the
Term Loan Facility and proceeds from the Revolver in an amount to be determined
to finance a portion of the Transaction.
Based upon and subject to the foregoing, and pursuant to the terms and
conditions described below, Canadian Imperial Bank of Commerce is pleased to
confirm that it or one or more of its agencies, branches or affiliates
(collectively, "CIBC"), Bankers Trust Company ("BT") and Lehman Commercial Paper
Inc. ("LCPI"), an affiliate of Lehman Brothers Inc. ("LB"), collectively commit
to provide, on a several and not joint basis, all of the Credit Facility
described above and in the Term Sheet attached as Annex A hereto (the "Term
-------
Sheet") in the amounts set forth on Schedule I hereto. In addition, the Company
----------
hereby agrees that CIBC World Markets Corp. ("CIBC World Markets") will act as
exclusive arranger (the "Lead Arranger"), and CIBC World Markets is pleased to
confirm that it is willing to use reasonable commercial efforts to arrange a
syndicate of other banks and financial institutions; each such bank and
financial institution, including CIBC, BT and LCPI (and any successors and
assigns of such banks and financial institutions), being a "Lender" and,
collectively, the "Lenders") to provide a portion of the Credit Facility (it
being agreed that no party will become a Lender without the prior written
consent of the Company, which consent will not be unreasonably withheld or
delayed). CIBC will act as administrative agent for the Lenders (in such
capacity, the "Administrative Agent"). BT will act as syndication agent for the
Lenders (in such capacity, the "Syndication Agent"), and LB will act as
documentation agent for the Lenders (in such capacity, the "Documentation
Agent"; together with the Syndication Agent and the Documentation Agent, the
"Agents"). The Syndication Agent and the Documentation Agent shall have no
roles or responsibilities under the Credit Facility, except as expressly set
forth in this Letter. The Company hereby agrees that no other agents, co-agents
or arrangers will be appointed, no other titles will be awarded and no
compensation (other than as expressly set forth in the Term Sheet and
accompanying fee letter dated as of the date hereof (the "Fee Letter")) will be
paid in connection with the Credit Facility unless the Lead Arranger shall so
agree.
In addition, we agree that if Harveys agrees to consummate any other
acquisitions previously disclosed to the Agents prior to the Closing Date, then
the Agents will, upon the reasonable request of the Company, negotiate, in good
faith, with an intent to increase the amount of the Credit Facility to finance
such other acquisitions, it being understood that any such increase shall be at
the sole and absolute discretion of each of the Agents. Any such increase will
be subject to satisfactory completion of due diligence with respect to such
acquisition and credit approval.
Conditions Precedent
--------------------
We have reviewed certain historical and pro forma financial statements of
Harveys and its subsidiaries and of Pinnacle and its subsidiaries and have met
with members of the management and other representatives of Harveys regarding
the transactions contemplated hereby, and we are pleased to advise you that the
results of our due diligence investigation of Harveys and its subsidiaries and
Pinnacle and its subsidiaries to date are satisfactory.
3
<PAGE>
Our commitment is subject to (i) the accuracy in all material respects of
the Company's representation set forth below (without the knowledge
qualification) regarding the Information (as defined below) and the Projections
(as defined below), (ii) the negotiation, execution and delivery of definitive
financing agreements, in each case prepared by the Lead Arranger's counsel and
reasonably satisfactory to the Agents and the Lead Arranger, containing the
terms set forth herein and in the Term Sheet and other provisions to the extent
not inconsistent with such terms that the Agents and the Lead Arranger
reasonably may deem appropriate, (iii) the consummation of the Pinnacle Merger
in accordance in all material respects with the Merger Agreement we have
reviewed and the consummation of the HCR Merger as described above, (iv) the
receipt of all required governmental, regulatory, and other material third party
approvals and appropriate legal opinions, in form and substance reasonably
satisfactory to the Agents and the Lead Arranger, (v) the issuance of the
Subordinated Notes in an aggregate principal amount of not less than $550.0
million and on terms and conditions reasonably satisfactory to the Agents and
the Lead Arranger (based on the Agents' and the Lead Arranger's reasonable
determination of then current market terms), (vi) the receipt of appraisals and
environmental and related reports reasonably satisfactory to the Agents and the
Lead Arranger, and (vii) the satisfaction of the conditions to be set forth in
the definitive documentation relating to the Credit Facility, including, without
limitation, those conditions set forth in the attached Term Sheet. Our
commitment shall also be subject to the Agents' and the Lead Arranger's
determination that there has not occurred any material adverse change in the
financial or capital markets in which the Lead Arranger or any Agent
participates since the date hereof that in our reasonable judgment could
reasonably be expected to materially impair syndication of the Credit Facility
or any Material Adverse Effect. As used herein, Material Adverse Effect means
any set of circumstances or events which are not in existence as of the November
30, 1999 (with respect to Harveys) or December 31, 2000 (with respect to
Pinnacle) or were not disclosed (other than matters of a general economic or
gaming industry nature or contained in the public filings of Harveys or Pinnacle
prior to the date hereof) to the Agents as of the date hereof which are material
and adverse to the collateral or the condition (financial or otherwise),
business operations or prospects of (a) Harveys and its subsidiaries and
Pinnacle and its subsidiaries, taken as a whole, (b) the ability of the Company,
Harveys and Pinnacle and their respective material subsidiaries to perform their
obligations under the Credit Facility, or (c) the ability of the Administrative
Agent or the Lenders to enforce any of their material rights or remedies under
the Credit Facility. Those matters that are not covered by the provisions
hereof and of the Term Sheet are subject to the approval and agreement of the
Lead Arranger, the Agents and the Company. Each Agent will promptly notify the
Company upon receiving any written notice from any Lender of such Lender's
determination not to provide its commitment for the Credit Facility due to a
failure of a condition precedent to the Credit Facility.
Syndication
-----------
As we discussed, the Lead Arranger intends to arrange for the syndication
of the Credit Facility. The Lead Arranger will manage all aspects of the
syndication, including decisions as to the selection of institutions to be
approached and when they will be approached, when their commitments will be
accepted (subject to the Company's consent, which consent will not be
unreasonably withheld or delayed), the allocations of the commitments among the
Lenders and the amount and distribution of fees among the Lenders. In that
regard, the Company agrees to actively assist, and to take all reasonable
efforts to cause Pinnacle and Harveys to assist, the
4
<PAGE>
Lead Arranger in the syndication of the Credit Facility, which assistance will
require, among other things, that the Company provide (to the extent reasonably
available) all information the Lead Arranger or the Administrative Agent
reasonably deems to be necessary to successfully complete the syndication.
In addition, the Company agrees upon reasonable notice to promptly provide,
and to cause its consultants and advisors to provide, to the Lead Arranger all
financial and other information the Lead Arranger may reasonably request in its
or their possession or reasonably available to it or them with respect to
Harveys and its subsidiaries, Pinnacle and its subsidiaries, the Transaction and
any other transactions contemplated thereby, including but not limited to
information and projections prepared by the Company, Harveys, Pinnacle or their
respective advisors relating to the Company and its subsidiaries, Pinnacle and
its subsidiaries, the Transaction and the other transactions contemplated
thereby, during regular business hours to answer questions regarding the Credit
Facility, to review and assist in the preparation of the syndication memorandum
relating to the Credit Facility, to meet with prospective Lenders and to use
commercially reasonable efforts to ensure that the Lead Arranger's syndication
efforts benefit from the lending relationships of Harveys, the Company and their
respective subsidiaries.
The descriptions of the Credit Facility are based on current market
conditions and the Lead Arranger shall be entitled at its reasonable discretion,
after consultation with the Company and the Agents, to modify the structure,
pricing or terms of the Credit Facility to reflect market conditions or if the
Lead Arranger determines that such changes are advisable in order to ensure a
successful syndication; provided that the aggregate amount of the Credit
--------
Facility shall remain unchanged.
The Company represents that, based on its review and analysis, (a) all
information, other than Projections (as defined below), which has been or is
hereafter made available to the Lead Arranger, the Agents or the other Lenders
by the Company or any of its representatives in connection with the transactions
contemplated hereby (the "Information") and, as supplemented as contemplated by
the next sentence, to the Company's knowledge, is (or will be, in the case of
Information made available after the date hereof) complete and correct in all
material respects when taken as a whole and does not (or will not, as the case
may be) contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements contained therein not materially
misleading in light of the circumstances under which such statements were or are
made, and (b) all financial projections concerning Harveys, the Company,
Pinnacle and their respective subsidiaries that have been or are hereafter made
available to the Lead Arranger, the Agents or the other Lenders by the Company
or any of its representatives in connection with the transactions contemplated
hereby (the "Projections") have been (or will be, in the case of Projections
made available after the date hereof) prepared in good faith based upon
reasonable assumptions (it being understood that such projections are subject to
significant uncertainties and contingencies, many of which are beyond the
Company's control, and that no assurance can be given that any particular
projections will be realized). The Company agrees to supplement the Information
and the Projections from time to time until the Closing Date so that the
representation and warranty in the preceding sentence is correct on the Closing
Date. In arranging and syndicating the Credit Facility, the Lead Arranger will
be using and relying on the Information and the Projections without independent
verification thereof.
5
<PAGE>
Fees and Expenses; Indemnity
----------------------------
In consideration of the Credit Facility to be arranged for by the Lead
Arranger, the Company shall pay to the Lead Arranger and the Administrative
Agent the fees set forth in and in accordance with the separate Fee Letter from
the Lead Arranger and CIBC to the Company. In addition, the Company agrees to
pay to the Lead Arranger for distribution to each Agent a non-refundable
commitment fee in an amount equal to 0.375% per annum of the aggregate principal
amount of the Credit Facility committed by each Agent as set forth on Schedule I
annexed hereto, such fee to begin accruing upon your acceptance of this Fee
Letter and to be payable on the earlier of (x) the Closing Date and (y) the date
of termination of the commitments of the Agents. On the Closing Date, any
amount paid under the commitment fee shall be fully creditable against any
financing fee payable by the Company to the Lead Arranger or such Agent.
In addition, and regardless of whether the transactions contemplated
hereunder are consummated, the Company agrees to pay the reasonable costs and
expenses (including the reasonable fees and expenses of external counsel
(including, without limitation, any local counsel retained with the prior
written consent of the Company (which consent will not be unreasonably withheld
or delayed)) to the Lead Arranger and CIBC, reasonable professional fees of
consultants, appraisers and other experts retained in consultation with the
Company and reasonable out-of-pocket expenses of the Lead Arranger and CIBC
incurred in connection with the preparation, execution and delivery of this
Letter and the definitive financing agreements and the syndication of the Credit
Facility. Such expenses shall be due and payable promptly following demand
(including reasonable supporting reconciliation) by the Lead Arranger or, at the
Lead Arranger's discretion, shall be due and payable at closing. The Company
also agrees to pay all reasonable costs and expenses of the Lead Arranger and
CIBC (including, without limitation, reasonable fees and disbursements of
internal and external counsel) incurred in connection with the enforcement of
any of its rights and remedies hereunder.
The Company further agrees to indemnify and hold harmless, release and
discharge each of the Lenders, each Agent and the Lead Arranger, and each
director, officer, employee, agent, attorney and affiliate thereof (each an
"indemnified person") from and against any and all losses, claims, damages,
liabilities or other expenses to which the Lead Arranger, any Agent or a Lender
or such indemnified persons may become subject, insofar as such losses, claims,
damages, liabilities (or actions or other proceedings commenced or threatened in
respect thereof) or other expenses arise out of or relate to or result from the
Transaction, relating to the extension of the financing contemplated by this
Letter, or any use or intended use of the proceeds of any of the loans and other
extensions of credit contemplated by this Letter, and to reimburse the Lead
Arranger, each Agent and each of the Lenders and each indemnified person for any
and all reasonable legal or other expenses incurred in connection with
investigating, defending or participating in any such investigation, litigation
or other proceeding (whether or not any such investigation, litigation or other
proceeding involves claims made between the Company or any third party and the
Lead Arranger, any Agent and such Lender or any such indemnified person, and
whether or not such Lender or any such indemnified person is a party to any
investigation, litigation or proceeding out of which any such expenses arise);
provided, however, that the indemnity contained herein shall not apply to the
-------- -------
extent that such losses, claims, damages, liabilities or other expenses result
from the gross negligence or willful misconduct of the Lead
6
<PAGE>
Arranger, such Agent, such Lender or indemnified person, as determined by a
final, non-appealable judgment of a court of competent jurisdiction, or claims
by the Company or Harveys against the Lead Arranger, any Agent or any Lender
arising from a breach by such person of its obligations hereunder. Neither the
Lead Arranger, any Agent nor any Lender nor the Company nor Harveys shall be
responsible or liable to any other party or any other person for punitive or
consequential damages which may be alleged as a result of this Letter. The
foregoing provisions of this paragraph shall be in addition to any rights that
the Lead Arranger, each Agent, any Lender or any indemnified person may have at
common law or otherwise.
All payments hereunder shall be made free and clear of any set-off,
withholding, claims or applicable taxes (other than taxes based on income or
franchise taxes) and shall be made in U.S. dollars (unless otherwise specified).
This provision shall survive termination of this Letter but shall be
superceded in its entirety by the indemnity provisions contained in the
definitive documentation entered into in connection with the Credit Facility
upon the execution and delivery thereof.
Confidentiality
---------------
The Company agrees that the existence of this Letter and the terms and
conditions hereof are confidential and may not be disclosed to any third party
without the Agents' and the Lead Arranger's prior written consent except to the
extent that such disclosure (a) is required by law, regulation, supervisory and
agency authorities, or other applicable judicial or governmental order, (b) was
or becomes generally available to the public other than as a result of a
disclosure by one of the parties, (c) is made on a comparable confidential basis
to the Company's and Pinnacle's respective officers and directors, attorneys,
accountants or tax advisors, financial advisors, investment bankers and other
advisors on a need to know basis, (d) is made on a comparable confidential basis
to investment banks and other entities (and their counsel) on a need to know
basis involved in the issuance of the Subordinated Notes and in registration
statements, prospectuses or offering circulars relating to the issuance of the
Subordinated Notes, (e) is made on a comparable confidential basis to Colony
Capital, Inc. and its affiliates and their attorneys and advisors or (f) in
connection with litigation concerning the terms hereof.
The Company acknowledges that the Lead Arranger, LCPI and the Agents may
share with any of their affiliates (including, in the case of CIBC, CIBC Inc.)
any information provided by the Company, Pinnacle or their respective
subsidiaries and affiliates in connection with the proposed Transaction, and
that the Lead Arranger, LCPI and the Agents reserve the right to employ the
services of such subsidiaries and affiliates in order to fulfill their
obligations under this Letter; provided any confidential information is held in
--------
accordance with their customary procedures for handling confidential information
as provided below.
The Company should be aware that other parties with conflicting interests
may also be the Lead Arranger's, LCPI's or any Agent's customers, and that the
Lead Arranger, LCPI and the Agents may be providing financial or other services
to them. However, the Lead Arranger, LCPI and the Agents assure that,
consistent with their long standing policy to hold in confidence the affairs of
their customers, the Lead Arranger, LCPI and the Agents will not furnish
confidential information obtained from the Company, Pinnacle, Harveys or any of
their
7
<PAGE>
respective subsidiaries or advisors or representatives to any other customer or
prospective customer, and will hold such information confidential in accordance
with their customary procedures for handling confidential information. By the
same token, the Lead Arranger, LCPI and the Agents will not make available to
the Company, Pinnacle, Harveys or any of their respective subsidiaries
confidential information that the Lead Arranger, LCPI or such Agent has obtained
from any other customer.
This provision shall survive the termination of this Letter.
Governing Law; Jurisdiction; Waivers
------------------------------------
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS, THE LEAD ARRANGER, THE
AGENTS, LCPI AND THE COMPANY HEREBY AGREE THAT THIS LETTER SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, U.S.A.
WITH RESPECT TO ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
LETTER OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THE PERFORMANCE OF ANY OF THE
PARTIES HEREUNDER, THE COMPANY HEREBY IRREVOCABLY (A) SUBMITS TO THE NON-
EXCLUSIVE JURISDICTION OF ANY NEW YORK STATE OR FEDERAL COURT SITTING IN NEW
YORK, NEW YORK, U.S.A.; (B) AGREES THAT ALL CLAIMS WITH RESPECT TO SUCH ACTION
OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE OR FEDERAL
COURT; (C) WAIVES THE DEFENSE OF ANY INCONVENIENT FORUM; (D) AGREES THAT A FINAL
JUDGMENT OR RULING IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY
BE ENFORCED IN ANOTHER JURISDICTION BY SUIT ON THE JUDGMENT OR IN ANY OTHER
MANNER PROVIDED BY LAW; (E) WAIVES ALL RIGHTS TO TRIAL BY JURY; AND (F) CONSENTS
TO SERVICE OF PROCESS BY MAILING OR DELIVERING A COPY OF SUCH PROCESS TO THE
COMPANY AT ITS ADDRESS SET FORTH ON THE FIRST PAGE OF THIS LETTER AND AGREES
THAT SUCH SERVICE SHALL BE EFFECTIVE FIVE DAYS AFTER BEING SENT OR DELIVERED.
THE COMPANY REPRESENTS AND WARRANTS THAT IT HAS CONSULTED WITH COUNSEL AND
UNDERSTANDS THE RAMIFICATIONS OF THE FOREGOING.
THIS PROVISION SHALL SURVIVE THE TERMINATION OF THIS LETTER.
Amendments; Assignment
----------------------
This Letter may not be amended or modified except in a writing signed by
the parties hereto. This Letter contains the entire agreement among the Lead
Arranger, LCPI, the Agents and the Company and supersedes all prior
understandings, written or oral, between the parties.
The Company may not assign or delegate any of its undertakings hereunder
without the prior written consent of the Lead Arranger, LCPI and the Agents,
except to Harveys or any of its subsidiaries.
8
<PAGE>
Miscellaneous
-------------
For the convenience of the parties, any number of counterparts of this
Letter may be executed by the parties hereto. Each such counterpart shall be,
and shall be deemed to be, an original instrument, but all such counterparts
taken together shall constitute one and the same agreement.
The Company agrees that the Lead Arranger, LCPI and the Agents have the
right to place advertisements in financial and other newspapers and journals at
its own expense describing its services to the Company hereunder; provided that
--------
the Lead Arranger, LCPI and the Agents will obtain prior written consent from
the Company (which consent will not be unreasonably withheld or delayed) if such
advertisement occurs prior to the closing of the Credit Facility.
The Company and the Lead Arranger acknowledge and agree that there are no
brokers, representatives or other persons which have an interest in the
compensation due to the Lead Arranger from any transaction contemplated herein.
The Company, the Lead Arranger, LCPI and each Agent agree that the Lead
Arranger, LCPI and each Agent shall be considered independent contractors in
relation to the Company under this Letter.
Termination
-----------
Our offer will terminate at 5:00 p.m. (Pacific time) on April 17, 2000,
unless on or before that date you sign and return an enclosed counterpart of
this Letter together with an executed copy of the accompanying Fee Letter
concerning certain fee arrangements. The Credit Facility referred to herein
shall in no event be available unless the Transaction have been consummated on
or prior to March 15, 2001.
Please acknowledge your agreement to the terms and conditions hereof and of
the attached Term Sheet by signing the enclosed copy of this Letter below and
returning same together with the letter regarding fees and the fees payable
thereunder to the Lead Arranger and the Agents before the expiration date
referred to above.
[Remainder of page intentionally left blank]
9
<PAGE>
We appreciate having been given the opportunity by you to be involved
in this transaction.
Very truly yours,
CIBC WORLD MARKETS CORP.
By: /s/ Paul J. Chakmak
----------------------------
Paul J. Chakmak
Managing Director
CANADIAN IMPERIAL BANK OF COMMERCE
By: /s/ Paul J. Chakmak
----------------------------
Paul J. Chakmak
Managing Director
CIBC World Markets Corp., AS AGENT
BANKERS TRUST COMPANY
By: /s/ Alexander B. U. Johnson
----------------------------
Name: Alexander B. U. Johnson
Title: Managing Director
LEHMAN BROTHERS INC.
By: /s/ Michael Konigsberg
----------------------------
Name: Michael Konigsberg
Title: Managing Director
LEHMAN COMMERCIAL PAPER INC.
By: /s/ Jeffrey Goodwin
----------------------------
Name: Jeffrey Goodwin
Title: Authorized Signatory
10
<PAGE>
AGREED AND ACCEPTED
the 16th day of April, 2000
PH CASINO RESORTS, INC.
By: /s/ Charles W. Scharer
-----------------------
Title: President
--------------------
11
<PAGE>
SCHEDULE I
Commitments
-----------
<TABLE>
<CAPTION>
Revolver Term Loan A Term Loan B
<S> <C> <C> <C>
Canadian Imperial
Bank of Commerce $115,000,000 $115,000,000 $310,000,000
Bankers Trust Company $ 60,000,000 $ 60,000,000 $150,000,000
Lehman Commercial Paper $ 25,000,000 $ 25,000,000 $ 40,000,000
Inc.
</TABLE>
1
<PAGE>
PH CASINO RESORTS, INC.
$900,000,000 Senior Secured Credit Facility
Summary of Terms and Conditions
The following summarizes selected terms of the senior secured credit facility to
be utilized in connection with the proposed Transaction (as defined in the
Commitment Letter to which this Summary of Terms and Conditions is attached).
This Summary of Terms is intended merely as an outline of certain of the
material terms of such senior secured credit facility. It does not include
descriptions of all of the terms, conditions and other provisions that are to be
contained in the definitive documentation relating to such senior secured credit
facility and it is not intended to limit the scope of discussion and negotiation
of any matters not inconsistent with the specific matters set forth herein. All
terms defined in the Commitment Letter to which this Summary of Terms is
attached and not otherwise defined herein shall have the same meanings when used
herein.
--------------------------------------------------------------------------------
BORROWER: PH Casino Resorts, Inc.
GUARANTORS: All domestic subsidiaries of the Borrower (including without
limitation Harveys, Pinnacle and the subsidiaries of
Pinnacle listed on the Schedule to the Merger Agreement
existing on the Closing) that currently exist or are
hereinafter created.
LEAD ARRANGER AND
SOLE BOOKRUNNER: CIBC World Markets Corp.
ADMINISTRATIVE
AGENT: Canadian Imperial Bank of Commerce, acting through one or
more of its affiliates (collectively, "CIBC").
SYNDICATION AGENT: Bankers Trust Company.
DOCUMENTATION
AGENT: Lehman Brothers Inc.
LENDERS: CIBC, the Syndication Agent, Lehman Commercial Paper Inc.
and a syndicate of financial institutions acceptable to the
Borrower and the Lead Arranger.
CLOSING: The effective date of the loan documentation and
satisfaction of Conditions Precedent, but not later than
March 15, 2001.
CREDIT FACILITY: A $900,000,000 senior secured credit facility comprised of
(i) a $200,000,000 revolving credit facility (the
"Revolver"), (ii) a $200,000,000 term loan A (the "Term A"),
and (iii) a $500,000,000 term loan B (the "Term B").
ACQUISITION: The Borrower's acquisition of Pinnacle for $24 per share
(subject to adjustment upon the sale of the Inglewood
property as described in the Commitment Letter)
<PAGE>
in cash, totaling approximately $661,200,000 plus the
refinancing and assumption of approximately $257,900,000
(based on current assumptions, including a December 31, 2000
closing, subject to change) of net debt, and payment of
transaction costs.
DESCRIPTION OF REVOLVER
-----------------------
REVOLVER: A $200,000,000 revolving credit facility.
MATURITY: The fifth anniversary of Closing.
AVAILABILITY: Revolving loans may be drawn, repaid and redrawn until
Maturity.
LETTER OF
CREDIT SUBLIMIT: The Revolver will contain a sublimit of $45,000,000 for the
Bluffs Run letter of credit, a sublimit of approximately
$27,000,000 for the Inglewood Sale letter of credit and a
sublimit of $15,000,000 for the issuance of other letters of
credit.
SWING LINE: A $15,000,000 Swing Line to be provided by CIBC, with all
Lenders risk participating. Swing Line outstandings to bear
interest at the Base Rate plus the Base Rate Margin, for the
account of CIBC, and to be drawn for not more than five
consecutive business days.
DESCRIPTION OF TERM A
---------------------
TERM A: A $200,000,000 fully amortizing term loan.
MATURITY: The fifth anniversary of Closing.
AVAILABILITY: The Term A shall be fully funded at Closing to effect the
Acquisition and shall amortize quarterly in annual amounts
equal to the product of the Term A amount and the
percentages set forth for the correlative periods below:
Year Percentage
---- ----------
1 10.0%
2 15.0%
3 20.0%
4 25.0%
5 30.0%
DESCRIPTION OF TERM B
---------------------
TERM B: A $500,000,000 amortizing term loan.
<PAGE>
MATURITY: The sixth anniversary of Closing.
AVAILABILITY: The Term B shall be fully funded at Closing to effect the
Acquisition and shall amortize quarterly in annual amounts
equal to the product of the Term B amount and the
percentages set forth for the correlative periods below:
Year Percentage
---- ----------
1 1.0%
2 1.0%
3 1.0%
4 1.0%
5 1.0%
6 95.0%
GENERAL TERMS & CONDITIONS
--------------------------
PURPOSE: The Credit Facility shall be used to consummate the
Transaction (including the refinancing of certain existing
indebtedness of Pinnacle and Harveys at Closing), and
thereafter for general corporate purposes, including working
capital, refinancings, acquisitions, investments, and
capital expenditures.
SECURITY: All obligations of the Borrower and the Guarantors under the
Credit Facility shall be secured by a first priority
perfected security interest in the following:
(i) Deed of trust or mortgage (as applicable) on the fee
simple and leasehold real properties owned by the
Borrower and the Guarantors;
(ii) First preferred ship mortgages on all vessels owned
by the Borrower and the Guarantors;
(iii) All stock, ownership units, membership interests and
notes owned by the Borrower and the Guarantors, 65%
of the stock in foreign subsidiaries; and
(iv) All other current and future tangible and intangible
assets owned by the Borrower and the Guarantors,
including real estate, equipment, inventory,
receivables, contracts, trademarks, and intellectual
property, subject to customary exceptions for
transaction of this type, such as assets held
internationally and gaming licenses; it being the
intent of the parties to consider in good faith the
exceptions in the existing Harveys and Pinnacle
credit facilities.
BORROWING RATE: The margin on Eurodollar Rate and Base Rate borrowings shall
be set according to the Pricing Matrix set forth below:
"Eurodollar Rate" means the rate that appears on page 3750
of the Dow Jones Telerate Screen as of 11:00 a.m. London
Time two business days prior to funding.
<PAGE>
"Base Rate" means a fluctuating rate of interest equal to
the higher of: (i) CIBC's reference rate and (ii) the
Federal Funds rate, as published from time to time
(calculated on a 365-day basis), plus 50 basis points.
COMMITMENT
FEE: The Borrower shall pay a per annum fee as determined by the
Pricing Matrix set forth below, calculated on a 360-day
basis payable, quarterly in arrears, on the unused portion
of the Revolver.
PRICING MATRIX: The Borrowing Rate and Commitment Fee will be determined by
a pricing matrix based on the Borrower's Total Leverage (in
basis points):
<TABLE>
<CAPTION>
Revolver/Term A Term B
----------------------- ----------
Total Eurodollar Commitment Eurodollar
Level Leverage Margin Fee Margin
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
I x less than 2.50 175.00 37.50 325.00
II 2.50 lesser than 200.00 37.50 325.00
or equal to
x less than 3.00
III 3.00 lesser than 225.00 37.50 325.00
or equal to
x less than 3.50
IV 3.50 lesser than 250.00 50.00 325.00
or equal to
x less than 4.00
V 4.00 lesser than 275.00 50.00 325.00
or equal to
x less than 4.50
VI 4.50 lesser than 300.00 50.00 325.00
or equal to
x less than 5.00
VII 5.00 lesser than 325.00 50.00 350.00
or equal to x
</TABLE>
The Base Rate Margin shall be equal to the applicable
Eurodollar Rate Margin less 100.0 basis points.
Total Leverage means the ratio of (i) Consolidated
Total Indebtedness divided by (ii) EBITDA (pro forma for the
Belterra development and any future acquisitions or
divestitures). Total Indebtedness means the sum of (a)
obligations for borrowed money (including reimbursement
obligations under letters of credit), (b) obligations as a
lessee that are capitalized in accordance with GAAP, (c) all
debt secured by a lien on any asset whether or not such debt
is otherwise an obligation of the Borrower, and (d)
contingent obligations where the primary obligation of such
contingent obligation constitutes indebtedness, calculated
as of the last business day of each fiscal quarter. EBITDA
means the Borrower's net income plus interest expense,
income tax expense, depreciation expense, amortization
expense, pre-opening expense, any other non-recurring and
non-cash expenses and fees and expenses (including employee
benefits and severance) related to acquisitions and
divestitures to be mutually agreed upon, less interest
income and any non-recurring and non-cash gains, calculated
on a rolling four-quarter basis at the end of each fiscal
quarter.
CALCULATION OF
INTEREST AND FEES: Interest on Base Rate loans will be calculated on the basis
of a 365-day year, and interest on Eurodollar Rate loans
will be calculated on the basis of a 360-day year.
Eurodollar Rate loans will be available for one, two, three
and six month interest periods. Interest will be payable
quarterly in arrears for Base Rate loans
<PAGE>
and on the last day of the applicable interest period for
Eurodollar Rate loans (and in the case of Eurodollar Rate
loans with an interest period of six months, on the three
month anniversary thereof). Letter of Credit fees will be
based on the applicable Eurodollar Margin, will be
calculated on the basis of a 360-day year, and will be
payable quarterly in arrears.
YIELD PROTECTION: The definitive financing agreement will contain customary
provisions relating to capital adequacy protection,
Eurodollar breakage costs, certain taxes imposed and other
provisions to protect the anticipated yield to Lenders.
REPRESENTATIONS
AND WARRANTIES: Customary for credit agreements of this nature including,
but not limited to, corporate existence, authorization,
enforceability, financial information, compliance with laws
(including environmental), no material litigation, liens,
payment of taxes, full disclosure and no material adverse
change.
CONDITIONS
PRECEDENT: Customary for credit agreements of this nature, including,
but not limited to:
(i) The Transaction shall have been consummated in
accordance in all material respects with the Merger
Agreement; other documentation (other than those
instruments or agreements provided as part of the
Information prior to the date hereof) entered into in
connection with the Transaction shall be reasonably
satisfactory in form and substance to the Agents and
the Lead Arranger; the final terms and conditions of
the Transaction, including, without limitation, all
legal and tax aspects thereof, shall be materially
consistent with the description provided in the
Commitment Letter and, to the extent not consistent
with such descriptions, otherwise reasonably
satisfactory to the Agents and the Lead Arranger;
(ii) Receipt of all necessary regulatory and material
third party approvals in connection with the
Transaction;
(iii) Receipt of unaudited financial statements for the
most recently available monthly period and year-to-
date versus prior year for both Harveys and Pinnacle;
(iv) Issuance of not less than $550.0 million of
Subordinated Notes on terms and conditions reasonably
satisfactory to Lead Arranger (based on the Agents'
and the Lead Arranger's reasonable determination of
then current market terms);
(v) Reasonably satisfactory opinions of counsel;
(vi) Reasonably satisfactory appraisals;
(vii) Reasonably satisfactory completion of environmental
and legal due diligence;
(viii) Reasonably satisfactory certificate of solvency;
(ix) Total Leverage of the Borrower and its subsidiaries
on the Closing Date shall not exceed 5.10:1.00; and
(x) No Material Adverse Effect. As used herein, Material
Adverse Effect means any set of circumstances or
events which are not in existence as of the date
hereof or were not disclosed (other than matters of a
general economic or gaming industry nature or
contained in the public filings of
<PAGE>
Harveys or Pinnacle prior to the date hereof) to the
Agents and the Lead Arranger as of the date hereof
which are material and adverse to the collateral or
the condition (financial or otherwise), business
operations or prospects of (a) Harveys and its
subsidiaries and Pinnacle and its subsidiaries, taken
as a whole, (b) the ability of the Company, Harveys
and Pinnacle and their respective material
subsidiaries to perform their obligations under the
credit facility, or (c) the ability of the Agents or
the Lenders to enforce any of their material rights
or remedies under the credit facility.
FINANCIAL
COVENANTS: Customary for credit agreements of this nature, including,
but not limited to, the following:
Minimum Consolidated Net Worth: As of the last day of each
fiscal quarter, the Borrower shall maintain a consolidated
net worth of not less than the sum of (i) a to be determined
percentage of consolidated net worth as of the first fiscal
quarter following Closing, plus (ii) a to be determined
percentage of consolidated net income, plus (iii) a to be
determined percentage of the net cash proceeds from any
equity offering.
Maximum Total Leverage: As of the last day of each fiscal
quarter, the Borrower shall not permit Total Leverage to
exceed to be determined levels.
Maximum Senior Leverage: As of the last day of each fiscal
quarter, the Borrower shall not permit the ratio of (i)
Consolidated Total Indebtedness, less unsecured subordinated
indebtedness, divided by (ii) Consolidated EBITDA (pro forma
for any acquisitions or divestitures), to exceed to be
determined levels.
Minimum Fixed Charge Coverage: As of the last day of each
fiscal quarter, the Borrower shall not permit the ratio of
(i) Consolidated EBITDA less maintenance capital
expenditures, divided by (ii) the sum of (a) interest
expense, (b) scheduled principal payments, and (c) income
taxes to be less than to be determined levels.
NEGATIVE
COVENANTS: Customary for credit agreements of this nature, including,
but not limited to, limitations on the following:
(i) Maintenance Capital Expenditures;
(ii) Acquisitions and Expansion Capital Expenditures;
(iii) Investments;
(iv) Other Indebtedness;
(v) Restricted Junior Payments; and
(vi) Liens.
<PAGE>
MANDATORY AND
VOLUNTARY
PREPAYMENTS: The Term A and Term B will be permanently reduced by to be
determined percentages of the net cash proceeds from the
events listed below (with certain exceptions and certain
reinvestments permitted).
(i) Certain equity and debt issuances;
(ii) Asset sales; and
(iii) Insurance proceeds from condemnation or casualty;
Voluntary prepayments of the Term A or Term B, or reduction
of the Revolver commitment, may be made at any time without
premium or penalty (subject to applicable Call Protection),
provided that voluntary prepayments of Eurodollar Loans made
on a date other than the last day of an applicable interest
period applicable thereto shall be subject to customary
breakage costs.
All Mandatory or Voluntary Prepayments of the Term A and
Term B shall be applied pro-rata and shall be applied to
reduce ratably the then remaining scheduled principal
payments. The Term B lenders shall have the right to refuse
up to 50% of their repayment, which will then be applied to
repay the Term A until the Term A is repaid in full, at
which point the remaining proceeds will be applied to the
Term B. In the event the Term A and Term B have been
repaid, the net cash proceeds will be applied to reduce the
Revolver commitment.
CALL PROTECTION: Any Mandatory or Voluntary Prepayments on the Term B through
the first anniversary of Closing shall be subject to a
premium of 1%.
EVENTS OF
DEFAULT: Customary for credit agreements of this nature including,
but not limited to, failure to pay interest, principal or
fees when due, any material inaccuracy of any representation
or warranty, material cross default, insolvency, bankruptcy
events, material judgments, ERISA events, change of control,
change in nature of business, failure to maintain first
priority perfected security interest, invalidity of
guarantee, liquidations or dissolutions, and loss of a
material license.
ASSIGNMENTS AND
PARTICIPATIONS: The Borrower may not assign its obligations under the Credit
Facility without the prior written consent of the Lenders.
The Lenders will be permitted to assign their commitments,
in a minimum amount of $2,500,000, to Eligible Assignees (to
be defined) with the consent of the Borrower (such consent
being required only so long as no event of default has
occurred or is continuing) and the Administrative Agent
(such consent not to be unreasonably withheld or delayed).
Assignees will have all the rights and obligations of the
assigning Lender.
Each Lender will have the right to sell participations in
its rights and obligations under the Credit Facility,
subject to customary restrictions on participants' voting
and other rights.
<PAGE>
FEES AND EXPENSES: The Borrower will pay all reasonable expenses incurred by
the Lead Arranger, including, without limitation, those
related to the preparation arrangement, negotiation,
documentation, syndication, closing and administration of
this transaction (whether or not the transaction actually
closes). The Borrower will pay the Lead Arranger and
Administrative Agent the fees detailed in the Commitment
Letter and the Fee Letter.
WAIVERS AND
AMENDMENTS: Lenders holding more than 50% of the Credit Facility size
("Majority Lenders") may approve waivers or amendments,
provided that the approval of all Lenders shall be required
to extend the maturity date for any payment (in such case
only the approval of all Lenders whose commitments are
affected thereby), decrease the interest rate, principal, or
any fees, release a material portion of the security, waive
payment defaults, or change either this provision or the
definition of "Majority Lenders."
MISCELLANEOUS: Waiver of jury trial and consent to jurisdiction.
GOVERNING LAW: State of New York.
