<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
------------------------
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED OCTOBER 31, 1998
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______________ TO ______________
COMMISSION FILE NUMBER 1-8570
------------------------
CIRCUS CIRCUS ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
NEVADA 88-0121916
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
2880 LAS VEGAS BOULEVARD SOUTH, LAS VEGAS, NEVADA 89109-1120
(Address of principal executive offices)
(702) 734-0410
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last
report)
------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes /X/ No / /
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS OUTSTANDING AT NOVEMBER 30, 1998
Common Stock, $.01 2/3 par value 94,638,683 shares
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
CIRCUS CIRCUS ENTERPRISES, INC. AND SUBSIDIARIES
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
PAGE NO.
-----------
<S> <C> <C>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements:
3-4
Condensed Consolidated Balance Sheets at October 31, 1998 (Unaudited) and January 31,
1998....................................................................................
5
Condensed Consolidated Statements of Income (Unaudited) for the Three and Nine Months
Ended October 31, 1998 and 1997.........................................................
6
Condensed Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended
October 31, 1998 and 1997...............................................................
7-14
Notes to Condensed Consolidated Financial Statements (Unaudited)........................
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations... 15-22
Item 3. Quantitative and Qualitative Disclosures About Market Risks............................. 22
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K........................................................ 23
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CIRCUS CIRCUS ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JANUARY 31,
1998
OCTOBER 31, ------------
1998
------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents........................................................... $ 59,176 $ 58,631
Receivables......................................................................... 22,278 33,640
Inventories......................................................................... 24,124 22,440
Prepaid expenses and other.......................................................... 30,680 28,152
------------ ------------
Total current assets.............................................................. 136,258 142,863
PROPERTY, EQUIPMENT AND LEASEHOLD INTERESTS, at cost, less accumulated depreciation
and amortization of $705,088 and $624,205, respectively............................. 2,898,540 2,466,848
EXCESS OF PURCHASE PRICE OVER FAIR MARKET value of net assets acquired, net........... 367,718 375,375
INVESTMENTS IN UNCONSOLIDATED AFFILIATES.............................................. 272,725 255,392
OTHER ASSETS.......................................................................... 41,869 23,070
------------ ------------
Total Assets...................................................................... $ 3,717,110 $ 3,263,548
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE>
CIRCUS CIRCUS ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JANUARY 31,
1998
OCTOBER 31, ------------
1998
------------
(UNAUDITED)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt................................................... $ 3,549 $ 3,071
Accounts payable--trade............................................................. 23,388 22,103
Accounts payable--construction...................................................... 66,498 40,670
Accrued liabilities................................................................. 131,429 101,114
------------ ------------
Total current liabilities......................................................... 224,864 166,958
LONG-TERM DEBT........................................................................ 2,094,824 1,788,818
DEFERRED INCOME TAX................................................................... 181,160 175,934
OTHER LONG-TERM LIABILITIES........................................................... 21,686 8,089
------------ ------------
Total liabilities................................................................. 2,522,534 2,139,799
------------ ------------
STOCKHOLDERS' EQUITY:
Common stock, $.01 2/3 par value
Authorized--450,000,000 shares
Issued--113,622,508 and 113,609,008 shares........................................ 1,894 1,893
Preferred stock, $.01 par value
Authorized--75,000,000 shares..................................................... -- --
Additional paid-in capital.......................................................... 558,839 558,658
Retained earnings................................................................... 1,144,880 1,074,271
Treasury stock (18,493,125 and 18,496,125 shares), at cost.......................... (511,037) (511,073)
------------ ------------
Total stockholders' equity........................................................ 1,194,576 1,123,749
------------ ------------
Total Liabilities and Stockholders' Equity........................................ $ 3,717,110 $ 3,263,548
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE>
CIRCUS CIRCUS ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED OCTOBER NINE MONTHS ENDED OCTOBER
31, 31,
---------------------------- ----------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
REVENUES:
Casino............................................ $ 183,011 $ 156,440 $ 532,529 $ 475,677
Rooms............................................. 92,168 82,884 268,797 248,815
Food and beverage................................. 63,749 54,415 188,311 163,269
Other............................................. 43,286 37,092 132,632 109,349
Earnings of unconsolidated affiliates............. 22,001 26,895 64,238 78,769
------------- ------------- ------------- -------------
404,215 357,726 1,186,507 1,075,879
Less-complimentary allowances..................... (21,766) (15,874) (62,435) (46,637)
------------- ------------- ------------- -------------
382,449 341,852 1,124,072 1,029,242
------------- ------------- ------------- -------------
COSTS AND EXPENSES:
Casino............................................ 91,937 82,554 268,925 230,936
Rooms............................................. 33,450 31,048 97,915 92,559
Food and beverage................................. 53,035 50,552 158,655 150,483
Other operating expenses.......................... 26,603 24,101 78,356 67,629
General and administrative........................ 66,571 57,356 199,641 172,854
Depreciation and amortization..................... 34,493 29,235 102,864 86,418
------------- ------------- ------------- -------------
306,089 274,846 906,356 800,879
------------- ------------- ------------- -------------
OPERATING PROFIT BEFORE CORPORATE EXPENSE........... 76,360 67,006 217,716 228,363
CORPORATE EXPENSE................................... 12,103 7,356 26,295 23,328
------------- ------------- ------------- -------------
INCOME FROM OPERATIONS.............................. 64,257 59,650 191,421 205,035
------------- ------------- ------------- -------------
OTHER INCOME (EXPENSE):
Interest, dividend and other income............... 526 7,124 2,055 8,571
Interest income and guarantee fees from
unconsolidated affiliate........................ 771 1,622 2,366 5,010
Interest expense.................................. (23,250) (21,465) (71,370) (65,181)
Interest expense from unconsolidated affiliates... (3,015) (3,870) (9,346) (12,131)
------------- ------------- ------------- -------------
(24,968) (16,589) (76,295) (63,731)
------------- ------------- ------------- -------------
INCOME BEFORE PROVISION FOR INCOME TAX.............. 39,289 43,061 115,126 141,304
Provision for income tax.......................... 15,573 15,838 44,518 52,104
------------- ------------- ------------- -------------
NET INCOME.......................................... $ 23,716 $ 27,223 $ 70,608 $ 89,200
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
BASIC EARNINGS PER SHARE............................ $ .25 $ .29 $ .74 $ .94
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
DILUTED EARNINGS PER SHARE.......................... $ .25 $ .29 $ .74 $ .94
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Avg. shares outstanding-basic..................... 95,129,383 95,063,866 95,127,213 94,895,291
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Avg. shares outstanding-diluted................... 95,129,383 95,363,728 95,157,946 95,283,128
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
<PAGE>
CIRCUS CIRCUS ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
OCTOBER 31,
------------------------
1998 1997
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................................................ $ 70,608 $ 89,200
----------- -----------
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization....................................................... 109,060 94,788
Gain on disposition of fixed assets................................................. (1,590) (6,438)
(Increase) decrease in other current assets......................................... (4,776) 11,414
Increase in other noncurrent assets................................................. (18,892) (3,421)
Increase in interest payable........................................................ 13,329 15,423
Increase in other current liabilities............................................... 30,198 5,208
Increase in deferred income tax..................................................... 5,226 7,350
Decrease in other noncurrent liabilities............................................ (49) (49)
Unconsolidated affiliates' earnings in excess of distributions...................... (10,235) (29,390)
----------- -----------
Total adjustments................................................................. 122,271 94,885
----------- -----------
Net cash provided by operating activities......................................... 192,879 184,085
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.................................................................. (536,907) (494,410)
Increase in construction payable...................................................... 25,828 8,503
Increase in investments in unconsolidated affiliates.................................. (7,409) (2,085)
Proceeds from sale of equipment and other assets...................................... 5,712 7,979
Other................................................................................. 183 203
----------- -----------
Net cash used in investing activities............................................. (512,593) (479,810)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net effect on cash of issuances and payments of debt with original maturities of three
months or less...................................................................... 312,531 541,386
Issuances of debt with original maturities in excess of three months.................. 337,266 37,161
Principal payments of debt with original maturities in excess of three months......... (343,404) (271,302)
Exercise of stock options and warrants................................................ 219 6,383
Purchases of treasury stock........................................................... -- (1,300)
Other................................................................................. 13,647 (10,832)
----------- -----------
Net cash provided by financing activities......................................... 320,259 301,496
----------- -----------
Net increase in cash and cash equivalents............................................... 545 5,771
Cash and cash equivalents at beginning of period........................................ 58,631 69,516
----------- -----------
Cash and cash equivalents at end of period.............................................. $ 59,176 $ 75,287
----------- -----------
----------- -----------
SUPPLEMENTAL CASH FLOW DISCLOSURES
Cash paid during the period for:
Interest (net of amount capitalized).................................................. $ 56,128 $ 47,799
Income tax............................................................................ $ 18,670 $ 37,270
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
6
<PAGE>
CIRCUS CIRCUS ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(ALL INFORMATION FOR THE THREE AND NINE MONTHS ENDED OCTOBER 31, 1998 AND 1997
IS UNAUDITED.)
(1) PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
Circus Circus Enterprises, Inc. (the "Company") was incorporated February
27, 1974. The Company owns and operates hotel and casino facilities in Las
Vegas, Reno, Laughlin, Jean and Henderson, Nevada and a hotel and dockside
casino in Tunica County, Mississippi. It is also an investor in several
unconsolidated affiliates, with operations that include a riverboat casino in
Elgin, Illinois, a hotel/casino in Reno, Nevada and a hotel/casino on the Las
Vegas Strip.
The condensed consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. Material intercompany accounts and
transactions have been eliminated.
The condensed consolidated financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company believes that the
disclosures are adequate to make the information presented not misleading. In
the opinion of management, all adjustments (which include normal recurring
adjustments) necessary for a fair statement of results for the interim periods
have been made. The results for the three and nine month periods are not
necessarily indicative of results to be expected for the full fiscal year.
Certain reclassifications have been made to the financial statements for the
three and nine months ended October 31, 1997 to conform to the financial
statement presentation for the three and nine months ended October 31, 1998.
These reclassifications have no effect on net income.
These financial statements should be read in conjunction with the financial
statements and notes thereto included in the Company's annual report on Form
10-K for the year ended January 31, 1998.
7
<PAGE>
CIRCUS CIRCUS ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL INFORMATION FOR THE THREE AND NINE MONTHS ENDED OCTOBER 31, 1998 AND 1997
IS UNAUDITED.)
(2) LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
JANUARY 31,
------------
1998
OCTOBER 31, ------------
------------
1998
------------
(UNAUDITED)
<S> <C> <C>
Amounts due under corporate debt program at floating interest
rates, weighted average of 6.1% and 5.8%........................ $ 25,000 $ 981,310
Amounts due under bank credit agreement at floating interest
rates, weighted average of 6.4%................................. 1,265,000 --
6.45% Senior Notes due 2006 (net of unamortized discount of $319
and $352)....................................................... 199,681 199,648
7 5/8% Senior Subordinated Debentures due 2013.................... 150,000 150,000
6 3/4% Senior Subordinated Notes due 2003 (net of unamortized
discount of $75 and $87)........................................ 149,925 149,913
7.0% Debentures due 2036 (net of unamortized discount of $136 and
$146)........................................................... 149,864 149,854
6.70% Debentures due 2096 (net of unamortized discount of $243 and
$279)........................................................... 149,757 149,721
Other notes....................................................... 9,146 11,443
------------ ------------
2,098,373 1,791,889
Less--current portion............................................. (3,549) (3,071)
------------ ------------
$ 2,094,824 $ 1,788,818
------------ ------------
------------ ------------
</TABLE>
The Company has established a corporate debt program whereby it can issue
commercial paper or similar forms of short-term debt. Although the debt
instruments issued under this program are short-term in tenor, they are
classified as long-term debt because (i) they are backed by a long-term debt
facility (see below) and (ii) it is management's intention to continue to
replace such borrowings on a rolling basis as various instruments come due and
to have such borrowings outstanding for longer than one year. To the extent that
the Company incurs debt under this program, it must maintain an equivalent
amount of credit available under its bank credit facility discussed more fully
below.
In May 1997, the Company renegotiated its $1.5 billion unsecured credit
facility, dated January 29, 1996. This agreement was replaced by a new $2.0
billion unsecured credit facility which matures on July 31, 2002 (the
"Facility"). The maturity date may be extended for an unlimited number of
one-year periods with the consent of the bank group. The Facility contains
financial covenants regarding senior and total debt and new venture capital
expenditures and investments. The Facility is for general corporate purposes.
The Company incurs commitment fees (currently 17.5 basis points) on the unused
portion of the Facility. As of October 31, 1998, the Company had $1.3 billion
outstanding under the Facility.
In November 1998, the Company issued $275 million principal amount of 9 1/4%
Senior Subordinated Notes due December 2005 (the "9 1/4% Notes"), with interest
payable each June and December. The 9 1/4% Notes are redeemable at the option of
the Company, in whole, at 100% of the principal amount plus a make-whole premium
at any time prior to December 1, 2002. A portion of the 9 1/4% Notes are also
redeemable at the option of the Company prior to December 1, 2001 with the
proceeds of a public offering
8
<PAGE>
CIRCUS CIRCUS ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL INFORMATION FOR THE THREE AND NINE MONTHS ENDED OCTOBER 31, 1998 AND 1997
IS UNAUDITED.)
(2) LONG-TERM DEBT --CONTINUED
of equity securities. The 9 1/4% Notes are also redeemable at the option of the
Company beginning December 1, 2002 at prices declining annually to 100% on or
after December 2004. The 9 1/4% Notes are not subject to any sinking fund
requirements. The net proceeds from this offering were used to repay borrowings
under the Company's credit facility.
In November 1996, the Company issued $150 million principal amount of 7.0%
Debentures due November 2036 (the "7.0% Debentures"). The 7.0% Debentures may be
redeemed at the option of the holder in November 2008. Also, in November 1996,
the Company issued $150 million principal amount of 6.70% Debentures due
November 2096 (the "6.70% Debentures"). The 6.70% Debentures may be redeemed at
the option of the holder in November 2003. Both the 7.0% Debentures, which were
discounted to $149.8 million, and the 6.70% Debentures, which were discounted to
$149.7 million, have interest payable each May and November, are not redeemable
by the Company prior to maturity and are not subject to any sinking fund
requirements. The net proceeds from these offerings were used primarily to repay
borrowings under the Company's corporate debt program.
In February 1996, the Company issued $200 million principal amount of 6.45%
Senior Notes due February 1, 2006 (the "6.45% Notes"), with interest payable
each February and August. The 6.45% Notes, which were discounted to $199.6
million, are not redeemable prior to maturity and are not subject to any sinking
fund requirements. The net proceeds from this offering were used primarily to
repay borrowings under the Company's corporate debt program.
In July 1993, the Company issued $150 million principal amount of 6 3/4%
Senior Subordinated Notes (the "6 3/4% Notes") due July 2003 and $150 million
principal amount of 7 5/8% Senior Subordinated Debentures (the "7 5/8%
Debentures") due July 2013, with interest payable each July and January. The
6 3/4% Notes, which were discounted to $149.8 million, and the 7 5/8% Debentures
are not redeemable prior to maturity and are not subject to any sinking fund
requirements. The net proceeds from these offerings were used primarily to repay
borrowings under the Company's corporate debt program.
The Company has a policy aimed at managing interest rate risk associated
with its current and anticipated future borrowings. This policy enables the
Company to use any combination of interest rate swaps, futures, options, caps
and similar instruments. To the extent the Company employs such financial
instruments pursuant to this policy, they are accounted for as hedging
instruments. In order to qualify for hedge accounting, the underlying hedged
item must expose the Company to risks associated with market fluctuations and
the financial instrument used must be designated as a hedge and must reduce the
Company's exposure to market fluctuation throughout the hedge period. If these
criteria are not met, a change in the market value of the financial instrument
is recognized as a gain or loss in the period of change. Otherwise, gains and
losses are not recognized except to the extent that the financial instrument is
disposed of prior to maturity. Net interest paid or received pursuant to the
financial instrument is included as interest expense in the period.
The Company has entered into various interest rate swaps, principally with
its bank group, to manage interest expense, which is subject to fluctuation due
to the variable-rate nature of the debt under the Company's corporate debt
program. The Company has interest rate swap agreements under which it pays a
fixed interest rate (weighted average of approximately 6.2%) and receives a
variable interest rate (weighted average of approximately 5.7% at October 31,
1998) on $175 million notional amount of "initial" swaps, and pays a variable
interest rate of approximately 5.8% at October 31, 1998, and receives a
9
<PAGE>
CIRCUS CIRCUS ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL INFORMATION FOR THE THREE AND NINE MONTHS ENDED OCTOBER 31, 1998 AND 1997
IS UNAUDITED.)
(2) LONG-TERM DEBT --CONTINUED
fixed interest rate of approximately 8.2% on $30 million notional amount of a
"reversing" swap. The net effect of all such swaps resulted in additional
interest expense, due to an interest rate differential which, at October 31,
1998, was approximately 0.1% on the total notional amount of the swaps. Two of
the initial swaps with a combined notional amount of $150 million provide that
the swaps will terminate two business days after any date on which three-month
LIBOR is set at or above 9% on or after October 15, 2000 for $100 million
notional amount, and on or after January 15, 2001 for $50 million notional
amount. These swaps otherwise terminate in fiscal 2008. The remaining initial
swap of $25 million terminates in fiscal 2000 while the reversing swap expires
in fiscal 2002.
As of October 31, 1998, under its most restrictive loan covenants, the
Company was restricted as to the purchase of its own capital stock in excess of
$490 million and was restricted from issuing additional debt in excess of
approximately $135 million. In November 1998, the Company issued the 9 1/4%
Notes, the net proceeds of which were utilized to reduce the indebtedness
outstanding under the Facility by $268 million. If the issuance of the 9 1/4%
Notes and the aforementioned application of the net proceeds had incurred on
October 31, 1998, the amount of additional indebtedness the Company would have
been permitted to incur would have been $403 million.
(3) STOCK OPTIONS
The Company has various stock option plans for executive, managerial and
supervisory personnel as well as the Company's outside directors and
consultants. The plans permit grants of options relating to the Company's common
stock and one of the plans also permits grants of the Company's common stock as
performance share and restricted stock awards. The only awards granted pursuant
to such plans through October 31, 1998 are stock options, which are generally
exercisable in one or more installments beginning not less than nine months
after the grant date.
Summarized information for stock options granted pursuant to the Company's
plans is as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED OCTOBER
31, 1998
-------------------------
WEIGHTED
AVERAGE
EXERCISE
OPTIONS PRICE
------------ -----------
<S> <C> <C>
Outstanding at beginning of period................................... 5,138,505 $ 23.92
Granted.............................................................. 577,000 18.20
Exercised............................................................ (16,500) 13.29
Cancelled............................................................ (211,200) 21.29
------------ -----------
Outstanding at end of period......................................... 5,487,805 $ 23.46
------------ -----------
------------ -----------
Options exercisable at end of period................................. 3,568,704 $ 23.17
Options available for grant at end of period......................... 3,666,100
</TABLE>
10
<PAGE>
CIRCUS CIRCUS ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL INFORMATION FOR THE THREE AND NINE MONTHS ENDED OCTOBER 31, 1998 AND 1997
IS UNAUDITED.)
(4) STOCK RELATED MATTERS --CONTINUED
On July 14, 1994, the Company declared a dividend of one Common Stock
Purchase Right (the "Rights") for each share of common stock outstanding at the
close of business on August 15, 1994. Each Right entitles the holder to purchase
from the Company one share of common stock at an exercise price of $125, subject
to certain antidilution adjustments. The Rights generally become exercisable ten
days after the earlier of an announcement that an individual or group has
acquired 15% or more of the Company's outstanding common stock or the
announcement of commencement of a tender offer for 15% or more of the Company's
common stock.
In the event the Rights become exercisable, each Right (except the Rights
beneficially owned by the acquiring individual or group, which become void)
would entitle the holder to purchase, for the exercise price, a number of shares
of the Company's common stock having an aggregate current market value equal to
two times the exercise price. The Rights expire August 15, 2004, and may be
redeemed by the Company at a price of $.01 per Right any time prior to their
expiration or the acquisition of 15% or more of the Company's common stock. The
Rights should not interfere with any merger or other business combination
approved by the Company's Board of Directors and are intended to cause
substantial dilution to a person or group that attempts to acquire control of
the Company on terms not approved by the Board of Directors.
During the year ended January 31, 1998, the Company elected to settle, for
cash, outstanding put options on 2.0 million shares of its common stock and call
options on 600,000 shares of common stock. The net cost to the Company was $9.4
million. The put and call options were entered into as a complement to the
Company's overall share repurchase program.
The Company is authorized to issue up to 75 million shares of $.01 par value
preferred stock in one or more series having such respective terms, rights and
preferences as are designated by the Board of Directors. No such preferred stock
has yet been issued.
(5) EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128--Earnings Per Share ("SFAS 128"). SFAS
128 is effective for periods ending after December 15, 1997 and replaces
earnings per share as previously reported with "basic," or undiluted earnings
per share, and "diluted" earnings per share. Basic earnings per share is
computed by dividing net income by the weighted average number of common shares
outstanding during the period, while diluted earnings per share reflects the
additional dilution for all potentially dilutive securities, such as stock
options.
The Company has adopted the provisions of SFAS 128 and all previously
reported earnings per share amounts have been restated. The table below
reconciles weighted average shares outstanding used to
11
<PAGE>
CIRCUS CIRCUS ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL INFORMATION FOR THE THREE AND NINE MONTHS ENDED OCTOBER 31, 1998 AND 1997
IS UNAUDITED.)
(5) EARNINGS PER SHARE --CONTINUED
calculate basic earnings per share with the weighted shares outstanding used to
calculate diluted earnings per share. There were no reconciling items for net
income.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
OCTOBER 31, OCTOBER 31,
-------------------- --------------------
1998 1997 1998 1997
--------- --------- --------- ---------
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
<S> <C> <C> <C> <C>
Net income............................................................ $ 23,716 $ 27,223 $ 70,608 $ 89,200
--------- --------- --------- ---------
--------- --------- --------- ---------
Weighted average shares outstanding used in computation of basic
earnings per share.................................................. 95,129 95,064 95,127 94,895
Stock options......................................................... -- 300 31 388
--------- --------- --------- ---------
Weighted average shares outstanding used in computation of diluted
earnings per share.................................................. 95,129 95,364 95,158 95,283
--------- --------- --------- ---------
--------- --------- --------- ---------
Basic earnings per share.............................................. $ .25 $ .29 $ .74 $ .94
--------- --------- --------- ---------
--------- --------- --------- ---------
Diluted earnings per share............................................ $ .25 $ .29 $ .74 $ .94
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
(6) INVESTMENTS IN UNCONSOLIDATED AFFILIATES
The Company has investments in unconsolidated affiliates that are accounted
for under the equity method. Using the equity method, original investments are
recorded at cost and adjusted by the Company's share of earnings or losses of
these entities. The investment balance also includes interest capitalized during
construction (net of amortization). Investments in unconsolidated affiliates
consist of the following (in thousands):
<TABLE>
<CAPTION>
JANUARY 31,
1998
OCTOBER 31, -----------
1998
-----------
(UNAUDITED)
<S> <C> <C>
Circus and Eldorado Joint Venture (50%)
(Silver Legacy, Reno, Nevada)..................................... $ 72,988 $ 64,407
Elgin Riverboat Resort (50%)
(Grand Victoria, Elgin, Illinois)................................. 43,435 44,759
Victoria Partners (50%)
(Monte Carlo, Las Vegas, Nevada).................................. 142,042 139,958
Detroit Entertainment (45%)
(Proposed Hotel/Casino, Detroit, Michigan)........................ 14,260 6,268
----------- -----------
$ 272,725 $ 255,392
----------- -----------
----------- -----------
</TABLE>
12
<PAGE>
CIRCUS CIRCUS ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL INFORMATION FOR THE THREE AND NINE MONTHS ENDED OCTOBER 31, 1998 AND 1997
IS UNAUDITED.)
(6) INVESTMENTS IN UNCONSOLIDATED AFFILIATES --CONTINUED
The above unconsolidated affiliates operate with fiscal years ending on
December 31. Summarized results of operations of the unconsolidated affiliates
are as follows (unaudited, in thousands):
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
1998 1997
---------- ----------
<S> <C> <C>
Revenues.............................................................. $ 506,603 $ 501,746
Expenses.............................................................. 387,482 355,069
Operating income...................................................... 119,121 146,677
Net income............................................................ 100,979 122,600
</TABLE>
Included in the above are revenues of the Grand Victoria of $197,509 and
$189,375 for the nine months ended September 30, 1998 and 1997. The property's
operating margin during those periods was 26% and 35%, respectively.
(7) COMMITMENTS AND CONTINGENT LIABILITIES
In July 1995, Silver Legacy, a 50/50 joint venture with the Eldorado
Hotel/Casino, opened in downtown Reno, Nevada. As a condition to the joint
venture's $230 million bank credit agreement, Circus is obligated under a
make-well agreement to make additional contributions to the joint venture as may
be necessary to maintain a minimum coverage ratio (as defined).
In the Spring of 1997, the Company commenced construction of Mandalay Bay, a
43-story, hotel-casino resort which will have approximately 3,700 rooms and
approximately 135,000 square feet of gaming space. The resort, which is
scheduled to open March 2, 1999, is situated on approximately 60 acres of land
just south of Luxor. Mandalay Bay's attractions will include an 11-acre tropical
lagoon featuring a sand-and-surf beach, a three-quarter-mile lazy river ride, a
30,000-square-foot spa and other entertainment attractions. Inside, Mandalay Bay
will offer internationally renowned restaurants, as well as a House of Blues
nightclub and restaurant, including its signature Foundation Room sited on
Mandalay Bay's rooftop, and 100 "music-themed" hotel rooms in Mandalay Bay's
tower.
Within Mandalay Bay and as part of its 3,700 rooms, a Four Seasons Hotel
with approximately 400 rooms will provide Las Vegas visitors with a luxury
"five-star" hospitality experience. The Four Seasons Hotel, which will be owned
by the Company and managed by Four Seasons, represents the first step pursuant
to the Company's cooperative effort with Four Seasons to identify strategic
opportunities for development of hotel and casino properties worldwide. The cost
of Mandalay Bay, including the Four Seasons Hotel but excluding land,
capitalized interest and preopening expenses, is currently estimated at
approximately $850 million and as of October 31, 1998, $635.1 million in costs
had been incurred for this project.
During the course of construction, Mandalay Bay's hotel tower experienced
settling in excess of the level contemplated in the building's original design
and the amount of settling has been greater in some portions of the structure
than others. We have retained geotechnical, structural engineering and
foundation consultants who have evaluated the situation and have recommended
remedial measures. The recommended remedial measures are substantially
completed, and we do not expect the remaining work to delay the opening of
Mandalay Bay or materially increase the cost of the project. However until such
13
<PAGE>
CIRCUS CIRCUS ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL INFORMATION FOR THE THREE AND NINE MONTHS ENDED OCTOBER 31, 1998 AND 1997
IS UNAUDITED.)
(7) COMMITMENTS AND CONTINGENT LIABILITIES --CONTINUED
remedial measures have been completed and evaluated over a meaningful perod of
time, we cannot be certain if further corrective measures will be required or as
to the impact of such measures.
Mandalay Bay is the latest phase of the Company's development of more than
230 acres of land it owns at the south end of the Las Vegas Strip which runs
from Tropicana Avenue south approximately one mile to Russell Road ("Masterplan
Mile"). As part of its development plan for Masterplan Mile, the Company is
constructing a 125,000-square-foot convention facility and a 12,000-seat arena.
These facilities, which are expected to be completed and opened shortly after
Mandalay Bay, will represent core components of Masterplan Mile which will be
cross-marketed to guests at the Company's existing and future hotel-casinos
within Masterplan Mile. The estimated cost of the convention facility and arena,
excluding land, capitalized interest and preopening expenses, is approximately
$100 million and as of October 31, 1998, $41.3 million in costs had been
incurred for these facilities.
The Company is also constructing a monorail system which will link the
Company's resorts on Masterplan Mile. Furthermore, the Company is planning a
"Sea of Predators" aquarium exhibit which will likewise represent a core
component of Masterplan Mile. The monorail is scheduled to open shortly after
Mandalay Bay, while the Sea of Predators exhibit is expected to open
approximately a year later. The cost of these additional Masterplan Mile core
components, excluding land, capitalized interest and preopening expenses, is
estimated at approximately $75 million, of which $9.1 million had been incurred
as of October 31, 1998. The Company may add other core components to its
development plan for Masterplan Mile in the future.
The Company has funded Mandalay Bay and the aforementioned Masterplan Mile
core components from internal cash flows or its credit facility, and anticipates
that future funding for such projects will be from these sources or from project
specific financing.
The Company is a defendant in various pending litigation. In management's
opinion, the ultimate outcome of such litigation will not have a material effect
on the results of operations or the financial position of the Company.
(8) RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes accounting and
reporting standards for derivative financial instruments. The provisions of SFAS
No. 133 require that a company recognize derivatives as either assets or
liabilities on its balance sheet and that the instrument be valued at its fair
value. The statement also defines the criteria and conditions which govern the
recognition of subsequent changes in the fair value of the instrument as either
balance sheet or income statement events. SFAS No. 133 is effective for fiscal
years beginning after June 15, 1999. The Company does not expect the adoption of
this pronouncement to materially impact its results of operations or financial
position.
The Accounting Standards Executive Committee of the American Institute of
Certified Public Accountants has issued Statement of Position 98-5 ("SOP 98-5")
"Reporting on the Costs of Start-up Activities." SOP 98-5 requires that the
costs of all start-up activities, as defined, be expensed as incurred. The
statement is effective for fiscal years beginning after December 15, 1998. The
Company will adopt SOP 98-5 in the first quarter of its fiscal year ending
January 31, 2000 and write-off any existing start-up costs as a cumulative
effect of change in accounting principal.
14
<PAGE>
CIRCUS CIRCUS ENTERPRISES, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (UNAUDITED)
RESULTS OF OPERATIONS
EARNINGS PER SHARE
For the quarter ended October 31, 1998, the Company reported net income of
$23.7 million, or $.25 per share, versus $27.2 million, or $.29 per share, a
year ago. In this year's quarter, the Company recorded a charge to corporate
expense of $5.4 million for political campaign costs associated with Proposition
5 in California, while in the prior year, the Company sold an airplane that
resulted in a gain of $6.0 million. Before these one-time items, earning in this
year's third quarter were $.29 per share versus $.25 on the same basis last
year.
For the nine months, net income was $70.6 million, or $.74 per share,
compared to $89.2 million, or $.94 per share, in the prior year. Before the
one-time items mentioned above and an additional $1.1 million of the
aforementioned campaign costs incurred in the second quarter, earnings per share
were $.79 for the current year period versus $.90 in last year's third quarter.
REVENUES
Revenues for the Company increased $40.6 million, or 12%, for the three
months ended October 31, 1998 and $94.8 million, or 9%, for the nine months,
versus the corresponding prior year periods. The increase in revenues for both
the three and nine months was attributable primarily to two properties, though
all of the Company's wholly owned properties reported increased revenues during
the third quarter. At Gold Strike-Tunica, the completion of an 1,100-room hotel
tower in the first quarter contributed to an increase in revenues at that
property of $19.0 million, or 180%, in the third quarter and $51.4 million, or
167%, in the nine months. Luxor benefitted from a new national advertising
campaign, an increase in the amount of high-budget play in the casino and the
opening of a new 1,200-seat showroom in the third quarter of the prior year,
which contributed to increases in revenue at this property of $11.3 million, or
14%, for the quarter and $38.4 million, or 17%, for the nine months ended
October 31, 1998.
OPERATING INCOME (excluding nonrecurring items)
For the quarter ended October 31, 1998, income from operations rose $10.0
million, or 17%, while the nine month period experienced a decline in income
from operations of $7.1 million, or 3%, compared to the same periods a year ago.
The Company's composite operating margin was 18.2% and 17.6% for the three and
nine months ended October 31, 1998 versus 17.4% and 19.9% for the comparable
periods in the prior year. A discussion of operating results by market follows.
LAS VEGAS
The Company's Las Vegas properties posted an overall increase in operating
income of $6.3 million, or 15%, during the third quarter, while there was an
overall decrease for the nine-month period of $6.0 million, or 4%. The increase
in operating income for the quarter was due primarily to improved results at
Luxor, which was up $4.2 million, or 37%, and Circus Circus-Las Vegas, which was
up $3.8 million, or 83%. These increases were partially offset by a lower
contribution from Monte Carlo (a 50%-owned joint venture) which fell $1.7
million, or 20%.
15
<PAGE>
CIRCUS CIRCUS ENTERPRISES, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (UNAUDITED) (CONTINUED)
As mentioned above, Luxor benefitted in the quarter from a new national
advertising campaign that began in February and an increase in the amount of
high-budget play in the casino. The increase at Circus Circus was driven by an
increase in the casino, increased contributions from the hotel department (rooms
were being remodeled in the prior year) and the food and beverage department
(due to selective price increases). The decrease at Monte Carlo was due
primarily to an increase in casino promotional expenses.
For the nine months ended October 31, 1998, the positive results for the
second and third quarters were more than offset by general softness in market
conditions in Las Vegas throughout the first three months of the year,
particularly during mid-week periods. Luxor was also negatively impacted by the
additional costs of the national advertising campaign and other promotional
expenses. The individual property results for the nine months are as follows:
Circus Circus up $1.3 million, or 6%, Luxor up $1.7 million or 4%, Excalibur
down $5.4 million or 10%, and Monte Carlo down $4.0 million, or 16%.
RENO
In Reno, the Company's combined third quarter operating income was even with
the prior year, while it declined $2.7 million, or 9%, for the nine months.
Strong results at Circus Circus in the third quarter (operating income up 21%)
were offset by a decrease in results at Silver Legacy (50%-owned by the
Company). Circus Circus benefitted from a comparison to the prior year in which
the casino was undergoing remodeling for a portion of the quarter. For the nine
months, both of these properties were negatively impacted by adverse weather
conditions in February, which made travel in and out of the area difficult.
LAUGHLIN
The Company's two properties in Laughlin, the Colorado Belle and the
Edgewater, posted a combined increase in operating income of $1.8 million, or
59%, in the third quarter and an increase of $1.5 million, or 10%, for the nine
months ended October 31, 1998. While the region continues to suffer from
difficult competitive challenges, foremostly the unregulated Native American
casinos in Laughlin's prime central Arizona and southern California feeder
markets, these two properties posted their second consecutive strong quarter.
The increases stemmed from a combination of casino marketing efforts and reduced
costs.
RIVERBOAT MARKETS
In Tunica County, Mississippi, operating income at the Gold Strike rose
almost four-fold to $3.6 million in the quarter, while for the nine months
operating income rose 199% to $9.2 million. The increases are the result of the
addition of a 1,100-room hotel tower that was completed during the first quarter
of this year.
Results at Grand Victoria (a 50%-owned riverboat casino in Elgin, Illinois)
reflected a $2.2 million decrease in the Company's share of operating income for
the third quarter and an $8.0 million decrease for the nine months. An increase
in the maximum tax rate on casino revenues in Illinois from 20% to 35% was
responsible for the decreased contribution from Grand Victoria.
INTEREST EXPENSE
For the three and nine months ended October 31, 1998, interest expense
(excluding joint venture interest expense) increased $1.8 million and $6.2
million versus the prior year. The increase was due
16
<PAGE>
CIRCUS CIRCUS ENTERPRISES, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (UNAUDITED) (CONTINUED)
primarily to higher average borrowings related to the construction of the new
hotel tower at Gold Strike-Tunica and the ongoing construction of Mandalay Bay.
Average borrowings were approximately $2.0 billion for the third quarter and
nine months, compared against $1.6 billion and $1.5 billion for the same periods
last year. Capitalized interest was $12.7 million and $29.8 million for the
quarter and the nine months ended October 31, 1998 versus $7.0 million and $15.5
million in the year-ago periods. Long-term debt at October 31, 1998 stood at
$2.1 billion compared to $1.7 billion at October 31, 1997.
The Company also recorded interest expense related to joint venture projects
of $3.0 million and $9.3 million in the three and nine months ended October 31,
1998 compared to $3.9 million and $12.1 million in the previous year. This
reflects the Company's 50% share of the interest expense of Silver Legacy and
Monte Carlo, with the decrease in expense attributable to lower debt outstanding
at Monte Carlo.
INCOME TAX
For the three and nine months ended October 31, 1998, the Company's
effective tax rate was approximately 40% and 39%, compared with 37% for both
periods in the prior year. These rates reflect the corporate statutory rate of
35% plus the effect of various nondeductible expenses, including the
amortization of goodwill associated with the acquisition of Gold Strike Resorts
and political contributions.
FINANCIAL POSITION AND CAPITAL RESOURCES
The Company had cash and cash equivalents of $59.2 million at October 31,
1998, reflecting normal daily operating requirements. The Company's pretax cash
flow from operations (before nonrecurring items) was $106.1 million and $307.0
million for the three and nine months ended October 31, 1998 versus $91.6
million and $299.8 million for the same periods last year. In this context,
pretax cash flow from operations is defined as the Company's income from
operations plus noncash operating expenses (primarily depreciation and
amortization). The Company used its current year cash flow primarily to fund the
construction of Mandalay Bay, to complete the new hotel tower at Gold
Strike-Tunica and to fund miscellaneous other construction projects.
CAPITAL SPENDING
Capital expenditures for the quarter and nine months ended October 31, 1998
were $186.9 million and $536.9 million. Of these amounts, $118.4 million and
$381.1 million related to the construction of Mandalay Bay, $28.8 million and
$48.7 million related to the construction of other core components of Masterplan
Mile (primarily the convention center, arena, monorail and aquarium exhibit--see
"New Projects") and $6.6 million and $8.8 million related to the renovation of
the hotel rooms at Excalibur (budgeted at approximately $23 million and expected
to be completed in late 1999). Capital expenditures also include capitalized
interest of $12.7 million and $29.8 million for the quarter and nine months. The
nine months also contained $18.8 million related to the completion of
construction and remodeling at Gold Strike-Tunica.
LONG-TERM DEBT
In May 1997, the Company amended its unsecured credit facility with its bank
group, increasing the size of the facility from $1.5 billion to $2.0 billion at
more favorable terms and pricing (see Note 2 of Notes to Condensed Consolidated
Financial Statements). The Company also has a $1.0 billion commercial paper
17
<PAGE>
CIRCUS CIRCUS ENTERPRISES, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (UNAUDITED) (CONTINUED)
program, which is backed by the credit facility. In order to provide increased
borrowing capacity during the construction of Mandalay Bay, the credit facility
was further amended in May 1998 to provide a more liberal test on total debt
during such period and a new leverage test on senior debt. As of October 31,
1998, the Company had aggregate borrowings of $1.3 billion outstanding under the
credit facility and under the Company's most restrictive loan covenants, it
could issue additional debt of approximately $135 million.
On October 30, 1998, the Company entered into a lease intended as security
with a group of financial institutions (the "Lease Facility") pursuant to which
it may finance the acquisition of up to $200 million of equipment. Pursuant to
the terms of the Lease Facility, at the time of each acquisition of equipment
using such facility, the Company must permanently reduce the $2 billion
commitment under the bank credit facility by the cost of the equipment so
acquired. As of the date hereof, the Company has not utilized the Lease
Facility.
In August 1998, the Company filed a shelf registration statement registering
$550 million of securities that may be issued from time to time in the form of
additional debt securities of the Company and/or preferred securities of
Delaware business trusts formed for the purpose of issuing their trust
securities and investing the proceeds in debt securities of the Company.
In November 1998, pursuant to the shelf registration statement mentioned
above, the Company issued $275 million principal amount of 9 1/4% Senior
Subordinated Notes due December 1, 2005. Proceeds from this offering were used
to reduce the Company's outstanding bank borrowings. If the issuance of these
notes and the application of the net proceeds had occured on October 31, 1998,
the amount of additional debt the Company could have issued as of that date
would have been $403 million.
JOINT VENTURES
In July 1995, Silver Legacy, a 50/50 joint venture with the Eldorado
Hotel/Casino, opened in downtown Reno, Nevada. As a condition of the joint
venture's $230 million bank credit agreement, the Company is obligated under a
make-well agreement to make additional contributions to the joint venture as may
be necessary to maintain a minimum coverage ratio (as defined).
NEW PROJECTS
In the Spring of 1997, the Company commenced construction of Mandalay Bay, a
43-story, hotel-casino resort which will have approximately 3,700 rooms and
approximately 135,000 square feet of gaming space. The resort, which is
scheduled to open March 2, 1999, is situated on approximately 60 acres of land
just south of Luxor. Mandalay Bay's attractions will include an 11-acre tropical
lagoon featuring a sand-and-surf beach, a three-quarter-mile lazy river ride, a
30,000-square-foot spa and other entertainment attractions. Inside, Mandalay Bay
will offer internationally renowned restaurants, as well as a House of Blues
nightclub and restaurant, including its signature Foundation Room sited on
Mandalay Bay's rooftop, and 100 "music-themed" hotel rooms in Mandalay Bay's
tower.
Within Mandalay Bay and as part of its 3,700 rooms, a Four Seasons Hotel
with approximately 400 rooms will provide Las Vegas visitors with a luxury
"five-star" hospitality experience. The Four Seasons Hotel, which will be owned
by the Company and managed by Four Seasons, represents the first step pursuant
to the Company's cooperative effort with Four Seasons to identify strategic
opportunities for development of hotel and casino properties worldwide. The cost
of Mandalay Bay, including the Four Seasons Hotel but excluding land,
capitalized interest and preopening expenses, is currently estimated at
18
<PAGE>
CIRCUS CIRCUS ENTERPRISES, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (UNAUDITED) (CONTINUED)
approximately $850 million and as of October 31, 1998, $635.1 million in costs
had been incurred for this project.
During the course of construction, Mandalay Bay's hotel tower experienced
settling in excess of the level contemplated in the building's original design
and the amount of settling has been greater in some portions of the structure
than others. We have retained geotechnical, structural engineering and
foundation consultants who have evaluated the situation and have recommended
remedial measures. The recommended remedial measures are substantially
completed, and we do not expect the remaining work to delay the opening of
Mandalay Bay or materially increase the cost of the project. However until such
remedial measures have been completed and evaluated over a meaningful perod of
time, we cannot be certain if further corrective measures will be required or as
to the impact of such measures.
Mandalay Bay is the latest phase of the Company's development of more than
230 acres of land it owns at the south end of the Las Vegas Strip which runs
from Tropicana Avenue south approximately one mile to Russell Road ("Masterplan
Mile"). As part of its development plan for Masterplan Mile, the Company is
constructing a 125,000-square-foot convention facility and a 12,000-seat arena.
These facilities, which are expected to be completed and opened shortly after
Mandalay Bay, will represent core components of Masterplan Mile which will be
cross-marketed to guests at the Company's existing and future hotel-casinos
within Masterplan Mile. The estimated cost of the convention facility and arena,
excluding land, capitalized interest and preopening expenses, is approximately
$100 million and as of October 31, 1998, $41.3 million in costs had been
incurred for these facilities.
The Company is also constructing a monorail system which will link the
Company's resorts on Masterplan Mile. Furthermore, the Company is planning a
"Sea of Predators" aquarium exhibit which will likewise represent a core
component of Masterplan Mile. The monorail is scheduled to open shortly after
Mandalay Bay, while the Sea of Predators exhibit is expected to open
approximately a year later. The cost of these additional Masterplan Mile core
components, excluding land, capitalized interest and preopening expenses, is
estimated at approximately $75 million, of which $9.1 million had been incurred
as of October 31, 1998. The Company may add other core components to its
development plan for Masterplan Mile in the future.
The Company has formed a joint venture with the Detroit-based Atwater Casino
Group to build, own and operate a hotel-casino in Detroit, Michigan. The Company
will own a 45% equity interest in the proposed project and receive a management
fee. The joint venture is one of three groups which negotiated development
agreements with the City, which were approved by the City Council on April 9,
1998. The joint venture's ability to proceed with the proposed project is
contingent upon the receipt of all necessary gaming approvals and satisfaction
of other conditions. The joint venture is planning a $600 million project. The
Company is expected to be required to contribute 20% of such amount in the form
of equity and we will seek project-specific financing for the balance. If the
Company proceeds with the project, the development agreement provides that the
Company will guarantee completion of the project and will be required to enter
into a keep-well guarantee with the City, pursuant to which the Company could be
required to contribute additional funds, if and as needed, to continue
operations of the project for a period of two years. If and as permitted by city
and state authorities, the joint venture intends to operate a temporary casino.
The Company has announced that it plans to develop a hotel/casino resort on
the Mississippi Gulf Coast at the north end of the Bay of St. Louis, near the
DeLisle exit on Interstate 10. It is currently anticipated that the resort will
include approximately 1,500 rooms and will involve an investment of
19
<PAGE>
CIRCUS CIRCUS ENTERPRISES, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (UNAUDITED) (CONTINUED)
approximately $225 million. The Company has received all necessary approvals to
commence development. However, these approvals have been challenged in state and
federal court, and the Company anticipates that the design and construction of
this project will begin only after satisfactory resolution of all legal actions.
As presently contemplated, Circus will own 90% of the resort, with a partner
contributing land (up to 500 acres) in exchange for the remaining 10% interest.
Although the Company had previously entered into an agreement with Mirage
Resorts to participate in the development of a site located in the Marina
District of Atlantic City, New Jersey, the agreement was subject to litigation
which was settled. The Company has no current plans for development in Atlantic
City.
OTHER MATTERS
The Company believes that, through a combination of its credit facility,
operating cash flows and ability to raise additional funds through debt or
equity markets, it has sufficient capital resources to meet all of its existing
cash obligations, fund its commitments on the projects underway and
strategically repurchase shares of the Company's common stock.
YEAR 2000 READINESS DISCLOSURE
BACKGROUND
In the past, many computer software programs were written using two digits
rather than four to define the applicable year. As a result, information
technology such as date-sensitive computer software ("IT") as well as non-IT
systems, such as equipment containing microcontrollers or other embedded
technology may recognize a date using "00" as the year 1900 rather than the year
2000. This is generally referred to as the Year 2000 issue. If this situation
occurs, the potential exists for computer system failures or miscalculations by
computer programs, which could disrupt operations.
RISK FACTORS
Date-sensitive IT and non-IT systems and equipment are utilized throughout
the Company's wholly owned properties and its joint venture properties. As such,
the Company is exposed to the risk that Year 2000 problems could disrupt
operations at the affected properties and have a material adverse impact upon
the Company's operating results.
The Company is also exposed to the risk of possible failure of IT and non-IT
systems external to the Company's operations ("External Risk Factors"). These
External Risk Factors arise from the fact that the Company's operations, like
most businesses, are dependent upon numerous other private, public, and
governmental entities. While these External Risk Factors are not the
responsibility of the Company and the remediation of these factors is beyond the
Company's control, we are attempting to monitor these risks and form contingency
plans as warranted. As a result of these External Risk Factors, the Company may
be materially and adversely impacted even if its own IT and non-IT systems and
equipment are Year 2000 compliant. The most significant of these External Risk
Factors are as follows:
- One or more of the Company's suppliers or its joint ventures' suppliers
could experience Year 2000 problems that impact the ability of such
suppliers to provide goods and services required in the operation of the
Company's properties or its joint venture properties. The Company believes
that the impact of such a potential disruption would be limited due to the
availability of alternative suppliers.
20
<PAGE>
CIRCUS CIRCUS ENTERPRISES, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (UNAUDITED) (CONTINUED)
- One or more of the Company's utility providers (including electric,
natural gas, water, sewer, garbage collection and similar services) could
experience Year 2000 problems that impact the ability of the utility to
provide the service. Furthermore, the Company could be adversely impacted
if a significant disruption of utility services occurred in any of its key
customer markets (e.g., southern California), as this could impact the
customary flow of visitors from the affected market.
- Airline service to and from the principal markets in which the Company
operates could experience disruption due to Year 2000 problems, thus
limiting the ability of potential customers to visit our properties.
- The possible disruption of banking services due to Year 2000 problems
could impair the Company's daily banking operations including the deposit
of monies and processing of checks. Furthermore, customer's credit card
processing and access to cash via automated teller machines could also be
disrupted.
While the Company is in the initial stages of developing contingency plans
with respect to identified risk factors, the nature of many External Risk
Factors is such that the Company does not believe a viable alternative would be
available. For example, should airline service be disrupted, there are no
equivalent alternatives available. Consequently, the occurrence of any of the
aforementioned disruptions could, depending upon the severity and duration of
the disruption, have a material adverse impact on operating results.
APPROACH
The Company has established a task force to coordinate the Company's
response to the Year 2000. This task force, which reports to the Audit Committee
of the Board of Directors, includes the Company's Chief Accounting Officer, the
Chief Internal Auditor, the Director of Information Services, as well as support
staff. The Company also engaged an outside consultant which assisted it in
establishing an approach to dealing with the Year 2000 issue, and the Company is
in the process of implementing a Year 2000 compliance program at the Company's
wholly owned properties and at its joint venture properties. The program
consists of the following phases:
<TABLE>
<S> <C>
Phase 1 Compilation of an inventory of information technology (IT) and non-IT
systems that may be sensitive to the Year 2000 problem.
Phase 2 Identification and prioritization of the critical systems from the systems
inventory compiled in Phase 1 and inquiries of third parties with whom the
Company does significant business (i.e., vendors and suppliers) as to the
state of their Year 2000 readiness.
Phase 3 Analysis of critical systems to determine which systems are not Year 2000
compliant and evaluation of the costs to repair or replace those systems.
Phase 4 Repair or replace noncompliant systems and testing of those systems for
which representation as to Year 2000 compliance has not been received or
for which representation was received but has not been confirmed.
</TABLE>
21
<PAGE>
CIRCUS CIRCUS ENTERPRISES, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (UNAUDITED) (CONTINUED)
STATUS
Phases 1 and 2 are substantially complete, though the Company has not
received all responses to inquiries of significant third parties as to their
Year 2000 readiness. Phases 3 and 4 are ongoing and will continue through the
first half of calendar 1999. It is the Company's goal to have this project
completed by mid-1999. Based upon the analysis conducted to date, the Company
believes all of the major critical systems at the Company's wholly owned
properties and at its joint venture properties are currently compliant or will
be compliant by mid-1999. The only significant aspect of Year 2000 compliance of
the Company and its joint ventures which has been identified to date is the need
to replace older personal computers whose systems are not Year 2000 compatible.
COSTS
The total cost to the Company of making its systems and those of its joint
venture properties Year 2000 compliant is currently estimated to be in the range
of $5 to $10 million. The majority of this cost relates to the acquisition of
new computer hardware to replace the personal computers noted above and the
purchase of new software to replace noncompliant software. These costs will be
capitalized and depreciated over their expected useful life. To the extent
existing hardware or software is replaced, the Company will recognize a loss
currently for the undepreciated balance. This loss is included in the above cost
estimate. Furthermore, all costs related to software modification, as well as
all costs associated with the Company's administration of its Year 2000 project,
are being expensed as incurred and are likewise included in the cost estimate
above.
FORWARD-LOOKING STATEMENTS
Certain information included in this report and other materials filed or to
be filed by the Company with the Securities and Exchange Commission (as well as
information included in oral statements or written statements made or to be made
by the Company) contains statements that are forward-looking within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Such statements include information
relating to current expansion projects, plans for future expansion projects and
other business development activities as well as other capital spending,
financing sources, Year 2000 compliance and the effects of regulation (including
gaming and tax regulation) and competition. Such forward-looking information
involves important risks and uncertainties that could significantly affect
anticipated results in the future and, accordingly, such results may differ from
those expressed in any forward-looking statements made by or on behalf of the
Company. These risks and uncertainties include, but are not limited to, those
relating to development and construction activities, dependence on existing
management, leverage and debt service (including sensitivity to fluctuations in
interest rates), domestic or global economic conditions, changes in federal or
state tax laws or the administration of such laws, changes in gaming laws or
regulations (including the legalization of gaming in certain jurisdictions) and
applications for licenses and approvals under applicable laws and regulations
(including gaming laws and regulations).
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
As of October 31, 1998 there were no material changes to the information
incorporated by reference in Item 7A of the Company's Annual Report on Form 10-K
for the fiscal year ended January 31, 1998.
22
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Reference is made to the discussion in Item 3 of the Company's Annual Report
on Form 10-K for the fiscal year ended January 31, 1998 concerning (i) a
complaint filed by Mirage Resorts Incorporated ("MRI") in the District Court for
Clark County, Nevada on February 4, 1998 seeking a judgement declaring that a
May 30, 1996 agreement between the Company and MRI relating to MRI's sale to the
Company of a site in the Marina area of Atlantic City, New Jersey is of no
further force and effect (the "Nevada Action"), and (ii) a complaint filed by
the Company against MRI in the Superior Court for Atlantic County, New Jersey on
February 13, 1998 contesting MRI's terminations of the May 30, 1996 agreement
(the "Atlantic City Action"). In October 1998, the Nevada Action and the New
Jersey Action were dismissed by mutual consent of the parties.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The exhibits filed as part of this report are listed on the Index to
Exhibits accompanying this report.
(b) REPORTS ON FORM 8-K. During the period covered by this report, the
Company filed one report on Form 8-K dated August 3, 1998. This Form 8-K
reported information under Item 5.
23
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
<TABLE>
<S> <C> <C>
CIRCUS CIRCUS ENTERPRISES, INC.
(Registrant)
By: /s/ GLENN SCHAEFFER
-----------------------------------------
Date: December 14, 1998 Glenn Schaeffer
PRESIDENT, CHIEF FINANCIAL OFFICER AND
TREASURER
</TABLE>
24
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- --------------------------------------------------------------------------------------------------------
<S> <C>
4(a). Indenture, dated November 20, 1998, by and between the Company and The Bank of New York, as Trustee.
4(b). Supplemental Indenture, dated November 20, 1998, by and between the Company and The Bank of New York, as
Trustee, with respect to the Company's 9 1/4% Senior Subordinated Notes due December 1,2005.
4(c). 9 1/4% Senior Subordinated Notes due December 1, 2005 in the principal amount of $275,000,000.
10(a). Lease Intended As Security, dated October 30, 1998, among Circus Circus Leasing, Inc., as lessee; the
Company, as guarantor; First Security Bank, National Association, as Trustee, the Banks named therein
and Bank of America National Trust and Savings Association, as administrative agent for the Banks.
10(b). Guaranty, dated October 30, 1998, by the Company in favor of First Security Bank, National Association,
as Trustee, and the Banks named therein.
10(c). Circus Circus Enterprises, Inc. Supplemental Executive Retirement Plan.
27. Financial Data Schedule for the nine months ended October 31, 1998 as required under EDGAR.
</TABLE>
25
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CIRCUS CIRCUS ENTERPRISES, INC.,
as Issuer
and
THE BANK OF NEW YORK,
as Trustee
------------------
INDENTURE
------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
TIA Indenture
Section Section
- ------- ---------
<S> <C>
310 (a)(1) . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(3) . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(5) . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(b) . . . . . . . . . . . . . . . . . . . . . . . . . 7.08; 7.10; 12.02
(c) . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
311 (a) . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(b) . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(c) . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
312(a) . . . . . . . . . . . . . . . . . . . . . . . . 2.07
(b) . . . . . . . . . . . . . . . . . . . . . . . . . 12.03
(c) . . . . . . . . . . . . . . . . . . . . . . . . . 12.03
313 (a) . . . . . . . . . . . . . . . . . . . . . . . . . 7.06
(b) . . . . . . . . . . . . . . . . . . . . . . . . . 7.06
(c) . . . . . . . . . . . . . . . . . . . . . . . . . 7.06; 12.02
(d) . . . . . . . . . . . . . . . . . . . . . . . . . 7.06
314 (a) . . . . . . . . . . . . . . . . . . . . . . . . . 4.07; 12.02
(b) . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(c)(1) . . . . . . . . . . . . . . . . . . . . . . . . 12.04
(c)(2) . . . . . . . . . . . . . . . . . . . . . . . . 12.04
(c)(3) . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(d) . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(e) . . . . . . . . . . . . . . . . . . . . . . . . . 12.05
(f) . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
315 (a) . . . . . . . . . . . . . . . . . . . . . . . . . 7.01(b)
(b) . . . . . . . . . . . . . . . . . . . . . . . . . 7.05; 12.02
(c) . . . . . . . . . . . . . . . . . . . . . . . . . 7.01(a)
(d) . . . . . . . . . . . . . . . . . . . . . . . . . 7.01(c)
(e) . . . . . . . . . . . . . . . . . . . . . . . . . 6.11
316 (a)(last sentence) . . . . . . . . . . . . . . . . . . 12.06
(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) . . . . . . . . . . . . . . . . . . . . . . . . . 2.06
318 (a) . . . . . . . . . . . . . . . . . . . . . . . . . 12.01
(b) . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(c) . . . . . . . . . . . . . . . . . . . . . . . . . 10.01
</TABLE>
- ---------------------
N.A. means Not Applicable.
*This Cross-Reference Table is not part of the Indenture.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Incorporation By Reference Of Trust Indenture Act.. . . . . . . . . . 9
SECTION 1.03. Rules Of Construction.. . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Forms Generally.. . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 2.02. Form Of Trustee's Certificate Of Authentication.. . . . . . . . . . 10
SECTION 2.03. Amount Unlimited, Issuable In Series. . . . . . . . . . . . . . . . 11
SECTION 2.04. Execution And Authentication;
Denominations; Delivery And Dating. . . . . . . . . . . . . . . . 14
SECTION 2.05. Registrar And Paying Agent. . . . . . . . . . . . . . . . . . . . . 15
SECTION 2.06. Paying Agent To Hold Money In Trust.. . . . . . . . . . . . . . . . 15
SECTION 2.07. Securityholder Lists. . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 2.08. Transfer And Exchange.. . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 2.09. Replacement Securities. . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 2.10. Outstanding Securities. . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 2.11. Temporary Securities. . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 2.12. Cancellation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 2.13. Defaulted Interest. . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 2.14. Mandatory Disposition Of Securities Pursuant To
Gaming Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 2.15. CUSIP Numbers.. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE THREE
SUBORDINATION
SECTION 3.01. Securities Subordinated To
Senior Indebtedness . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 3.02. No Payment On Securities In Certain Circumstances.. . . . . . . . . 21
SECTION 3.03. Securities Subordinated To Prior
Payment Of All Senior Indebtedness
On Dissolution, Liquidation Or
Reorganization Of Company . . . . . . . . . . . . . . . . . . . . 23
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<S> <C>
SECTION 3.04. Securityholders To Be Subrogated
To Rights Of Holders Of Senior
Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 3.05. Obligations Of The Company
Unconditional . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 3.06. Trustees And Paying Agent Entitled To Assume Payments Not
Prohibited In
Absence Of Notice . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 3.07. Application By Trustee Of Monies Deposited With It. . . . . . . . . 25
SECTION 3.08. Subordination Rights Not Impaired
By Acts Or Omissions Of Company Or Holders Of Senior
Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 3.09. Securityholders Authorize Trustee
To Effectuate Subordination Of
Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 3.10. Right Of Trustee And Paying Agent To Hold Senior
Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 3.11. Article Three Not To Prevent Events Of Default. . . . . . . . . . . 27
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment Of Securities.. . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 4.02. Corporate Existence.. . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 4.03. Payment Of Taxes And Other Claims.. . . . . . . . . . . . . . . . . 28
SECTION 4.04. Maintenance Of Properties.. . . . . . . . . . . . . . . . . . . . . 28
SECTION 4.05. Maintenance Of Office Or Agency.. . . . . . . . . . . . . . . . . . 29
SECTION 4.06. Compliance Certificate. . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 4.07. Reports.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 4.08. Waiver Of Stay, Extension Of
Usury Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 4.09. Limitation On Liens.. . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 4.10. Limitation On Sale And Lease-Back Transactions. . . . . . . . . . . 33
SECTION 4.11. Defeasance Of Certain Obligations.. . . . . . . . . . . . . . . . . 34
SECTION 4.12. Limitation On Layering Debt.. . . . . . . . . . . . . . . . . . . . 36
ARTICLE FIVE
SUCCESSOR CORPORATION
ARTICLE SIX
DEFAULTS AND REMEDIES
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<S> <C>
SECTION 6.01. Events Of Default.. . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 6.02. Acceleration. . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 6.03. Other Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 6.04. Waiver Of Past Defaults.. . . . . . . . . . . . . . . . . . . . . . 40
SECTION 6.05. Control By Majority.. . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 6.06. Limitation On Suits.. . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 6.07. Rights Of Holders To Receive Payment. . . . . . . . . . . . . . . . 41
SECTION 6.08. Collection Suit By Trustee. . . . . . . . . . . . . . . . . . . . . 41
SECTION 6.09. Trustee May File Proofs Of Claim. . . . . . . . . . . . . . . . . . 42
SECTION 6.10. Priorities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 6.11. Undertaking For Costs.. . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties Of Trustee.. . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 7.02. Rights Of Trustee.. . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 7.03. Individual Rights Of Trustee. . . . . . . . . . . . . . . . . . . . 45
SECTION 7.04. Trustee's Disclaimer. . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 7.05. Notice Of Defaults. . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 7.06. Reports By Trustee. . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 7.07. Compensation And Indemnity. . . . . . . . . . . . . . . . . . . . . 46
SECTION 7.08. Replacement Of Trustee. . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 7.09. Successor Trustee By Merger, Etc. . . . . . . . . . . . . . . . . . 48
SECTION 7.10. Eligibility; Disqualification.. . . . . . . . . . . . . . . . . . . 49
SECTION 7.11. Preferential Collection Of Claims Against Company.. . . . . . . . . 49
SECTION 7.12. Authenticating Agent. . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE EIGHT
DISCHARGE OF INDENTURE
SECTION 8.01. Termination Of Company's Obligations. . . . . . . . . . . . . . . . 51
SECTION 8.02. Application Of Trust Money. . . . . . . . . . . . . . . . . . . . . 53
SECTION 8.03. Repayment To The Company. . . . . . . . . . . . . . . . . . . . . . 54
SECTION 8.04. Reinstatement.. . . . . . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent Of Holders. . . . . . . . . . . . . . . . . . . . . 55
SECTION 9.02. With Consent Of Holders.. . . . . . . . . . . . . . . . . . . . . . 56
SECTION 9.03. Compliance With Trust Indenture Act.. . . . . . . . . . . . . . . . 57
SECTION 9.04. Revocation And Effect Of Consents.. . . . . . . . . . . . . . . . . 57
SECTION 9.05. Notation On Or Exchange Of Securities.. . . . . . . . . . . . . . . 58
SECTION 9.06. Trustee To Sign Amendments, Etc.. . . . . . . . . . . . . . . . . . 58
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ARTICLE TEN
MEETINGS OF SECURITYHOLDERS
SECTION 10.01. Purposes For Which Meetings May Be Called.. . . . . . . . . . . . . 58
SECTION 10.02. Manner Of Calling Meetings. . . . . . . . . . . . . . . . . . . . . 59
SECTION 10.03. Call Of Meetings By Company
Or Holders. . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 10.04. Who May Attend And Vote At Meetings.. . . . . . . . . . . . . . . . 60
SECTION 10.05. Regulations May Be Made By Trustee; Conduct Of The Meeting;
Voting Rights; Adjournment. . . . . . . . . . . . . . . . . . . . 60
SECTION 10.06. Voting At The Meeting And Record
To Be Kept. . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 10.07. Exercise Of Rights Of Trustee Or
Securityholders May Not Be Hindered
Or Delayed By Call Of Meeting . . . . . . . . . . . . . . . . . . 62
ARTICLE ELEVEN
REDEMPTION
SECTION 11.01. Notices To Trustee. . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 11.02. Selection Of Securities To Be
Redeemed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 11.03. Notice Of Redemption. . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 11.04. Effect Of Notice Of Redemption. . . . . . . . . . . . . . . . . . . 65
SECTION 11.05. Deposit Of Redemption Price.. . . . . . . . . . . . . . . . . . . . 65
SECTION 11.06. Securities Redeemed In Part.. . . . . . . . . . . . . . . . . . . . 65
ARTICLE TWELVE
MISCELLANEOUS
SECTION 12.01. Trust Indenture Act Controls. . . . . . . . . . . . . . . . . . . . 65
SECTION 12.02. Notices.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 12.03. Communication By Holders With Other Holders.. . . . . . . . . . . . 66
SECTION 12.04. Certificates And Opinion As To
Conditions Precedent. . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 12.05. Statements Required In Certificate
Or Opinion. . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 12.06. When Treasury Securities Disregarded. . . . . . . . . . . . . . . . 67
SECTION 12.07. Rules By Paying Agent, Registrar. . . . . . . . . . . . . . . . . . 67
SECTION 12.08. Legal Holidays. . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 12.09. Governing Law.. . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 12.10. No Adverse Interpretation Of Other Agreements.. . . . . . . . . . . 68
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SECTION 12.11. No Recourse Against Others. . . . . . . . . . . . . . . . . . . . . 68
SECTION 12.12. Successors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 12.13. Duplicate Originals.. . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 12.14. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 12.15. Effect Of Headings, Table
Of Contents, Etc. . . . . . . . . . . . . . . . . . . . . . . . . 69
</TABLE>
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<PAGE>
INDENTURE, dated as of November 20, 1998, between Circus Circus
Enterprises, Inc., a Nevada corporation ("Company"), and The Bank of New York, a
New York banking corporation, as Trustee ("Trustee").
RECITALS
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its Senior
Subordinated Notes to be issued in one or more series (the "Securities"), as
herein provided, up to such principal amount as may from time to time be
authorized in or pursuant to one or more resolutions of the Board of Directors
or by supplemental indenture.
All things necessary to make this Indenture a valid agreement of the
Company, in accordance with its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders (as hereinafter defined) thereof, it is mutually
covenanted and agreed, for the equal and proportionate benefit of the Holders of
each series of the Securities, as follows:
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"Affiliate" means a person "affiliated" with the Company, as that term
is defined in Rule 405 promulgated under the Securities Act of 1933, as amended.
"Authenticating Agent" shall have the meaning provided in Section
7.12.
"Bankruptcy Law" shall have the meaning provided in Section 6.01.
"Board of Directors" means the Board of Directors of the Company or
any committee of such Board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Com-
<PAGE>
pany to have been duly adopted by the Board of Directors and to be in full
force and effect on the date of such certification and delivered to the Trustee.
"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 so required to be capitalized on the balance sheet in
accordance with GAAP.
"Company" means the party named as such in this Indenture until a
successor replaces it pursuant to the applicable provisions of this Indenture
and thereafter means the successor.
"Consolidated Net Tangible Assets" means the total amount of assets
(less applicable reserves and other properly deductible items) after deducting
therefrom (i) all current liabilities (excluding any thereof which are by their
terms extendible or renewable at the option of the obligor thereon to a time
more than 12 months after the time as of which the amount thereof is being
computed) and (ii) all goodwill, trade names, trademarks, patents, purchased
technology, unamortized debt discount and other like intangible assets, all as
set forth on the most recent quarterly balance sheet of the Company and its
consolidated subsidiaries and computed in accordance with generally accepted
accounting principles.
"Consolidated Property" means any property of the Company or any
subsidiary of the Company.
"Credit Facility" means the Amended and Restated Loan Agreement dated
as of May 23, 1997 among the Company, as Borrower, Bank of America National
Trust and Savings Association, as Administrative Agent, and the lenders which
are or become parties from time to time thereto, as amended by Amendment No. 1
thereto dated as of October 3, 1997 and Amendment No. 2 thereto dated as of May
15, 1998, together with the related documents thereto (including, without
limitation, any guarantee agreements and security documents), in each case as
such agreements may be amended (including any amendment and restatement
thereof), supplemented or otherwise modified from time to time, including,
without limitation, any agreement extending the maturity of, refinancing or
otherwise restructuring (including adding guarantors) all or any portion of the
Indebtedness under such agreement or any successor agreement or increasing the
credit available thereunder.
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"Custodian" shall have the meaning provided in Section 6.01.
"Default" means any event which is, or after notice or passage of time
would be, an Event of Default.
"Detroit Joint Venture" means the Michigan limited liability company
governed by an Operating Agreement, dated October 7, 1997, by and between Circus
Circus Michigan, Inc., a wholly-owned subsidiary of the Company, and Atwater
Casino Group, L.L.C.
"Event of Default" shall have the meaning provided in Section 6.01.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing and Permitted Completion Guarantees and Make-Well
Agreements" means (i) that certain Amended and Restated Make-Well Agreement by
the Company in favor of Bank of America National Trust and Savings Association
dated as of November 24, 1997 relating to the Circus and Eldorado Joint Venture,
a Nevada general partnership, as such agreement may be amended (including any
amendment and restatement thereof), supplemented or otherwise modified from time
to time, including any extension of the term thereof, (ii) any contract
providing for the Completion of construction or other payment or performance
with respect to the construction, maintenance or improvement of property or
equipment of the Detroit Joint Venture, or (iii) any "make-well," "keep-well" or
other agreement or arrangement of whatever nature providing for the obligation
to advance funds, property or services on behalf of the Detroit Joint Venture,
or given for the purpose of assuring or holding harmless any governmental entity
or agency and/or lender against loss with respect to any obligation of the
Detroit Joint Venture.
"Funded Debt" means all Indebtedness of the Company which (i) matures
by its terms, or is renewable at the option of any obligor thereon to a date,
more than one year after the date of original issuance of such Indebtedness and
(ii) ranks at least PARI PASSU with the Securities.
"Gaming Authority" means the Nevada Gaming Commission, the Nevada
Gaming Control Board, the Mississippi Gaming Commission, the Illinois Gaming
Board, the Michigan Gaming Control Board, the New Jersey Casino Control
Commission, the New
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Jersey Division of Gaming Enforcement or any similar federal, state or local
commission, agency or other regulatory body which has, or may at any time after
the date of this Indenture have, jurisdiction over the gaming activities of the
Company or a subsidiary of the Company (or any joint venture in which the
Company or a subsidiary of the Company is a participant) or any successor
thereto.
"Gaming Laws" means the gaming laws of a jurisdiction or jurisdictions
to which the Company or a subsidiary of the Company (or any joint venture in
which the Company or a subsidiary of the Company is a participant) is, or may at
any time after the date of this Indenture be, subject.
"Global Security" shall mean a Security issued to evidence all or a
part of any series of Securities that is executed by the Company and
authenticated and delivered by the Trustee to a depositary or pursuant to such
depositary's instructions, all in accordance with this Indenture and pursuant to
an Officer's Certificate, which shall be registered as to principal and interest
in the name of such depositary or its nominee.
"Holder" or "Securityholder" means the person in whose name a Security
is registered on the Registrar's books.
"Indebtedness" of any person means (a) any indebtedness of such
person, contingent or otherwise, in respect of borrowed money (whether or not
the recourse of the lender is to the whole of the assets of such person or only
to a portion thereof), or evidenced by bonds, notes, debentures or similar
instruments or letters of credit, or representing the balance deferred and
unpaid of the purchase price of any property, including any such indebtedness
incurred in connection with the acquisition by such person or any of its
subsidiaries of any other business or entity, if and to the extent such
indebtedness would appear as a liability upon a balance sheet of such person
prepared in accordance with generally accepted accounting principles, including
for such purpose obligations under capitalized leases, and (b) any guaranty,
endorsement (other than for collection or deposit in the ordinary course of
business), discount with recourse, agreement (contingent or otherwise) to
purchase, repurchase or otherwise acquire or to supply or advance funds with
respect to, or to become liable with respect to (directly or indirectly) any
indebtedness, obligation, liability or dividend of any person, but shall not
include indebtedness or amounts owed (except to banks or other financial
institutions) for compensation to employees, or for goods or
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materials purchased, or services utilized, in the ordinary course of business
of such person. Notwithstanding anything to the contrary in the foregoing,
"Indebtedness" shall not include (i) any contracts providing for the completion
of construction or other payment or performance with respect to the
construction, maintenance or improvement of property or equipment of the
Company or its Affiliates or (ii) any contracts providing for the obligation to
advance funds, property or services on behalf of an Affiliate of the Company in
order to maintain the financial condition of such Affiliate, in each case,
including Existing and Permitted Completion Guarantees and Make-Well
Agreements. For purposes hereof, a "capitalized lease" shall be deemed to mean
a lease of real or personal property which, in accordance with generally
accepted accounting principles, is required to be capitalized.
"Indenture" means this Indenture as amended or supplemented from time
to time.
"Interest Rate Protection Obligations" means, with respect to any
person, the obligations of such Person under (i) interest 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 rates.
"Joint Venture" means (i) with respect to properties located in the
United States, any partnership, corporation or other entity, in which up to and
including 50% of the partnership interests, outstanding voting stock or other
equity interests is owned, directly or indirectly, by the Company and/or one or
more subsidiaries, and (ii) with respect to properties located outside the
United States, any partnership, corporation or other entity, in which up to and
including 60% of the partnership interests, outstanding voting stock or other
equity interests is owned, directly or indirectly, by the Company and/or one or
more subsidiaries.
"Legal Holiday" shall have the meaning provided in Section 12.08.
"Lien" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, security interest, lien (statutory or other), or
preference, priority or other security or similar agreement or preferential
arrangement of any kind or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement having substantially the
same economic effect as any of the foregoing).
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"Officer" means the Chairman of the Board, the President, any
Executive Vice President, any Vice President, the Chief Financial Officer, the
Treasurer, the Secretary or the Controller of the Company.
"Officers' Certificate" means a certificate signed by two Officers or
by an Officer and an Assistant Treasurer, Assistant Secretary or Assistant
Controller of the Company. See Sections 12.04 and 12.05.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of or counsel to the
Company or the Trustee. See Sections 12.04 and 12.05.
"Original Issue Discount Security" means any Security which provides
that an amount less than its principal amount is due and payable upon
acceleration after an Event of Default.
"Paying Agent" shall have the meaning provided in Section 2.05.
"person" means any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated organization or
government or other agency or political subdivision thereof.
"Predecessor Securities" of any Security means every previous Security
evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 2.09 in lieu of a lost, destroyed or
stolen Security shall be deemed to evidence the same debt as the lost, destroyed
or stolen Security.
"principal" of a debt security, including the Securities, means the
principal of the security plus, when appropriate, the premium, if any, on the
security.
"Project Cost" means, with respect to any Resort Property, the
aggregate costs required to complete such construction project in accordance
with the plans therefor and applicable legal requirements, as set forth in an
Officers' Certificate submitted to the Trustee, setting forth in reasonable
detail all amounts theretofore expended and any anticipated costs and expenses
estimated to be incurred and reserves to be established in connection with the
construction and development of such future addition or improvement, including
direct costs
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related thereto such as construction management, architectural engineering and
interior design fees, site work, utility installations and hook-up fees,
construction permits, certificates and bonds, land acquisition costs and the
cost of furniture, fixtures, furnishings, machinery and equipment, but
excluding the following: principal or interest payments on any Indebtedness
(other than interest which is required to be capitalized in accordance with
generally accepted accounting principles, which shall be included in
determining Project Cost), or costs related to the operation of the Resort
Property including, but not limited to, non-construction supplies and
pre-operating payroll.
"Representative" means the indenture trustee or other trustee, agent
or representative for any Senior Indebtedness.
"Registrar" shall have the meaning provided in Section 2.05.
"Resort Property" means any property owned or to be owned by the
Company or any of its subsidiaries that is, or will be upon completion, a casino
(including a riverboat casino), casino-hotel, destination resort or a theme
park.
"Sale and Lease-Back Transaction" means any arrangement with any
person (other than the Company or a subsidiary of the Company), or to which any
such person is a party, providing for the leasing to the Company or a subsidiary
of the Company for a period of more than three years of any Consolidated
Property which has been or is to be sold or transferred by the Company or such
subsidiary to such person or to any other person (other than the Company or a
subsidiary of the Company), to which funds have been or are to be advanced by
such person on the security of the leased property.
"SEC" means the Securities and Exchange Commission.
"Securities" has the meaning specified in the first recital of this
Indenture and more particularly means any Securities authenticated and delivered
under this Indenture.
"Senior Indebtedness" shall have the meaning provided in Section 3.01.
"Senior Secured Debt Securities" means any securities of the Company
that constitute senior secured debt of the Company.
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<PAGE>
"Senior Unsecured Debt Securities" means any securities of the Company
that constitute senior unsecured debt of the Company.
"subsidiary" of any person means (i) any corporation of which at least
a majority in interest of the outstanding stock having by the terms thereof
voting power under ordinary circumstances to elect a majority of the directors
of such corporation, irrespective of whether or not at the time stock of any
other class or classes of such corporation shall have or might have voting power
by reason of the happening of any contingency, is at the time, directly or
indirectly, owned or controlled by such person, or by one or more other
corporations a majority in interest of such stock of which is similarly owned or
controlled, or by such person and one or more other corporations a majority in
interest of such stock of which is similarly owned or controlled and (ii) any
other person (other than a corporation, or a partnership, corporation or other
entity described in clause (ii) of the definition of Joint Venture) in which
such person or any subsidiary, directly or indirectly, has greater than a 50%
ownership interest.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code Sections
77aaa-77bbbb) as in effect on the date of this Indenture, except as provided in
Section 9.03 hereto.
"Trustee" means the party named as such in this Indenture until a
successor replaces it pursuant to the applicable provisions of this Indenture
and thereafter means the successor.
"Trust Officer" means any officer or assistant officer of the Trustee
assigned by the Trustee to administer its corporate trust matters.
"U.S. Government Obligations" means direct non-cancelable obligations
of the United States of America for the payment of which the full faith and
credit of the United States is pledged.
"Value" means, with respect to a Sale and Lease-Back Transaction, as
of any particular time, the amount equal to the greater of (i) the net proceeds
of the sale or transfer of property leased pursuant to such Sale and Lease-Back
Transaction or (ii) the fair value, in the opinion of the Board of Directors as
evidenced by a board resolution, of such property at the time of entering into
such Sale and Lease Back Transaction.
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SECTION 1.02. 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 Securities.
"indenture security holder" means a Securityholder or Holder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule have the
meanings assigned to them.
SECTION 1.03. 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 generally accepted accounting principles; (3)
"or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular; and
(5) provisions apply to successive events and transactions.
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ARTICLE TWO
THE SECURITIES
SECTION 2.01. FORMS GENERALLY.
The Securities of each series shall be in such form as shall be
established by or pursuant to a Board Resolution or in one or more indentures
supplemental hereto, in each case with such appropriate provisions as are
required or permitted by this Indenture, and may have such letters, numbers or
other marks of identification and such legends or endorsements placed thereon as
may be required by any Gaming Authority or as may be required to comply with the
rules of any securities exchange or depositary therefor or as may, consistently
herewith, be determined by the officers executing such Securities, as evidenced
by their execution thereof. If the form of any series of Securities is
established by action taken pursuant to a Board Resolution, a copy of an
appropriate record of such action shall be certified by the Secretary or any
Assistant Secretary of the Company and delivered to the Trustee at or prior to
the delivery of a written order signed by two Officers or by and Officer and an
Assistant Treasurer of the Company for the authentication and delivery of such
Securities.
The definitive Securities shall be printed, lithographed or engraved
on steel engraved borders or may be produced in any other manner, all as
determined by the officers executing such Securities, as evidenced by their
execution of such Securities.
The terms and provisions in the Securities shall constitute, and are
hereby expressly made, a part of this Indenture.
SECTION 2.02. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
The Trustee's certificates of authentication shall be in substantially
the following form:
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This is one of the Securities of the series designated herein referred
to in the within-mentioned Indenture.
THE BANK OF NEW YORK,
as Trustee
By:
------------------------------------
Authorized Signatory
SECTION 2.03. AMOUNT UNLIMITED, ISSUABLE IN SERIES.
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is unlimited.
The Securities may be issued in one or more series. There shall be
established in or pursuant to a Board Resolution and, subject to Section 2.04,
set forth, or determined in the manner provided, in an Officers' Certificate, or
established in one or more indentures supplemental hereto, prior to the issuance
of any series of Securities:
(1) the title of the Securities of the series (which shall
distinguish the Securities of the series from Securities of any other
series);
(2) any limit upon the aggregate principal amount of the Securities
of the series which may be authenticated and delivered under this Indenture
(except for Securities authenticated and delivered upon registration of
transfer of, or in exchange for, or in lieu of, other Securities of the
series pursuant to Section 2.08, 2.09, 2.11 or 9.05 and except for any
Securities which, pursuant to Section 2.04, are deemed never to have been
authenticated and delivered hereunder);
(3) the person to whom any interest on a Security of the series shall
be payable, if other than the person in whose name that Security (or one or
more Predecessor Securities) is registered at the close of business on the
record date for such interest;
(4) the date or dates on which the principal of any Securities of the
series is payable;
(5) the rate or rates at which any Securities of the series shall
bear interest, if any, the date or dates from which any such interest shall
accrue, the dates on which
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any such interest shall be payable and the record date for any such
interest payable on any such payment date;
(6) the place or places where the principal of and any premium and
interest on any Securities of the series shall be payable;
(7) the period or periods within which, the price or prices at which
and the terms and conditions upon which any Securities of the series may be
redeemed, in whole or in part, at the option of the Company and, if other
than by a Board Resolution, the manner in which any election by the Company
to redeem the Securities shall be evidenced;
(8) the obligation, if any, of the Company to redeem or purchase any
Securities of the series pursuant to any sinking fund or analogous
provisions or at the option of the Holder thereof and the period or periods
within which, the price or prices at which and the terms and conditions
upon which any Securities of the series shall be redeemed or purchased, in
whole or in part, pursuant to such obligation;
(9) if other than denomination of $1,000 and any integral multiple
thereof, the denominations in which any Securities of the series shall be
issuable;
(10) if the amount of principal of or any premium or interest on any
Securities of the series may be determined with reference to an index or
pursuant to a formula, the manner in which such amounts shall be
determined;
(11) if other than the currency of the United States of America, the
currency, currencies or currency units in which the principal of or any
premium or interest on any Securities of the series shall be payable and
the manner of determining the equivalent thereof in the currency of the
United States of America for any purpose;
(12) if the principal of or any premium or interest on any Securities
of the series is to be payable, at the election of the Company or the
Holder thereof, in one or more currencies or currency units other than that
or those in which such Securities are stated to be payable, the currency,
currencies or currency units in which the principal of or any premium or
interest on such Securities as to which such election is made shall be
payable, the periods within which and the terms and conditions upon which
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such election is to be made and the amount so payable (or the manner in
which such amount shall be determined);
(13) if other than the entire principal amount thereof the portion of
the principal amount of any Securities of the series which shall be payable
upon declaration of acceleration of the maturity thereof pursuant to
Section 6.02;
(14) if the principal amount payable at the maturity of any Securities
of the series will not be determinable as of any one or more dates prior to
maturity, the amount which shall be deemed to be the principal amount of
such Securities as of any such date for any purpose thereunder or
hereunder, including the principal amount thereof which shall be due and
payable upon any maturity date other than the stated maturity or which
shall be deemed to be outstanding as of any date prior to the stated
maturity (or, in any such case, the manner in which such amount deemed to
be the principal amount shall be determined);
(15) if applicable, that the Securities of the series, in whole or
any specified part, shall be defeasible pursuant to Section 4.11, and, if
other than by a Board Resolution, the manner in which any election by the
Company to defease such Securities shall be evidenced;
(16) any addition to or change in the Events of Default which applies
to any Securities of the series and any change in the right of the Trustee
or the requisite Holders of such Securities to declare the principal amount
thereof due and payable pursuant to Section 6.02;
(17) any addition to or change in the covenants set forth in Article
Four which applies to Securities of the series;
(18) whether the Securities of the series shall be issued in whole or
in part in the form of a Global Security or Securities; the terms and
conditions, if any, upon which such Global Security or Securities may be
exchanged in whole or in part for other individual Securities, and the
depositary for such Global Security and Securities; and
(19) any other terms of the series (which terms shall not be
inconsistent with the provisions of this Indenture, but which may modify or
delete any provision of this In-
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denture with respect to such series, provided that no such term may
modify or delete any provision hereof if imposed by the Trust Indenture
Act, and PROVIDED, further that any modification or deletion of the
rights, duties or immunities of the Trustee hereunder shall have been
consented to in writing by the Trustee).
If any of the foregoing terms are not available at the time such Board
Resolution is adopted, or such Officers' Certificate or any supplemental
indenture is executed, such resolutions, Officers' Certificate or supplemental
indenture may reference the document or documents to be created in which such
terms will be set forth prior to the issuance of such Securities.
All Securities of any one series shall be substantially identical
except as to denomination and except as may otherwise be provided in or pursuant
to the Board Resolution referred to above and (subject to Section 2.04) set
forth, or determined in the manner provided, in the Officers' Certificate
referred to above or in any such indenture supplemental hereto.
If any of the terms of the series are established by action taken
pursuant to a Board Resolution, a copy of an appropriate record of such action
shall be certified by the Secretary or an Assistant Secretary of the Company and
delivered to the Trustee at or prior to the delivery of the Officers'
Certificate setting forth the terms of the series.
SECTION 2.04. EXECUTION AND AUTHENTICATION;
DENOMINATIONS; DELIVERY AND DATING.
Two Officers shall sign the Securities for the Company by original or
facsimile signature. The Company's seal shall be reproduced on the Securities.
If an Officer whose signature is on a Security no longer holds that
office at the time the Trustee authenticates the Security, the Security shall be
valid nevertheless.
A Security shall not be valid until the Trustee manually signs the
certificate of authentication on the Security. The signature shall be
conclusive evidence that the Security has been authenticated under this
Indenture.
Upon a written order of the Company signed by two Officers or by an
Officer and an Assistant Treasurer of the Company, the Trustee shall
authenticate the Securities.
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The Securities shall be issuable only in registered form without
coupons and only in minimum denominations of $100,000 and in integral multiples
of $1,000 in denominations above $100,000.
The Company and the Trustee, by their execution and authentication,
respectively, of the Securities, expressly agree to the terms and conditions
stated therein and to be bound thereby.
SECTION 2.05. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency where Securities of
a series may be presented for registration of transfer or for exchange
("Registrar") and an office or agency where Securities of that series may be
presented for payment ("Paying Agent"). At all times the Registrar and the
Paying Agent shall each maintain an office or agency in the State of New York
where Securities of a series may be presented for the above purposes. The
Registrar shall keep a register of the Securities of that series and of their
registration of transfer and exchange. The Company may have one or more
co-registrars and one or more additional paying agents for each series of
Securities. The term "Paying Agent" includes any additional paying agent.
The term "Registrar" includes any co-registrar.
The Company 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. The Company shall notify the Trustee of the name and address of any such
agent. If the Company fails to maintain a Registrar or Paying Agent for any
series of Securities, the Trustee shall act as such.
The Company initially appoints the Trustee as Registrar and Paying
Agent.
SECTION 2.06. PAYING AGENT TO HOLD MONEY IN TRUST.
Subject to the provisions of Article Three and Section 8.03 hereof,
each Paying Agent shall hold in trust for the benefit of Securityholders or the
Trustee all money held by the Paying Agent for the payment of principal of or
interest on any series of Securities, and shall notify the Trustee of any
default by the Company in making any such payment. If the Company or a
subsidiary of the Company acts as Paying Agent, it shall, on or before each due
date of principal of or interest
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on that series of Securities, segregate the money and hold it as a separate
trust fund. The Company at any time may require a Paying Agent to pay all
money held by it to the Trustee. Upon doing so the Paying Agent shall have
no further liability for the money.
SECTION 2.07. SECURITYHOLDER 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
Securityholders, separately by series, and shall otherwise comply with TIA
Section 312(a). If the Trustee is not the Registrar, the Company shall furnish
to the Trustee on or 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
Securityholders, separately by series, relating to such interest payment date or
request, as the case may be.
SECTION 2.08. TRANSFER AND EXCHANGE.
Where a Security is presented to the Registrar or a co-registrar with
a request to register a transfer, the Registrar shall register the transfer as
requested if the requirements of Section 8-401(1) of the New York Uniform
Commercial Code are met. Where Securities are presented to the Registrar or a
co-registrar with a request to exchange them for an equal principal amount of
Securities of other denominations, the Registrar shall make the exchange as
requested if the same requirements are met. To permit registration of transfers
and exchanges, the Trustee shall authenticate Securities at the Registrar's
request. The Company may charge a reasonable fee for any transfer or exchange
but not for any exchange pursuant to Section 2.11 or 9.05.
The Company need not issue, and the Registrar or co-Registrar need not
register the transfer or exchange of, (i) any Security of a series during a
period beginning at the opening of business 15 days before the day of mailing of
a notice of redemption of Securities of that series for redemption under Section
11.02 and ending at the close of business on the day of such mailing, or (ii)
any Security so selected for redemption in whole or in part, except the
unredeemed portion of any Security of that series being redeemed in part.
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SECTION 2.09. REPLACEMENT SECURITIES.
If the Holder of a Security claims that the Security has been lost,
destroyed or wrongfully taken, the Company shall issue and the Trustee shall
authenticate and make available for delivery a replacement Security of like
series if the requirements of Section 8-405 of the New York Uniform Commercial
Code are met. Before any Security is replaced, an indemnity bond must be
provided sufficient in the judgment of the Company and the Trustee to protect
the Company, the Trustee, the Paying Agent, the Registrar or any co-registrar
from any loss which any of them may suffer if a Security is replaced. The
Company may charge for its expenses in replacing a Security. Every replacement
Security shall constitute a contractual obligation of the Company and shall be
entitled to all the benefits of this Indenture equally with all other Securities
of the same series issued hereunder.
SECTION 2.10. OUTSTANDING SECURITIES.
The Securities of any series outstanding at any time are all the
Securities of that series authenticated by the Trustee except for those canceled
by it and those described in this Section. Subject to the provisions of Section
12.06 hereof, a Security does not cease to be outstanding because the Company or
an Affiliate holds the Security. If a Security is replaced pursuant to Section
2.09, it ceases to be outstanding unless the Trustee receives proof satisfactory
to it that the replaced Security is held by a bona fide purchaser.
If the Paying Agent holds on the maturity date money sufficient to pay
Securities payable on that date, then on and after that date such Securities
shall cease to be outstanding and interest on them shall cease to accrue.
For each series of Original Issue Discount Securities, the principal
amount of such Securities that shall be deemed to be outstanding and used to
determine whether the necessary Holders have given any request, demand,
authorization, direction, notice, consent or waiver shall be the principal
amount of such Securities that could be declared to be due and payable upon
acceleration upon an Event of Default as of the date of such determination.
When requested by the Trustee, the Company will advise the Trustee of such
amount, showing its computations in reasonable detail.
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SECTION 2.11. TEMPORARY SECURITIES.
Until definitive Securities are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Securities upon a written
order of the Company signed by two officers of the Company. Temporary
Securities shall be substantially in the form of definitive Securities, but may
have variations that the Company considers appropriate for temporary Securities.
Without unreasonable delay, the Company shall prepare and the Trustee shall
authenticate definitive Securities in exchange for temporary Securities.
SECTION 2.12. CANCELLATION.
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall cancel and dispose of
and destroy any Securities surrendered to them for registration of transfer,
exchange, payment or cancellation in accordance with its customary procedures.
The Company may not issue new Securities to replace Securities it has paid or
delivered to the Trustee for cancellation.
SECTION 2.13. DEFAULTED INTEREST.
If the Company defaults in a payment of interest on any series of
Securities, it shall pay the defaulted interest to the persons who are
Securityholders of that series on a subsequent special record date. After the
deposit by the Company with the Trustee of money sufficient to pay such
defaulted interest, the Trustee shall fix the record date and payment date. At
least 15 days before the record date, the Company shall mail to each
Securityholder of that series a notice that states the record date, the payment
date, and the amount of defaulted interest to be paid. The Company may pay
defaulted interest in any other lawful manner.
SECTION 2.14. MANDATORY DISPOSITION OF SECURITIES PURSUANT TO GAMING LAWS.
Each Holder and beneficial owner of Securities, by accepting or
otherwise acquiring an interest in the Securities, shall be deemed to have
agreed that if the Gaming Authority of any jurisdiction in which the Company or
any of its subsidiaries (or any joint venture in which the Company or a
subsidiary of the Company is a participant) now or hereafter conducts or
proposes to conduct gaming requires that a person who is a Holder or beneficial
owner of Securities must be licensed, qualified or found suitable, or comply
with any other require-
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ment under applicable Gaming Laws, such Holder or beneficial owner shall
apply for a license, qualification or a finding of suitability or comply with
such other requirement, as the case may be, within the prescribed time
period. If such Holder or beneficial owner fails to apply to be, or fails to
become, licensed or qualified, is found unsuitable or fails to comply with
any other requirement, as the case may be (a "failure of compliance"), then
the Company shall have the right, at its option (i) to require such person to
dispose of its Securities or beneficial interest therein within 30 days of
receipt of notice of the Company's election or such earlier date as may be
requested or prescribed by the Gaming Authority or (ii) to redeem such
Securities (which redemption may be less than 30 days following the notice of
redemption if so requested or prescribed by the Gaming Authority) at a
redemption price equal to the lesser of (A) such person's cost, (B) 100% of
the principal amount thereof, plus accrued and unpaid interest to the earlier
of the redemption date and the date of any failure of compliance, or (C) such
other amount as may be required by applicable law or by order of any Gaming
Authority. The Company shall notify the Trustee in writing of any such
redemption as soon as practicable. The Company shall not be responsible for
any costs or expenses any such Holder or beneficial owner may incur in
connection with its application for a license, qualification or a finding of
sutability or its compliance with any other requirement of a Gaming
Authority. Immediately upon the imposition by a Gaming Authority of a
requirement that a Holder or beneficial owner of Securities dispose of
Securities, such Holder or beneficial owner shall, to the extent required by
applicable Gaming Laws, have no further right (i) to exercise, directly or
indirectly, through any trustee, nominee or any other person or entity, any
right conferred by the Securities or (ii) to receive any interest, dividends
or any other distributions or payments with respect to the Securities or any
remuneration in any form with respect to the Securities from the Company or
the Trustee, except the redemption price referred to in this Section 2.14.
SECTION 2.15. CUSIP NUMBERS.
The Company in issuing the Securities may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices
of redemption as a convenience to Holders; PROVIDED that any such notice may
state that no representation is made as to the correctness of such numbers
either as printed on the Securities or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Securities, and
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any such redemption shall not be affected by any defect in or omission of
such numbers. The Company will promptly notify the Trustee of any change in
the "CUSIP" numbers.
ARTICLE THREE
SUBORDINATION
SECTION 3.01. SECURITIES SUBORDINATED TO
SENIOR INDEBTEDNESS.
The Company, for itself and its successors, and each Holder, by his
acceptance of Securities, agrees that the payment of the principal of, premium,
if any, and interest on the Securities is subordinated, to the extent and in the
manner provided in this Article Three, to the prior payment in full in cash or
cash equivalents of all Senior Indebtedness.
For purposes of this Article Three, "Senior Indebtedness" means the
principal, premium, if any, and interest on any Indebtedness of the Company,
whenever created, incurred, issued, assumed or guaranteed, unless, in the case
of any particular Indebtedness, the instrument creating or evidencing the same
or pursuant to which the same is outstanding expressly provides that such
Indebtedness shall not be senior in right of payment to the Securities.
Without limiting the foregoing, Senior Indebtedness shall include (a) the
principal of and interest on and other amounts due on or in connection with the
Indebtedness of the Company under the Credit Facility; (b) all Interest Rate
Protection Obligations of the Company; (c) all obligations of the Company under
standby letters of credit; and (d) Indebtedness evidenced by the Senior Secured
Debt Securities, the Senior Unsecured Debt Securities, the 6.45% Senior Notes
of the Company Due 2006, the 7.0% Debentures of the Company Due 2036 and the
6.70% Debentures of the Company Due 2096. Notwithstanding the foregoing,
Senior Indebtedness shall not include (a) to the extent that it may constitute
Indebtedness, any obligation for federal, state, local or other taxes; (b) any
Indebtedness among or between the Company and/or any one or more subsidiaries
and Affiliates of the Company; (c) to the extent that it may constitute
Indebtedness, any obligation in respect to any trade payable incurred for the
purchase of goods or materials, or for services obtained, in the ordinary
course of business; (d) Indebtedness evidenced by the 6-3/4% Senior
Subordinated Notes of the Company Due 2003 and the 7-5/8% Senior Subordinated
Debentures of the Company Due 2013, with respect to which the Securities will
rank PARI PASSU in right of payment; (e) Indebtedness of the Company that is
expressly sub-
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ordinate or junior in right of payment to any other Indebtedness of the
Company; (f) to the extent that it may constitute Indebtedness, any
obligation owing under leases (other than Capital Lease Obligations) or
management agreements; and (g) any obligation that by operation of law is
subordinate to any general unsecured obligations of the Company; PROVIDED,
that any guaranty by the Company of Indebtedness of a subsidiary of the
Company to third parties shall constitute Senior Indebtedness unless, in the
case of any particular guaranty, the instrument creating or evidencing the
same provides that such guaranty is subordinated to any other Indebtedness of
the Company; PROVIDED FURTHER, that in the event a subsidiary of the Company
advances to the Company the proceeds attributable to Indebtedness incurred by
such subsidiary to a third party which Indebtedness has been guaranteed by
the Company pursuant to a guaranty which itself constitutes Senior
Indebtedness, then such obligation of the Company to repay such advance to
the subsidiary shall constitute Senior Indebtedness, unless such obligation
is created or evidenced by an instrument which provides that such obligation
is subordinated to any other Indebtedness of the Company. This Article Three
shall constitute a continuing offer to all persons who, in reliance upon such
provisions, become holders of, or continue to hold, Senior Indebtedness, and
such provisions are made for the benefit of the holders of Senior
Indebtedness, and such holders are made obligees hereunder and they and/or
each of them may enforce such provisions.
SECTION 3.02. NO PAYMENT ON SECURITIES IN CERTAIN CIRCUMSTANCES.
(a) Upon the maturity of any Senior Indebtedness 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 or other provision made therefor in a manner satisfactory to
the holders of such Senior Indebtedness, before any payment is made (i) on
account of principal of or interest on any of the Securities or (ii) to acquire
any of the Securities for cash or property other than capital stock of the
Company.
(b) Upon the happening of and during the continuance of any event of
default (or if an event of default would result upon any payment with respect to
any of the Securities) with respect to any Senior Indebtedness, as such event of
default is defined therein or in the instrument under which it is outstanding,
permitting the holders to immediately accelerate the maturity thereof beyond any
applicable grace period and (if the
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default is other than (i) a default in payment of the principal of or
interest on or other amount due in connection with such Senior Indebtedness
or (ii) a default for which notice is required to be sent under the terms of
such Senior Indebtedness by the holders thereof or their Representative) upon
written notice thereof given to the Company and the Trustee by the holders of
such Senior Indebtedness or their Representative, then, unless and until such
event of default shall have been cured or waived or shall have ceased to
exist, no payment or distribution of any assets of the Company of any kind or
character (excluding any payment from the trust described under Article Eight
below) shall be made by the Company with respect to the principal of,
premium, if any, or interest on any of the Securities or to acquire any of
the Securities for cash or property other than capital stock of the Company;
PROVIDED, HOWEVER, that if such default is a default other than a default
referred to in clause (i) of this Section 3.02(b), nothing contained in this
Section 3.02(b) shall prevent the Company from making payments of interest,
when due, on any of the Securities.
(c) In the event that notwithstanding the provisions of this Section
3.02 the Company shall make any payment to the Trustee on account of the
principal of or interest on any of the Securities (other than as permitted by
Section 3.02(b)) after the happening of an event of default of the type
specified in clauses (i) or (ii) of Section 3.02(b) above or after receipt by
the Company and the Trustee of written notice as provided in Section 3.02(b)
above of any other event of default with respect to any Senior Indebtedness,
then, unless and until such event of default shall have been cured or waived or
shall have ceased to exist, such payment (subject to the provisions of Sections
3.06 and 3.07) shall be held by the Trustee in trust for the benefit of, and
shall be paid forthwith over and delivered to, the holders of Senior
Indebtedness (pro rata as to each of such holders on the basis of the
respective amounts of Senior Indebtedness held by them) or their Representative
or the trustee under the indenture or other agreement (if any) pursuant to
which Senior Indebtedness may have been issued, as their respective interests
may appear, for application to the payment of all Senior Indebtedness remaining
unpaid to the extent necessary to pay all Senior Indebtedness in full in
accordance with its terms, after giving effect to any concurrent payment or
distribution to or for the holders of Senior Indebtedness. The Company shall
give prompt written notice to the Trustee of any default under any Senior
Indebtedness or under any agreement pursuant to which Senior Indebtedness may
have been issued.
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SECTION 3.03. SECURITIES SUBORDINATED TO PRIOR
PAYMENT OF ALL SENIOR INDEBTEDNESS
ON DISSOLUTION, LIQUIDATION OR
REORGANIZATION OF COMPANY.
Upon any distribution of assets of the Company pursuant to any
dissolution, winding up, liquidation or reorganization of the Company (whether
in bankruptcy, insolvency, receivership or similar proceedings relating to the
Company or its property or upon an assignment for the benefit of creditors or
other marshalling of assets or liabilities of the Company or otherwise, whether
voluntary or otherwise):
(a) the holders of all Senior Indebtedness shall first be entitled to
receive payment in full of the principal and interest due thereon and other
amounts due in connection therewith before the Holders are entitled to
receive any payment or distribution (excluding any payment from the trust
described under Article Eight below) on account of the principal of,
premium, if any, or interest on any of the Securities;
(b) any payment or distributions of assets of the Company of any kind
or character, whether in cash, property or securities, to which the Holders
or the Trustee on behalf of the Holders would be entitled except for the
provisions of this Article Three shall be paid by the liquidating trustee
or agent or other person making such a payment or distribution directly to
the holders of Senior Indebtedness or their Representative to the extent
necessary to make payment in full of all Senior Indebtedness remaining
unpaid, after giving effect to any concurrent payment or distribution or
provision therefor to the holders of such Senior Indebtedness; and
(c) in the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in
cash, property or securities, shall be received by the Trustee or the
Holders or any Paying Agent (or, if the Company is acting as its own Paying
Agent, money for any such payment or distribution shall be segregated or
held in trust) on account of principal of or interest on any of the
Securities before all Senior Indebtedness is paid in full, or effective
provision made for its payment, such payment or distribution (subject to
the provisions of Sections 3.06 and 3.07) shall be received and held in
trust for and shall be paid over to the holders of the Senior Indebtedness
remaining
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unpaid or unprovided for or to their Representative for application to
the payment of such Senior Indebtedness until all such Senior
Indebtedness shall have been paid in full, after giving effect to any
concurrent payment or distribution or provision therefor to the holders
of such Senior Indebtedness.
The Company shall give prompt written notice to the Trustee of any
dissolution, winding up, liquidation or reorganization of the Company or any
assignment for the benefit of the Company's creditors.
SECTION 3.04. SECURITYHOLDERS TO BE SUBROGATED
TO RIGHTS OF HOLDERS OF SENIOR
INDEBTEDNESS.
Subject to the payment in full in cash of all Senior Indebtedness,
the Holders of any series of Securities shall be subrogated to the rights of
the holders of Senior Indebtedness to receive payments or distributions of
assets of the Company applicable to the Senior Indebtedness until all amounts
owing on such series of Securities shall be paid in full, and for the purpose
of such subrogation no such payments or distributions to the holders of Senior
Indebtedness by or on behalf of the Company or by or on behalf of the Holders
of such series by virtue of this Article Three which otherwise would have been
made to the Holders of such series shall, as between the Company and the
Holders of such series, be deemed to be payment by the Company to or on account
of the Senior Indebtedness, it being understood that the provisions of this
Article Three are and are intended solely for the purpose of defining the
relative rights of the Holders of such series, on the one hand, and the holders
of Senior Indebtedness, on the other hand.
SECTION 3.05. OBLIGATIONS OF THE COMPANY
UNCONDITIONAL.
Nothing contained in this Article Three or elsewhere in this
Indenture or in any Security is intended to or shall impair, as between the
Company and the Holders, the obligation of the Company, which is absolute and
unconditional, to pay to the Holders the principal of and interest on the
Securities as and when the same shall become due and payable in accordance with
their terms, or is intended to or shall affect the relative rights of the
Holders and creditors of the Company other than the holders of the Senior
Indebtedness, nor shall anything herein or therein prevent the Trustee or any
Holder from exercising all remedies otherwise permitted by applicable law upon
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default under this Indenture, subject to the rights, if any, under this Article
Three of the holders of Senior Indebtedness in respect of cash, property or
securities of the Company received upon the exercise of any such remedy. Upon
any distribution of assets of the Company referred to in this Article Three,
the Trustee, subject to the provisions of Sections 7.01 and 7.02, and the
Holders shall be entitled to rely upon any order or decree made by any court of
competent jurisdiction in which such dissolution, winding up, liquidation,
reorganization or similar proceedings are pending, or a certificate 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 the Senior Indebtedness and
other indebtedness of the Company, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article Three.
SECTION 3.06. TRUSTEES AND PAYING AGENT ENTITLED TO ASSUME PAYMENTS
NOT PROHIBITED IN ABSENCE OF NOTICE.
The Trustee and Paying Agent shall not at any time be charged with
knowledge of the existence of any facts which would prohibit the making of any
payment to or by the Trustee or the Paying Agent unless and until the Trustee or
the Paying Agent shall have received written notice thereof from the Company or
from one or more holders of Senior Indebtedness or from any Representative
therefor and, prior to the receipt of any such written notice, the Trustee and
Paying Agent, subject to the provisions of Sections 7.01 and 7.02, shall be
entitled in all respects conclusively to assume that no such fact exists.
SECTION 3.07. APPLICATION BY TRUSTEE OF MONIES
DEPOSITED WITH IT.
Any deposit of monies by the Company with the Trustee or any Paying
Agent (whether or not in trust) for the payment of principal of or interest on
any of the Securities shall be subject to the provisions of Sections 3.01, 3.02,
3.03 and 3.04 except that, if prior to the date on which by the terms of this
Indenture any such monies may become payable for any purpose (including, without
limitation, the payment of either principal of or interest on any Security) the
Trustee or such Paying Agent shall not have received with respect to such monies
the notice provided for in Section 3.06, then the Trustee or such Paying Agent
shall have full power and authority to receive such monies and to apply the same
to the purpose for which they
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were received, and shall not be affected by any notice to the contrary which
may be received by it on or after such date. Nothing herein shall be
construed to relieve any Holders from duties imposed upon them under
Section 3.03(c) with respect to monies received in violation of the
provisions of this Article Three.
SECTION 3.08. SUBORDINATION RIGHTS NOT IMPAIRED BY ACTS OR OMISSIONS
OF COMPANY OR HOLDERS OF SENIOR INDEBTEDNESS.
No right of any present or future holders of any Senior Indebtedness
to enforce subordination as provided herein shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms of this Indenture, regardless of any
knowledge thereof which any such holder may have or be otherwise charged with.
The holders of Senior Indebtedness may extend, renew, modify or amend the terms
of the Senior Indebtedness or any security therefor and release, sell or
exchange such security and otherwise deal freely with the Company, all without
affecting the liabilities and obligations of the parties to the Indenture or the
Holders of the Securities. No provision in any supplemental indenture which
affects the superior position of the holders of the Senior Indebtedness shall be
effective against the holders of the Senior Indebtedness who have not consented
thereto.
SECTION 3.09. SECURITYHOLDERS AUTHORIZE TRUSTEE TO EFFECTUATE
SUBORDINATION OF SECURITIES.
Each Holder of the Securities by his acceptance thereof authorizes
and expressly directs the Trustee on his behalf to take such action as may be
necessary or appropriate to effectuate the subordination provided in this
Article Three and appoints the Trustee his attorney-in-fact for such purpose,
including, in the event of any dissolution, winding up, liquidation or
reorganization of the Company (whether in bankruptcy, insolvency, receivership,
reorganization or similar proceedings or upon an assignment for the benefit of
creditors or otherwise) tending towards liquidation of the business and assets
of the Company, the immediate filing of a claim for the unpaid balance of its
or his Securities in the form required in said proceedings and cause said claim
to be approved. If the Trustee does not file a proper claim or proof of debt
in the form required in such proceeding prior to 30 days before the expira-
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tion of the time to file such claim or claims, then the holders of Senior
Indebtedness are hereby authorized to have the right to file and are hereby
authorized to file an appropriate claim for and on behalf of the Holders of
said Securities.
SECTION 3.10. RIGHT OF TRUSTEE AND PAYING AGENT TO HOLD SENIOR
INDEBTEDNESS.
The Trustee and the Paying Agent shall be entitled to all of the
rights set forth in this Article Three in respect of any Senior Indebtedness at
any time held by either of them to the same extent as any other holder of Senior
Indebtedness, and nothing in this Indenture shall be construed to deprive the
Trustee or the Paying Agent of any of its rights as such holder.
SECTION 3.11. ARTICLE THREE NOT TO PREVENT EVENTS OF DEFAULT.
The failure of the Company to make a payment on account of principal
of or interest on the Securities when due or within any applicable grace period
by reason of any provision of this Article Three shall not be construed as
preventing the occurrence of an Event of Default under Section 6.01.
ARTICLE FOUR
COVENANTS
SECTION 4.01. PAYMENT OF SECURITIES.
The Company shall pay the principal of and interest on the Securities
on the dates and in the manner provided in the Securities. An installment of
principal of or interest on the Securities shall be considered paid on the date
it is due if the Trustee or Paying Agent holds on that date money designated for
and sufficient to pay the installment; PROVIDED, HOWEVER, that money held by the
Trustee for the benefit of holders of Senior Indebtedness pursuant to the
provisions of Article Three hereof shall not be considered paid within the
meaning of this Section 4.01.
The Company shall pay interest on overdue principal at the rate borne
by the Securities; it shall pay interest on overdue installments of interest at
the same rate to the extent lawful.
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SECTION 4.02. CORPORATE EXISTENCE.
Subject to Article Five, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence and the corporate, partnership or other existence of each subsidiary
in accordance with the respective organizational documents of each subsidiary
and the rights (charter and statutory), licenses and franchises of the Company
and its subsidiaries; PROVIDED, HOWEVER, that the Company shall not be required
to preserve, with respect to itself, any right, license or franchise, and with
respect to the subsidiaries, any such existence, right, license or franchise, if
the Board of Directors, or the board of directors or managing partners of the
subsidiary concerned, shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company or any subsidiary and
that the loss thereof is not disadvantageous in any material respect to the
Holders.
SECTION 4.03. PAYMENT OF TAXES AND OTHER CLAIMS.
The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (1) all taxes, assessments and
governmental charges levied or imposed upon the Company or any subsidiary or
upon the income, profits or property of the Company or any subsidiary, and (2)
all lawful claims for labor, materials and supplies which, if unpaid, might by
law become a lien upon the property of the Company or any subsidiary; PROVIDED,
HOWEVER, that the Company shall not be required to pay or discharge or cause to
be paid or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings; and PROVIDED, FURTHER, that the Company shall not be required to
cause to be paid or discharged any such tax, assessment, charge or claim if the
Board of Directors, or the board of directors or managing partners of the
subsidiary concerned, shall determine that such payment is not advantageous to
the conduct of the business of the Company or any subsidiary and that the
failure so to pay or discharge is not disadvantageous in any material respect
to the Holders.
SECTION 4.04. MAINTENANCE OF PROPERTIES.
The Company will cause all properties used in the conduct of its
business or the business of any subsidiary to be maintained and kept in such
condition, repair and working order as in the judgment of the Company may be
necessary, so that the business carried on in connection therewith may be
properly and
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advantageously conducted at all times; PROVIDED, HOWEVER, that nothing in
this Section shall prevent the Company from discontinuing the operation or
maintenance of any of such properties, or disposing of any of them, if such
discontinuance or disposal is, in the judgment of the Board of Directors or
of the board of directors or managing partners of the subsidiary concerned,
desirable in the conduct of the business of the Company or any subsidiary and
not disadvantageous in any material respect to the Holders; and PROVIDED
FURTHER, that property may be disposed of in the ordinary course of the
business of the Company or its subsidiaries at the discretion of the
appropriate officers of the Company and its subsidiaries.
SECTION 4.05. MAINTENANCE OF OFFICE OR AGENCY.
The Company will maintain in the Borough of Manhattan, The City of New
York, an office or agency where Securities may be presented or surrendered for
payment, where Securities may be surrendered for registration of transfer or
exchange and where notices and demands to or upon the Company in respect of the
Securities and this Indenture may be served. Unless the Trustee serves as
Paying Agent or Registrar, the Company will give prompt written notice to the
Trustee of the location, and any change in the location, of such office or
agency. If at any time the Company 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 12.02.
The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations;
PROVIDED, HOWEVER, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, The City of New York for such purposes.
SECTION 4.06. COMPLIANCE CERTIFICATE.
The Company shall deliver to the Trustee within 120 days after the
end of each fiscal year of the Company an Officers' Certificate (one of the
signers of which shall be the principal executive officer, principal financial
officer or principal accounting officer of the Company) stating whether or not
the signers know of any default by the Company in performing its covenants
hereunder, without regard to notice require-
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ments or periods of grace, in Sections 4.02, 4.03, 4.04, 4.05, 4.09 and 4.10.
If they do know of such a default, the certificate shall describe the
default in detail.
SECTION 4.07. REPORTS.
The Company shall file with the Trustee within 15 days after it files
them with the SEC copies of the quarterly and annual reports and of the
information, documents, and other reports (or copies of such portions of any of
the foregoing as the SEC may by rules and regulations prescribe) which the
Company is required to file with the SEC pursuant to Section 13 or 15(d) of the
Exchange Act. The Company also shall comply with the other provisions of TIA
Section 314(a).
So long as any of the Securities remain outstanding the Company shall
cause to be mailed to the Holders at their addresses appearing in the register
of Securities maintained by the Registrar all annual, quarterly or other reports
which the Company mails or causes to be mailed to its stockholders generally,
concurrently with such mailing to stockholders, and will cause to be disclosed
in such annual reports as of the date of the most recent financial statements in
each such report the amount available for dividends and other payments pursuant
to the most restrictive covenant therefor as of such date.
SECTION 4.08. WAIVER OF STAY, EXTENSION OF
USURY LAWS.
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in an manner whatsoever
claim, and will resist any and all efforts to be compelled to take the benefit
or advantage of, any stay or extension law or any usury law or other law which
would prohibit or forgive the Company from paying all or any portion of the
interest on the Securities as contemplated herein, whenever enacted, now or at
any time hereafter in force, or which may affect the covenants or the
performance of this Indenture; and (to the extent that it may lawfully do so)
the Company hereby expressly waives all benefit or advantage of any such law,
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution
of every such power as though no such law had been enacted.
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SECTION 4.09. LIMITATION ON LIENS.
Nothing in this Indenture or in the Securities shall in any way
restrict or prevent the Company or any of its subsidiaries from incurring any
Indebtedness; PROVIDED, HOWEVER, that neither the Company nor any of its
subsidiaries may issue, assume or guarantee any Indebtedness secured by a Lien
upon any Consolidated Property without effectively providing that the Securities
shall be secured equally and ratably with (or prior to) such Indebtedness so
long as such Indebtedness shall be so secured, except that this restriction will
not apply to:
(a) Liens existing on the date of original issuance of the
Securities;
(b) Liens affecting property of a corporation or other entity
existing at the time it becomes a subsidiary of the Company or at the time
it is merged into or consolidated with the Company or a subsidiary of the
Company;
(c) Liens on property existing at the time of acquisition thereof or
incurred to secure payment of all or a part of the purchase price thereof
or to secure Indebtedness incurred prior to, at the time of, or within 24
months after the acquisition thereof for the purpose of financing all or
part of the purchase price thereof;
(d) Liens on any property to secure all or part of the cost of
improvements or construction thereon or Indebtedness incurred to provide
funds for such purpose in a principal amount not exceeding the cost of such
improvements or construction;
(e) Liens which secure Indebtedness owing by a subsidiary of the
Company to the Company or to a subsidiary of the Company;
(f) Liens securing Indebtedness of the Company the proceeds of which
are used substantially simultaneously with the incurrence of such
Indebtedness to retire Funded Debt;
(g) purchase money security Liens on personal property;
(h) Liens securing Indebtedness of the Company the proceeds of which
are used within 24 months of the incurrence of such Indebtedness for the
Project Cost of the
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construction and development or improvement of a Resort Property;
(i) Liens on the stock, partnership or other equity interest of the
Company or any subsidiary in any Joint Venture or any subsidiary which owns
an equity interest in such Joint Venture to secure Indebtedness, PROVIDED
the amount of such Indebtedness is contributed and/or advanced solely to
such Joint Venture;
(j) Liens securing any Senior Indebtedness, including without
limitation, the Senior Secured Debt Securities;
(k) Liens in favor of the United States or any state thereof, or any
department, agency, instrumentality, or political subdivision of any such
jurisdiction, to secure partial, progress, advance or other payments
pursuant to any contract or statute or to secure any indebtedness incurred
for the purpose of financing all or any part of the purchase price or cost
of constructing or improving the property subject thereto, including,
without limitation, Liens to secure Indebtedness of the pollution control
or industrial revenue bond type;
(l) Liens required by any contract or statute in order to permit the
Company or a subsidiary of the Company to perform any contract or
subcontract made by it with or at the request of the United States of
America, any state or any department, agency or instrumentality or
political subdivision of either;
(m) mechanic's, materialman's, carrier's or other like Liens, arising
in the ordinary course of business;
(n) Liens for taxes or assessments and similar charges either (x) not
delinquent or (y) contested in good faith by appropriate proceedings and as
to which the Company or a subsidiary of the Company shall have set aside on
its books adequate reserves;
(o) zoning restrictions, easements, licenses, covenants,
reservations, restrictions on the use of real property and minor
irregularities of title incident thereto which do not in the aggregate
materially detract from the value of the property or assets of the Company
and its subsidiaries taken as a whole or impair the use of such
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property in the operation of the Company's or any of its subsidiary's
business; and
(p) any extension, renewal, replacement or refinancing of any Lien
referred to in the foregoing clauses (a) through (j) inclusive or of any
Indebtedness secured thereby, PROVIDED, that the principal amount of
Indebtedness secured thereby shall not exceed the principal amount of
Indebtedness so secured at the time of such extension, renewal, replacement
or refinancing, and that such extension, renewal, replacement or
refinancing Lien shall be limited to all or part, of substantially the same
property which secured the Lien extended, renewed, replaced or refinanced
(plus improvements on such property).
Notwithstanding the foregoing provisions of this Section 4.09, the
Company and any one or more of its subsidiaries may, without securing the
Securities, issue, assume or guarantee Indebtedness which would otherwise be
subject to the foregoing restrictions in an aggregate principal amount which,
together with all other such Indebtedness of the Company and its subsidiaries
which would otherwise be subject to the foregoing restrictions (not including
Indebtedness permitted to be secured under clauses (a) through (j) inclusive
above) and the aggregate Value of Sale and Lease-Back Transactions (other than
those in connection with which the Company has voluntarily retired Funded Debt)
does not at any one time exceed 15% of Consolidated Net Tangible Assets of the
Company and its consolidated subsidiaries.
SECTION 4.10. LIMITATION ON SALE AND LEASE-BACK TRANSACTIONS.
Neither the Company nor any of its subsidiaries shall enter into any
Sale and Lease-Back Transaction unless either (a) the Company or such
subsidiary would be entitled, pursuant to the provisions of Section 4.09, to
incur Indebtedness in a principal amount equal to or exceeding the Value of
such Sale and Lease-Back Transaction, secured by a Lien on the property to be
leased, without equally and ratably securing the Securities or (b) the Company
(and in any such case the Company covenants and agrees that it will do so)
within 120 days after the effective date of such Sale and Lease-Back
Transaction (whether made by the Company or a subsidiary of the Company)
applies to the voluntary retirement of its Funded Debt an amount equal to the
Value of the Sale and Lease-Back Transaction less the principal amount of other
Funded Debt voluntarily retired by the Company within four months after the
effective date of such ar-
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rangement, excluding retirements of Funded Debt as a result of conversions or
pursuant to mandatory sinking fund or prepayment provisions or by payment at
maturity.
SECTION 4.11. DEFEASANCE OF CERTAIN OBLIGATIONS.
The Company may omit to comply with any term, provision or condition
set forth in Sections 4.03, 4.04, 4.09 and 4.10 and Article Five and Section
6.01(3) (with respect to Sections 4.03, 4.04, 4.09 and 4.10 and Article Five)
and, in each case with respect to any series of Securities, such omission shall
be deemed not to be an Event of Default, PROVIDED, that the following conditions
have been satisfied with respect to such series:
(1) the Company has irrevocably deposited or caused to be deposited
with the Trustee, as trust funds in trust, specifically pledged as security
for, and dedicated solely to, the benefit of the Holders of such series of
Securities, (A) money in an amount, or (B) U.S. Government Obligations
which through the payment of interest and principal in respect thereof in
accordance with their terms will, without consideration of any reinvestment
of such interest, provide not later than the opening of business on the
relevant due date, money in an amount, or (C) a combination thereof, in the
opinion of a nationally recognized firm of independent certified public
accountants expressed in a written certification thereof delivered to the
Trustee, sufficient to pay and discharge the principal of, and each
installment of interest on, such series of Securities then outstanding on
the date of maturity of such principal or installment of interest or on the
redemption date, as the case may be;
(2) Such deposit shall not cause the Trustee with respect to such
series of Securities to have a conflicting interest for purposes of the TIA
with respect to such series of Securities;
(3) Such deposit will not result in a breach or violation of, or
constitute a default under, this Indenture;
(4) No Event of Default or event which with the giving of notice or
lapse of time, or both, would become an Event of Default with respect to
such series of Securities shall have occurred and be continuing on the date
of such deposit and no Event of Default under Section 6.01(5) or Section
6.01(6) or event which with the giving of notice
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or lapse of time, or both, would become an Event of Default under
Section 6.01(5) or Section 6.01(6) shall have occurred and be continuing
at any time during the period ending on the 91st day after such date or,
if longer, ending on the day following the expiration of the longest
preference period applicable to the Company in respect of such deposit
(it being understood that this condition shall not be deemed satisfied
until the expiration of such period);
(5) the deposit shall not result in the Company, the Trustee or the
trust becoming or being deemed to be an "investment company" under the
Investment Company Act of 1940;
(6) The Company has delivered to the Trustee an Opinion of Counsel,
reasonably satisfactory to the Trustee, to the effect that (i) Holders of
such series of Securities will not recognize income, gain or loss for
federal income tax purposes as a result of such deposit and defeasance of
certain obligations and will be subject to federal income tax on the same
amount and in the same manner and at the same times, as would have been the
case if such deposit and defeasance had not occurred and (ii) (A) the trust
funds will not be subject to any rights of holders of Senior Indebtedness,
including, without limitation, those arising under Article Three of this
Indenture and (B) after the passage of 90 days 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, PROVIDED, that if a court were to rule under any such law in any
case or proceeding that the trust funds remained property of the Company,
no opinion need be given as to the effect of such laws on the trust funds
except the following: (x) assuming such trust funds remained in the
Trustee's possession prior to such court ruling to the extent not paid to
Holders of such series of Securities, the Trustee will hold, for the
benefit of the Holders of such series of Securities, a valid and perfected
security interest in such trust funds that is not avoidable in bankruptcy
or otherwise and (y) no property, rights in property or other interests
granted to the Trustee for the benefit of the Holders of Securities or to
the Holders of Securities in exchange for or with respect to any of such
trust funds will be subject to any prior rights of holders of Senior
Indebtedness, including without limitation those arising under Article
Three of this Indenture; and
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(7) The Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
provided for herein relating to the defeasance contemplated by this Section
have been complied with.
SECTION 4.12. LIMITATION ON LAYERING DEBT.
The Company may not create, incur, assume or suffer to exist any
Indebtedness that is subordinate in right of payment to any other indebtedness
of the Company, unless, by its terms or the terms of the instrument creating or
evidencing it, such Indebtedness is subordinate in right of payment to, or ranks
PARI PASSU with, the Securities.
ARTICLE FIVE
SUCCESSOR CORPORATION
The Company shall not consolidate with or merge into any other person
or transfer its properties and assets substantially as an entirety to any person
unless:
(1) either the Company shall be the continuing corporation, or the
person (if other than the Company) formed by such consolidation or into
which the Company is merged or to which the properties and assets of the
Company substantially as an entirety are transferred shall be a
corporation, partnership or trust organized and existing under the laws of
the United States of America or any State thereof or the District of
Columbia and shall expressly assume, by an indenture supplemental hereto,
executed and delivered to the Trustee, in form satisfactory to the Trustee,
all the obligations of the Company under the Securities and this Indenture;
(2) immediately after giving effect to such transaction, no Default
or Event of Default exists; and
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that such consolidation, merger or
transfer and such supplemental indenture comply with this Article and that
all conditions precedent herein provided for relating to such transaction
have been complied with.
The successor corporation formed by such consolidation or into which
the Company is merged or to which such
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transfer is made shall succeed to, and be substituted for, and may exercise
every right and power of, the Company under this Indenture with the same
effect as if such successor corporation had been named as the Company herein,
and thereafter the predecessor corporation shall be relieved of all
obligations and covenants under the Indenture and the Securities, and in the
event of such transfer any such predecessor corporation may be dissolved and
liquidated.
ARTICLE SIX
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
An "Event of Default" with respect to any series of Securities occurs
if:
(1) the Company defaults in the payment of interest on such series of
Securities when the same becomes due and payable and the default continues
for a period of 30 days; or
(2) the Company defaults in the payment of principal of such series
of Securities when the same becomes due and payable at maturity, upon
redemption or otherwise; or
(3) the Company fails to comply with any of its other agreements in
such series of Securities or this Indenture, and the default continues for
the period and after the notice specified below; or
(4) an event or events of default, as defined in any one or more
mortgages, indentures or instruments under which there may be issued, or by
which there may be secured or evidenced, any Indebtedness of the Company or
a subsidiary, whether such Indebtedness now exists or shall hereafter be
created, shall happen and shall entitle the holders of such Indebtedness to
declare an aggregate principal amount of at least $10,000,000 of such
Indebtedness due and payable and such event of default shall not have been
cured or waived in accordance with the provisions of such instrument, or
such Indebtedness shall not have been discharged, within a period of 30
days after there shall have been given, by registered or certified mail, to
the Company by the Trustee or to the Company and the Trustee by the Holders
of at least 25% in principal amount of such series of Securities then
outstanding a written notice
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specifying such event or events of default and requiring the Company to
cause such event of default to be cured or such Indebtedness to be
discharged and stating that such notice is a "Notice of Default"
hereunder, PROVIDED, HOWEVER, that the Company is not in good faith
contesting in appropriate proceedings the occurrence of such an event of
default; or
(5) a court of competent jurisdiction enters a judgment, decree or
order for relief in respect of the Company or any Subsidiary in an
involuntary case or proceeding under any Bankruptcy Law which shall (A)
approve as properly filed a petition seeking reorganization, arrangement,
adjustment or composition in respect of the Company or any subsidiary,
(B) appoint a Custodian of the Company or any subsidiary or for any
substantial part of its property or (C) order the winding-up or liquidation
of its affairs; and such judgment, decree or order shall remain unstayed
and in effect for a period of 60 consecutive days; or any bankruptcy or
insolvency petition or application is filed, or any bankruptcy or
insolvency proceeding is commenced, against the Company or any subsidiary
and such petition, application or proceeding is not dismissed within 60
days; or any warrant of attachment is issued against any substantial
portion of the property of the Company or any subsidiary which is not
released within 60 days of service; or
(6) the Company or any subsidiary shall (A) become insolvent, (B)
generally fail to pay its debts as they become due, (C) make any general
assignment for the benefit of creditors, (D) admit in writing its inability
to pay its debts generally as they become due, (E) commence a voluntary
case or proceeding under any Bankruptcy Law, (F) consent to the entry of a
judgment, decree or order for relief in an involuntary case or proceeding
under any Bankruptcy Law, (G) consent to the institution of bankruptcy or
insolvency against it, (H) apply for, consent to or acquiesce in the
appointment of or taking possession by a Custodian of the Company or any
subsidiary or for any substantial part of its property or (I) take any
corporate action in furtherance of any of the foregoing.
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
federal or state law for the relief of debtors. The term "Custodian" means any
receiver, trustee, assignee, liquidator or similar official under any Bankruptcy
Law.
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A default under clause (3) (other than a Default under Section 4.02 or
Article Five which Default shall be an Event of Default without the notice or
passage of time specified in this paragraph) is not an Event of Default with
respect to a series of Securities until the Trustee or the Holders of at least
25% in principal amount of such series of Securities then outstanding notify the
Company of the default and the Company does not cure the default within 30 days
after receipt of the notice. The notice must specify the default, demand that
it be remedied and state that the notice is a "Notice of Default."
SECTION 6.02. ACCELERATION.
If an Event of Default relating to any series of Securities occurs and
is continuing, the Trustee by notice in writing to the Company, or the Holders
of not less than 25% in principal amount of such series of Securities then
outstanding by notice in writing to the Company and the Trustee, may declare the
unpaid principal (or, in the case of Original Issue Discount Securities, such
lesser amount as may be provided for in such Securities of and any accrued
interest on all such series of Securities (but in no event more than the maximum
amount of principal and interest thereon allowed by law), to be due and payable
immediately. Upon any such declaration such principal and interest shall be
payable immediately.
At any time after such a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter in this Article provided, the Holders of a majority
in principal amount of such series of Securities then outstanding, by written
notice to the Company and the Trustee, may rescind and annul such declaration as
to such series of Securities, and its consequences if:
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) the principal of such series of Securities that has become
due otherwise than by such declaration of acceleration (together with
interest, if any, payable thereon); and
(B) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee and its agents, attorneys and counsel; and
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(2) all existing Events of Default relating to such series of
Securities have been cured or waived and the rescission would not conflict
with any judgment or decree.
SECTION 6.03. OTHER REMEDIES.
If an Event of Default relating to any series of Securities 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 interest on such series
of Securities or to enforce the performance of any provisions of such series of
Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the subject series of Securities or does not produce any of them in the
proceeding. A delay or omission by the Trustee or any Securityholder 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. No remedy is exclusive of any other remedy. All available
remedies are cumulative to the extent permitted by law.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
Subject to Section 9.02, the Holders of a majority in principal
amount of any series of Securities then outstanding by notice to the Trustee
may waive an existing Default or Event of Default with respect to such series
of Securities, and its consequences. When a Default or Event of Default is
waived, it is cured and stops continuing.
SECTION 6.05. CONTROL BY MAJORITY.
The Holders of a majority in principal amount of any series of
Securities then outstanding may 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 it with respect to any default under such series of
Securities. However, subject to Section 7.01, the Trustee may refuse to follow
any direction that conflicts with any rule of law or this Indenture, that is
unduly prejudicial to the rights of another Holder of such series of Securities,
or that would involve the Trustee in personal liability.
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SECTION 6.06. LIMITATION ON SUITS.
A Holder of any series of Securities may not pursue any remedy with
respect to this Indenture or any series of Securities unless:
(1) the Holder gives to the Trustee written notice of a continuing
Event of Default with respect to such series;
(2) the Holders of at least 25% in principal amount of such series of
Securities then outstanding make a written request to the Trustee to pursue
the remedy;
(3) such Holder or Holders offer to the Trustee indemnity
satisfactory to the Trustee against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of indemnity; and
(5) during such 60-day period the Holders of a majority of principal
amount of such series of Securities then outstanding do not give the
Trustee a direction inconsistent with the request.
A Holder of any series of Securities may not use this Indenture to
prejudice the rights of another Holder of such series of Securities or to obtain
a preference or priority over another Holder of such series of Securities.
SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, but subject to
the provisions of Article Three, the right of any Holder of a Security to
receive payment of principal of or interest on the Security on or after the
respective due dates expressed in the Security or to bring suit for the
enforcement of any such payment on or after such respective dates shall not be
impaired or affected without the consent of the Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default in payment of interest or principal specified
in Section 6.01(1) or (2) occurs and is continuing with respect to any series of
Securities, the Trust-
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ee may recover judgment in its own name and as trustee of an express
trust against the Company for the whole amount of principal (or such
portion of the principal as may be specified as due upon acceleration at
that time in the terms of that series of Securities) and interest, if
any, remaining unpaid on such series of Securities then outstanding.
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 Securityholders allowed in any judicial proceedings relative to
the Company, its creditors or its property.
SECTION 6.10. PRIORITIES.
Subject to the provisions of Article Three, if the Trustee collects
any money pursuant to this Article with respect to any series of Securities, it
shall pay out the money in the following order:
First: to the Trustee for amounts due under Section 7.07;
Second: to Securityholders for amounts due and unpaid on such series
of Securities for principal and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on such
series of Securities for principal and interest, respectively; and
Third: to the Company.
The Trustee may fix a record date and payment date for any payment to
Holders of any series of Securities pursuant to this Section. The Trustee shall
notify the Company in writing reasonably in advance of any such record date and
payment date.
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 Trustee, a court in its discretion may require the filing by any party
litigant in the
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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 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 principal amount of the Securities then
outstanding.
ARTICLE SEVEN
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 known to the Trustee
(and is not cured), the Trustee shall exercise its rights and powers and use the
same degree of care and skill in their exercise as a prudent man would exercise
or use under the circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(1) The Trustee need perform only those duties that are specifically
set forth in this Indenture or in the TIA and no covenants or obligations
shall be implied in this Indenture which bind the Trustee.
(2) In the absence of 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,
the Trustee shall examine the certificates and opinions which by any
provision of this Indenture are specifically required to be furnished to
the Trustee to determine whether or not they conform in form 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:
(1) This paragraph does not limit the effect of paragraph (b) of this
Section;
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(2) 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
(3) 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.
(4) The Trustee shall comply with any order or directive of a Gaming
Authority that the Trustee submit an application for any license, finding
of suitability or other approval pursuant to any Gaming Law and will
cooperate fully and completely in any proceeding related to such
application.
(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.
(e) The Trustee may refuse to perform any duty or exercise any right
or power unless it receives security and indemnity satisfactory to it 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 with the Company.
SECTION 7.02. RIGHTS OF TRUSTEE.
(a) The Trustee may rely 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, it may require
an Officers' Certificate or an Opinion of Counsel. 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.
(c) The Trustee may act through its attorneys or agents (which shall
not include its employees) and shall not be responsible for the misconduct or
negligence of any agent appointed with due care.
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(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
power.
(e) 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, if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Company or its
subsidiaries or Affiliates with the same rights it would have if it were not
Trustee. Any Paying Agent, Registrar or co-registrar may do the same with like
rights. However, the Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.04. TRUSTEE'S DISCLAIMER.
The Trustee makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for the Company's
use of the proceeds from the Securities, and it shall not be responsible for any
statement in the Securities other than its certificate of authentication.
SECTION 7.05. NOTICE OF DEFAULTS.
If a Default occurs with respect to any series of Securities and is
continuing and if it is known to the Trustee, the Trustee shall mail to each
Holder of such series of Securities, notice of the Default within 90 days after
it occurs. Except in the case of a default in the payment of principal of or
interest on such series of Securities, 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 the Holders of such series of
Securities.
SECTION 7.06. REPORTS BY TRUSTEE.
Within 60 days after each May 15 beginning with the May 15 following
the date of this Indenture, the Trustee shall mail to each Securityholder a
brief report dated as of such May
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15 that complies with TIA Section 313(a) if required by such Section
313(a). The Trustee also shall comply with TIA Section 313(b).
A copy of each report at the time of its mailing to Securityholders
shall be filed with the SEC and each stock exchange on which the Securities are
listed. The Company shall promptly notify the Trustee when the Securities are
listed on any stock exchange.
To the extent requested in writing by the Company, the Trustee shall
cooperate with the Gaming Authorities in order to provide such Gaming
Authorities with any information and documentation that they may request and as
otherwise required by law.
SECTION 7.07. COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time such
compensation for its services as shall be agreed in writing by the Company and
the Trustee. The Company shall reimburse the Trustee upon request for all
reasonable out-of-pocket expenses incurred by it. Such expense may include the
reasonable compensation and expenses of the Trustee's agents and counsel. The
Company shall indemnify the Trustee against any loss or liability incurred by
it, without negligence or bad faith on its part, arising out of or in
connection with the acceptance or administration of this trust. The Trustee
shall notify the Company promptly of any claim for which it may seek indemnity.
The Company shall defend the claim and the Trustee shall cooperate in the
defense. The Trustee may have separate counsel and the Company shall pay the
reasonable fees and expenses of such counsel. The Company need not pay for any
settlement made without its consent. The Company need not reimburse any
expense or indemnify against any loss or liability incurred by the Trustee
through negligence or bad faith.
To secure the Company's payment obligations in this Section, the
Trustee shall have a lien prior to the Securities on all money or property held
or collected by the Trustee, except that held in trust to pay principal and
interest on particular Securities.
The provisions of this Section shall survive the termation of this
Indenture.
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SECTION 7.08. REPLACEMENT OF TRUSTEE.
The Trustee may resign by so notifying the Company in writing. The
Holders of a majority in principal amount of any series of Securities then
outstanding may remove the Trustee with respect to such series of Securities by
so notifying the removed Trustee and may appoint a successor Trustee with the
Company's consent. The Company may remove the Trustee with respect to one or
more or all series of Securities if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or an insolvent;
(3) a receiver or other public officer takes charge of the Trustee or
its property; or
(4) the Trustee becomes incapable of acting.
If, as to any series of Securities, the Trustee resigns or is removed
or if a vacancy exists in the office of Trustee for any reason, the Company
shall promptly appoint a successor Trustee for that series.
A successor Trustee as to any series of Securities shall deliver a
written acceptance of its appointment to the retiring Trustee and to the
Company. Immediately after that, the retiring Trustee shall promptly transfer
all property held by it as Trustee to the successor Trustee, the resignation or
removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture as to such series. A successor Trustee shall mail notice of its
succession to the Holders of such series of Securities.
If a successor Trustee as to any series of Securities does not take
office within 60 days after the retiring Trustee resigns or is removed, then
(i) the retiring Trustee or the Company may petition any court of competent
jurisdiction for the appointment of a successor Trustee and (ii) the Holders of
a majority in principal amount of such series of Securities then outstanding
may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee fails to comply with Section 7.10 with respect to any
series of Securities, any Holder of such series of Securities who satisfies the
requirements of TIA Section
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310(b) may petition any court of competent jurisdiction for the removal
of the Trustee and the appointment of a successor Trustee for such
series.
In case of appointment hereunder of a successor Trustee with respect
to the Securities of one or more (but not all) series, the Company, the retiring
Trustee and each successor Trustee with respect to the Securities of one or more
series shall execute and deliver an indenture supplemental hereto wherein each
successor Trustee shall accept such appointment and which (1) shall contain such
provisions as shall be necessary or desirable to transfer and confirm to, and to
vest in, each successor Trustee all the rights, powers, trusts and duties of the
retiring Trustee with respect to the Securities of that or those series to which
the appointment of such successor Trustee relates, (2) shall contain such
provisions as shall be necessary or desirable to confirm that all the rights,
powers, trusts and duties of the retiring Trustee with respect to the Securities
of that or those series as to which the retiring Trustee is not retiring shall
continue to be vested in the retiring Trustee, and (3) shall add to or change
any of the provisions of this Indenture as shall be necessary or desirable to
provide for or facilitate the administration of the trusts hereunder by more
than one Trustee; PROVIDED, HOWEVER, that nothing herein or in such supplemental
Indenture shall constitute such Trustee co-trustees of the same trust and that
each such Trustee shall be a trustee of a trust hereunder separate and apart
from any trust hereunder and administered by any other such Trustee.
Upon the execution and delivery of such supplemental Indenture the
resignation or removal of the retiring Trustee shall become effective to the
extent provided therein and each such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring Trustee with respect to the Securities of that or
those series to which the appointment of such successor Trustee relates.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee as to any series of Securities consolidates with,
merges or converts into, or transfers all or substantially all of its corporate
trust assets to, another corporation, the resulting, surviving or transferee
corporation shall, if such resulting, surviving or transferee corporation is
otherwise eligible hereunder, without any further act, be the successor Trustee
as to such series.
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SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
Each series of Securities shall always have a Trustee who satisfies
the requirements of TIA Section 310(a). The Trustee as to any series of
Securities shall have a combined capital and surplus of at least $50,000,000 as
set forth in its most recent published annual report of condition. The Trustee
shall comply with TIA Section 310(b), including the optional provision permitted
by the second sentence of TIA Section 310(b)(9).
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated.
SECTION 7.12. AUTHENTICATING AGENT.
If the Company so requests, there shall be an Authenticating Agent
appointed by the Trustee with power to act on its behalf and subject to its
direction in the authentication and delivery of any series of Securities in
connection with the exchange or registration of transfer thereof as fully to
all intents and purposes as though the Authenticating Agent had been expressly
authorized by the relevant Sections hereof to authenticate and deliver such
series of Securities, and such series of Securities so authenticated shall be
entitled to the benefits of this Indenture and shall be valid and obligatory
for all purposes as though authenticated by the Trustee hereunder, and for all
purposes of this Indenture, the authentication and delivery of such series of
Securities by the Authenticating Agent pursuant to this Section shall be deemed
to be the authentication and delivery of such series of Securities "by the
Trustee." Notwithstanding anything to the contrary contained in Section 2.04,
or in any other Section hereof, all authentication in connection with exchange
or registration of transfer thereof shall be effected either by the Trustee or
an Authenticating Agent and such Authenticating Agent shall at all times be a
corporation organized and doing business under the laws of the United States or
of any State, with a combined capital and surplus of at least $5,000,000 and
authorized under such laws to exercise corporate trust powers and subject to
supervision or examination by Federal or State authority. If at any time an
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Sec-
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tion, it shall resign immediately in the manner and with the effect
herein specified in this Section. If such corporation publishes reports
of condition at least annually pursuant to law or the requirements of
such authority, then for the purposes of this Section the combined
capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of
condition so published.
Any corporation into which any Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any Authenticating Agent
shall be a party, or any corporation succeeding to the corporate trust business
of any Authenticating Agent, shall be the successor of the Authenticating Agent
hereunder, if such successor corporation is otherwise eligible under this
Section, without the execution or filing of any paper or any further act on the
part of the parties hereto or the Authenticating Agent or such successor
corporation.
Any Authenticating Agent may at any time resign by giving written
notice of resignation to the Trustee and to the Company. The Trustee may at any
time terminate the agency of any Authenticating Agent by giving written notice
of termination to such Authenticating Agent and to the Company. Upon receiving
such a notice of resignation or upon such a termination, or in case at any time
any Authenticating Agent shall cease to be eligible under this Section, the
Trustee shall promptly appoint a successor Authenticating Agent, shall give
written notice of such appointment to the Company and shall mail notice of such
appointment to all Holders of the Securities as the names and addresses of such
Holders appear on the register of Securities, and shall publish notices of such
appointment at least once in a newspaper of general circulation in the place
where such successor Authenticating Agent has its principal office.
Any Authenticating Agent by the acceptance of its appointment shall
be deemed to have agreed with the Trustee that: it will perform and carry out
the duties of an Authenticating Agent as herein set forth, including, without
limitation, the duties to authenticate and deliver the Securities when
presented to it in connection with exchanges or registrations of transfer
thereof; it will furnish from time to time, as requested by the Trustee,
appropriate records of all transactions carried out by it as Authenticating
Agent and will furnish the Trustee such other information and reports as the
Trustee may
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reasonably require; it is eligible for appointment as Authenticating
Agent under this Section and will notify the Trustee promptly if it
shall cease to be so qualified; and it will indemnify the Trustee
against any loss, liability or expense incurred by the Trustee and will
defend any claim asserted against the Trustee by reason of any act or
failure to act of the Authenticating Agent but it shall have no
liability for any action taken by it at the specific written direction
of the Trustee.
The Company agrees that it will pay to the Authenticating Agent from
time to time reasonable compensation for its services.
The provisions of Sections 7.02, 7.03 and 7.04 shall bind and inure to
the benefit of any Authenticating Agent to the same extent that they bind and
inure to the benefit of the Trustee.
If an appointment is made pursuant to this Section, the Securities
may have endorsed thereon, in addition to the Trustee's certificate of
authentication, an alternate certificate of authentication in the following
form:
This is one of the Securities referred to in the within mentioned
Indenture.
[TRUSTEE]
as Trustee
By: ____________________________________
As Authenticating Agent
By: ____________________________________
Authorized Signatory
ARTICLE EIGHT
DISCHARGE OF INDENTURE
SECTION 8.01. TERMINATION OF COMPANY'S OBLIGATIONS.
The Company may terminate its obligations under any series of
Securities and this Indenture with respect to such series, except those
obligations referred to in the immediately succeeding paragraph, if:
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(a) all such series of Securities previously authenticated and
delivered (other than mutilated, destroyed, lost or stolen Securities which
have been replaced or such series of Securities which are paid for pursuant
to Section 4.01 or such series of Securities for whose payment money or
securities have theretofore been held in trust and thereafter repaid to the
Company, as provided in Section 8.03) have been delivered to the Trustee
for cancellation and the Company has paid all sums payable by it hereunder
with respect to such series; or
(b)(1) the series of Securities mature within one year or all of them
are to be called for redemption within one year after arrangements
satisfactory to the Trustee for giving the notice of redemption; and
(b)(2) the Company has irrevocably deposited or caused to be
deposited with the Trustee, during such one-year period, as trust funds in
trust, specifically pledged as security for, and dedicated solely to, the
benefit of the Holders of such series of Securities, (A) money in an
amount, or (B) U.S. Government Obligations which through the payment of
interest and principal in respect thereof in accordance with their terms
will, without consideration of any reinvestment of such interest, provide
not later than the opening of business on the relevant due date, money in
an amount, or (C) a combination thereof, in the opinion of a nationally
recognized firm of independent certified public accountants expressed in a
written certification thereof delivered to the Trustee, sufficient to pay
and discharge the principal of, and each installment of interest on, such
series of Securities then outstanding on the date of maturity of such
principal or installment of interest or the redemption date, as the case
may be; or
(c)(1) the Company has irrevocably deposited or caused to be
deposited with the Trustee, as trust funds in trust, specifically pledged
as security for, and dedicated solely to, the benefit of the Holders of
such series of Securities, (A) money in an amount, or (B) U.S. Government
Obligations which through the payment of interest and principal in respect
thereof in accordance with their terms will, without consideration of any
reinvestment of such interest, provide not later than the opening of
business on the relevant due date, money in an amount, or (C) a combination
thereof, in the opinion of a nationally recognized firm of independent
certified public accountants
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expressed in a written certification thereof delivered to the Trustee,
sufficient to pay and discharge the principal of and each installment of
interest on such series of Securities then outstanding on the date of
maturity of such principal or installment of interest, or, on the
redemption date, as the case may be; and
(c)(2) the Company delivers to the Trustee an Officers' Certificate
and an Opinion of Counsel each stating that all conditions precedent
provided for in clause (c) and in Section 4.11 relating to the satisfaction
and discharge of this Indenture with respect to such series of Securities
have been complied with.
Notwithstanding the foregoing clause (c), prior to the end of the
90-day period referred to in clause (6)(ii) of Section 4.11, none of the
Company's obligations under this Indenture shall be discharged, and subsequent
to the end of the 90-day period only the Company's obligations in Sections 2.05,
2.06, 2.07, 2.08, 2.09, 4.01, 4.02, 7.07, 7.08, 8.03 and 8.04 shall survive
until such series of Securities are no longer outstanding. Thereafter, the
Company's obligations in Sections 7.07, 8.03 and 8.04 shall survive; PROVIDED,
that the Company shall pay any taxes or other costs and expenses incurred by any
trust created pursuant to this Article Eight.
After any such irrevocable deposit and after satisfaction of all the
conditions of this Section 8.01, the Trustee, upon the Company's request, shall
acknowledge in writing the discharge of the Company's obligations under the
subject Securities and this Indenture, except for those surviving obligations
specified above. The Trustee shall not be responsible for any calculations made
by the Company in connection with the deposit of funds pursuant to clauses
(b)(2) or (c)(1) of this Section 8.01.
The Company may make an irrevocable deposit pursuant to this Section
8.01 only if at such time it is not prohibited from doing so under the
provisions of Article Three and the Company shall have delivered to the Trustee
and any such Paying Agent an Officers' Certificate to that effect.
SECTION 8.02. APPLICATION OF TRUST MONEY.
The Trustee or Paying Agent shall, with respect to any series of
Securities, hold in trust money or U.S. Government Obligations deposited with it
pursuant to Section 8.01, and shall apply the deposited money and the money from
U.S.
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Government Obligations in accordance with this Indenture, to the payment
of principal of and interest on such series of Securities. Money so
held in trust, to the extent allocated for the payment of such series of
Securities, shall not be subject to the provisions of Article Three.
SECTION 8.03. REPAYMENT TO THE COMPANY.
Subject to Section 8.02, the Trustee and the Paying Agent shall
promptly pay to the Company upon request any excess money or U.S. Government
Obligations held by them at any time and thereupon shall be relieved from all
liability with respect to such money. The Trustee and the Paying Agent shall
pay to the Company upon request any money held by them for the payment of
principal or interest that remains unclaimed for two years; PROVIDED, HOWEVER,
that the Company shall, if requested by the Trustee or such Paying Agent, give
the Trustee or such Paying Agent satisfactory indemnification against any and
all liability which may be incurred by it by reason of such payment; and
PROVIDED, FURTHER, that the Trustee or such Paying Agent before being required
to make any payment shall at the expense of the Company cause to be published
once in a newspaper or newspapers printed in the English language, customarily
published at least five days a week and of general circulation in the City of
Las Vegas, Nevada and in the Borough of Manhattan, The City of New York and mail
to each Securityholder entitled to such money notice that such money remains
unclaimed and that, after a date specified therein which shall be at least 30
days from the date of such publication or mailing, any unclaimed balance of such
money then remaining will be repaid to the Company. After payment to the
Company, Securityholders entitled to such money must look to the Company for
payment as general creditors unless an applicable law designates another person.
SECTION 8.04. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with Section 8.01 by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, the
Company's obligations under this Indenture and the Securities shall be revived
and reinstated as though no deposit had occurred pursuant to Section 8.01 until
such time as the Trustee or Paying Agent is permitted to apply all such money or
U.S. Government Obligations in accordance with Section 8.01; PROVIDED, HOWEVER,
that if the Company has made any payment of interest on or principal of any
series of Securities because of
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the reinstatement of its obligations, the Company shall be subrogated to
the rights of the Holders of such series of Securities to receive such
payment from the money or U.S. Government Obligations held by the
Trustee or Paying Agent.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. WITHOUT CONSENT OF HOLDERS.
The Company and the Trustee as to any series of Securities may amend
or supplement this Indenture or the Securities without notice to or consent of
any Securityholder:
(1) to cure any ambiguity, defect or inconsistency;
(2) to comply with Article Five;
(3) to provide, to the extent permitted by law, that all or a portion
of the obligations of the Company hereunder shall be represented only by
appropriate records maintained by the Company or the Trustee in addition to
or in place of the issue of Securities;
(4) to comply with any requirements of the SEC in connection with the
qualification of this Indenture under the TIA;
(5) to add to, change or eliminate any of the provisions of this
Indenture in respect of one or more series of Securities, PROVIDED,
however, that any such addition, change or elimination (A) shall neither
(i) apply to any series of Securities created prior to the execution of
such supplemental indenture and entitled to the benefit of such provision
nor (ii) modify the rights of the Holder of any such Security with respect
to such provision or (B) shall become effective only when there is no
outstanding Security of any series created prior to the execution of such
supplemental indenture and entitled to the benefit of such provision;
(6) to make any change that does not adversely affect the rights of
any Securityholder of any series; or
(7) to establish additional series of Securities as permitted by
Section 2.03.
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SECTION 9.02. WITH CONSENT OF HOLDERS.
The Company and the Trustee as to any series of Securities may amend
or supplement this Indenture or such series of Securities without notice to any
Securityholder but with the written consent of the Holders of at least a
majority in principal amount of the then outstanding Securities of each series
affected by such amendment or supplement, with each such series voting as a
separate class. The Holders of a majority in principal amount of any series of
Securities then outstanding may also waive compliance in a particular instance
by the Company with any provision of this Indenture with respect to that series
of Securities; PROVIDED, however, that without the consent of each
Securityholder affected, an amendment, supplement or waiver, including a waiver
pursuant to Section 6.04, may not:
(1) reduce the amount of Securities whose Holders must consent to an
amendment, supplement or waiver;
(2) reduce the rate, or extend the time for payment of interest on,
any Security in a manner adverse to the Holders thereof;
(3) reduce the principal of, or extend the fixed maturity or fixed
redemption date of any Securities, in a manner adverse to the Holders
thereof;
(4) waive a default in the payment of the principal of, or interest
on, any Security;
(5) modify the provisions of Article Three (Subordination) in a
manner adverse to the Holders of Securities or in a manner which will cause
any Security to be senior to any other Security in right of payment;
(6) make any Security payable in money other than that stated in the
Security; or
(7) make any changes in Section 6.04, 6.07 and 9.02 (second
sentence).
An amendment or waiver under this Section may not make any change that
adversely affects the rights under Article Three of any holder of an issue of
Senior Indebtedness unless such holder consents to such amendment or waiver.
An amendment or waiver under this Section which waives, changes or
eliminates any covenant or other provision
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of this Indenture which has expressly been included solely for the
benefit of one or more series of Securities, or which modifies the
rights of the Holders of Securities of such series with respect to such
covenant or other provision, shall be deemed not to affect the rights
under this Indenture of the Holders of Securities of any other series.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment or waiver, but
it shall be sufficient if such consent approves the substance thereof.
After an amendment or waiver under this Section becomes effective, the
Company shall mail to Holders of Securities of each series affected thereby a
notice briefly describing the amendment or waiver.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment to or supplement of this Indenture or the Securities
shall comply with the TIA as then in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a consent
to such amendment, supplement or waiver by a Holder of a Security shall bind the
Holder and every subsequent Holder of a Security or portion of a Security that
evidences the same debt as the consenting Holder's Security, even if notation of
the consent is not made on any Security. However, any such Holder or subsequent
Holder may revoke the consent as to his Security or portion of a Security if the
Trustee receives notice of revocation before the date the amendment, supplement
or waiver becomes effective.
The Company may, but shall not be obligated to, set a record date
for the purpose of determining the identity of Holders entitled to consent to
any amendment, supplement or waiver permitted by this Indenture. If a record
date is fixed, the Holders of Securities of that series outstanding on such
record date, and no other Holders, shall be entitled to consent to such
amendment, supplement or waiver or revoke any consent previously given,
whether or not such Holders remain 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 principal amount of Securities of
that series required hereunder for such amendment, supplement or
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waiver to be effective shall have also been given and not revoked within such
90-day period.
After an amendment, supplement or waiver becomes effective, it shall
bind the Holder of every Security unless it makes a change described in clause
(1), (2), (3), (4), (5), (6) or (7) of Section 9.02. In that case the
amendment, supplement or waiver shall bind each Holder of a Security who has
consented to it and every subsequent Holder of a Security or portion of a
Security that evidences the same debt as the consenting Holder's Security.
SECTION 9.05. NOTATION ON OR EXCHANGE OF SECURITIES.
If an amendment, supplement or waiver changes the terms of a Security,
the Trustee may require the Holder of the Security to deliver it to the Trustee.
The Trustee may place an appropriate notation on the Security about the changed
terms and return it to the Holder. Alternatively, if the Company or the Trustee
so determines, the Company in exchange for the Security shall issue and the
Trustee shall authenticate a new Security that reflects the changed terms.
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amendment, supplement or waiver authorized
pursuant to this Article if the amendment, supplement or waiver does not
adversely affect the rights of the Trustee. If it does, the Trustee may but
need not sign it. The Company may not sign an amendment or supplement until the
Board of Directors approves it. The Trustee, subject to Sections 7.01 and 7.02,
shall be entitled to receive, and shall be fully protected in relying upon an
Opinion of Counsel stating that any amendment, supplement or waiver is
authorized by this Indenture and complies with the provisions of this Article
Nine.
ARTICLE TEN
MEETINGS OF SECURITYHOLDERS
SECTION 10.01. PURPOSES FOR WHICH MEETINGS MAY BE CALLED.
A meeting of Holders of any series of Securities, either separately or
jointly, may be called at any time and from time to time pursuant to the
provisions of this Article Ten for any of the following purposes:
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(a) to give any notice to the Company or to the Trustee, or to give
any directions to the Trustee, or to waive or to consent to the waiving of
any Default or Event of Default hereunder and its consequences, or to take
any other action authorized to be taken by Securityholders pursuant to any
of the provisions of Article Six;
(b) to remove the Trustee or appoint a successor Trustee pursuant to
the provisions of Article Seven;
(c) to consent to an amendment, supplement or waiver pursuant to the
provisions of Section 9.02; or
(d) to take any action (i) authorized to be taken by or on behalf of
the Holders of any specified aggregate principal amount of such series of
Securities under any other provision of this Indenture, or authorized or
permitted by law or (ii) which the Trustee deems necessary or appropriate
in connection with the administration of this Indenture.
SECTION 10.02. MANNER OF CALLING MEETINGS.
The Trustee may at any time call a meeting of Holders of any series of
Securities to take any action specified in Section 10.01, to be held at such
time and at such place in the City of Las Vegas, Nevada, or in the Borough of
Manhattan, The City of New York, as the Trustee shall determine. Notice of
every meeting of Holders of any series of Securities, setting forth the time and
place of such meeting and in general terms the action proposed to be taken at
such meeting, shall be mailed by the Trustee, first-class postage prepaid, to
the Company, and to the Holders of such series of Securities at their last
addresses as they shall appear on the registration books of the Registrar, not
less than ten nor more than 60 days prior to the date fixed for the meeting.
Any meeting of Holders of the Securities shall be valid without notice
if (i) with respect to a meeting of any series of Securities, all Holders of
such series of Securities then outstanding are present in person or by proxy, or
if notice is waived before or after the meeting by all Holders of such series of
Securities then outstanding and (ii) with respect to a meeting of all
Securityholders, all Holders of such Securities then outstanding are present in
person or by proxy, or if notice is waived before or after the meeting by all
Holders of such Securities then outstanding, and, in each case, if the Company
and the Trustee are either present by duly author-
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ized representative or have, before or after the meeting waived notice.
SECTION 10.03. CALL OF MEETINGS BY COMPANY
OR HOLDERS.
In case at any time the Company, pursuant to resolution of its Board
of Directors, or the Holders of not less than 25% in aggregate principal amount
of any series of Securities then outstanding shall have requested the Trustee to
call a meeting of Securityholders, either separately or jointly, to take any
action specified in Section 10.01, by written request setting forth in
reasonable detail the action proposed to be taken at the meeting, and the
Trustee shall not have mailed the notice of such meeting within 20 days for
receipt of such request, then the Company or the Holders of such series of
Securities in the amount above specified may determine the time and place in the
City of Las Vegas, Nevada, or in the Borough of Manhattan, The City of New York,
for such meeting and may call such meeting for the purpose of taking such
action, by mailing or causing to be mailed notice thereof as provided in Section
10.02, or by causing notice thereof to be published at least once in each of two
successive calendar weeks (on any day of the week) in a newspaper or newspapers
printed in the English language, customarily published at least five days a week
and of general circulation in the City of Las Vegas, Nevada and in the Borough
of Manhattan, The City of New York, the first such publication to be not less
than 10 nor more than 60 days prior to the date fixed for the meeting.
SECTION 10.04. WHO MAY ATTEND AND VOTE AT MEETINGS.
To be entitled to vote at any meeting of Securityholders, a person
shall (a) be a registered Holder of one or more Securities, or (b) be a person
appointed by an instrument in writing as proxy for the registered Holder or
Holders of Securities. The only persons who shall be entitled to be present or
to speak at any meeting of Securityholders shall be the persons entitled to vote
at such meeting and their counsel and any representative of the Trustee and its
counsel and any representatives of the Company and its counsel.
SECTION 10.05. REGULATIONS MAY BE MADE BY TRUSTEE; CONDUCT OF THE
MEETING; VOTING RIGHTS; ADJOURNMENT.
Notwithstanding any other provision of this Indenture, the Trustee may
make such reasonable regulations as it
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may deem advisable for any meeting of Securityholders, in regard to
proof of the holding of Securities and of the appointment of proxies,
and in regard to the appointment and duties of inspectors of votes, and
submission and examination of proxies, certificates and other evidence
of the right to vote, and such other matters concerning the conduct of
the meeting as it shall think appropriate. Such regulations may fix a
record date and time for determining the Holders of record of Securities
entitled to vote at such meeting, in which case those and only those
persons who are Holders of Securities at the record date and time so
fixed, or their proxies, shall be entitled to vote at such meeting
whether or not they shall be such Holders at the time of the meeting.
The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by Securityholders as provided in Section 10.03, in which case the
Company or the Securityholders calling the meeting, as the case may be, shall in
like manner appoint a temporary chairman. A permanent chairman and a permanent
secretary of the meeting shall be elected by vote of the Holders of a majority
in principal amount of the Securities represented at the meeting and entitled to
vote.
At any meeting each Securityholder or proxy shall be entitled to one
vote for each $1,000 principal amount of Securities held or represented by him;
PROVIDED, HOWEVER, that no vote shall be cast or counted at any meeting in
respect of any Securities challenged as not outstanding and ruled by the
chairman of the meeting to be not outstanding. The chairman of the meeting
shall have no right to vote other than by virtue of Securities held by him or
instruments in writing as aforesaid duly designating him as the person to vote
on behalf of other Securityholders. At any meeting of Securityholders, the
presence of persons holding or representing any number of Securities shall be
sufficient for a quorum. Any meeting of Securityholders duly called pursuant to
the provisions of Section 10.02 or Section 10.03 may be adjourned from time to
time by vote of the Holders of a majority in aggregate principal amount of the
Securities represented at the meeting and entitled to vote, and the meeting may
be held as so adjourned without further notice.
SECTION 10.06. VOTING AT THE MEETING AND RECORD TO BE KEPT.
The vote upon any resolution submitted to any meeting of
Securityholders shall be by written ballots on which shall
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be subscribed the signatures of the Holders of Securities or of their
representatives by proxy and the principal amount of the Securities
voted by the ballot. The permanent chairman of the meeting shall
appoint two inspectors of votes, who shall count all votes cast at the
meeting for or against any resolution and who shall make and file with
the secretary of the meeting their verified written reports in duplicate
of all votes cast at the meeting. A record in duplicate of the
proceedings of each meeting of Securityholders shall be prepared by the
secretary of the meeting and there shall be attached to such record the
original reports of the inspectors of votes on any vote by ballot taken
thereat and affidavits by one or more persons having knowledge of the
facts, setting forth a copy of the notice of the meeting and showing
that such notice was mailed as provided in Section 10.02 or published as
provided in Section 10.03. The record shall be signed and verified by
the affidavits of the permanent chairman and the secretary of the
meeting and one of the duplicates shall be delivered to the Company and
the other to the Trustee to be preserved by the Trustee, the latter to
have attached thereto the ballots voted at the meeting.
Any record so signed and verified shall be conclusive evidence of the
matters therein stated.
SECTION 10.07. EXERCISE OF RIGHTS OF TRUSTEE OR
SECURITYHOLDERS MAY NOT BE HINDERED
OR DELAYED BY CALL OF MEETING.
Nothing in this Article Ten contained shall be deemed or construed to
authorize or permit, by reason of any call of a meeting of Securityholders or
any rights expressly or impliedly conferred hereunder to make such call, any
hindrance or delay in the exercise of any right or rights conferred upon or
reserved to the Trustee or to the Securityholders under any of the provisions of
this Indenture or of the Securities.
ARTICLE ELEVEN
REDEMPTION
SECTION 11.01. NOTICES TO TRUSTEE.
If the Company elects to redeem any series of Securities pursuant to
any optional redemption provisions thereof, it shall notify the Trustee of the
redemption date and the principal amount of Securities of that series to be
redeemed.
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<PAGE>
The Company shall give each notice provided for in this Section in an
Officers' Certificate at least 45 days before the redemption date (unless a
shorter notice period shall be satisfactory to the Trustee), which notice shall
specify the provisions of such Security pursuant to which the Company elects to
redeem such Securities.
If the Company elects to reduce the principal amount of Securities of
any series to be redeemed pursuant to mandatory redemption provisions thereof,
it shall notify the Trustee of the amount of, and the basis for, any such
reduction. If the Company elects to credit against any such mandatory
redemption Securities it has not previously delivered to the Trustee for
cancellation, it shall deliver such Securities with such notice.
SECTION 11.02. SELECTION OF SECURITIES TO BE
REDEEMED.
If less than all of the Securities of a series are to be redeemed,
the Trustee shall select the Securities of that series to be redeemed by a
method that complies with the requirements of any exchange on which the
Securities of that series are listed, or, if the Securities of that series are
not listed on an exchange, on a pro rata basis or by lot. The Trustee shall
make the selection not more than 75 days and not less than 30 days before the
redemption date from Securities of that series outstanding and not previously
called for redemption. Except as otherwise provided as to any series of
Securities, Securities and portions thereof that the Trustee selects shall be
in amounts equal to the minimum authorized denomination for Securities of the
series to be redeemed or any integral multiple thereof. Provisions of this
Indenture that apply to Securities called for redemption also apply to portions
of Securities called for redemption. The Trustee shall notify the Company
promptly in writing of the Securities or portions of Securities to be called
for redemption.
SECTION 11.03. NOTICE OF REDEMPTION.
Except as otherwise provided as to any series of Securities, at least
30 days but not more than 60 days before a redemption date, the Company shall
mail a notice of redemption to each Holder whose Securities are to be redeemed.
The notice shall identify the Securities to be redeemed and shall
state:
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<PAGE>
(1) the redemption date;
(2) the redemption price fixed in accordance with the terms of the
Securities of the series to be redeemed, plus accrued interest, if any, to
the date fixed for redemption (the "redemption price");
(3) if any Security is being redeemed in part, the portion of the
principal amount of such Security to be redeemed and that, after the
redemption date, upon surrender of such Security, a new Security or
Securities in principal amount equal to the unredeemed portion will be
issued;
(4) the name and address of the Paying Agent;
(5) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(6) that, unless the Company defaults in payment of the redemption
price, interest on Securities called for redemption ceases to accrue on and
after the redemption date;
(7) The paragraph of the series of Securities and/or Section of any
supplemental indenture pursuant to which such Securities called for
redemption are being redeemed; and
(8) the CUSIP number, if any, of the Securities to be redeemed.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; PROVIDED, HOWEVER, that the
Company 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. The notice mailed in the manner herein provided
shall be conclusively presumed to have been duly given whether or not the Holder
receives such notice. In any case, failure to give such notice by mail or any
defect in the notice of the Holder of any Security shall not affect the validity
of the proceeding for the redemption of any other Security.
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<PAGE>
SECTION 11.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 11.03
hereof, Securities called for redemption become due and payable on the
redemption date for the redemption price. Upon surrender to the Paying Agent,
such Securities will be paid at the redemption price.
SECTION 11.05. DEPOSIT OF REDEMPTION PRICE.
On or before the redemption date, the Company shall deposit with the
Paying Agent (or, if the Company or any subsidiary is the Paying Agent, shall
segregate and hold in trust) money sufficient to pay the redemption price of all
Securities called for redemption on that date other than Securities which have
previously been delivered by the Company to the Trustee for cancellation. The
Paying Agent shall return to the Company any money not required for that
purpose.
SECTION 11.06. SECURITIES REDEEMED IN PART.
Upon surrender of a Security that is redeemed in part, the Company
shall issue and the Trustee shall authenticate for the Holder at the expense of
the Company a new Security of like series equal in principal amount to the
unredeemed portion of the Security surrendered.
ARTICLE TWELVE
MISCELLANEOUS
SECTION 12.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies, or conflicts
with another provision which is required to be included in this Indenture by the
TIA or the TIA as amended after the date hereof, the required provision shall
control.
SECTION 12.02. NOTICES.
Any notice or communication shall be sufficiently given if in writing
and delivered in person or mailed by first-class mail postage prepaid, addressed
as follows:
if to the Company:
Circus Circus Enterprises, Inc.
2880 Las Vegas Boulevard South
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<PAGE>
Las Vegas, Nevada 89109
Attention: General Counsel
if to the Trustee:
The Bank of New York
101 Barclay Street, Floor 21W
New York, New York 10286
Attention: Corporate Trust Trustee
Administration
The Company or the Trustee by notice to the other may designate additional or
different addresses for subsequent notices or communications.
Any notice or communication mailed to a Securityholder shall be mailed
by first-class mail, postage prepaid, to such Holder at such Holder's address as
it appears on the register maintained by the Registrar and shall be sufficiently
given to such Holder if so mailed within the time prescribed.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it shall be deemed to have been duly given two days after the data of
mailing, whether or not the addressee receives it.
SECTION 12.03. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.
Securityholders may communicate pursuant to TIA Section 312(b) with
other Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and anyone else shall have
the protection of TIA Section 312(c).
SECTION 12.04. CERTIFICATES AND OPINION AS TO
CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:
(1) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
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<PAGE>
(2) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
SECTION 12.05. STATEMENTS REQUIRED IN CERTIFICATE
OR OPINION.
Each Officers' Certificate or Opinion of Counsel with respect to
compliance with a condition or covenant provided for in this Indenture shall
include:
(1) a statement that the person making such Officers' Certificate or
Opinion of Counsel 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
Officers' Certificate of Opinion of Counsel 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 such
person 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.
SECTION 12.06. WHEN TREASURY SECURITIES DISREGARDED.
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, waiver or consent, Securities owned
by the Company or by an Affiliate shall be disregarded, except that for the
purpose of determining whether the Trustee shall be protected in relying on any
such direction, waiver or consent, only Securities which the Trustee knows are
so owned shall be so disregarded.
SECTION 12.07. RULES BY PAYING AGENT, REGISTRAR.
The Paying Agent or Registrar each may make reasonable rules for its
functions.
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<PAGE>
SECTION 12.08. LEGAL HOLIDAYS.
A "Legal Holiday" is a Saturday, a Sunday, a legal holiday or a day on
which banking institutions are not required to be open. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue
for the intervening period.
SECTION 12.09. GOVERNING LAW.
This Indenture and the Securities shall be governed by and construed
in accordance with the laws of the State of New York.
SECTION 12.10. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or any subsidiary. Any such indenture, loan or
debt agreement may not be used to interpret this Indenture.
SECTION 12.11. NO RECOURSE AGAINST OTHERS.
A past, present or future director, officer, employee, stockholder or
incorporator, as such, of the Company or any successor corporation shall not
have any liability for any obligations of the Company under the Securities or
the Indenture or for any claim based on, in respect of, or by reason of such
obligations or their creation. Each Securityholder by accepting a Security
waives and releases all such liability. The waiver and release are part of the
consideration of issuance of the Securities. The waiver may not be effective to
waive liabilities under the federal securities laws and it is the view of the
SEC that such a waiver is against public policy.
SECTION 12.12. SUCCESSORS.
All agreements of the Company in this Indenture and the Securities
shall bind its successor. All agreements of the Trustee in this Indenture shall
bind its successor.
SECTION 12.13. DUPLICATE ORIGINALS.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
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<PAGE>
SECTION 12.14. SEVERABILITY.
In case any provision in this Indenture or in the Securities 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 12.15. EFFECT OF HEADINGS, TABLE
OF CONTENTS, ETC.
The Article and Section headings herein and the table of contents are
for convenience only and shall not affect the construction thereof.
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<PAGE>
IN WITNESS WHEREOF, the Company and the Trustee have caused their
names to be signed hereto by their respective officers thereunto duly
authorized, all as of the day and year first above written.
SIGNATURES
CIRCUS CIRCUS ENTERPRISES, INC.
By: MICHAEL S. ENSIGN
----------------------------------
Name: Michael S. Ensign
Title: Chairman of the Board,
Chief Executive Officer and
Chief Operating Officer
THE BANK OF NEW YORK,
as Trustee
By: MICHELE RUSSO
----------------------------------
Name: Michele Russo
Title:
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CIRCUS CIRCUS ENTERPRISES, INC.,
as Issuer
AND
THE BANK OF NEW YORK,
as Trustee
----------------------
SUPPLEMENTAL INDENTURE
----------------------
DATED AS OF
NOVEMBER 20, 1998
$275,000,000
9 1/4% SENIOR SUBORDINATED NOTES DUE 2005
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
Supplemental Indenture, dated as of November 20, 1998, between Circus
Circus Enterprises, Inc., a Nevada corporation (hereinafter sometimes referred
to as the "Company"), and The Bank of New York, a New York banking corporation,
as trustee (hereinafter sometimes referred to as the "Trustee") under the
Indenture (as hereinafter defined).
W I T N E S S E T H T H A T :
WHEREAS, the Company and the Trustee have entered into an Indenture
(the "Indenture") dated as of the date hereof, providing for the issuance of
debt securities in series; and
WHEREAS, for its lawful corporation purposes, the Company desires to
create and authorize the series of 9 1/4% Senior Subordinated Notes due 2005
(hereinafter referred to as the "Notes") in an aggregate principal amount of
$275,000,000, and, to provide the terms and conditions upon which the Notes are
to be executed, registered, authenticated, issued and delivered, the Company has
duly authorized the execution and delivery of this Supplemental Indenture; and
WHEREAS, the Notes are a series of Securities (as that term is defined
in the Indenture) and are being issued under the Indenture, as supplemented by
this Supplemental Indenture, and are subject to the terms contained therein and
herein; and
WHEREAS, the Notes and the certificates of authentication to be borne
by the Notes are to be substantially in the following forms, respectively:
<PAGE>
REGISTERED CUSIP NO.
PRINCIPAL AMOUNT
$
NO.
CIRCUS CIRCUS ENTERPRISES, INC.
9 1/4% SENIOR SUBORDINATED
NOTE DUE 2005
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY ("DTC"), 55 WATER STREET, NEW YORK, NEW YORK TO THE
ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND SUCH
NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO., OR 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.
UNLESS AND UNTIL THIS NOTE IS EXCHANGED IN WHOLE OR IN PART FOR
SECURITIES IN CERTIFICATED FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A
WHOLE BY DTC TO A NOMINEE THEREOF OR BY A NOMINEE THEREOF TO DTC OR ANOTHER
NOMINEE OF DTC OR BY DTC OR ANY SUCH NOMINEE TO A SUCCESSOR OF DTC OR A NOMINEE
OF SUCH SUCCESSOR.
CIRCUS CIRCUS ENTERPRISES, INC., a Nevada corporation (the "Company,"
which term shall include any successor under the Indenture hereinafter referred
to), for value received, hereby promises to pay to , or registered assigns, the
principal sum of on December 1, 2005, and to pay interest thereon at the rate of
9 1/4% per annum, until the entire principal amount hereof is paid or duly
provided for. This Note is one of a duly authorized series issued by the Company
designated as the "9 1/4% Senior Subordinated Notes due 2005" (herein called the
"Notes").
1. Interest.
The Company will pay interest semiannually on June 1 and December 1 of
each year (each, an "Interest Payment Date") commencing June 1, 1999. Interest
on the Notes will accrue from the most recent date to which interest has been
paid, unless the date hereof is a date to which interest has been paid, in which
case from the date of the Note, or, if no interest has
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<PAGE>
been paid, from November 20, 1998. Notwithstanding the foregoing, when there is
no existing default in the payment of interest on the Notes, if the date hereof
is after a Record Date, as that term is defined below, and before the next
succeeding Interest Payment Date, this Note shall bear interest from such
Interest Payment Date; PROVIDED, HOWEVER, that if the Company shall default in
the payment of interest due on such Interest Payment Date, then this Note shall
bear interest from the next preceding Interest Payment Date to which interest
has been paid, or, if no interest has been paid on the Notes, from November 20,
1998. Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
2. Method of Payment.
The Company will pay interest on the Notes (except defaulted interest)
to the persons who are registered Holders of Notes at the close of business on
the May 15 or November 15 preceding the June 1 or December 1, as the case may
be, on which the Interest Payment Date occurs (each, a "Record Date"). Holders
must surrender Notes to a Paying Agent to collect principal payments. The
Company will pay principal and interest in money of the United States that at
the time of payment is legal tender for payment of public and private debts.
However, the Company may pay principal and any interest by its check payable in
such money. It may mail an interest check to a holder's registered address.
3. Paying Agent and Registrar.
Initially, the Trustee will act as Paying Agent and Registrar. The
Company may change any Paying Agent, Registrar or co-registrar without notice.
The Company or any of its subsidiaries may act as Paying Agent, Registrar or
co-registrar.
4. Indenture.
The Company issued the Notes under an Indenture dated as of November
20, 1998 and a Supplemental Indenture dated as of November 20, 1998, each
between the Company and the Trustee (collectively, the "Indenture"). 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 (15 U.S. Code
77aaa-77bbbb), as amended, as in effect on the date of the Indenture. The Notes
are subject to all such terms and Holders are referred to the Indenture and such
Act for a statement of them. Terms used herein which are defined in the In-
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<PAGE>
denture shall have the respective meanings assigned to them in the Indenture.
5. Redemption.
a. Optional Redemption. The Notes will be redeemable, at the option of
the Company, (i) in whole but not in part, at any time prior to December 1,
2002, at a redemption price equal to 100% of the principal amount thereof plus
the Make-Whole Premium, together with accrued and unpaid interest thereon to the
applicable redemption date, and (ii) in whole or in part at any time on or after
December 1, 2002 at the redemption prices (expressed as percentages of principal
amount) set forth below, plus accrued and unpaid interest thereon to the
applicable redemption date, if redeemed during the twelve-month period beginning
on December 1 of each of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2002 ................................................... 104.625%
2003 ................................................... 102.313%
2004 and thereafter .................................... 100.000%
</TABLE>
"Make-Whole-Premium" means, with respect to any Note at any redemption
date, the excess, if any, of (a) the aggregate present value of the sum of the
principal amount and premium that would be payable on December 1, 2002 of such
Note and all remaining interest payments to and including December 1, 2002,
discounted on a semi-annual bond equivalent basis from December 1, 2002 to the
redemption date at a per annum interest rate equal to the sum of the Treasury
Yield (determined on the Business Day immediately preceding the date of such
redemption), plus 50 basis points, over (b) the aggregate principal amount of
the Note being redeemed.
"Treasury Yield" means the yield to maturity at the time of
computation of United States Treasury securities with a constant maturity (as
compiled by and published in the most recent Federal Reserve Statistical Release
H.15 (519) which has become publicly available at least two business days prior
to the date fixed for redemption (or, if such Statistical Release is no longer
published, any publicly available source of similar data)) most nearly equal to
the then remaining average life of the Notes, PROVIDED that if the average life
of the Notes is not equal to the constant maturity of a United States Treasury
security for which a weekly average yield is given, the Treasury yield shall be
obtained by linear interpolation (calculated
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<PAGE>
to the nearest one-twelfth of a year) from the weekly average yields of United
States Treasury securities for which such yields are given, except that if the
average life of the Notes is less than one year, the weekly average yield on
actually traded United States Treasury securities adjusted to a constant
maturity of one year shall be used.
b. Optional Redemption upon Public Equity Offering. On or prior to
December 1, 2001, the Company may, at its option, use the net proceeds of a
Public Equity Offering to redeem up to 35% of the originally issued aggregate
principal amount of the Notes, at a redemption price in cash equal to 109.25% of
the principal amount thereof, plus accrued and unpaid interest thereon, if any,
to the date of redemption; PROVIDED that not less than $178.8 million in
aggregate principal amount of Notes is outstanding following such redemption.
Notice of any such redemption must be given not later than 60 days after the
consummation of the Public Equity Offering.
As used in the preceding paragraph, a "Public Equity Offering" means
an underwritten public offering of Capital Stock (other than Redeeemable Capital
Stock) of the Company made on a primary basis by the Company pursuant to a
registration statement filed with and declared effective by the Securities and
Exchange Commission in accordance with the Securities Act of 1933, as amended,
resulting in net cash proceeds to the Company (after deducting any underwriting
discounts and commissions) of at least $50 million. "Capital Stock" means with
respect to any person, any and all shares, interests, participations, rights in
or other equivalents (however designated) of such person's capital stock, and
any rights (other than debt securities convertible into capital stock), warrants
or options exchangeable for or convertible into such capital stock. "Redeemable
Capital Stock" means any class or series of Capital Stock that, either by its
terms, by the terms of any security into which it is convertible or exchangeable
or by contract or otherwise, is or upon the happening of an event or passage of
time would be, required to be redeemed prior to the stated maturity of the Notes
or is redeemable at the option of the holder thereof at any time prior to the
stated maturity of the Notes, or is convertible into or exchangeable for debt
securities at any time prior to the stated maturity of the Notes.
c. Mandatory Redemption. The Company will not be required to make any
mandatory sinking fund payments in respect of the Notes.
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<PAGE>
6. Denominations, Transfer, Exchange.
The Notes are in registered form without coupons in denominations of
$1,000 and in integral multiples of $1,000. A Holder may transfer or exchange
Notes in accordance with the Indenture. The Registrar may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and to pay any taxes and fees required by law or permitted by the Indenture.
7. Persons Deemed Owners.
The Holder of a Note may be treated as the owner of it for all
purposes.
8. Unclaimed Money.
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent will pay the money back to the
Company at its request. After that, Holders entitled to the money must look to
the Company for payment unless an abandoned property law designates another
person, and all liability of the Trustee and such Paying Agent with respect to
such money shall cease.
9. Discharge Prior to Maturity.
Subject to certain conditions, if the Company deposits with the
Trustee money or U.S. Government Obligations sufficient to pay principal of and
accrued interest on the Notes to maturity, the Company will be discharged (to
the extent provided in the Indenture) from the Indenture and the Notes.
10. Amendment, Supplement, Waiver.
Subject to certain exceptions requiring the consent of the Holders of
each of the affected Notes, 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 affected by such amendment, supplement or
waiver, and any past default or compliance with any provision as to the Notes
may be waived with the consent of the Holders of a majority in principal amount
of the Notes then outstanding. Without the consent of any Holder, the Company
and the Trustee may amend or supplement the Indenture of the Notes to, among
other things, cure any ambiguity, defect or inconsistency or to provide that the
obligations of the Company hereunder may be represented solely in the records of
the Com-
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<PAGE>
pany in addition to or in place of the issue of Notes or to make any
change that does not materially adversely affect the rights of any Holder.
11. Restrictive Covenants.
The Notes are general unsecured obligations of the company limited to
the aggregate principal amount of $275,000,000. The Indenture does not limit the
Company from incurring unsecured Indebtedness other than the aggregate principal
amount of indebtedness to be issued pursuant to the Supplemental Indenture. It
does limit the ability of the Company and its subsidiaries to grant certain
security interests in their property without equally and ratably securing the
Notes and to engage in certain sales and leaseback transactions, subject to
certain important exceptions described therein. Once a year the Company must
report to the Trustee with respect to its compliance with such limitations.
12. Successor Corporation.
When a successor corporation assumes all the obligations of its
predecessor under the Notes and the Indenture, the predecessor corporation will
be released from those obligations.
13. Defaults and Remedies.
An Event of Default is anyone of the following: (i) failure of the
Company to pay (whether or not prohibited by the subordination provisions)
interest for 30 days on, or the principal when due of, the Notes; (ii) failure
to perform any other covenant contained in the Indenture for 30 days after
notice (other than a Default under Section 4.02 or Article Five which Default
shall be an Event of Default without the notice or passage of time specified in
this clause); (iii) the occurrence of an event of default under any instrument
evidencing Indebtedness of the Company or its subsidiaries entitling the holder
or holders thereof to accelerate the payment of an aggregate principal amount of
$10,000,000 or more of such Indebtedness, which event of default is not cured or
waived in accordance with the provisions of such instrument, or such
Indebtedness is not discharged, within 30 days after the receipt by the Company
of notice from the Trustee or the holders of 25% in principal amount of such
series of Debt Securities then outstanding of such event of default and
requiring the Company to cause such event of default to be cured or such
Indebtedness to be discharged; and (iv) certain events of bankruptcy, insolvency
or reorgani-
-7-
<PAGE>
If an Event of Default occurs and is continuing, the Trustee or the Holders
of not less than 25% in principal amount of the Notes then outstanding may
declare all the Notes to be due and payable immediately in accordance with
Section 6.02 of the Indenture. Holders may not enforce the Indenture or the
Notes except as provided in the Indenture. The Trustee may require security
and indemnity satisfactory to it before it enforces the Indenture or the
Notes. Subject to certain limitations, Holders of a majority in principal
amount of the Notes then outstanding may direct the Trustee in its exercise
of any trust or power. The Trustee may withhold from Holders notice of any
continuing default (except a default in payment of principal or interest) if
it determines that withholding notice is in their interests.
14. Trustee Dealings with Company.
The Bank of New York, the Trustee under the Indenture, in its
individual or any other capacity, may make loans to, accept deposits from, and
perform services for the Company or its subsidiaries or Affiliates, and may
otherwise deal with the Company or its subsidiaries or Affiliates, as if it were
not Trustee.
15. No Recourse Against Others.
A past, present or future director, officer, employee, stockholder or
incorporator, as such, of the company or any successor corporation shall not
have any liability for any obligations of the Company 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 by accepting a Note waives and
released all such liability. The waiver and release are part of the
consideration for the issue of the Notes.
16. Authentication.
This Note shall not be valid until the Trustee signs the certificate
of authentication at the end of this Note.
17. Copies of the Indenture.
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Requests may be made to:
Circus Circus Enterprises, Inc.
2880 Las Vegas Boulevard South
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<PAGE>
Las Vegas, Nevada 89109
Attention: General Counsel
18. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of a Note
or an assignee, such as: TEN COM (= 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. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company will cause CUSIP numbers to be
printed on the Notes as a convenience to the Holders of the Notes. No
representation is made as to the accuracy of such numbers as printed on the
Notes and reliance may be placed only on the other identification numbers
printed hereon.
(Signature Page To Follow)
-9-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal this th day of .
SIGNATURES
CIRCUS CIRCUS ENTERPRISES, INC.
By: Glenn Schaeffer
-------------------------------------
Name: Glenn Schaeffer
Title: President, CFO, and Treasurer
By: Michele Russo
-------------------------------------
Name: Michele Russo
Title:
(SEAL)
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes of the series designated "9 1/4% Senior
Subordinated Notes due 2005," pursuant to the Indenture.
THE BANK OF NEW YORK,
as Trustee
By: ___________________________________
Authorized Signatory
Date of Authentication:
<PAGE>
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned hereby
sells, assigns and transfers to
PLEASE INSERT SOCIAL
SECURITY OR OTHER IDENTIFYING
NUMBER OF ASSIGNEE: ____________________________________________________________
________________________________________________________________________________
(Please Print or Typewrite Name and Address
including Zip Code of Assignee)
________________________________________________________________________________
the within Note of ________________________ and ____________________ hereby does
irrevocably constitute and appoint
________________________________________________________________________________
Attorney to transfer said Note on the books of the within-named Company with
full power of substitution in the premises.
Dated: _________________________________________________________________________
________________________________________________________________________________
NOTICE: The signature to this assignment must correspond with the name as it
appears on the first page of the within Note in every particular, without
alteration or enlargement or any change whatever.
Signature Guaranteed:
__________________________________
Authorized Signature
Signature guarantee should be made by a guarantor institution participating in
the Securities Transfer Agents Medallion Program or in such guarantee program
acceptable to the Trustee.
<PAGE>
AND WHEREAS, all acts and things necessary to make the Notes of this
series, when executed by the Company and authenticated and delivered by or on
behalf of the Trustee as in this Supplemental Indenture provided, the valid,
binding and legal obligations of the Company, and to constitute these presents a
valid indenture and agreement according to its terms, have been done and
performed;
NOW, THEREFORE, in order to declare the terms and conditions upon
which the Notes of this series are executed, registered, authenticated, issued
and delivered, and in consideration of the premises, of the purchase and
acceptance of such Notes by the holders thereof and of the sum of one dollar to
it duly paid by the Trustee at the execution of these presents, the receipt
whereof is hereby acknowledged, the Company covenants and agrees with the
Trustee, for the equal and proportionate benefit of the respective holders from
time to time of such Notes, as follows:
ARTICLE I
CREATION AND AUTHORIZATION OF SERIES
There is hereby created and authorized the series of Notes entitled
the "9 1/4% Senior Subordinated Notes due 2005," which shall be a closed series
limited to $275,000,000 aggregate principal amount (except for Notes
authenticated and delivered upon registration of transfer of, or in exchange
for, or in lieu of, other Notes of this series pursuant to Sections 3.06, 3.07,
3.09 or 11.06).
ARTICLE II
SPECIAL PROVISIONS APPLICABLE TO THIS SERIES
(a) Officers signing the Notes for the Company may do so by manual
signature. The Company's seal may be manually applied to the Notes.
(b) This Supplemental Indenture and each Note of this series shall be
governed by and construed in accordance with the laws of the State of Nevada,
except as otherwise required by mandatory provisions of law.
(Signature Page To Follow)
-2-
<PAGE>
IN WITNESS WHEREOF, the Company and the Trustee have caused their
names to be signed hereto by their respective officers hereunto duly authorized,
all as of the day and year first above written.
SIGNATURES
CIRCUS CIRCUS ENTERPRISES, INC.
By:
---------------
THE BANK OF NEW YORK,
as Trustee
By:
-------------
Name:
Title:
<PAGE>
EXHIBIT 4(c)
REGISTERED PRINCIPAL AMOUNT: $200,000,000
CUSIP NO.: 172909 AK 9
NO. 1
CIRCUS CIRCUS ENTERPRISES, INC.
9 1/4% SENIOR SUBORDINATED
NOTE DUE 2005
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY ("DTC"), 55 WATER STREET, NEW YORK, NEW YORK TO THE
ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND SUCH
NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO., OR 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.
UNLESS AND UNTIL THIS NOTE IS EXCHANGED IN WHOLE OR IN PART FOR
SECURITIES IN CERTIFICATED FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A
WHOLE BY DTC TO A NOMINEE THEREOF OR BY A NOMINEE THEREOF TO DTC OR ANOTHER
NOMINEE OF DTC OR BY DTC OR ANY SUCH NOMINEE TO A SUCCESSOR OF DTC OR A NOMINEE
OF SUCH SUCCESSOR.
CIRCUS CIRCUS ENTERPRISES, INC., a Nevada corporation (the "Company,"
which term shall include any successor under the Indenture hereinafter referred
to), for value received, hereby promises to pay to CEDE & CO., or registered
assigns, the principal sum of TWO HUNDRED MILLION DOLLARS ($200,000,000) on
December 1, 2005, and to pay interest thereon at the rate of 9-1/4% per annum,
until the entire principal amount hereof is paid or duly provided for. This
Note is one of a duly authorized series issued by the Company designated as the
"9-1/4% Senior Subordinated Notes due 2005" (herein called the "Notes").
<PAGE>
1. Interest.
The Company will pay interest semiannually on June 1 and December 1 of
each year (each, an "Interest Payment Date") commencing June 1, 1999. Interest
on the Notes will accrue from the most recent date to which interest has been
paid, unless the date hereof is a date to which interest has been paid, in which
case from the date of the Note, or, if no interest has been paid, from November
20, 1998. Notwithstanding the foregoing, when there is no existing default in
the payment of interest on the Notes, if the date hereof is after a Record Date,
as that term is defined below, and before the next succeeding Interest Payment
Date, this Note shall bear interest from such Interest Payment Date; PROVIDED,
HOWEVER, that if the Company shall default in the payment of interest due on
such Interest Payment Date, then this Note shall bear interest from the next
preceding Interest Payment Date to which interest has been paid, or, if no
interest has been paid on the Notes, from November 20, 1998. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
2. Method of Payment.
The Company will pay interest on the Notes (except defaulted interest)
to the persons who are registered Holders of Notes at the close of business on
the May 15 or November 15 preceding the June 1 or December 1, as the case may
be, on which the Interest Payment Date occurs (each, a "Record Date"). Holders
must surrender Notes to a Paying Agent to collect principal payments. The
Company will pay principal and interest in money of the United States that at
the time of payment is legal tender for payment of public and private debts.
However, the Company may pay principal and any interest by its check payable in
such money. It may mail an interest check to a holder's registered address.
3. Paying Agent and Registrar.
Initially, the Trustee will act as Paying Agent and Registrar. The
Company may change any Paying Agent, Registrar or co-registrar without notice.
The Company or any of its subsidiaries may act as Paying Agent, Registrar or
co-registrar.
-2-
<PAGE>
4. Indenture.
The Company issued the Notes under an Indenture dated as of
November 20, 1998 and a Supplemental Indenture dated as of November 20, 1998,
each between the Company and the Trustee (collectively, the "Indenture"). 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 (15 U.S. Code
77aaa-77bbbb), as amended, as in effect on the date of the Indenture. The Notes
are subject to all such terms and Holders are referred to the Indenture and such
Act for a statement of them. Terms used herein which are defined in the
Indenture shall have the respective meanings assigned to them in the Indenture.
5. Redemption.
a. Optional Redemption. The Notes will be redeemable, at the option
of the Company, (i) in whole but not in part, at any time prior to December 1,
2002, at a redemption price equal to 100% of the principal amount thereof plus
the Make-Whole Premium, together with accrued and unpaid interest thereon to the
applicable redemption date, and (ii) in whole or in part at any time on or after
December 1, 2002 at the redemption prices (expressed as percentages of principal
amount) set forth below, plus accrued and unpaid interest thereon to the
applicable redemption date, if redeemed during the twelve-month period beginning
on December 1 of each of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2002. . . . . . . . . . . . . . . . . 104.625%
2003. . . . . . . . . . . . . . . . . 102.313%
2004 and thereafter . . . . . . . . . 100.000%
</TABLE>
"Make-Whole-Premium" means, with respect to any Note at any redemption
date, the excess, if any, of (a) the aggregate present value of the sum of the
principal amount and premium that would be payable on December 1, 2002 of such
Note and all remaining interest payments to and including December 1, 2002,
discounted on a semi-annual bond equivalent basis from December 1, 2002 to the
redemption date at a per annum interest rate equal to the sum of the Treasury
Yield (determined on the Business Day immediately preceding the date of such
redemption), plus 50 basis points, over (b) the aggregate principal amount of
the Note being redeemed.
-3-
<PAGE>
"Treasury Yield" means the yield to maturity at the time of
computation of United States Treasury securities with a constant maturity (as
compiled by and published in the most recent Federal Reserve Statistical Release
H.15 (519) which has become publicly available at least two business days prior
to the date fixed for redemption (or, if such Statistical Release is no longer
published, any publicly available source of similar data)) most nearly equal to
the then remaining average life of the Notes, PROVIDED that if the average life
of the Notes is not equal to the constant maturity of a United States Treasury
security for which a weekly average yield is given, the Treasury yield shall be
obtained by linear interpolation (calculated to the nearest one-twelfth of a
year) from the weekly average yields of United States Treasury securities for
which such yields are given, except that if the average life of the Notes is
less than one year, the weekly average yield on actually traded United States
Treasury securities adjusted to a constant maturity of one year shall be used.
b. Optional Redemption upon Public Equity Offering. On or prior to
December 1, 2001, the Company may, at its option, use the net proceeds of a
Public Equity Offering to redeem up to 35% of the originally issued aggregate
principal amount of the Notes, at a redemption price in cash equal to 109.25% of
the principal amount thereof, plus accrued and unpaid interest thereon, if any,
to the date of redemption; PROVIDED that not less than $178.8 million in
aggregate principal amount of Notes is outstanding following such redemption.
Notice of any such redemption must be given not later than 60 days after the
consummation of the Public Equity Offering.
As used in the preceding paragraph, a "Public Equity Offering" means
an underwritten public offering of Capital Stock (other than Redeeemable Capital
Stock) of the Company made on a primary basis by the Company pursuant to a
registration statement filed with and declared effective by the Securities and
Exchange Commission in accordance with the Securities Act of 1933, as amended,
resulting in net cash proceeds to the Company (after deducting any underwriting
discounts and commissions) of at least $50 million. "Capital Stock" means with
respect to any person, any and all shares, interests, participations, rights in
or other equivalents (however designated) of such person's capital stock, and
any rights (other than debt securities convertible into capital stock), warrants
or options exchangeable for or convertible into such capital stock. "Redeemable
Capital Stock" means any class or series of Capital Stock that, either by its
terms, by the terms of any security into which it is convertible or exchangeable
or by contract or
-4-
<PAGE>
otherwise, is or upon the happening of an event or passage of time would be,
required to be redeemed prior to the stated maturity of the Notes or is
redeemable at the option of the holder thereof at any time prior to the stated
maturity of the Notes, or is convertible into or exchangeable for debt
securities at any time prior to the stated maturity of the Notes.
c. Mandatory Redemption. The Company will not be required to make
any mandatory sinking fund payments in respect of the Notes.
6. Denominations, Transfer, Exchange.
The Notes are in registered form without coupons in minimum
denominations of $100,000 and in integral multiples of $1,000 in denominations
above $100,000. A Holder may transfer or exchange Notes in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay any taxes and fees
required by law or permitted by the Indenture.
7. Persons Deemed Owners.
The Holder of a Note may be treated as the owner of it for all
purposes.
8. Unclaimed Money.
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent will pay the money back to the
Company at its request. After that, Holders entitled to the money must look to
the Company for payment unless an abandoned property law designates another
person, and all liability of the Trustee and such Paying Agent with respect to
such money shall cease.
9. Discharge Prior to Maturity.
Subject to certain conditions, if the Company deposits with the
Trustee money or U.S. Government Obligations sufficient to pay principal of and
accrued interest on the Notes to maturity, the Company will be discharged (to
the extent provided in the Indenture) from the Indenture and the Notes.
-5-
<PAGE>
10. Amendment, Supplement, Waiver.
Subject to certain exceptions requiring the consent of the Holders of
each of the affected Notes, 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 affected by such amendment, supplement or
waiver, and any past default or compliance with any provision as to the Notes
may be waived with the consent of the Holders of a majority in principal amount
of the Notes then outstanding. Without the consent of any Holder, the Company
and the Trustee may amend or supplement the Indenture of the Notes to, among
other things, cure any ambiguity, defect or inconsistency or to provide that the
obligations of the Company hereunder may be represented solely in the records of
the Company in addition to or in place of the issue of Notes or to make any
change that does not materially adversely affect the rights of any Holder.
11. Restrictive Covenants.
The Notes are general unsecured obligations of the company limited to
the aggregate principal amount of $275,000,000. The Indenture does not limit
the Company from incurring unsecured Indebtedness other than the aggregate
principal amount of indebtedness to be issued pursuant to the Supplemental
Indenture. It does limit the ability of the Company and its subsidiaries to
grant certain security interests in their property without equally and ratably
securing the Notes and to engage in certain sales and leaseback transactions,
subject to certain important exceptions described therein. Once a year the
Company must report to the Trustee with respect to its compliance with such
limitations.
12. Successor Corporation.
When a successor corporation assumes all the obligations of its
predecessor under the Notes and the Indenture, the predecessor corporation will
be released from those obligations.
13. Defaults and Remedies.
An Event of Default is anyone of the following: (i) failure of the
Company to pay (whether or not prohibited by the subordination provisions (if
any)) interest for 30 days on, or the principal when due of, such series of Debt
Securities; (ii) failure to perform any other covenant contained in such Inden-
-6-
<PAGE>
ture for 30 days after notice; (iii) the occurrence of an event of default under
any instrument evidencing Indebtedness of the Company or its subsidiaries
entitling the holder or holders thereof to accelerate the payment of an
aggregate principal amount of $10,000,000 or more of such Indebtedness, which
event of default is not cured or waived in accordance with the provisions of
such instrument, or such Indebtedness is not discharged, within 30 days after
the receipt by the Company of notice from the Trustee or the holders of 25% in
principal amount of such series of Debt Securities then outstanding of such
event of default and requiring the Company to cause such event of default to be
cured or such Indebtedness to be discharged; and (iv) certain events of
bankruptcy, insolvency or reorganization. If an Event of Default occurs and is
continuing, the Trustee or the Holders of not less than 25% in principal amount
of the Notes then outstanding may declare all the Notes to be due and payable
immediately in accordance with Section 6.02 of the Indenture. Holders may not
enforce the Indenture or the Notes except as provided in the Indenture. The
Trustee may require security and indemnity satisfactory to it before it enforces
the Indenture or the Notes. Subject to certain limitations, Holders of a
majority in principal amount of the Notes then outstanding may direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders notice of any continuing default (except a default in payment of
principal or interest) if it determines that withholding notice is in their
interests.
14. Trustee Dealings with Company.
The Bank of New York, the Trustee under the Indenture, in its
individual or any other capacity, may make loans to, accept deposits from, and
perform services for the Company or its subsidiaries or Affiliates, and may
otherwise deal with the Company or its subsidiaries or Affiliates, as if it were
not Trustee.
15. No Recourse Against Others.
A past, present or future director, officer, employee, stockholder or
incorporator, as such, of the company or any successor corporation shall not
have any liability for any obligations of the Company 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 by accepting a Note waives and
released all such liability. The waiver and release are part of the
consideration for the issue of the Notes.
-7-
<PAGE>
16. Authentication.
This Note shall not be valid until the Trustee signs the certificate
of authentication at the end of this Note.
17. Copies of the Indenture.
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Requests may be made to:
Circus Circus Enterprises, Inc.
2880 Las Vegas Boulevard South
Las Vegas, Nevada 89109
Attention: General Counsel
18. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of a Note
or an assignee, such as: TEN COM (= 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. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company will cause CUSIP numbers to be
printed on the Notes as a convenience to the Holders of the Notes. No
representation is made as to the accuracy of such numbers as printed on the
Notes and reliance may be placed only on the other identification numbers
printed hereon.
(Signature Page To Follow)
-8-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal this 20th day of November 1998.
SIGNATURES
CIRCUS CIRCUS ENTERPRISES, INC.
By: Michael S. Ensign
------------------------------
Name: Michael S. Ensign
Title: Chairman of the Board
Chief Executive Officer
and Chief Operating Officer
By: Glenn Schaeffer
------------------------------
Name: Glenn Schaeffer
Title: President Chief Financial
Officer and Treasurer
(SEAL)
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes of the series designated "9 1/4% Senior
Subordinated Notes due 2005," pursuant to the Indenture.
THE BANK OF NEW YORK,
as Trustee
By: Michele Russo
------------------------------
Authorized Signatory
Date of Authentication: November 20, 1998
<PAGE>
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned hereby
sells, assigns and transfers to
PLEASE INSERT SOCIAL
SECURITY OR OTHER IDENTIFYING
NUMBER OF ASSIGNEE:
------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please Print or Typewrite Name and Address
including Zip Code of Assignee)
- --------------------------------------------------------------------------------
the within Note of ______________________ and ______________________ hereby does
irrevocably constitute and appoint
- --------------------------------------------------------------------------------
Attorney to transfer said Note on the books of the within-named Company with
full power of substitution in the premises.
Dated:
-------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTICE: The signature to this assignment must correspond with the name as it
appears on the first page of the within Note in every particular, without
alteration or enlargement or any change whatever.
Signature Guaranteed:
- -------------------------------------------
Authorized Signature
Signature guarantee should be made by a
guarantor institution participating in the
Securities Transfer Agents Medallion Program
or in such guarantee program acceptable to the
Trustee.
<PAGE>
REGISTERED PRINCIPAL AMOUNT: $75,000,000
CUSIP NO.: 172909 AK 9
NO. 2
CIRCUS CIRCUS ENTERPRISES, INC.
9 1/4% SENIOR SUBORDINATED
NOTE DUE 2005
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY ("DTC"), 55 WATER STREET, NEW YORK, NEW YORK TO THE
ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND SUCH
NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO., OR 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.
UNLESS AND UNTIL THIS NOTE IS EXCHANGED IN WHOLE OR IN PART FOR
SECURITIES IN CERTIFICATED FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A
WHOLE BY DTC TO A NOMINEE THEREOF OR BY A NOMINEE THEREOF TO DTC OR ANOTHER
NOMINEE OF DTC OR BY DTC OR ANY SUCH NOMINEE TO A SUCCESSOR OF DTC OR A NOMINEE
OF SUCH SUCCESSOR.
CIRCUS CIRCUS ENTERPRISES, INC., a Nevada corporation (the "Company,"
which term shall include any successor under the Indenture hereinafter referred
to), for value received, hereby promises to pay to CEDE & CO., or registered
assigns, the principal sum of SEVENTY FIVE MILLION DOLLARS ($75,000,000) on
December 1, 2005, and to pay interest thereon at the rate of 9-1/4% per annum,
until the entire principal amount hereof is paid or duly provided for. This
Note is one of a duly authorized series issued by the Company designated as the
"9-1/4% Senior Subordinated Notes due 2005" (herein called the "Notes").
-2-
<PAGE>
20. Interest.
The Company will pay interest semiannually on June 1 and December 1 of
each year (each, an "Interest Payment Date") commencing June 1, 1999. Interest
on the Notes will accrue from the most recent date to which interest has been
paid, unless the date hereof is a date to which interest has been paid, in which
case from the date of the Note, or, if no interest has been paid, from November
20, 1998. Notwithstanding the foregoing, when there is no existing default in
the payment of interest on the Notes, if the date hereof is after a Record Date,
as that term is defined below, and before the next succeeding Interest Payment
Date, this Note shall bear interest from such Interest Payment Date; PROVIDED,
HOWEVER, that if the Company shall default in the payment of interest due on
such Interest Payment Date, then this Note shall bear interest from the next
preceding Interest Payment Date to which interest has been paid, or, if no
interest has been paid on the Notes, from November 20, 1998. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
21. Method of Payment.
The Company will pay interest on the Notes (except defaulted interest)
to the persons who are registered Holders of Notes at the close of business on
the May 15 or November 15 preceding the June 1 or December 1, as the case may
be, on which the Interest Payment Date occurs (each, a "Record Date"). Holders
must surrender Notes to a Paying Agent to collect principal payments. The
Company will pay principal and interest in money of the United States that at
the time of payment is legal tender for payment of public and private debts.
However, the Company may pay principal and any interest by its check payable in
such money. It may mail an interest check to a holder's registered address.
22. Paying Agent and Registrar.
Initially, the Trustee will act as Paying Agent and Registrar. The
Company may change any Paying Agent, Registrar or co-registrar without notice.
The Company or any of its subsidiaries may act as Paying Agent, Registrar or
co-registrar.
-3-
<PAGE>
23. Indenture.
The Company issued the Notes under an Indenture dated as of
November 20, 1998 and a Supplemental Indenture dated as of November 20, 1998,
each between the Company and the Trustee (collectively, the "Indenture"). 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 (15 U.S. Code
77aaa-77bbbb), as amended, as in effect on the date of the Indenture. The Notes
are subject to all such terms and Holders are referred to the Indenture and such
Act for a statement of them. Terms used herein which are defined in the
Indenture shall have the respective meanings assigned to them in the Indenture.
24. Redemption.
a. Optional Redemption. The Notes will be redeemable, at the option
of the Company, (i) in whole but not in part, at any time prior to December 1,
2002, at a redemption price equal to 100% of the principal amount thereof plus
the Make-Whole Premium, together with accrued and unpaid interest thereon to the
applicable redemption date, and (ii) in whole or in part at any time on or after
December 1, 2002 at the redemption prices (expressed as percentages of principal
amount) set forth below, plus accrued and unpaid interest thereon to the
applicable redemption date, if redeemed during the twelve-month period beginning
on December 1 of each of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2002 . . . . . . . . . . . . . 104.625%
2003 . . . . . . . . . . . . . 102.313%
2004 and thereafter. . . . . . 100.000%
</TABLE>
"Make-Whole-Premium" means, with respect to any Note at any redemption
date, the excess, if any, of (a) the aggregate present value of the sum of the
principal amount and premium that would be payable on December 1, 2002 of such
Note and all remaining interest payments to and including December 1, 2002,
discounted on a semi-annual bond equivalent basis from December 1, 2002 to the
redemption date at a per annum interest rate equal to the sum of the Treasury
Yield (determined on the Business Day immediately preceding the date of such
redemption), plus 50 basis points, over (b) the aggregate principal amount of
the Note being redeemed.
-4-
<PAGE>
"Treasury Yield" means the yield to maturity at the time of
computation of United States Treasury securities with a constant maturity (as
compiled by and published in the most recent Federal Reserve Statistical Release
H.15 (519) which has become publicly available at least two business days prior
to the date fixed for redemption (or, if such Statistical Release is no longer
published, any publicly available source of similar data)) most nearly equal to
the then remaining average life of the Notes, PROVIDED that if the average life
of the Notes is not equal to the constant maturity of a United States Treasury
security for which a weekly average yield is given, the Treasury yield shall be
obtained by linear interpolation (calculated to the nearest one-twelfth of a
year) from the weekly average yields of United States Treasury securities for
which such yields are given, except that if the average life of the Notes is
less than one year, the weekly average yield on actually traded United States
Treasury securities adjusted to a constant maturity of one year shall be used.
b. Optional Redemption upon Public Equity Offering. On or prior to
December 1, 2001, the Company may, at its option, use the net proceeds of a
Public Equity Offering to redeem up to 35% of the originally issued aggregate
principal amount of the Notes, at a redemption price in cash equal to 109.25% of
the principal amount thereof, plus accrued and unpaid interest thereon, if any,
to the date of redemption; PROVIDED that not less than $178.8 million in
aggregate principal amount of Notes is outstanding following such redemption.
Notice of any such redemption must be given not later than 60 days after the
consummation of the Public Equity Offering.
As used in the preceding paragraph, a "Public Equity Offering" means
an underwritten public offering of Capital Stock (other than Redeeemable Capital
Stock) of the Company made on a primary basis by the Company pursuant to a
registration statement filed with and declared effective by the Securities and
Exchange Commission in accordance with the Securities Act of 1933, as amended,
resulting in net cash proceeds to the Company (after deducting any underwriting
discounts and commissions) of at least $50 million. "Capital Stock" means with
respect to any person, any and all shares, interests, participations, rights in
or other equivalents (however designated) of such person's capital stock, and
any rights (other than debt securities convertible into capital stock), warrants
or options exchangeable for or convertible into such capital stock. "Redeemable
Capital Stock" means any class or series of Capital Stock that, either by its
terms, by the terms of any security into which it is convertible or exchangeable
or by contract or
-5-
<PAGE>
otherwise, is or upon the happening of an event or passage of time would be,
required to be redeemed prior to the stated maturity of the Notes or is
redeemable at the option of the holder thereof at any time prior to the stated
maturity of the Notes, or is convertible into or exchangeable for debt
securities at any time prior to the stated maturity of the Notes.
c. Mandatory Redemption. The Company will not be required to make
any mandatory sinking fund payments in respect of the Notes.
25. Denominations, Transfer, Exchange.
The Notes are in registered form without coupons in minimum
denominations of $100,000 and in integral multiples of $1,000 in denominations
above $100,000. A Holder may transfer or exchange Notes in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay any taxes and fees
required by law or permitted by the Indenture.
26. Persons Deemed Owners.
The Holder of a Note may be treated as the owner of it for all
purposes.
27. Unclaimed Money.
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent will pay the money back to the
Company at its request. After that, Holders entitled to the money must look to
the Company for payment unless an abandoned property law designates another
person, and all liability of the Trustee and such Paying Agent with respect to
such money shall cease.
28. Discharge Prior to Maturity.
Subject to certain conditions, if the Company deposits with the
Trustee money or U.S. Government Obligations sufficient to pay principal of and
accrued interest on the Notes to maturity, the Company will be discharged (to
the extent provided in the Indenture) from the Indenture and the Notes.
-6-
<PAGE>
29. Amendment, Supplement, Waiver.
Subject to certain exceptions requiring the consent of the Holders of
each of the affected Notes, 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 affected by such amendment, supplement or
waiver, and any past default or compliance with any provision as to the Notes
may be waived with the consent of the Holders of a majority in principal amount
of the Notes then outstanding. Without the consent of any Holder, the Company
and the Trustee may amend or supplement the Indenture of the Notes to, among
other things, cure any ambiguity, defect or inconsistency or to provide that the
obligations of the Company hereunder may be represented solely in the records of
the Company in addition to or in place of the issue of Notes or to make any
change that does not materially adversely affect the rights of any Holder.
30. Restrictive Covenants.
The Notes are general unsecured obligations of the company limited to
the aggregate principal amount of $275,000,000. The Indenture does not limit
the Company from incurring unsecured Indebtedness other than the aggregate
principal amount of indebtedness to be issued pursuant to the Supplemental
Indenture. It does limit the ability of the Company and its subsidiaries to
grant certain security interests in their property without equally and ratably
securing the Notes and to engage in certain sales and leaseback transactions,
subject to certain important exceptions described therein. Once a year the
Company must report to the Trustee with respect to its compliance with such
limitations.
31. Successor Corporation.
When a successor corporation assumes all the obligations of its
predecessor under the Notes and the Indenture, the predecessor corporation will
be released from those obligations.
32. Defaults and Remedies.
An Event of Default is anyone of the following: (i) failure of the
Company to pay (whether or not prohibited by the subordination provisions (if
any)) interest for 30 days on, or the principal when due of, such series of Debt
Securities; (ii) failure to perform any other covenant contained in such Inden-
-7-
<PAGE>
ture for 30 days after notice; (iii) the occurrence of an event of default under
any instrument evidencing Indebtedness of the Company or its subsidiaries
entitling the holder or holders thereof to accelerate the payment of an
aggregate principal amount of $10,000,000 or more of such Indebtedness, which
event of default is not cured or waived in accordance with the provisions of
such instrument, or such Indebtedness is not discharged, within 30 days after
the receipt by the Company of notice from the Trustee or the holders of 25% in
principal amount of such series of Debt Securities then outstanding of such
event of default and requiring the Company to cause such event of default to be
cured or such Indebtedness to be discharged; and (iv) certain events of
bankruptcy, insolvency or reorganization. If an Event of Default occurs and is
continuing, the Trustee or the Holders of not less than 25% in principal amount
of the Notes then outstanding may declare all the Notes to be due and payable
immediately in accordance with Section 6.02 of the Indenture. Holders may not
enforce the Indenture or the Notes except as provided in the Indenture. The
Trustee may require security and indemnity satisfactory to it before it enforces
the Indenture or the Notes. Subject to certain limitations, Holders of a
majority in principal amount of the Notes then outstanding may direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders notice of any continuing default (except a default in payment of
principal or interest) if it determines that withholding notice is in their
interests.
33. Trustee Dealings with Company.
The Bank of New York, the Trustee under the Indenture, in its
individual or any other capacity, may make loans to, accept deposits from, and
perform services for the Company or its subsidiaries or Affiliates, and may
otherwise deal with the Company or its subsidiaries or Affiliates, as if it were
not Trustee.
34. No Recourse Against Others.
A past, present or future director, officer, employee, stockholder or
incorporator, as such, of the company or any successor corporation shall not
have any liability for any obligations of the Company 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 by accepting a Note waives and
released all such liability. The waiver and release are part of the
consideration for the issue of the Notes.
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<PAGE>
35. Authentication.
This Note shall not be valid until the Trustee signs the certificate
of authentication at the end of this Note.
36. Copies of the Indenture.
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Requests may be made to:
Circus Circus Enterprises, Inc.
2880 Las Vegas Boulevard South
Las Vegas, Nevada 89109
Attention: General Counsel
37. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of a Note
or an assignee, such as: TEN COM (= 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).
38. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company will cause CUSIP numbers to be
printed on the Notes as a convenience to the Holders of the Notes. No
representation is made as to the accuracy of such numbers as printed on the
Notes and reliance may be placed only on the other identification numbers
printed hereon.
(Signature Page To Follow)
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal this 20th day of November 1998.
SIGNATURES
CIRCUS CIRCUS ENTERPRISES, INC.
By: Michael S. Ensign
-----------------------------------
Name: Michael S. Ensign
Title: Chairman of the Board,
Chief Executive Officer and
Chief Operating Officer
By: Glenn Schaeffer
-----------------------------------
Name: Glenn Schaeffer
Title: President Chief financial
Officer and Treasurer
(SEAL)
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes of the series designated "9 1/4% Senior
Subordinated Notes due 2005," pursuant to the Indenture.
THE BANK OF NEW YORK,
as Trustee
By: Michele Russo
-----------------------------------
Authorized Signatory
Date of Authentication: November 20, 1998
<PAGE>
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned hereby
sells, assigns and transfers to
PLEASE INSERT SOCIAL
SECURITY OR OTHER IDENTIFYING
NUMBER OF ASSIGNEE:
----------------------------------------------------------
- --------------------------------------------------------------------------------
(Please Print or Typewrite Name and Address
including Zip Code of Assignee)
- --------------------------------------------------------------------------------
the within Note of _______________________ and _______________________ hereby
does irrevocably constitute and appoint
- --------------------------------------------------------------------------------
Attorney to transfer said Note on the books of the within-named Company with
full power of substitution in the premises.
Dated:
-------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTICE: The signature to this assignment must correspond with the name as it
appears on the first page of the within Note in every particular, without
alteration or enlargement or any change whatever.
Signature Guaranteed:
- -------------------------------------
Authorized Signature
Signature guarantee should be made by a
guarantor institution participating in the
Securities Transfer Agents Medallion Program
or in such guarantee program acceptable to the
Trustee.
<PAGE>
EXHIBIT 10(a)
THIS IS COUNTERPART NO. ____ OF 18 SERIALLY NUMBERED MANUALLY EXECUTED
COUNTERPARTS. TO THE EXTENT THAT THIS DOCUMENT CONSTITUTES CHATTEL PAPER UNDER
THE UNIFORM COMMERCIAL CODE, NO SECURITY INTEREST IN THIS DOCUMENT MAY BE
CREATED THROUGH THE TRANSFER AND POSSESSION OF ANY COUNTERPART OTHER THAN
COUNTERPART NO. 1.
---------------------------------------------------------------------------
LEASE INTENDED AS SECURITY
Dated as of October 30, 1998
among
CIRCUS CIRCUS LEASING, INC.,
as Lessee
CIRCUS CIRCUS ENTERPRISES, INC.,
as Guarantor
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
as Trustee
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Administrative Agent and Lead Arranger
SOCIETE GENERALE FINANCIAL CORPORATION,
as Documentation Agent
PNC LEASING CORP,
as Syndication Agent
THE BANK OF NOVA SCOTIA,
as Managing Agent
and
THE PERSONS LISTED ON SCHEDULE I HERETO,
as Certificate Purchasers
<PAGE>
- --------------------------------------------------------------------------
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<PAGE>
TABLE OF CONTENTS
------------------
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I DEFINITIONS AND INTERPRETATION; ACCOUNTING TERMS..........................2
1.1 Definitions and Interpretation............................................2
1.2 Accounting Terms; Rounding...............................................27
ARTICLE II EFFECTIVENESS; ACQUISITION AND LEASE; GENERAL
PROVISIONS...............................................................28
2.1 Effectiveness of this Lease..............................................28
2.2 Fundings; Payment of Purchase Price; Failure of a Certificate
Purchaser to Fund......................................................31
2.3 Application of Funds; Sale and Lease of Equipment........................33
2.4 Time and Place of Delivery Dates.........................................34
2.5 Postponement of Delivery Date............................................34
2.6 Nature of Transaction....................................................35
2.7 Replacements.............................................................35
2.8 NO WARRANTY..............................................................35
2.9 Legal and Tax Representation.............................................36
2.10 Computations; Conclusive Determinations..................................37
ARTICLE III CONDITIONS TO DELIVERY DATES.............................................37
3.1 Delivery Date Notice; Invoices...........................................37
3.2 Bill of Sale or Purchase Order Assignment................................38
3.3 Lease Supplements........................................................38
3.4 Financing Statements; Supplemental Searches; Consents and Waivers........38
3.5 Payment of Impositions...................................................39
3.6 No Casualty..............................................................39
3.7 Representations and Warranties True; Absence of Defaults.................39
3.8 Sublease Documents.......................................................39
3.9 Consents and Approval....................................................40
3.10 Insurance................................................................40
3.11 Proceedings Satisfactory, etc............................................40
3.12 Supplemental Appraisals..................................................41
3.13 Further Assurances, etc..................................................41
3.14 Transaction Costs........................................................41
3.15 Reduction of Commitment - Guarantor Loan Agreement.......................41
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<PAGE>
ARTICLE IV LEASE TERM, RENT AND PAYMENT.............................................42
4.1 Lease Term...............................................................42
4.2 Lease Renewal............................................................42
4.3 Rent Payments............................................................42
4.4 Place and Manner of Payment..............................................42
4.5 Net Lease................................................................43
4.6 Overdue Amounts..........................................................43
4.7 No Termination or Abatement..............................................44
ARTICLE V POSSESSION, ASSIGNMENT, USE, MAINTENANCE AND
SUBSTITUTION OF EQUIPMENT................................................44
5.1 Possession and Use of Equipment; Compliance with Laws....................44
5.2 Subleases and Assignments................................................44
5.3 Maintenance..............................................................46
5.4 Alterations, Modifications, etc..........................................47
5.5 Optional Equipment Substitutions.........................................49
5.6 Liens....................................................................50
ARTICLE VI RISK OF LOSS; INSURANCE..................................................50
6.1 Casualty.................................................................50
6.2 Insurance Coverages......................................................53
6.3 Insurance Certificates...................................................54
ARTICLE VII INDEMNIFICATION..........................................................55
7.1 General Indemnification..................................................55
7.2 General Tax Indemnity....................................................57
7.3 Excessive Use Indemnity..................................................59
7.4 Claims Procedure.........................................................60
7.5 Gross Up.................................................................61
7.6 Increased Commitment Costs...............................................61
7.7 Eurodollar Costs and Related Matters.....................................62
ARTICLE VIII EVENTS OF DEFAULT; REMEDIES..............................................66
8.1 Events of Default........................................................66
8.2 Remedies.................................................................69
8.3 Sale of Collateral.......................................................69
8.4 Application of Proceeds..................................................70
8.5 Right to Perform Obligations.............................................70
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<PAGE>
8.6 Power of Attorney........................................................70
8.7 Remedies Cumulative; Consents............................................71
8.8 Reconveyance of Title....................................................71
8.9 Purchase After Event of Default..........................................71
ARTICLE IX FEES.....................................................................72
9.1 Commitment Fees..........................................................72
9.2 Facility Fees............................................................72
9.3 Agency Fees..............................................................72
9.4 Supplemental Fees........................................................72
9.5 Compensation of Trustee..................................................73
ARTICLE X DISTRIBUTIONS TO CERTIFICATE PURCHASERS..................................73
10.1 Pro Rata Distribution....................................................73
10.2 Timing of Distributions..................................................73
ARTICLE XI LEASE TERMINATION........................................................73
11.1 Lessee's Options.........................................................73
11.2 Election of Options......................................................74
11.3 Sale Option Procedures...................................................75
11.4 Appraisal................................................................75
11.5 Early Termination........................................................75
11.6 Procedures for Purchase Option and Early Termination.....................76
ARTICLE XII REPRESENTATIONS AND WARRANTIES...........................................76
12.1 Representations and Warranties of Lessee.................................76
12.2 Representations and Warranties of Certificate Purchasers.................82
12.3 Representations and Warranties of Trustee................................84
12.4 Representations and Warranties of Administrative Agent...................85
ARTICLE XIII COVENANTS................................................................87
13.1 Covenants of Lessee......................................................87
13.2 Covenants of Guarantor...................................................91
13.3 Covenants of Trustee.....................................................97
13.4 Covenants of Certificate Purchasers......................................98
13.5 Trust Agreement..........................................................98
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<PAGE>
ARTICLE XIV ASSIGNMENT BY CERTIFICATE PURCHASERS; PARTICIPATIONS.....................99
14.1 Assignments..............................................................99
14.2 Participations..........................................................101
14.3 Miscellaneous Provisions Regarding Assignments and Participations.......102
ARTICLE XV OWNERSHIP AND GRANT OF SECURITY INTEREST................................103
15.1 Grant of Security Interest..............................................103
15.2 Retention of Proceeds...................................................103
ARTICLE XVI RETURN OF EQUIPMENT.....................................................104
ARTICLE XVII ADMINISTRATIVE AGENT....................................................104
17.1 Authorization and Action................................................104
17.2 Administrative Agent's Reliance, Etc....................................105
17.3 Bank of America and Affiliates..........................................105
17.4 Certificate Purchaser Credit Decision...................................106
17.5 Indemnification.........................................................106
17.6 Successor Administrative Agent..........................................107
ARTICLE XVIII MISCELLANEOUS...........................................................107
18.1 Cumulative Remedies; No Waiver..........................................107
18.2 Costs, Expenses and Taxes...............................................108
18.3 Nature of Certificate Purchasers' Obligations...........................108
18.4 Survival of Representations and Warranties..............................108
18.5 Notices.................................................................109
18.6 Execution of Operative Documents........................................109
18.7 Confidentiality.........................................................109
18.8 Integration.............................................................110
18.9 Governing Law...........................................................110
18.10 Severability of Provisions..............................................110
18.11 Headings................................................................110
18.12 Time of the Essence.....................................................111
18.13 Gaming Boards...........................................................111
18.14 Release of Lien.........................................................111
18.15 Brokers.................................................................111
18.16 Modification............................................................111
18.17 Consideration for Consents to Waivers and Amendments....................112
18.18 Sharing of Setoffs......................................................112
-iv-
<PAGE>
18.19 Waiver of Right to Trial by Jury........................................113
18.20 Purported Oral Amendments...............................................113
18.21 Limitations.............................................................113
</TABLE>
-v-
<PAGE>
SCHEDULES
Schedule I List of Certificate Purchasers and Commitments
Schedule II Addresses for Payment and Other Communications to
Creditors
Schedule III General Description of Categories of Equipment
Schedule IV Filings and Recordings
Schedule V Description of Purchase Contracts
Schedule VI Capital Rent Amortization
Schedule VII Disclosure Schedule
EXHIBITS
Exhibit A Form of Assignment and Acceptance
Exhibit B Form of Bill of Sale
Exhibit C Form of Consent to Sublease Assignment
Exhibit D Form of Delivery Date Notice
Exhibit E Form of Guaranty
Exhibit F Form of Lease Supplement
Schedule I to
Lease Supplement - Description of Equipment and Purchase Price for Items of
Equipment
Schedule II to
Lease Supplement - Aggregate Purchase Price and Capital Rent Payment
Schedule
Exhibit G-1 Form of Officer's Certificate of Guarantor
Exhibit G-2 Form of Officer's Certificate of Lessee
Exhibit G-3 Form of Officer's Certificate of Sublessee
Exhibit H-1 Form of Opinion of Special Counsel to Lessee, Guarantor
and Sublessees
Exhibit H-2 Form of Opinion of Special Nevada Counsel to Lessee,
Guarantor and Sublessees
Exhibit H-3 Form of Opinion of Special Counsel to Trustee
Exhibit I Form of Purchase Order Assignment
Exhibit J-1 Form of Secretary's Certificate of Guarantor
Exhibit J-2 Form of Secretary's Certificate of Lessee
Exhibit J-3 Form of Secretary's Certificate of Sublessee
Exhibit K Form of Sublease
Exhibit L Form of Sublease Assignment
Exhibit M Form of Trust Agreement
-vi-
<PAGE>
LEASE INTENDED AS SECURITY
This LEASE INTENDED AS SECURITY (as amended and supplemented from time
to time, this "LEASE") is entered into as of October 30, 1998 among: CIRCUS
CIRCUS LEASING, INC., a Nevada corporation ("LESSEE"), with its principal office
at 2880 Las Vegas Boulevard South, Las Vegas, Nevada 89109; CIRCUS CIRCUS
ENTERPRISES, INC., a Nevada corporation ("GUARANTOR"); FIRST SECURITY BANK,
NATIONAL ASSOCIATION, a national banking association ("FIRST SECURITY"), not in
its individual capacity (EXCEPT as specifically set forth herein) but solely in
its capacity as trustee under the Trust Agreement referred to below ("TRUSTEE");
the Persons listed in SCHEDULE I hereto as certificate purchasers (each
individually a "Certificate Purchaser" and collectively the "CERTIFICATE
PURCHASERS", PROVIDED that no such reference shall be deemed to refer to any
Person who is not a holder of a Certificate at the date of determination, OTHER
THAN for purposes of ARTICLE VII hereof); SOCIETE GENERALE FINANCIAL
CORPORATION, as Documentation Agent; PNC LEASING CORP, as Syndication Agent; THE
BANK OF NOVA SCOTIA, as Managing Agent; and BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, not in its individual capacity (EXCEPT as otherwise
expressly provided herein), but solely as Administrative Agent for the
Certificate Purchasers and as Lead Arranger.
R E C I T A L S:
WHEREAS, on each Delivery Date, Lessee or a Sublessee, as the case may
be, will cause to be transferred to Trustee, for the benefit of the Certificate
Purchasers, legal title to items of Equipment generally described on SCHEDULE
III to this Lease, and Trustee, for the benefit of the Certificate Purchasers,
will purchase such Equipment directly from the Vendors, Lessee or such
Sublessee, as the case may be;
WHEREAS, upon the transfer of title to the Equipment on each Delivery
Date, Trustee, on behalf of the Certificate Purchasers, will lease such
Equipment to Lessee and Lessee will lease such Equipment (on a "lease intended
as security" basis) from Trustee, for the benefit of the Certificate Purchasers,
pursuant to the terms of this Lease and one or more Lease Supplements, each such
Lease Supplement being substantially in the form of EXHIBIT F hereto, upon the
terms and conditions hereinafter set forth;
WHEREAS, in connection with one or more Lease Supplements, Lessee may
enter into a Sublease substantially in the form of EXHIBIT K to this Lease for
the purpose of subleasing to a Sublessee (on a "true lease" basis) the Equipment
described therein;
WHEREAS, each Certificate Purchaser shall hold an undivided interest in
the Equipment equal to such Certificate Purchaser's Investment Percentage, which
interest shall be represented by a Certificate registered in such Certificate
Purchaser's name; and
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<PAGE>
WHEREAS, Lessee's obligation under the Operative Documents will be
guaranteed by Guarantor pursuant to the terms of the Guaranty;
NOW, THEREFORE, in consideration of the mutual terms and conditions
herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION; ACCOUNTING TERMS
------------------------------------------------
1.1 DEFINITIONS AND INTERPRETATION. In this Lease and each other
Operative Document, unless the context otherwise requires:
(a) any term defined below by reference to another instrument or
document shall continue to have the meaning ascribed thereto whether or not
such other instrument or document remains in effect;
(b) words importing the singular include the plural and vice versa;
(c) words importing a gender include any gender;
(d) a reference to a part, clause, section, article, exhibit or
schedule is a reference to a part, clause, section and article of, and
exhibit and schedule to, such Operative Document;
(e) a reference to any statute, regulation, proclamation, ordinance
or law includes all statutes, regulations, proclamations, ordinances or
laws amending, supplementing, supplanting, varying, consolidating or
replacing them, and a reference to a statute includes all regulations,
proclamations and ordinances issued or otherwise applicable under that
statute;
(f) a reference to a document includes any amendment or supplement
to, or replacement or novation of, that document;
(g) a reference to a party to a document includes that party's
successors and permitted assigns;
(h) a reference to "including" means including without limiting the
generality of any description preceding such term and for purposes hereof
the rule of EJUSDEM GENERIS shall not be applicable to limit a general
statement followed by or referable to an enumeration of specific matters to
matters similar to those specifically mentioned; and
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<PAGE>
(i) all Exhibits and Schedules to this Lease, either as originally
existing or as the same may from time to time be supplemented, modified or
amended, are incorporated herein by this reference. A matter disclosed on
any Schedule shall be deemed disclosed on all Schedules.
Further, each of the parties to the Operative Documents and their
counsel have reviewed and revised the Operative Documents, or requested
revisions thereto, and the usual rule of construction that any ambiguities are
to be resolved against the drafting party shall be inapplicable in construing
and interpreting the Operative Documents.
"ACCRUAL RENT" means, with respect to each Rent Period, an amount equal
to interest accrued on the Lease Balance outstanding during such period at the
Interest Rate.
"ACTUAL KNOWLEDGE" means, (a) with respect to Lessee, Guarantor or any
Sublessee, the actual knowledge of any Senior Officer of such Person, and (b)
with respect to any other Person, the actual knowledge of any Responsible
Official of such Person, in any such case, without any specific inquiry, and the
term "Actual Knowledge" shall in no event include any knowledge of any other
individual that is not a Senior Officer or Responsible Official, as applicable,
if such knowledge is not shared by the applicable individual with such Senior
Officer or Responsible Official, as the case may be.
"ADMINISTRATIVE AGENT" means Bank of America, when acting in its
capacity as Administrative Agent under any of the Operative Documents, or any
successor Administrative Agent.
"AFFECTED EQUIPMENT VALUE FRACTION" means, with respect to any
item of Equipment, a fraction determined as of any Payment Date the numerator of
which is the Purchase Price for such item and the denominator of which is the
aggregate Purchase Price of all Equipment then subject to this Lease, including
such item.
"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); PROVIDED that, in any
event, any Person that owns, directly or indirectly, 10% or more of the
securities having ordinary voting power for the election of directors or other
governing body of a corporation that has more than 100 record holders of such
securities, or 10% or more of the partnership or other ownership interests of
any other Person that has more than 100 record holders of such interests, will
be deemed to control such corporation or other Person.
"AGENTS" means, collectively, those Persons listed in the preamble to
this Lease as "Documentation Agent," "Syndication Agent," "Managing Agent" and
"Administrative
-3-
<PAGE>
Agent". No such Agent shall have any rights, duties or obligations under this
Agreement or the other Operative Documents EXCEPT, in the case of Administrative
Agent only, as specifically identified herein or therein.
"AGGREGATE COMMITMENT Amount" means $200,000,000.
"APPLICABLE LAWS" means all existing and future applicable laws
(including Gaming Laws and Environmental Laws), rules, regulations, statutes,
treaties, codes, ordinances, permits, certificates, orders and licenses of and
interpretations by, any Governmental Agency, and applicable judgments, decrees,
injunctions, writs, orders or like action of any court, arbitrator or other
administrative, judicial or quasi-judicial tribunal or agency of competent
jurisdiction (including those pertaining to health, safety or the environment),
to which Lessee or any Equipment is subject.
"APPLICABLE PERCENTAGE" means, with respect to each Lease Supplement as
of the end of the Base Term and each Renewal Term, the percentage set forth
opposite each such date in Schedule II to such Lease Supplement.
"APPLICABLE PERCENTAGE AMOUNT" means, as of any date of determination,
the sum of the products obtained by multiplying the aggregate original Purchase
Price of each item of Equipment then subject to this Lease by the Applicable
Percentage set forth in Schedule II to the Lease Supplement covering such
Equipment for the period in which such date occurs.
"APPRAISAL" means each appraisal of all or any part of the
Equipment from an Appraiser received pursuant to SECTIONS 2.1(g) and 3.12.
"APPRAISED VALUE" means, with respect to any item of Equipment
or System, as the case may be, as of any date of determination, the Fair Market
Value of such item or System, as applicable, on the specified date set forth in
the Appraisal therefor.
"APPRAISER" means The Rice Group, or such other Person as may
be selected by the Required Certificate Purchasers.
"ASSIGNMENT AND ACCEPTANCE" is defined in Section 14.1.
"AUTHORIZED TRUSTEE OFFICER" means any officer in the
corporate trust administration department of Trustee, including any Vice
President, Assistant Vice President, Secretary, Assistant Secretary or any other
officer of Trustee customarily performing functions similar to those performed
by any of the above designated officers and also, with respect to a particular
matter, any officer to whom such matter is referred because of such officer's
knowledge of and familiarity with the particular subject.
"BANK OF AMERICA" means Bank of America National Trust and
Savings Association, its successors and assigns.
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<PAGE>
"BANKRUPTCY CODE" means the Bankruptcy Reform Act of 1978, as amended
from time to time.
"BASE RATE" means, for any day during any Rent Period, the rate per
annum (rounded upward, if necessary, to the next 1/100 of 1%) equal to the
HIGHER OF (a) the Reference Rate in effect on such date (calculated on the basis
of a year of 365 or 366 days and the actual number of days elapsed) and (b) the
Federal Funds Rate in effect on such date (calculated on the basis of a year of
360 days and the actual number of days elapsed) PLUS 1/2 of 1% (50 basis
points).
"BASE RATE INVESTMENT" is defined in SECTION 7.7(a).
"BASE TERM" is defined in SECTION 4.1.
"BASIC RENT" is defined in SECTION 4.3.
"BILL(S) OF SALE" is defined in SECTION 3.2.
"BOARD OF DIRECTORS" means, with respect to a corporation, either the
board of directors or any duly authorized committee of that board of directors
which, pursuant to the by-laws of such corporation, has the same authority as
that board of directors as to the matter at issue.
"BUSINESS DAY" means (a) any Monday, Tuesday, Wednesday, Thursday or
Friday OTHER THAN a day on which banks are authorized or required to be closed
in California, Nevada, Utah or New York and (b) relative to the payment of Rent
determined by reference to the Eurodollar Rate, any day which is a Business Day
under CLAUSE (a) and is also a day on which dealings in Dollars are carried on
in the Designated Eurodollar Market.
"CAPITAL RENT" means, for each Payment Date during the Base Term and
each Renewal Term, that portion of the installment of Basic Rent payable on such
Payment Date designated as Capital Rent on Schedule II to each Lease Supplement.
"CASUALTY" means as to an item of Equipment or System, as the case may
be, an event or occurrence in which such item of Equipment or System, as
applicable, is (a) lost, stolen, totally destroyed, irreparably damaged from any
cause whatsoever, damaged beyond economic repair, or rendered permanently unfit
for normal use for any reason whatsoever (OTHER THAN obsolescence), (b) damaged
so as to result in an insurance settlement on the basis of a total loss or a
constructive or compromised total loss or taken or requisitioned by
Condemnation, or (c) as a result of any Applicable Laws or other action by any
Governmental Agency, the use of such item of Equipment or System, as applicable,
in the normal course of Lessee's (or any applicable Sublessee's) business shall
have been prohibited, directly or indirectly, for a period equal to the lesser
of one hundred eighty (180) consecutive days and the remaining Lease Term.
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<PAGE>
"CASUALTY AMOUNT" means, with respect to any item of Equipment or
System, as the case may be, as of any date specified for payment thereof, a
portion of the Lease Balance equal to the product obtained by multiplying the
entire outstanding Lease Balance by the Affected Equipment Value Fraction of
such item or System, as applicable, PLUS all accrued and unpaid Accrual Rent
accrued on such portion of the Lease Balance to the date of payment, PLUS all
Supplemental Rent (if any) then due and owing.
"CASUALTY RECOVERIES" is defined in SECTION 6.1.
"CASUALTY SETTLEMENT DATE" is defined in SECTION 6.1(a).
"CERTIFICATE" is defined in SECTION 2.1(a) of the Trust Agreement.
"CERTIFICATE PURCHASER" is defined in the introductory paragraph.
"CERTIFICATE PURCHASER AMOUNT" means at any time of determination, the
aggregate amount funded by a Certificate Purchaser under SECTION 2.2 of this
Lease MINUS the aggregate amount of all distributions of invested capital
(including a Certificate Purchaser's pro rata share of Capital Rent) actually
received by such Certificate Purchaser.
"CERTIFICATE REGISTER" is defined in SECTION 2.8(a) of the Trust
Agreement.
"CHANGE IN CONTROL" means (a), with respect to Guarantor, any
transaction or series of related transactions (i) in which any Unrelated Person
or two or more Unrelated Persons acting in concert acquire beneficial ownership
(within the meaning of Rule 13d-3(a)(1) under the Securities Exchange Act,
directly or indirectly, of 50% or more of the Common Stock, (ii) in which any
such Unrelated Person or Unrelated Persons acting in concert acquire beneficial
ownership of 20% or more of the Common Stock subsequent to the Closing Date and
(A) at the first election for the Board of Directors of Guarantor subsequent to
such acquisition, individuals who prior to such election were directors of
Guarantor cease for any reason (OTHER THAN death, incapacity or disqualification
under any Gaming Law) to constitute 50% or more of the Board of Directors of
Guarantor or (B) if the terms of all directors of Guarantor do not expire at the
date of such first election, then at the second election for the Board of
Directors of Guarantor subsequent to such acquisition, individuals who prior to
such first election were directors of Guarantor cease for any reason (OTHER THAN
death, incapacity or disqualification under any Gaming Law) to constitute 50% or
more of the Board of Directors of Guarantor or (iii) constituting a "change in
control" or other similar occurrence under documentation evidencing or governing
any indebtedness of Guarantor of $25,000,000 or more which results in an
obligation of Guarantor to prepay, purchase, offer to purchase, redeem or
defease such Indebtedness, and (b), with respect to Lessee, the failure at any
time of Guarantor to own, directly or indirectly, at least 78% of the issued and
outstanding capital stock of Lessee.
"CLAIMS" means liabilities, obligations, damages, losses, demands,
penalties, fines, claims, actions, suits, judgments, settlements, utility
charges, costs, fees, expenses and
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disbursements (including legal fees (including allocated time charges of
internal counsel) and expenses and costs of investigation which, in the case of
counsel or investigators retained by an Indemnitee, shall be reasonable) of any
kind and nature whatsoever.
"CLOSING DATE" is defined in SECTION 2.1.
"CODE" means the Internal Revenue Code of 1986, as amended or replaced
and in effect from time to time.
"COLLATERAL" means all of Lessee's right, title and interest in and to
each of the following, however arising and whether now existing or hereafter
acquired or arising:
(a) the Equipment (whether part of a System or otherwise),
including all Parts thereof, accessions thereto and replacements and
substitutions therefor;
(b) the Intellectual Property Collateral;
(c) all contracts necessary to purchase, operate and maintain the
Equipment;
(d) any rights to a rebate, offset or other assignment, warranty or
service under a purchase order, invoice or purchase agreement with any
manufacturer of any item of Equipment and any contractor of a System;
(e) the Subleases and all rental payments and other amounts due and
to become due thereunder;
(f) any cash account maintained by Trustee pursuant to the terms of
the Operative Documents;
(g) all books, manuals, logs, records, writings, data bases and
other similar information maintained by Lessee in connection with any of
the foregoing; and
(h) all products, accessions, rents, issues, profits, returns,
income and proceeds of and from any and all of the foregoing Collateral
(including proceeds which constitute property of the types described in
CLAUSES (a), (b), (c), (d), (e), (f) and (g) above and, to the extent not
otherwise included, all payments under insurance (whether or not Trustee or
any Certificate Purchaser is the loss payee thereof), or any indemnity,
warranty or guaranty, payable by reason of loss or damage to or otherwise
with respect to any of the foregoing Collateral).
"COMMITMENT" means, as to any Certificate Purchaser, such Certificate
Purchaser's obligation to make amounts available during the Commitment Period
for the
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acquisition of title to the Equipment, in an aggregate amount not to exceed at
any one time outstanding such Certificate Purchaser's Commitment Amount.
"COMMITMENT AMOUNT" means, with respect to each Certificate Purchaser,
the amount set forth opposite such Certificate Purchaser's name on SCHEDULE I,
as such amount may be revised from time to time in accordance with SECTION 2.2
or 14.1.
"COMMITMENT FEE" is defined in SECTION 9.1.
"COMMITMENT FEE RATE" means, for each Pricing Period occurring during
the Commitment Period, the rate set forth below (expressed in basis points)
opposite the Pricing Level for that Pricing Period:
<TABLE>
<CAPTION>
Pricing Level Commitment Fee Rate
------------- -------------------
<S> <C>
I 8.00
II 10.00
III 12.50
IV 15.00
V 17.50
VI 25.00;
</TABLE>
PROVIDED, HOWEVER, that if the "Commitment Fee Rate" (as such term is defined in
the Guarantor Loan Agreement or in any Replacement Loan Agreement) is at any
time increased from that rate in effect as of the date hereof, the Commitment
Fee Rate set forth above shall be increased by a like amount for each relevant
Pricing Level.
"COMMITMENT PERCENTAGE" means, as to any Certificate Purchaser, at any
date of determination, the percentage of the aggregate unfunded Commitment
represented by such Certificate Purchaser's unfunded Commitment.
"COMMITMENT PERIOD" means the period commencing on (and including) the
Closing Date and ending on (and including) the EARLIEST OF (a) June 30, 1999,
(b) the Delivery Date specified by Lessee to be the final Delivery Date under
the Lease and (c) the date on which the Commitments shall have been fully
utilized.
"COMMON STOCK" means the common stock of Guarantor or its successor by
merger.
"COMPUTER SOFTWARE COLLATERAL" means:
(a) all software programs (including both source code, object code
and all related applications and data files), whether now owned, licensed
or leased or hereafter acquired by Lessee or any Sublessee, designed for
use on any computers and electronic
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data processing hardware constituting part of the Equipment and necessary
for the operation and maintenance of the Equipment; PROVIDED that with
respect to any licensed or leased software program the foregoing shall be
included in "Computer Software Collateral" only to the extent that a grant
of a security interest is not prohibited by the terms of the license or
lease;
(b) all firmware associated therewith;
(c) all documentation (including flow charts, logic diagrams,
manuals, guides and specifications) with respect to such hardware, software
and firmware described in the preceding CLAUSES (a) and (b); and
(d) all rights with respect to all of the foregoing, including any
and all copyrights, licenses, options, warranties, service contracts,
program services, test rights, maintenance rights, support rights,
improvement rights, renewal rights and indemnifications and any
substitutions, replacements, additions or model conversions of any of the
foregoing.
"CONDEMNATION" means any condemnation, requisition, confiscation,
seizure or other taking or sale of the use, access, occupancy, easement rights
or title to the Equipment or any part thereof, wholly or partially (temporarily
or permanently), by or on account of any actual or threatened eminent domain
proceeding or other taking of action by any Person having the power of eminent
domain or otherwise, or any transfer made in lieu of any such proceeding or
action. A Condemnation shall be deemed to have occurred on the earliest of the
dates that use, occupancy or title vests in the condemning authority.
"CONSENT TO SUBLEASE ASSIGNMENT" means a Consent to Sublease Assignment
substantially in the form of EXHIBIT C to this Lease, to be delivered by the
applicable Sublessee to Trustee pursuant to the provisions hereof.
"CONTRACTUAL OBLIGATION" means, as to any Person, any provision of any
outstanding security 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.
"CREDITORS" means, collectively, Trustee, Administrative Agent, each
Certificate Purchaser and, where the context requires, any one or more of them.
"DEBT RATING" means, as of each date of determination, the most
creditworthy credit rating, actual or implicit, assigned to (i) senior unsecured
Indebtedness of Guarantor by S&P, (ii) senior unsecured Indebtedness of
Guarantor by Moody's or (iii) in the event such a credit rating is issued, the
bank debt credit rating assigned to the Indebtedness evidenced by the Guarantor
Loan Agreement by Moody's or S&P, whichever is higher.
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<PAGE>
"DEBTOR RELIEF LAWS" means the Bankruptcy Code and all other applicable
liquidation, conservatorship, bankruptcy, moratorium, rearrangement,
receivership, insolvency, reorganization, or similar debtor relief laws from
time to time in effect affecting the rights of creditors generally.
"DEFAULT" means any event that, with the giving of any applicable
notice or passage of time, or both, would be an Event of Default.
"DEFAULT RATE" is defined in SECTION 4.6.
"DELIVERY DATE" means each of the actual dates on or prior to the last
day of the Commitment Period on which the transactions contemplated in ARTICLE
II are completed.
"DELIVERY DATE NOTICE" is defined in SECTION 3.1.
"DESIGNATED EURODOLLAR MARKET" means (a) the London Eurodollar Market,
or (b) if prime banks in the London Eurodollar Market are at the relevant time
not accepting deposits of Dollars or if Administrative Agent determines that the
London Eurodollar Market does not represent at the relevant time the effective
pricing to the Certificate Purchasers for deposits of Dollars in the London
Eurodollar Market, the Cayman Islands Eurodollar Market or (c) if prime banks in
the Cayman Islands Eurodollar Market are at the relevant time not accepting
deposits of Dollars or if Administrative Agent determines that the Cayman
Islands Eurodollar Market does not represent at the relevant time the effective
pricing to the Certificate Purchasers for deposits of Dollars in the Cayman
Islands Eurodollar Market, such other Eurodollar Market as may from time to time
be selected by Administrative Agent with the approval of Lessee and the Required
Certificate Purchasers.
"DOLLAR" and the sign "$" mean lawful money of the United States of
America.
"ELIGIBLE ASSIGNEE" means (a) another Certificate Purchaser, (b) with
respect to any Certificate Purchaser, any Affiliate of that Certificate
Purchaser and (c) any commercial bank having a combined capital and surplus of
$50,000,000 or more that is (i) organized under the Applicable Laws of the
United States of America or any State thereof or (ii) organized under the
Applicable 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 14.1(d) at the time of any assignment pursuant to SECTION 14.1.
"ENVIRONMENTAL LAWS" means and includes the Resource Conservation and
Recovery Act of 1976, the Comprehensive Environmental Response, Compensation and
Liability Act (CERCLA), the Hazardous Materials Transportation Act of 1975, the
Toxic Substances Control Act, the Clean Air Act, the Federal Insecticide,
Fungicide and Rodenticide Act and all similar federal, state and local
environmental laws, ordinances, rules, orders, statutes, decrees,
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judgments, injunctions, codes and regulations relating to the environment, human
health or natural resources or the regulation or control of or imposing
liability or standards of conduct concerning human health, the environment,
Hazardous Materials or the clean-up or other remediation of an item of Equipment
or any Facility upon which any Equipment is installed or otherwise located.
"EQUIPMENT" means, individually, each item of equipment set forth in a
Delivery Date Notice (and as generally described on SCHEDULE III of this Lease),
including items collectively identified as a System, and, collectively, each of
the foregoing, together with any substitutions therefor, replacements thereof
and additions thereto from time to time pursuant to the Operative Documents.
"ERISA GROUP" means Guarantor, Lessee and all members of a controlled
group of corporations and all trades or businesses (whether or not incorporated)
under common control which, together with Guarantor and Lessee, are treated as a
single employer under Section 414 of the Code.
"EURODOLLAR BASE RATE" means, relative to any Rent Period with respect
to the Lease Balance and each Supplement Balance, the average of the interest
rates per annum (rounded upward, if necessary, to the next 1/16 of 1%) at which
deposits in Dollars are offered by the Eurodollar Reference Banks to prime banks
in the Designated Eurodollar Market at or about 11:00 a.m. local time in the
Designated Eurodollar Market, two (2) Business Days before the first day of the
applicable Rent Period in an aggregate amount approximately equal to the amount
of the Lease Balance or the applicable Supplement Balance and for a period of
time comparable to the number of days in the applicable Rent Period. The
determination of the Eurodollar Base Rate by Trustee shall be conclusive in the
absence of manifest error.
"EURODOLLAR MARGIN" means, for each Pricing Period, the interest rate
margin set forth below (expressed in basis points) opposite the Pricing Level
for that Pricing Period:
<TABLE>
<CAPTION>
Pricing Level Eurodollar Margin
------------- -----------------
<S> <C>
I 44.00
II 45.00
III 55.00
IV 60.00
V 80.00
VI 95.00;
</TABLE>
PROVIDED, HOWEVER, that if the "Eurodollar Rate Margin" (as such term is defined
in the Guarantor Loan Agreement or in any Replacement Loan Agreement) is at any
time changed from that margin in effect as of the date hereof, the Eurodollar
Margin set forth above shall be changed by a like amount for each relevant
Pricing Level.
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<PAGE>
"EURODOLLAR MARKET" means a regular established market located outside
the United States of America by and among banks for the solicitation, offer and
acceptance of Dollar deposits in such banks.
"EURODOLLAR OBLIGATIONS" means eurocurrency liabilities, as defined in
Regulation D.
"EURODOLLAR OFFICE" means, as to each Certificate Purchaser, its office
or branch so designated by written notice to Lessee and Trustee as its
Eurodollar Office. If no Eurodollar Office is designated by a Certificate
Purchaser, its Eurodollar Office shall be its office at its address for purposes
of notices hereunder.
"EURODOLLAR RATE" means, relative to any Rent Period with respect to
the Lease Balance and each Supplement Balance, an interest rate per annum
(rounded upward, if necessary, to the nearest 1/16 of one percent) determined
pursuant to the following formula:
Eurodollar Eurodollar Base Rate
Rate -------------------------
= 1.00 - Eurodollar Reserve
Percentage
The Eurodollar Rate shall be determined as of 11:00 a.m. local time in the
Designated Eurodollar Market two (2) Business Days prior to the beginning of
each Rent Period for delivery on the first day of such Rent Period, and in an
amount approximately equal to the amount of the Lease Balance or the applicable
Supplement Balance and for a period approximately equal to such Rent Period.
"EURODOLLAR RATE INVESTMENT" is defined in SECTION 7.7(a).
"EURODOLLAR REFERENCE BANKS" means, collectively, Bank of America,
Societe Generale, acting through its New York Branch, and PNC Bank, National
Association.
"EURODOLLAR RESERVE PERCENTAGE" means, relative to any Rent Period with
respect to the Lease Balance and each Supplement Balance, the maximum reserve
percentage (expressed as a decimal, rounded upward to the nearest 1/100th of 1%)
in effect on the date the Eurodollar Base Rate for the Lease Balance or the
applicable Supplement Balance is determined (whether or not applicable to any
Certificate Purchaser) under regulations issued from time to time by the Federal
Reserve Board for determining the maximum reserve requirement (including any
emergency, supplemental or other marginal reserve requirement) with respect to
eurocurrency funding (currently referred to as "eurocurrency liabilities")
having a term comparable to the applicable Rent Period. The determination by
Trustee of any applicable Eurodollar Reserve Percentage shall be conclusive in
the absence of manifest error.
"EVENT OF DEFAULT" is defined in SECTION 8.1.
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<PAGE>
"EXCLUDED AMOUNTS" means:
(a) all indemnity payments and expenses to which Trustee,
Administrative Agent or any Certificate Purchaser (or the respective
successors, assigns, agents, officers, directors or employees of any such
Person) is entitled pursuant to the Operative Documents;
(b) any amounts payable under any Operative Document to reimburse
Trustee, Administrative Agent or any Certificate Purchaser (including the
reasonable expenses of Trustee, Administrative Agent and any Certificate
Purchaser incurred in connection with any such payment) for performing any
of the obligations of Lessee under and as permitted by any Operative
Document;
(c) any insurance proceeds (or payments with respect to risks
self-insured or policy deductibles) under liability policies payable to
Trustee, Administrative Agent or any Certificate Purchaser (or the
respective successors, assigns, agents, officers, directors or employees of
any such Person);
(d) any insurance proceeds under policies maintained by Trustee,
Administrative Agent or any Certificate Purchaser and not required to be
maintained by Lessee under this Lease;
(e) any amounts payable to Trustee, Administrative Agent, First
Security, Bank of America or any Certificate Purchaser pursuant to SECTION
2.1(m), 3.14, 9.1, 9.2, 9.3 or 9.5, whether or not such amounts are or can
be characterized as Supplemental Rent; and
(f) any payments of interest on payments referred to in CLAUSES (a)
through (e) above.
"FACILITY" means a hotel and casino or gaming facility (and related
facilities) owned by Guarantor or any Restricted Subsidiary.
"FAIR MARKET VALUE" means, with respect to any item of Equipment as of
any date, the retail price which a purchaser would pay to purchase such item in
an arm's-length transaction between a willing buyer and a willing seller,
neither of them being under any compulsion to buy or sell. In making any
determination of Fair Market Value, Appraiser may assume such item has been
maintained in accordance with the requirements of this Lease and that such item
is in the condition in which it is required to be hereunder as of the date for
which such determination is made (unless such fair market value is being
determined for purposes of SECTION 11.4 with respect to the Appraisal delivered
for purposes of determining the Recourse Deficiency Amount, in which case the
foregoing assumptions shall not be made and Appraiser shall determine the actual
condition of each item of Equipment). Appraiser shall use such reasonable
methods of appraisal as are chosen by Trustee upon written instructions from the
Required Certificate Purchasers.
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<PAGE>
"FEDERAL FUNDS RATE" means, as of any date of determination, the rate
set forth in the weekly statistical release designated as H.15(519), or any
successor publication, published by the Federal Reserve Board (including any
such successor, "H.15(519)") for such date opposite the caption "Federal Funds
(Effective)". If for any relevant date such rate is not yet published in
H.15(519), the rate for such date will be the rate set forth in the daily
statistical release designated as the Composite 3:30 p.m. Quotations for U.S.
Government Securities, or any successor publication, published by the Federal
Reserve Bank of New York (including any such successor, the "Composite 3:30 p.m.
Quotation") for such date under the caption "Federal Funds Effective Rate". If
on any relevant date the appropriate rate for such date is not yet published in
either H.15(519) or the Composite 3:30 p.m. Quotations, the rate for such date
will be the arithmetic mean of the rates for the last transaction in overnight
Federal funds arranged prior to 9:00 a.m. (New York City time) on that date by
each of three leading brokers of Federal funds transactions in New York City
selected by Trustee. For purposes of this Agreement, any change in the Base Rate
due to a change in the Federal Funds Rate shall be effective as of the opening
of business on the effective date of such change.
"FINAL MATURITY DATE" is defined in SECTION 2.1(a) of the Trust
Agreement.
"FISCAL QUARTER" means the fiscal quarter of Guarantor consisting of a
three month fiscal period ending on each April 30, July 31, October 31 and
January 31.
"FISCAL YEAR" means the fiscal year of Guarantor consisting of a twelve
month fiscal period ending on each January 31.
"FORCE MAJEURE" means a delay resulting from causes beyond a Person's
reasonable control such as strikes, walk-outs or other labor disputes, acts of
God, inability to obtain labor, materials or merchandise, governmental
restrictions, regulations or controls, judicial orders, war, riot or civil
commotion, fire or casualty.
"FUNDING" is defined in SECTION 2.2.
"GAMING BOARD" means any Governmental Agency that holds regulatory,
licensing or permit authority over gambling, gaming or casino activities
conducted by Guarantor, any Subsidiary of Guarantor or any joint venture in
which Guarantor or any of its Subsidiaries is a joint venturer within its
jurisdiction, or before which an application for licensing to conduct such
activities is pending.
"GAMING LAWS" means all Applicable Laws pursuant to which any Gaming
Board possesses regulatory, licensing or permit authority over gambling, gaming
or casino activities conducted by Guarantor, any Subsidiary of Guarantor or any
joint venture in which Guarantor or any of its Subsidiaries is a joint venturer
within its jurisdiction.
"GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" means, as of any date of
determination, accounting principles (a) set forth as generally accepted in then
currently effective
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<PAGE>
Opinions of the Accounting Principles Board of the American Institute of
Certified Public Accountants, (b) set forth as generally accepted in then
currently effective Statements of the Financial Accounting Standards Board or
(c) that are then approved by such other entity as may be 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.
"GOVERNMENTAL ACTION" means all applicable permits, authorizations,
registrations, consents, approvals, waivers, exceptions, variances, orders,
judgments, decrees, licenses, exemptions, publications, filings, notices to and
declarations of or with, or required by, any Governmental Agency, or required by
any Applicable Laws.
"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, or (c) any court or administrative
tribunal.
"GUARANTEED PARTIES" means each of the "Beneficiaries" as such term is
defined in the Guaranty.
"GUARANTOR" means Circus Circus Enterprises, Inc., a Nevada
corporation, and its successors.
"GUARANTOR LOAN AGREEMENT" means that certain Amended and Restated Loan
Agreement dated as of May 23, 1997 among Guarantor, as borrower, Bank of
America, as administrative agent, and the banks party thereto, as the same from
time to time may have been or in the future be amended.
"GUARANTY" means that certain Guaranty Agreement of even date herewith
made by Guarantor for the benefit of the Guaranteed Parties, substantially in
the form of EXHIBIT E to this Lease.
"HAZARDOUS MATERIAL" means any substance, waste or material which is
toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic,
mutagenic or otherwise hazardous by listing characteristic or definition under
any Environmental Law, including petroleum, crude oil or any fraction thereof,
petroleum derivatives, by-products and other hydrocarbons and is or becomes
regulated by any Governmental Agency and also including asbestos, asbestos
containing materials, urea formaldehyde foam insulation, polychlorinated
biphenyls ("PCBS") and radon gas.
"INCREMENTAL MARGIN" means, during any Pricing Period, (a) 0%, if, as
of the last day of the Fiscal Quarter most recently ended prior to such Pricing
Period, the Total Debt Ratio was equal to or less than 3.50 to 1.00, (b)
10/100th's of 1% (10 basis points) if, as of the last day
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of the Fiscal Quarter most recently ended prior to such Pricing Period, the
Total Debt Ratio was greater than 3.50 to 1.00, (c) 20/100th's of 1% (20 basis
points) if, as of the last day of the Fiscal Quarter most recently ended prior
to such Pricing Period, the Total Debt Ratio was greater than 4.00 to 1.00, and
(d) 30/100th's of 1% (30 basis points) if, as of the last day of the Fiscal
Quarter most recently ended prior to such Pricing Period, the Total Debt Ratio
was greater than 5.00 to 1.00; PROVIDED, HOWEVER, that if the "Incremental
Margin" (as such term is defined in the Guarantor Loan Agreement or in any
Replacement Loan Agreement) is at any time increased from that margin in effect
as of the date hereof, the Incremental Margin set forth above shall be increased
by a like amount.
"INDEMNITEE" means each Certificate Purchaser, Trustee, the Trust
Company, the Lead Arranger, Administrative Agent and their respective
Affiliates, successors, permitted assigns, permitted transferees, employees,
officers, directors, shareholders, partners, participants, representatives and
agents; PROVIDED, HOWEVER, that in no event shall Lessee or Guarantor be an
Indemnitee.
"INDEBTEDNESS" shall have the meaning specified for such term in the
Guarantor Loan Agreement or, if the Guarantor Loan Agreement is terminated and a
Replacement Loan Agreement then exists, as such term (or a functionally
equivalent term) may be defined in such Replacement Loan Agreement; PROVIDED
that if the Guarantor Loan Agreement is terminated and no Replacement Loan
Agreement then exists, then the definition of "Indebtedness" (including any
component definitions) in the Guarantor Loan Agreement or Replacement Loan
Agreement (whichever last existed) in the form that existed immediately prior to
such termination shall be deemed incorporated herein by this reference.
"INSURANCE REQUIREMENTS" means all terms and conditions of any
insurance policy required by this Lease to be maintained by Lessee, and all
requirements of the issuer of such insurance policy pursuant to such policy.
"INTELLECTUAL PROPERTY COLLATERAL" means all Computer Software
Collateral, all copyrights, whether statutory or common law, registered or
unregistered, and all applications therefor, all trademarks and trade names, all
common law and statutory trade secrets and all other confidential or proprietary
information, but only to the extent in each case necessary to operate and
maintain the Equipment, and all know-how (which know-how is used in connection
with the Equipment).
"INTEREST DIFFERENTIAL" means, with respect to any prepayment of all or
any portion of the Lease Balance or any Supplement Balance on a day prior to the
last day of the applicable Rent Period pertaining thereto, (a) the per annum
interest rate then applicable to payments of Rent with respect to the Lease
Balance or such Supplement Balance (or portion thereof, as the case may be)
MINUS (b) the Eurodollar Rate on, or as near as practicable to the date of the
prepayment for an amount equal to the amount so prepaid commencing on such date
and ending on the last day of the applicable Rent Period for the amount so
prepaid.
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"INTEREST RATE" means with respect to any day in any Rent Period the
rate per annum equal to the SUM OF (a) the Eurodollar Rate for such Rent Period
PLUS (b) the Eurodollar Margin for such Rent Period PLUS (c) the Incremental
Margin for such Rent Period.
"INTERIM PERIOD" means (i) as to each Lease Supplement the period
commencing on (and including) the Delivery Date set forth in Schedule I to such
Lease Supplement and ending on (but excluding) June 30, 1999 and (ii) for this
Lease means the period commencing on (and including) the initial Delivery Date
and ending on (but excluding) June 30, 1999.
"INTERIM RENT" means, with respect to each Rent Period during the
Interim Period, (a) for each Lease Supplement, an amount equal to Accrual Rent
allocable to the Supplement Balance of such Lease Supplement during such period
and (b) for this Lease, the sum of the amounts described in the foregoing CLAUSE
(a) for all Lease Supplements subject to this Lease. Interim Rent shall be due
and payable on the last day of each Rent Period during the Interim Period.
"INVESTMENT PERCENTAGE" means, as to any Certificate Purchaser, at a
particular time, the percentage of the outstanding Lease Balance at such time
represented by such Certificate Purchaser's Certificate.
"LEAD ARRANGER" means Bank of America.
"LEASE" is defined in the introductory paragraph.
"LEASE BALANCE" means, as of any date of determination, the aggregate
Supplement Balances of all Lease Supplements then subject to this Lease.
"LEASE SUPPLEMENT" is defined in SECTION 3.3.
"LEASE TERM" is defined in SECTION 4.1.
"LESSEE" is defined in the introductory paragraph.
"LESSOR LIENS" means Liens on or against any item of Equipment arising
as a result of (a) any act of, or any Claim against, Trustee (in its individual
capacity or as Trustee or both), Administrative Agent (in its individual
capacity or as Administrative Agent or both) or any Certificate Purchaser
unrelated to the transactions contemplated by the Operative Documents, (b) any
breach of any covenant or agreement of Trustee (in its individual capacity or as
Trustee or both), Administrative Agent (in its individual capacity or as
Administrative Agent or both) or any Certificate Purchaser, set forth in any
Operative Document or (c) any Tax owed by Trustee, in its individual capacity or
in its capacity as trustee for the Certificate Purchasers, EXCEPT any Tax for
which Lessee is obligated to indemnify against pursuant to the Operative
Documents.
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"LICENSE REVOCATION" means the revocation, failure to renew or
suspension of, or the appointment of a receiver, supervisor or similar official
with respect to, any casino, gambling or gaming license issued by any Gaming
Board covering any casino or gaming facility of Guarantor and its Restricted
Subsidiaries.
"LIEN" means any lien, mortgage, deed of trust, encumbrance, pledge,
charge, lease, easement, servitude, right of others or security interest of any
kind, including any thereof arising under any conditional sale or other title
retention agreement.
"MANDALAY BAY COMPLETION DATE" means the date upon which the Mandalay
Bay Project is open for business to the general public with (a) at least 95% of
the hotel rooms provided for in the Mandalay Bay Construction Plans ready for
occupancy, (b) at least 95% of the square footage of casino space provided for
in the Mandalay Bay Construction Plans ready for gaming and (c) substantially
all other amenities of the Mandalay Bay Project substantially complete.
"MANDALAY BAY CONSTRUCTION PLANS" means all drawings, plans and
specifications relating to the Mandalay Bay Project prepared by or for Guarantor
or any Affiliate (including Lessee) of Guarantor as the same may be amended or
supplemented from time to time, and, if required, submitted to and approved by
the Clark County Building Department, all of which plans and specifications
describe and set forth the plans and specifications for the construction of the
Mandalay Bay Project and the labor and materials necessary for the construction
thereof.
"MANDALAY BAY EQUIPMENT COMPLETION" means, as of the date of
determination, that on such date substantially all of the Equipment described in
the Appraisal delivered pursuant to SECTION 2.1(g) pertaining to the Mandalay
Bay Project is assembled, installed, in operation and available to perform its
function (if any) as set forth in the Mandalay Bay Construction Plans, and all
such Equipment has been accepted by Lessee under this Lease.
"MANDALAY BAY PROJECT" means the hotel/casino known as the "Mandalay
Bay Resort Hotel and Casino" consisting generally of a 43-story hotel-casino
resort in Las Vegas, Nevada, with approximately 3,700 hotel rooms.
"MANDALAY BAY SUBLEASE" means a Sublease executed and delivered by
Mandalay Bay Sublessee with respect to the Equipment to be subleased by Mandalay
Bay Sublessee from Lessee in connection with the Mandalay Bay Project.
"MANDALAY BAY SUBLESSEE" means Mandalay Corp., a Nevada corporation.
"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 Operative Document,
(b) is or could reasonably be expected to be material and adverse to the
condition (financial or otherwise), assets or business operations of Guarantor
and its Restricted Subsidiaries, taken as a whole, (c) materially impairs or
could
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reasonably be expected to materially impair the ability of Guarantor to perform
its obligations under the Guaranty and any other Operative Document to which it
is a party or (d) materially impairs or could reasonably be expected to
materially impair the ability of Lessee to perform the Obligations.
"MOODY'S" means Moody's Investors Service, Inc., a Delaware
corporation, and its successors and its assigns, and if such corporation shall
be dissolved or liquidated or shall no longer perform the functions of a
securities rating agency, "Moody's" shall be deemed to refer to any other
nationally recognized securities rating agency (OTHER THAN S&P) designated by
Required Certificate Purchasers and approved by Lessee (with written notice
thereof to Trustee) if such an agency shall exist.
"MULTIEMPLOYER PLAN" means at any time, a "multiemployer plan" as such
term is defined in Section 4001(a)(3) of ERISA to which any member of the ERISA
Group is then making or accruing an obligation to make contributions or has
within the preceding five plan years made contributions, including as a member
of the ERISA Group for this purpose any Person which made contributions at any
time during such five-year period while a member of the ERISA Group even if such
Person subsequently ceased to be a member of the ERISA Group.
"OBLIGATIONS" means all obligations (monetary or otherwise) of Lessee
arising under or in connection with this Lease or any other Operative Document.
"OFFICER'S CERTIFICATE" of a Person means a certificate signed by a
Responsible Official of such Person.
"OPERATIVE DOCUMENTS" means this Lease (including all Annexes, Exhibits
and Schedules hereto), the Guaranty, the Trust Agreement, the Bills of Sale, the
Purchase Order Assignments, the Certificates, each Lease Supplement, each
Delivery Date Notice, each Sublease, each Sublease Assignment and each Consent
to Sublease Assignment.
"ORIGINAL PART" is defined in SECTION 5.4.
"OVERALL TRANSACTION" is defined in SECTION 1.1 of the Trust Agreement.
"PART" is defined in SECTION 5.4.
"PARTICIPANT" is defined in SECTION 14.2.
"PAYMENT DATE" means the last Business Day of each Rent Period.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
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"PENSION PLAN" means, with respect to any Person, a "pension plan" as
such term is defined in section 3(2) of ERISA which is subject to Title IV of
ERISA and to which such Person may have any liability or contingent liability,
including, but not limited to, liability by reason of having been a substantial
employer within the meaning of section 4063 of ERISA at any time during the
preceding five years, or by reason or being deemed to be a contributing sponsor
under section 4069 of ERISA.
"PERMITTED CONTEST" means actions taken by a Person to contest in good
faith, by appropriate proceedings initiated timely and diligently prosecuted,
the legality, validity or applicability to any item of Equipment or any interest
therein of any Person of: (a) any law, regulation, rule, judgment, order, or
other legal provision or judicial or administrative requirements; (b) any term
or condition of, or any revocation or amendment of, or other proceeding relating
to, any authorization or other consent, approval or other action by any
Governmental Agency; or (c) any Lien or Tax; PROVIDED that the initiation and
prosecution of such contest would not: (i) result in, or materially increase the
risk of, the imposition of any criminal liability on any Indemnitee or any other
party to this Lease; (ii) materially and adversely affect the Liens created by
the Operative Documents or the right, title or interest of Trustee or any
Certificate Purchaser or any other party to this Lease, in or to any of the
Equipment or the right of Trustee or any Certificate Purchaser to receive
payment of all or any portion of any payment of Rent, Lease Balance or any other
amount payable under the Operative Documents or, with respect to a Permitted
Contest taken by any party other than Lessee, Lessee's rights under this Lease
and the other Operative Documents; (iii) permit, or pose a material risk of, the
sale or forfeiture of, or foreclosure on, any item of Equipment; or (iv)
materially and adversely affect the fair market value, utility or remaining
useful life of any item of Equipment or any interest therein or the continued
economic operation thereof; and PROVIDED FURTHER that in any event adequate
reserves in accordance with Generally Accepted Accounting Principles are
maintained against any adverse determination of such contest.
"PERMITTED LIENS" means (i) any rights in favor of Trustee or the
Certificate Purchasers pursuant to this Lease or any other Operative Document;
(ii) materialmen's, mechanics', workers', artisan's, repairmen's, employees' or
other like Liens securing payment of the price of goods or services rendered in
the ordinary course of business for amounts the payment of which is not overdue
or is being contested pursuant to a Permitted Contest; (iii) with respect to
Lessee, any Lessor Lien; (iv) Liens for Taxes which are not delinquent or the
validity of which is being contested pursuant to a Permitted Contest; (v) any
rights of any sublessee or assignee permitted under the Operative Documents; and
(vi) Liens arising out of judgments or awards which are being appealed in good
faith and by appropriate proceedings and have been bonded to the reasonable
satisfaction of Required Certificate Purchasers or the enforcement of such Lien
has been stayed pending appeal or review.
"PERSON" means any entity, whether an individual, trustee, corporation,
general partnership, limited partnership, joint stock company, trust, estate,
unincorporated organization, business association, firm, joint venture,
Governmental Agency, or otherwise.
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"PRICING LEVEL" means, for each Pricing Period, the pricing level set
forth below opposite the pricing criteria achieved by Guarantor as of the first
day of that Pricing Period (and, if the Total Debt Ratio and the Debt Rating are
at different pricing levels, then the pricing level which yields the lowest
Eurodollar Margin and Commitment Fee Rate to Lessee):
<TABLE>
<CAPTION>
Pricing Level Pricing Criteria
------------- ---------------------------------------
Total Debt
Debt Ratio Rating
---------- ------
<S> <C> <C>
I Less than 0.75 to 1.00 At least A or
A2
II Equal to or greater than A- or A3
0.75 to 1.00 but less than
1.50 to 1.00
III Equal to or greater than BBB+ or
1.50 to 1.00 but less than Baa1
2.25 to 1.00
IV Equal to or greater than BBB or Baa2
2.25 to 1.00 but less than
3.00 to 1.00
V Equal to or greater than BBB- or
3.00 to 1.00 but less than Baa3
3.75 to 1.00
VI Equal to or greater than BB+ or Ba1
3.75 to 1.00 or below
</TABLE>
PROVIDED that in the event of that the then prevailing Debt Ratings are
"split ratings" and to the extent that the applicable Pricing Level is then
based upon the Debt Ratings, Lessee will receive the benefit of the higher
Debt Rating, UNLESS the split is a "double split rating" (in which case the
intermediate Pricing Level will apply) or a "triple split rating" (in which
case the Pricing Level below that applicable to the higher Debt Rating will
apply).
"PRICING OCCURRENCE" means (a) with respect to any change in the Total
Debt Ratio which results in a change in the Pricing Level or results in an
Incremental Margin, the EARLIER of (i) the date upon which Guarantor delivers
(or causes to be delivered) the compliance certificate to Trustee and
Administrative Agent reflecting such changed Total Debt Ratio described in
SECTION 13.2(a)(xiv) and (ii) the date upon which Guarantor is required by
SECTION 13.2(a)(xiv)
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to deliver such compliance certificate and (b) with respect to any change in the
Debt Rating which results in a change in the Pricing Level, the date which is
five (5) Business Days after Trustee and Administrative Agent have received
evidence reasonably satisfactory to them of such change.
"PRICING PERIOD" means (a) the period commencing on the Closing Date
and ending on the first Pricing Occurrence to occur thereafter and (b) each
subsequent period commencing on the date of a Pricing Occurrence and ending on
the next Pricing Occurrence to occur.
"PROCEEDS" shall have the meaning specified in SECTION 11.1(c).
"PROHIBITED TRANSACTION" means a transaction that is prohibited under
Code Section 4975 or ERISA Section 406 and not exempt under Code Section 4975 or
ERISA Section 408.
"PURCHASE CONTRACT" means each contract between Lessee and a Vendor for
the purchase of one or more items of Equipment.
"PURCHASE OPTION" is defined in SECTION 11.1(b).
"PURCHASE ORDER ASSIGNMENT" means a purchase order assignment between
Lessee (or an Affiliate of Lessee) and Trustee, substantially in the form of
EXHIBIT I to this Lease.
"PURCHASE OPTION EXERCISE AMOUNT" means, as of any date of
determination, the sum of (a) the Lease Balance, determined as of the date of
purchase after payment of all Basic Rent due on such date, PLUS (b) all accrued
but unpaid Accrual Rent, PLUS (c) all other sums then due and payable under the
Operative Documents by Lessee or any of its Affiliates.
"PURCHASE PRICE" for an item of Equipment means the Appraised Value of
such item, and the aggregate Purchase Price of all Equipment shall be the
aggregate Appraised Value of the Equipment.
"RECOURSE DEFICIENCY AMOUNT" means, with respect to the exercise of the
Sale Option, the excess, if any, of (x) the Purchase Option Exercise Amount at
the last day of a Renewal Term in which such Sale Option was elected over (y)
the product obtained by multiplying 17.50% by the Fair Market Value of all
Equipment then subject to this Lease as of the first day of the Renewal Term in
which the Sale Option was elected.
"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" or the similar prime rate or reference rate announced by any successor
Administrative Agent. Bank of America's reference rate is a rate set by Bank of
America based upon various factors including Bank of America's costs and desired
return, general economic conditions and other factors, and is used as a
reference
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point for pricing some loans, which may be priced at, above, or below such
announced rate. Any change in the Reference Rate announced by Bank of America or
any successor Administrative Agent shall take effect at the opening of business
on the day specified in the public announcement of such change.
"REGULATED ACTIVITY" means the use, Release, generation, treatment,
storage, recycling, transportation or disposal of Hazardous Material to the
extent such activities are regulated by any Governmental Agency.
"REGULATIONS" means the income tax regulations promulgated from time to
time under and pursuant to the Code.
"RELEASE" means the release, deposit, disposal or leak of any Hazardous
Material into or upon or under any land or water or air, or otherwise into the
environment, including, without limitation, by means of burial, disposal,
discharge, emission, injection, spillage, leakage, seepage, leaching, dumping,
pumping, pouring, escaping, emptying, placement and the like.
"REMOVABLE PART" is defined in SECTION 5.4.
"RENEWAL TERM" is defined in SECTION 4.2.
"RENT" means Interim Rent, Basic Rent and Supplemental Rent,
collectively.
"RENT PERIOD" means (a) for the Interim Period, each period beginning
on (and including) the date of the relevant Funding and ending on (but
excluding) the last Business Day of the third calendar month thereafter and each
consecutive three-month period thereafter during the Interim Period, with each
such period ending on the last Business Day of the applicable calendar month,
and (b) for the Base Term or any Renewal Term, the period beginning on (and
including) the last Business Day of the Interim Period and ending on (but
excluding) the last Business Day of the third calendar month thereafter and each
consecutive three-month period thereafter, with each such period ending on the
last Business Day of such calendar month; PROVIDED, HOWEVER, that
notwithstanding the foregoing, (i) no Rent Period during the Interim Period may
end later than the last day of the Interim Period and (ii) no Rent Period may
end later than the last day of the Lease Term.
"REPLACEMENT LOAN AGREEMENT" means a loan or credit agreement governing
credit facilities extended to Guarantor that (a) replace the credit facilities
extended under the Guarantor Loan Agreement (or a prior Replacement Loan
Agreement) in whole or in part, (b) are extended by a bank or a syndicate of
lenders for which a bank is the agent and (c) if there is more than one credit
facility that satisfies the requirement of CLAUSES (a) and (b), is the largest
such credit facility.
"REPLACEMENT PARTS" is defined in SECTION 5.4.
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"REQUIRED ALTERATION" is defined in SECTION 5.4.
"REQUIRED CERTIFICATE PURCHASERS" means, as of the date of the
determination, holders of Certificates representing more than 66 2/3% of the
then outstanding Lease Balance.
"REQUIREMENT OF LAW" means, as to any Person, the articles or
certificate of incorporation and by-laws or other organizational or governing
documents of such Person, and any Applicable 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 corporate 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 another Person shall be conclusively
presumed to have been authorized by all necessary corporate, partnership and/or
other action on the part of such other Person.
"RESTRICTED SUBSIDIARY" means, as of any date of determination, any
Subsidiary of Guarantor (a) at least 80% of the capital stock or other ownership
interests of which are owned on such date, directly or indirectly, by Guarantor
and (b) with respect to which neither Guarantor nor any of its Restricted
Subsidiaries has entered any shareholders' agreement, management agreement or
other agreement which has the effect of delegating management control over such
Subsidiary to a Person OTHER THAN Guarantor or a Restricted Subsidiary.
"S&P" means Standard & Poor's Ratings Group, a division of McGraw Hill
Inc., and if such corporation shall be dissolved or liquidated or shall no
longer perform the functions of a securities rating agency, "S&P" shall be
deemed to refer to any other nationally recognized securities rating agency
(OTHER THAN Moody's) designated by Required Certificate Purchasers and approved
by Lessee (with written notice thereof to Trustee) if such an agency shall
exist.
"SALE OPTION" is defined in SECTION 11.1(c).
"SALE RECOURSE AMOUNT" is defined in SECTION 11.1(c).
"SEARCH" is defined in SECTION 2.1(h).
"SEC" means the United States Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
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"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"SENIOR OFFICER" means, with respect to Lessee, Guarantor or any
Sublessee, such Person's (a) chief executive officer, (b) president, (c) chief
financial officer or (d) treasurer.
"SIGNIFICANT SUBSIDIARY" means, as of any date of determination, each
Restricted Subsidiary that had on the last day of the Fiscal Quarter then most
recently ended total assets (determined in accordance with Generally Accepted
Accounting Principles) of $10,000,000 or more.
"SPECIAL EURODOLLAR CIRCUMSTANCE" means the application or adoption
after the date hereof of any law or interpretation, or any change therein or
thereof, or any change in the interpre tation or administration thereof by any
Governmental Agency, central bank or comparable authority charged with the
interpretation or administration thereof, or compliance by any Certificate
Purchaser or its Eurodollar 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 the existence or occurrence of circumstances affecting
the Designated Eurodollar Market generally that are beyond the reasonable
control of the Certificate Purchasers.
"SUBLEASE" is defined in SECTION 5.2.
"SUBLEASE ASSIGNMENT" means an assignment of a Sublease executed by
Lessee in favor of Trustee, for the benefit of the Certificate Purchasers,
substantially in the form of EXHIBIT L to this Lease.
"SUBLESSEE" is defined in SECTION 5.2.
"SUBSIDIARY" means, as of any date of determination and with respect to
any Person, any corporation 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 a majority of the partnership or other ownership
interests are at the time beneficially owned by such Person and/or one or more
of its Subsidiaries.
"SUPPLEMENT BALANCE" means with respect to any Lease Supplement, as of
any determination date, the aggregate Purchase Price of all of the Equipment
subject to such Lease Supplement, MINUS all amounts of Capital Rent under such
Lease Supplement actually paid to and including the date of determination and
all repayments of such Supplement Balance pursuant to SECTIONS 6.1 and 8.2
actually paid with respect to such Equipment to and including the date of
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determination and all reductions of such Supplement Balance pursuant to SECTION
6.1 made with respect to such Equipment to and including the date of
determination.
"SUPPLEMENTAL RENT" means any and all amounts, liabilities and
obligations OTHER THAN Basic Rent which Lessee assumes or agrees or is otherwise
obligated to pay under this Lease or any other Operative Document (whether or
not designated as Supplemental Rent) to Trustee, Administrative Agent, any
Certificate Purchaser or any other Person, including the Recourse Deficiency
Amount, and indemnities (including any amounts due pursuant to SECTION 7.7).
"SYSTEM" means any "system" or group of items of Equipment classified
as a System on Schedule I to a Lease Supplement.
"TAXES" and "TAX" means any and all fees (including documentation,
recording, license and registration fees), taxes (including income (whether net,
gross or adjusted gross), gross receipts, sales, rental, use, turnover,
value-added, property, excise and stamp taxes), levies, imposts, duties,
charges, assessments or withholdings of any nature whatsoever, together with any
penalties, fines or interest thereon or additions thereto.
"TERMINATION DATE" means the date on which the Lease Term (including
any Renewal Term) ends pursuant to (a) SECTION 4.1, (b) ARTICLE VIII in
connection with an Event of Default, (c) SECTION 11.5 in connection with an
early termination, or (d) SECTION 11.1 in connection with the exercise of the
Purchase Option or Sale Option.
"TO THE BEST KNOWLEDGE OF" means, when modifying a representation,
warranty or other statement of any Person, that the fact or situation described
therein is known by the Person (or, in the case of a Person other than a natural
Person, known by a Responsible Official of that Person) making the
representation, warranty or other statement, or with the exercise of reasonable
due diligence under the circumstances (in accordance with the standard of what a
reasonable Person in similar circumstances would have done) should have been
known by the Person (or, in the case of a Person other than a natural Person,
should have been known by a Responsible Official of that Person).
"TOTAL DEBT RATIO" shall have the meaning specified for such term in
the Guarantor Loan Agreement or, if the Guarantor Loan Agreement is terminated
and a Replacement Loan Agreement then exists, as such term (or a functionally
equivalent term) may be defined in such Replacement Loan Agreement; PROVIDED
that if the Guarantor Loan Agreement is terminated and no Replacement Loan
Agreement then exists, then the definition of Total Debt Ratio (including
component definitions) in the Guarantor Loan Agreement or the Replacement Loan
Agreement (whichever last existed) in the form that existed immediately prior to
such termination shall be deemed incorporated herein by this reference.
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"TRANSACTION COSTS" means
(a) the reasonable fees and expenses of Sheppard, Mullin, Richter &
Hampton LLP and any local or special counsel incurred in connection with
the negotiation, execution and delivery of the term sheet, the commitment
letters, the Operative Documents, each Delivery Date and the transactions
contemplated thereby (subject to the provisions of SECTIONS 2.1(m) and
3.14);
(b) the allocated reasonable time charges of internal counsel to
Administrative Agent and Lead Arranger incurred in connection with the
Operative Documents;
(c) the initial and ongoing fees and reasonable expenses of Trustee
and its special counsel;
(d) the fees and expenses of the Appraiser and insurance
consultant;
(e) all costs of searching, and perfecting a first priority
security interest in, the Equipment; and
(f) without duplication of any of the foregoing, the fees described
in SECTIONS 2.1(m) and 3.14.
"TRUST" is defined in SECTION 1.1 of the Trust Agreement.
"TRUST AGREEMENT" means the Trust Agreement of even date herewith among
the Certificate Purchasers and Trust Company in the form of EXHIBIT M to this
Lease.
"TRUST COMPANY" means the institution acting as Trustee or any
successor financial institution acting as Trustee under the Operative Documents,
in each case, in its individual capacity.
"TRUSTEE" means First Security Bank, National Association, a national
banking association, not in its individual capacity (EXCEPT as expressly
provided herein) but solely as Trustee under the Trust Agreement, and any
successor or replacement Trustee expressly permitted under the Operative
Documents.
"TRUST ESTATE" means all estate, right, title and interest of Trustee
in, to and under the Trust Agreement, the Lease and all of the other Operative
Documents and in and to the Equipment, including (a) all amounts (OTHER THAN
Excluded Amounts) of Rent and other payments due or to become due of any kind
under any Operative Document or for or with respect to the Equipment or payable
under any of the foregoing, (b) any or all payments or proceeds received by
Trustee after the termination of the Lease with respect to the Equipment as the
result of the sale, lease or other disposition thereof, and (c) proceeds of the
investments in the Certificates,
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together with any other moneys, proceeds or property received by Trustee under
or in connection with the Operative Documents.
"UCC" means the Uniform Commercial Code of California or any other
applicable jurisdiction.
"UNRELATED PERSON" means any Person OTHER THAN (a) a Subsidiary of
Guarantor or (b) an employee stock ownership plan or other employee benefit plan
covering the employees of Guarantor and its Subsidiaries.
"VENDOR" means a seller, dealer or manufacturer of one or more items of
personal property sold or to be sold to Lessee under a Purchase Contract.
"YIELD" is defined in SECTION 2.1(a) of the Trust Agreement.
1.2 ACCOUNTING TERMS; ROUNDING.
(a) All accounting terms not specifically defined in this Lease
(whether by incorporation by reference or otherwise) shall be construed in
conformity with, and all financial data required to be submitted by this
Lease 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 covenants
incorporated by reference pursuant to SECTION 13.2(b) would then be
calculated in a different manner or with different components, (a) Lessee,
Guarantor, Trustee, Administrative Agent and the Certificate Purchasers
agree to amend this Lease in such respects as are necessary to conform
those covenants as criteria for evaluating Guarantor's financial condition
to sub stantially the same criteria as were effective prior to such change
in Generally Accepted Accounting Principles and (b) Guarantor shall be
deemed to be in compliance with the covenants contained in the aforesaid
Section during the 90 day period following any such change in Generally
Accepted Accounting Principles if and to the extent that Guarantor would
have been in compliance therewith under Generally Accepted Accounting
Principles as in effect immediately prior to such change.
(b) ROUNDING. Any financial ratios required to be maintained by
Guarantor pursuant to this Lease 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 Lease 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 Lease.
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ARTICLE II
EFFECTIVENESS; ACQUISITION AND LEASE; GENERAL PROVISIONS
2.1 EFFECTIVENESS OF THIS LEASE. This Lease shall become effective on
the date on which all of the following conditions precedent shall have been
satisfied or waived by the applicable parties (the "CLOSING DATE"):
(a) AUTHORIZATION, EXECUTION AND DELIVERY OF CERTAIN OPERATIVE
DOCUMENTS. This Lease and each of the Certificates, Trust Agreement,
Guaranty and Mandalay Bay Sublease (together with a Sublease Assignment and
Consent to Sublease Assignment pertaining to the Mandalay Bay Sublease)
shall have been duly authorized, executed and delivered by each of the
respective parties thereto, and shall be in full force and effect;
PROVIDED, HOWEVER, only Trustee shall receive the original counterpart of
this Lease marked "Counterpart No. 1 - Trustee's Original Copy."
(b) CORPORATE STATUS AND PROCEEDINGS. Trustee and Administrative
Agent shall have received:
(i) Certificates of existence and good standing with respect
to each of Lessee, Guarantor and Mandalay Bay Sublessee from the
Secretary of State of the State of its incorporation, dated no earlier
than the 15th day prior to the Closing Date;
(ii) An Officer's Certificate of Guarantor, Lessee and
Mandalay Bay Sublessee, substantially in the form of EXHIBITS G-1, G-2
and G-3 respectively, dated as of the Closing Date, with respect to
representations and warranties and absence of defaults; and
(iii) A Certificate of the Secretary or Assistant Secretary of
Guarantor, Lessee and Mandalay Bay Sublessee, substantially in the form
of EXHIBITS J-1 and J-2 and J-3 respectively, dated as of the Closing
Date, with respect to the governing documents, resolutions and
incumbent officers of Guarantor, Lessee and Mandalay Bay Sublessee.
(c) REPRESENTATIONS AND WARRANTIES; NO DEFAULT. Each of the
representations and warranties made by or on behalf of Lessee, Guarantor,
Mandalay Bay Sublessee, Trustee in its individual capacity, Administrative
Agent in its individual capacity, and each Certificate Purchaser under the
Operative Documents described in CLAUSE (a) above shall be true as of the
Closing Date and no Default or Event of Default shall exist under any such
Operative Document (either before or after giving effect to the
transactions contemplated by such Operative Documents).
(d) ABSENCE OF MATERIAL ADVERSE EFFECT. No Material Adverse Effect
shall have occurred since January 31, 1998.
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(e) CERTIFICATES. Each Certificate Purchaser shall have received
from Trustee a Certificate duly executed by Trustee and registered in such
Certificate Purchaser's name evidencing such Certificate Purchaser's right
to receive in the aggregate such Certificate Purchaser's Investment
Percentage of the payments (i) in respect of the Lease Balance and (ii) in
respect of the Rent hereunder, in each case as provided in this Lease.
(f) OPINIONS OF COUNSEL.
(i) Each Certificate Purchaser, Administrative Agent, Trustee
and their respective counsel shall have received the opinion of (A)
Wolf, Block, Schorr & Solis-Cohen LLP, special counsel to Lessee,
Guarantor and Mandalay Bay Sublessee, substantially to the effect of
the matters set forth in EXHIBIT H-1, and (B) Jones Vargas, special
Nevada counsel to Lessee, Guarantor and Mandalay Bay Sublessee,
substantially to the effect of the matters set forth in EXHIBIT H-2. By
their execution hereof, Lessee and Guarantor expressly authorize, and
by its execution of the Mandalay Bay Sublease, Mandalay Bay Sublessee
expressly authorizes, such counsel to execute and deliver such opinions
to the Persons designated in the preceding sentence.
(ii) Each Certificate Purchaser, Administrative Agent, Lessee,
Guarantor and their respective counsel shall have received the opinion
of special counsel to Trustee substantially to the effect of the
matters set forth in EXHIBIT H-3.
(g) APPRAISAL. On or before the Closing Date, Trustee,
Administrative Agent and Certificate Purchasers shall have received a
preliminary Appraisal to their satisfaction opining:
(i) that the Appraised Value of the Equipment (assuming all
such Equipment becomes subject to this Lease on the Closing Date)
pertaining to the Mandalay Bay Project and related amenities is
reasonably expected to be as follows:
<TABLE>
<CAPTION>
Date Value
---- -----
<S> <C>
Appraised Value on
the Closing Date $159,262,976
End of Base Term $117,941,580
End of First Renewal Term $104,261,550
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End of Second Renewal Term $ 90,687,050
</TABLE>
(ii) that the remaining economic useful life of each item of
Equipment is not less than 6 3/4 years; and
(iii) that the values set forth in clause (a) above include a
reasonable factor for an increase in inflation as specified in the
Appraisal.
The preliminary Appraised Values set forth in such Appraisal shall be subject to
final verification from time to time as described in SECTION 3.12.
(h) SEARCH REPORTS. Not later than five (5) days prior to the
Closing Date, Administrative Agent shall have received reports (each, a
"SEARCH") acceptable to Administrative Agent and counsel to the Certificate
Purchasers as to Lessee, Guarantor and Mandalay Bay Sublessee (and any of
their respective Affiliates as may be required by Administrative Agent) and
the Equipment (to the extent then obtained by any such party) from each
appropriate state and county filing or recording offices, each dated as
close to the Closing Date as practicable, in respect of a search of the
applicable UCC files and any indices of Liens maintained by such offices
(including, if applicable, indices of judgment, revenue and tax liens),
which Searches shall evidence Lessee's (or such other applicable Person's)
ownership of any of the Equipment free and clear of all Liens OTHER THAN
Permitted Liens.
(i) FILINGS AND RECORDINGS. All filings, registrations and
recordings set forth in SCHEDULE IV pertaining to the State of Nevada and
Clark County, Nevada shall have been made, or shall have been arranged to
be made promptly thereafter, in the appropriate places or offices and all
fees and Taxes with respect to any recordings, filings or registrations
made pursuant to this subsection shall have been paid in full, and
satisfactory evidence thereof shall have been delivered to Trustee and each
Certificate Purchaser, or arrangements for such payment shall have been
made to the satisfaction of Trustee and each Certificate Purchaser.
(j) CONSENTS AND APPROVALS. All necessary consents, approvals and
authorizations of, and declarations, registrations and filings with,
Governmental Agencies and nongovernmental Persons required to consummate
the transactions contemplated by this Lease shall have been obtained or
made by Lessee, Guarantor and Mandalay Bay Sublessee, as applicable, and
shall be in full force and effect.
(k) PROCEEDINGS SATISFACTORY, ETC. All proceedings taken in
connection with the Closing Date and all documents relating thereto shall
be reasonably satisfactory to Lessee, Guarantor, each Creditor, and their
respective counsel, and each such Person shall have received copies of such
documents as they may reasonably request in connection therewith, all in
form and substance reasonably satisfactory to each such Person.
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(l) FURTHER ASSURANCES, ETC. Each Creditor shall have received such
other and further instruments, duly executed, acknowledged (if appropriate)
and delivered, as any such Creditor reasonably shall have requested in
connection with the Closing Date and the applicable Operative Documents.
(m) TRANSACTION COSTS; FEES. Lessee shall have paid to Trustee, for
the benefit of Trustee, Administrative Agent and the Certificate
Purchasers, any Transaction Costs invoiced to Lessee not less than three
(3) days prior to the Closing Date and not previously paid. Such payment
shall be made by wire transfer of immediately available funds to the
account specified for the Person to whom such payment is due. In addition,
Lessee shall have paid to (a) the Lead Arranger (in its individual
capacity) the arrangement fee provided for in that certain letter agreement
dated as of May 18, 1998, between Guarantor and Lead Arranger, (b)
Administrative Agent the agency fee provided for in that certain letter
agreement dated as of October 30, 1998 between Lessee and Administrative
Agent, (c) the Certificate Purchasers the facility fees described in
SECTION 9.2 and (d) Trustee the initial acceptance fee as set forth in that
certain letter agreement dated as of July 14, 1998 between Guarantor and
Trustee.
2.2 FUNDINGS; PAYMENT OF PURCHASE PRICE; FAILURE OF A CERTIFICATE
PURCHASER TO FUND.
(a) Subject to the terms and conditions hereinafter set forth, and
in reliance on the representations and warranties contained herein or made
pursuant hereto, during the Commitment Period upon receipt of each Delivery
Date Notice, each Certificate Purchaser shall transfer to Trustee (each
such transfer being referred to herein as a "FUNDING") on the date
specified in such Delivery Date Notice, an amount equal to the product of
(x) the aggregate Purchase Price of the Equipment specified in such
Delivery Date Notice MULTIPLIED BY (y) such Certificate Purchaser's
Commitment Percentage. In no event shall (i) any Certificate Purchaser be
required to provide funds under this Lease in an aggregate amount exceeding
such Certificate Purchaser's Commitment, (ii) the aggregate amount advanced
by the Certificate Purchasers exceed the Aggregate Commitment Amount, or
(iii) Lessee request (whether by delivery of Delivery Date Notices or
otherwise) more than one Delivery Date for Equipment in any calendar month.
(b) Remittances pursuant to this SECTION 2.2 shall be made in
immediately available funds by wire transfer to the account of Trustee set
forth below (or to such other account as specified by Trustee to each
Certificate Purchaser from time to time not less than three (3) Business
Days prior to the date of the requested Funding) and must be received by
Trustee by 10:00 a.m., San Francisco time, on the applicable Delivery Date:
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Bank: First Security Bank, National Association
ABA Routing #: 124-000-012
Account #: 0510922115
Reference: Circus Circus - 34825
Attn: Corporate Trust/Dain Brown (801) 246-5177
(c) If Trustee is informed by any Certificate Purchaser (a
"DEFAULTING CERTIFICATE PURCHASER") that such Certificate Purchaser will
not make available the amount (the "DEFAULTED AMOUNT") which would
constitute its portion of the Funding specified in a Delivery Date Notice,
Trustee shall promptly notify each other Certificate Purchaser (each, a
"NON-DEFAULTING CERTIFICATE PURCHASER") and specify the additional amounts
required to be funded by each Non-Defaulting Certificate Purchaser. Each
Non-Defaulting Certificate Purchaser, as soon as practical after receipt of
notice but not before the applicable Delivery Date, shall transfer to
Trustee, in immediately available funds, its pro rata share of the
Defaulted Amount, determined in the same proportion that such
Non-Defaulting Certificate Purchaser's Commitment bears to the aggregate
Commitments of all Non-Defaulting Certificate Purchasers; PROVIDED, that
such amount, together with all amounts previously funded by each
Non-Defaulting Certificate Purchaser, shall not exceed the Non-Defaulting
Certificate Purchaser's Commitment. If the Defaulted Amount cannot be fully
funded by the Non-Defaulting Certificate Purchasers by reason of the
proviso of the preceding sentence, Trustee shall so notify the
Non-Defaulting Certificate Purchasers and give to all Non-Defaulting
Certificate Purchasers the opportunity to increase their respective
Commitments by notice in writing to Trustee; PROVIDED, that should the
aggregate proposed increased Commitments by one or more Non-Defaulting
Certificate Purchasers exceed the Defaulted Amount, Trustee shall increase
the Commitments of the participating Non-Defaulting Certificate Purchasers
on a pro rata basis in accordance with the respective amounts by which such
Non-Defaulting Certificate Purchasers have offered to participate, it being
understood that in no event shall the aggregate amount funded by any
Certificate Purchaser exceed the amount of such Certificate Purchaser's
Commitment, after giving effect to any increase in such Commitment pursuant
to this sentence.
In the event of any funding of all or a portion of the Defaulted Amount
by the Non-Defaulting Certificate Purchasers, the following rules shall apply,
notwithstanding any other provision in any Operative Document:
(i) The Commitment of the Defaulting Certificate Purchaser
shall be decreased in an amount equal to the total aggregate increase,
if any, in the Commitments of the Non-Defaulting Certificate Purchasers
pursuant to this SECTION 2.2(c), and the Commitment Percentages of the
Certificate Purchasers shall be revised accordingly;
(ii) A Defaulting Certificate Purchaser shall be obligated to
fund any Fundings occurring after its default, which funding shall be
based upon
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<PAGE>
its revised Commitment Percentage, if the Commitment Percentages are
revised in accordance with the immediately preceding CLAUSE (i); and
to the extent that the Commitment Percentage of any Defaulting
Certificate Purchaser shall not be so revised, Trustee may thereafter
call upon such Defaulting Certificate Purchaser to fund a share of one
or more future Fundings in an amount greater than such Defaulting
Certificate Purchaser's Commitment Percentage so that the aggregate
amount disbursed by such Defaulting Certificate Purchaser shall equal
(after giving effect to such Funding or Fundings) its Commitment
Percentage of the aggregate amount of all Fundings then and theretofore
made by all Certificate Purchasers;
(iii) A Defaulting Certificate Purchaser shall not have the
right to fund its Defaulted Amount without the written consent of
Required Certificate Purchasers and Lessee, and then only to the extent
such Defaulted Amount has not been funded by the Non-Defaulting
Certificate Purchasers in a manner that resulted in a decrease in the
Defaulting Certificate Purchaser's Commitment Percentage;
(iv) If and to the extent that the Defaulted Amount is not
funded by the Non-Defaulting Certificate Purchasers, Trustee may reduce
the Purchase Price set forth in the Delivery Date Notice so that the
total Funding specified in the Delivery Date Notice as so restated
equals the aggregate revised fundings to be made by the Non-Defaulting
Certificate Purchasers on the applicable Delivery Date; and
(v) Neither Trustee nor any Certificate Purchaser, including
the Defaulting Certificate Purchaser, shall be responsible for any
consequential damages suffered by Lessee or any of Lessee's Affiliates
as a result of such Defaulting Certificate Purchaser's failure to so
fund or any decrease in the amount of the total Funding in accordance
with CLAUSE (iv) above.
2.3 APPLICATION OF FUNDS; SALE AND LEASE OF EQUIPMENT. On each Delivery
Date, upon (a) receipt by Trustee of all amounts to be paid by the Certificate
Purchasers pursuant to SECTION 2.2, and (b) satisfaction or waiver of each of
the conditions set forth in ARTICLE III, (i) Trustee shall acquire legal title
to, for the benefit of the Certificate Purchasers, the Equipment to be leased on
such Delivery Date, as specified in the relevant Delivery Date Notice delivered
pursuant to SECTION 3.1, (ii) in consideration therefor, Trustee, on behalf of
the Certificate Purchasers, shall pay, from the funds made available by the
Certificate Purchasers pursuant to SECTION 2.2, an amount equal to the aggregate
Purchase Price of the Equipment being so sold and purchased, in each case, in
immediately available funds remitted by wire transfer to the account specified
by Lessee in the Delivery Date Notice to Lessee or directly to Vendors, as
applicable, and (iii) Trustee, on behalf of the Certificate Purchasers, shall
lease to Lessee the Equipment so transferred to Trustee and Lessee shall accept
delivery of and lease from Trustee such Equipment pursuant to this Lease.
Delivery of the Equipment to be purchased by Trustee on behalf of the
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<PAGE>
Certificate Purchasers on such Delivery Date shall be effected by the delivery
by Lessee or the Vendor, as applicable, of one or more Bills of Sale or Purchase
Order Assignments, as applicable, specifically identifying the Equipment
delivered on such Delivery Date. Each Certificate Purchaser shall hold an
undivided interest in each item of Equipment equal to such Certificate
Purchaser's Commitment Percentage.
2.4 TIME AND PLACE OF DELIVERY DATES. Each delivery of the Equipment
shall take place on the Delivery Date set forth in the applicable Delivery Date
Notice, subject to the following:
(a) each Funding shall occur on the last Business Day of a calendar
month on or after the date hereof and not later than the last day of the
Commitment Period, it being understood that there may be a Funding without
the consummation of a Delivery Date if Lessee has postponed such Delivery
Date pursuant to SECTION 2.5, so long as such Delivery Date occurs not
later than the last day of the Commitment Period;
(b) each Delivery Date shall occur on the last Business Day of a
calendar month (unless postponed in accordance with SECTION 2.5) on or
after the date hereof and not later than the last day of the Commitment
Period; and
(c) in no event shall the aggregate amount advanced by the
Certificate Purchasers exceed the Aggregate Commitment Amount, nor shall
the aggregate amount advanced by any Certificate Purchaser exceed such
Certificate Purchaser's Commitment.
2.5 POSTPONEMENT OF DELIVERY DATE. In the event that the Certificate
Purchasers shall make the Funding requested pursuant to a Delivery Date Notice
and the applicable Delivery Date shall not have been consummated on the date
specified in such Delivery Date Notice, Trustee, at the written request of
Lessee received no later than 2:30 p.m., San Francisco time, on the scheduled
Funding date, shall retain such funds in a deposit account maintained at the
Trust Company for the benefit of the Certificate Purchasers; PROVIDED that this
provision shall not be construed to require Trustee to invest such funds in
interest-bearing accounts. No additional Delivery Date Notice shall be required
to be given if such Delivery Date is postponed and thereafter consummated within
five (5) Business Days of the Funding. If the Delivery Date is not consummated
within such five (5) Business Day period, then Trustee shall refund to each
Certificate Purchaser all amounts funded by such Certificate Purchaser, and
Lessee shall pay to Trustee, for the account of each such Certificate Purchaser,
any amounts due pursuant to SECTION 7.7(d) PLUS interest on all amounts funded
by such Certificate Purchaser at the applicable Interest Rate.
2.6 NATURE OF TRANSACTION. It is the intent of the parties that
notwithstanding any provision of this Lease to the contrary: (a) the transaction
contemplated hereby constitutes an operating lease from Trustee, on behalf of
the Certificate Purchasers, to Lessee for purposes of Lessee's financial
reporting, (b) the transaction contemplated hereby is a financing arrangement
and preserves ownership in the Equipment in Lessee for Federal, state and local
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<PAGE>
income tax, bankruptcy and UCC purposes, (c) this Lease grants a Lien in the
Equipment and the other Collateral to Trustee, for the benefit of the
Certificate Purchasers and (d) the obligations of Lessee to pay Capital Rent and
Accrual Rent shall be treated as payments of principal and interest,
respectively, on the loans made by Trustee to Lessee and, similarly, the
Fundings made by the Certificate Purchasers to Trustee. EXCEPT as specifically
provided for herein, Trustee, for the benefit of the Certificate Purchasers,
shall retain title to the Equipment, free and clear of all Liens OTHER THAN
Permitted Liens, as security for the obligations of Lessee under the Operative
Documents. Lessee shall not have any right, title or interest in the Equipment
EXCEPT as expressly set forth in this Lease. Each of the parties to this Lease
agrees that it will not, nor will any Person controlled by it, or under common
control with it, directly or indirectly, at any time take any action or fail to
take any action with respect to the filing of any income tax return, including
an amended income tax return, inconsistent with the intention of the parties
expressed in this SECTION 2.6. In furtherance of the foregoing neither Trustee
nor any Certificate Purchaser will claim any federal, state or local tax
attributes or benefit of ownership (including depreciation) of any of the
Equipment for federal, state or local income tax purposes.
2.7 REPLACEMENTS. Certificate Purchasers hereby agree that, if an item
of Equipment is replaced pursuant to SECTION 6.1 then, upon satisfaction of the
conditions to replacement set forth in SECTION 6.1, the replaced item shall be
released from the Lien of this Lease and, upon the request of Lessee, they shall
instruct Trustee to evidence such release by the execution and delivery of a
termination statement release and such other documents as may be required to
release the replaced item from this Lease and which are in form and substance
satisfactory to the Required Certificate Purchasers and Lessee.
2.8 NO WARRANTY. THE EQUIPMENT IS LEASED BY LESSEE "AS IS" IN ITS
PRESENT OR THEN CONDITION, AS THE CASE MAY BE, SUBJECT TO (a) ANY RIGHTS OF ANY
PARTIES IN POSSESSION THEREOF, (b) THE STATE OF TITLE THERETO EXISTING AT THE
TIME CERTIFICATE PURCHASERS ACQUIRE THEIR RESPECTIVE INTEREST IN THE EQUIPMENT,
(c) ANY STATE OF FACT WHICH AN ACCURATE PHYSICAL INSPECTION MIGHT SHOW, AND
LESSEE CONFIRMS THAT ITS EXECUTION AND DELIVERY OF EACH LEASE SUPPLEMENT SHALL
CONSTITUTE ITS CERTIFICATION THAT IT HAS INSPECTED AND ACCEPTS, AS BETWEEN
TRUSTEE, ADMINISTRATIVE AGENT AND THE CERTIFICATE PURCHASERS, ON THE ONE HAND,
AND LESSEE, ON THE OTHER HAND, EACH ITEM OF EQUIPMENT WHICH IS THE SUBJECT
MATTER THEREOF, (d) ALL APPLICABLE LAWS, AND (e) ANY VIOLATIONS OF APPLICABLE
LAWS WHICH MAY EXIST AT THE COMMENCEMENT OF THE RELATED LEASE TERM. LESSEE
ACKNOWLEDGES AND AGREES THAT (i) EACH ITEM OF EQUIPMENT IS OF A SIZE, DESIGN,
CAPACITY AND MANUFACTURE SELECTED BY LESSEE, (ii) LESSEE IS SATISFIED THAT THE
SAME IS SUITABLE FOR ITS PURPOSES, (iii) NONE OF THE CERTIFICATE PURCHASERS,
ADMINISTRATIVE AGENT OR LEAD ARRANGER IS A MANUFACTURER THEREOF OR A DEALER IN
PROPERTY OF SUCH KIND, (iv) NONE OF THE CERTIFICATE PURCHASERS, TRUSTEE,
ADMINISTRATIVE AGENT OR LEAD ARRANGER SHALL BE LIABLE FOR ANY LATENT, HIDDEN OR
PATENT DEFECT IN
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<PAGE>
ANY ITEM OF EQUIPMENT, OR THE FAILURE OF ANY ITEM OF EQUIPMENT TO COMPLY WITH
APPLICABLE LAWS AND (v) NONE OF THE CERTIFICATE PURCHASERS, TRUSTEE,
ADMINISTRATIVE AGENT OR LEAD ARRANGER HAS MADE, OR DOES OR WILL MAKE, (A) ANY
REPRESENTATION OR WARRANTY OR COVENANT WITH RESPECT TO THE MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE, CONDITION, QUALITY, DESCRIPTION, DURABILITY OR
SUITABILITY OF ANY SUCH ITEM OF EQUIPMENT IN ANY RESPECT OR IN CONNECTION WITH
OR FOR THE PURPOSES AND USES OF LESSEE OR, EXCEPT AS EXPRESSLY PROVIDED IN
SECTION 13.3(a) OR 13.4(b), ANY REPRESENTATION, WARRANTY OR COVENANT WITH
RESPECT TO THE TITLE OF ANY ITEM OF EQUIPMENT OR (B) ANY OTHER REPRESENTATION OR
WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO ANY ITEM OF EQUIPMENT,
IT BEING AGREED THAT ALL RISKS, AS BETWEEN CERTIFICATE PURCHASERS, TRUSTEE,
ADMINISTRATIVE AGENT AND LEAD ARRANGER, ON THE ONE HAND, AND LESSEE, ON THE
OTHER HAND, SHALL BE BORNE BY LESSEE. Lessee hereby assigns to Trustee as
further security for Lessee's obligations under this Lease, to the extent
assignable, all of its interest, if any, in any warranties, covenants and
representations of any Vendor of any item of Equipment and Trustee hereby
assigns to Lessee for the Lease Term all of Trustee's interest in such
warranties, covenants and representations (PROVIDED, that (x) such assignment by
Trustee to Lessee shall be effective only during any period when no Default
shall have occurred and be continuing and (y) any action taken by Lessee by
reason of any such warranties, covenants or representations shall be at the sole
expense of Lessee and shall be consistent with Lessee's obligations pursuant to
this Lease). Notwithstanding the proviso set forth in the preceding sentence,
(1) Trustee agrees to use reasonable commercial efforts to keep Lessee apprised
of any action taken by Trustee in connection with any such warranties, covenants
and representations and (2) if a Default shall have occurred and remain in
effect and Trustee shall have failed to take action in connection with any such
warranties, covenants or representations, which action Lessee reasonably and in
good faith believes should be taken, Lessee may notify Trustee in writing that
Lessee intends to take such action (and Lessee shall be permitted to take such
action) unless Trustee either itself takes such action or advises Lessee in
writing that Lessee is prohibited from taking such action (and the reasons for
such prohibition), in either case, within ten (10) Business Days of receipt of
such notice from Lessee.
2.9 LEGAL AND TAX REPRESENTATION. Each of Lessee, Guarantor, Trustee,
Administrative Agent and each Certificate Purchaser acknowledges and agrees that
none of the parties to this Lease has provided any assurances or covenants
concerning the tax, accounting or legal characteristics of this Lease and that
each of the parties to this Lease has obtained and relied on such tax,
accounting and legal advice regarding this Lease and the other Operative
Documents as it deems appropriate.
2.10 COMPUTATIONS; CONCLUSIVE DETERMINATIONS.
(a) All computations of accrued amounts pursuant to the Operative
Documents shall be made on the basis of actual number of days elapsed in a
360-day year,
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unless otherwise specifically stated to the contrary in any such Operative
Document. Administrative Agent shall, as soon as practicable but in no
event later than 10:00 a.m. San Francisco time, two (2) Business Days prior
to the effectiveness of each Rent Period, calculate the applicable Interest
Rate and notify Lessee, Trustee and each Certificate Purchaser thereof;
PROVIDED that the failure to give or receive any such notice shall not
limit Lessee's obligations under this Lease.
(b) Each determination of the Interest Rate pursuant to any
provisions of this Lease or any of the other Operative Documents shall be
conclusive and binding on Lessee and Certificate Purchasers in the absence
of manifest error.
ARTICLE III
CONDITIONS TO DELIVERY DATES
The obligation of each Certificate Purchaser to make any Funding
hereunder and of Trustee, on behalf of the Certificate Purchasers, to acquire
title to and lease the Equipment to, Lessee, and for Lessee to cause the
transfer of title to such Equipment to, and to lease such Equipment from,
Trustee, on behalf of the Certificate Purchasers, on each Delivery Date, shall
be subject to the fulfillment to the satisfaction of (including, with respect to
writings that do not conform to any applicable Exhibit hereto, such writings
being in form and substance reasonably satisfactory to Trustee, Administrative
Agent and each Certificate Purchaser and, to the extent provided below, Lessee),
or the waiver in writing by, Trustee, Administrative Agent and each Certificate
Purchaser and Lessee, of the conditions precedent applicable to such party
(PROVIDED that no action required to be taken by any such party or any of its
Affiliates shall be a condition precedent to such party's obligations) set forth
in this ARTICLE III on or prior to each Delivery Date (EXCEPT that the
obligation of any party hereto shall not be subject to the performance or
compliance of such party or of any of such party's Affiliates).
3.1 DELIVERY DATE NOTICE; INVOICES. Lessee shall have delivered to
Trustee and Administrative Agent (for delivery by Trustee to each of the
Certificate Purchasers), not later than 10:00 a.m., San Francisco time, and not
later than the tenth (10th) Business Day prior to the proposed Delivery Date
(or, in the case of the initial Delivery Date, not later than the fifth (5th)
Business Day prior thereto), an irrevocable notice substantially in the form of
EXHIBIT D (a "DELIVERY DATE NOTICE"), setting forth (i) the proposed Delivery
Date (which proposed date shall be the last Business Day of a calendar month,
OTHER THAN with respect to the initial Delivery Date which may be any Business
Day), (ii) a description (including model, make and serial number, if available)
of each item of Equipment to be transferred to Trustee, on behalf of the
Certificate Purchasers, and leased to Lessee on such Delivery Date, (iii) the
respective Purchase Prices of such Equipment (which, for each Delivery Date
OTHER THAN the final Delivery Date, shall be in an aggregate amount of not less
than $10,000,000), and (iv) wire transfer instructions for the disbursement of
funds. Concurrently with such Delivery Date Notice, Lessee shall deliver to
Administrative Agent true and correct copies of the Vendor's invoices for each
item of Equipment to be delivered on such Delivery Date. All Equipment
identified in a Delivery Date
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Notice shall be items of personal property sold under a Purchase Contract
identified in SCHEDULE V, as the same may be updated from time to time. No
Delivery Date shall occur later than the last day of the Commitment Period.
3.2 BILL OF SALE OR PURCHASE ORDER ASSIGNMENT. Lessee shall have
delivered to Trustee a fully-executed bill of sale in the form of EXHIBIT B
(each a "BILL OF SALE") or Purchase Order Assignment transferring to Trustee, on
behalf of the Certificate Purchasers, title to each item of Equipment to be
leased by Trustee, on behalf of the Certificate Purchasers, to Lessee on such
Delivery Date.
3.3 LEASE SUPPLEMENTS. On each Delivery Date, Lessee and Trustee shall
execute and deliver (with original counterparts for Administrative Agent and
each Certificate Purchaser) a Lease Supplement substantially in the form of
EXHIBIT F (a "LEASE SUPPLEMENT"), with any material changes to the form thereof
subject to the approval of the Required Certificate Purchasers; PROVIDED,
HOWEVER, only Trustee shall receive the Lease Supplement marked "Counterpart No.
1 - Trustee's Original Copy". The Lease Supplement to be executed and delivered
by Lessee and Trustee on each Delivery Date shall set forth:
(a) in Schedule I thereto, a description of and the Purchase Price
for the Equipment (including any System) to be acquired by Trustee, on
behalf of the Certificate Purchasers, and leased to Lessee on such Delivery
Date; and
(b) in Schedule II thereto, (i) a schedule of the installments of
Capital Rent, (ii) the Payment Dates therefor payable during the Base Term
and during each Renewal Term, (iii) the Applicable Percentage with respect
to the end of the Base Term and each Renewal Term, and (iv) the Supplement
Balance of such Lease Supplement as of the Delivery Date therefor and as of
each Payment Date in the Base Term and each Renewal Term, assuming in each
case that all installments of Capital Rent due and payable thereunder to
and including such Payment Date have been paid.
The payments of Capital Rent under each Lease Supplement shall be in amounts
such that, at the end of the Base Term and each Renewal Term, the Supplement
Balance of such Lease Supplement shall be equal to the percentage specified for
such date on SCHEDULE VI to this Lease MULTIPLIED BY the Supplement Balance of
such Lease Supplement as of the Delivery Date on which such Lease Supplement was
executed and delivered. Schedules I and II to each Lease Supplement shall be
prepared by Administrative Agent and Lessee, and the items set forth in such
Schedules shall be conclusive and binding upon Lessee for all purposes hereunder
absent manifest error.
3.4 FINANCING STATEMENTS; SUPPLEMENTAL SEARCHES; CONSENTS AND WAIVERS.
Trustee shall have received (a) from Lessee to the extent not theretofore
delivered pursuant to SECTION 2.1(i) or this Section, duly executed UCC
financing statements (or amendments to financing statements, as applicable)
covering all Equipment to be transferred to Trustee, on behalf of the
Certificate Purchasers, and leased to Lessee on such Delivery Date, identifying
Lessee as
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debtor and Trustee as secured party for the benefit of the Certificate
Purchasers, and such financing statements (or amendments) shall have been filed
in each applicable jurisdiction, (b), if required by Trustee (acting at the
direction of the Required Certificate Purchasers), such Searches acceptable to
Administrative Agent and counsel to the Certificate Purchasers as to Lessee,
Guarantor and any applicable Sublessee (and any of their respective Affiliates
as may be required by Administrative Agent) and the applicable Equipment (to the
extent then obtained by any such party) from each appropriate state and county
filing or recording office, each dated as close to the applicable Delivery Date
as practicable, which Searches shall evidence Lessee's (or such other applicable
Person's) ownership of any of the applicable Equipment free and clear of all
Liens OTHER THAN Permitted Liens, and (c) such releases of liens, termination
statements, landlord consents (from Facility landlords) and mortgagee consents
(from Facility mortgagees) as may be necessary to ensure (i) a first priority
security interest in the Equipment which may be deemed "fixtures" and thereby
subject to prior Liens and (ii) the ability of Trustee and Certificate
Purchasers to obtain access to such Facilities and remove the Equipment
therefrom in connection with exercising their rights and remedies under the
Operative Documents.
3.5 PAYMENT OF IMPOSITIONS. All Taxes payable on or prior to each
Delivery Date in connection with the execution, delivery, recording or filing of
any of the Operative Documents, in connection with the filing of any of the
financing statements (or amendments) and any other documents, in connection with
the consummation of any other transactions contemplated hereby or by any of the
other Operative Documents, shall have been paid in full by Lessee.
3.6 NO CASUALTY. No Casualty shall have occurred with respect to any
item of Equipment being delivered on such Delivery Date.
3.7 REPRESENTATIONS AND WARRANTIES TRUE; ABSENCE OF DEFAULTS. Each of
the representations and warranties made by or on behalf of Lessee, Guarantor,
Trustee in its individual capacity, Administrative Agent in its individual
capacity and each Certificate Purchaser under the Operative Documents shall be
true on and as of each Delivery Date, and there shall exist no Default or Event
of Default. With respect to any Sublessee that is to sublease any of the
Equipment to be acquired by Trustee, on behalf of the Certificate Purchasers, on
any Delivery Date, the representations and warranties made by or on behalf of
such Sublessee shall be true on and as of such Delivery Date.
3.8 SUBLEASE DOCUMENTS. In the event that on such Delivery Date any of
the Equipment designated in the Delivery Date Notice is to be delivered to, and
subleased by, any Sublessee (OTHER THAN Mandalay Bay Sublessee or any other
applicable Sublessee to the extent the following conditions shall have then been
satisfied as of the Closing Date or an earlier Delivery Date):
(a) Such Sublessee and Lessee shall have executed a Sublease
substantially in the form of EXHIBIT K and Lessee shall have delivered to
Trustee the original thereof together with a fully-executed original
Sublease Assignment substantially
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in the form of EXHIBIT L and a fully-executed Consent to Sublease
Assignment substantially in the form of EXHIBIT C;
(b) Administrative Agent shall have received reports acceptable to
Administrative Agent and counsel to the Certificate Purchasers as to such
Sublessee and the applicable Equipment substantially consistent with the
requirements for searches and reports described in SECTION 2.1(h);
(c) Each Certificate Purchaser, Administrative Agent, Trustee and
their respective counsel shall have received an opinion (or opinions, as
the case may be) of counsel to such Sublessee, substantially to the effect
of the matters set forth in EXHIBIT H-1 and EXHIBIT H-2, respectively. By
its execution of a Sublease, each Sublessee expressly authorizes such
counsel to execute and deliver such opinions to the Persons designated in
the preceding sentence; and
(d) Trustee and Administrative Agent shall have received:
(i) on or prior to such Delivery Date, certificates of
existence and good standing with respect to such Sublessee from the
Secretary of State of its incorporation, dated no earlier than the 15th
day prior to such Delivery Date;
(ii) on or prior to such Delivery Date, an Officer's
Certificate of Sublessee, substantially in the form of EXHIBIT G-3,
dated such Delivery Date, with respect to representations and
warranties and absence of default; and
(iii) on or prior to such Delivery Date, a Certificate of the
Secretary or Assistant Secretary of such Sublessee, substantially in
the form of EXHIBIT J-3, dated such Delivery Date, with respect to the
governing documents, resolutions and incumbent officers of such
Sublessee.
3.9 CONSENTS AND APPROVAL. On or prior to such Delivery Date, all
necessary consents, approvals and authorizations of, and declarations,
registrations and filings with, Governmental Agencies and nongovernmental
Persons required to consummate the transactions contemplated by this Lease shall
have been obtained or made by Lessee (or any Sublessee, if applicable) and shall
be in full force and effect.
3.10 INSURANCE. Trustee and Administrative Agent shall have received
(and each Certificate Purchaser shall have received a copy of) a current
certificate to the effect that insurance complying with SECTION 6.2 of this
Lease (and, in connection with the initial Delivery Date, reasonably acceptable
to the Required Certificate Purchasers) is in full force and effect.
3.11 PROCEEDINGS SATISFACTORY, ETC. All proceedings taken in connection
with such Delivery Date and all documents relating thereto shall be reasonably
satisfactory to Lessee, Guarantor, each applicable Sublessee, each Creditor, and
their respective counsel, and each such
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Person shall have received copies of such documents as they may reasonably
request in connection therewith, all in form and substance reasonably
satisfactory to each such Person.
3.12 SUPPLEMENTAL APPRAISALS. At least five (5) Business Days prior to
such Delivery Date, Trustee, Administrative Agent and the Certificate Purchasers
shall have received an Appraisal from the Appraiser to their satisfaction
opining, with respect to any Equipment proposed to be delivered on such Delivery
Date that was not covered in any "final" (as opposed to a preliminary) Appraisal
previously delivered to Trustee, Administrative Agent and the Certificate
Purchasers, that:
(a) the Fair Market Value of the Equipment identified in the
Delivery Date Notice preceding and relating to such Delivery Date is at
least equal to the Purchase Price for such Equipment;
(b) the estimated Fair Market Value of such Equipment at the end of
the Base Term and each Renewal Term shall be not less than the product of
(i) the difference between the scheduled portion of the Supplement
Balance(s) allocable to such Equipment and the Applicable Percentage Amount
for such Equipment as of each such date MULTIPLIED BY (ii) 3.
(c) the remaining economic useful life of such Equipment is not
less than 6 3/4 years; and
(d) the values set forth in subsection (a) above include a
reasonable factor for an increase in inflation as specified in such
Appraisal.
3.13 FURTHER ASSURANCES, ETC. Each Creditor shall have received such
other and further instruments, duly executed, acknowledged (if appropriate) and
delivered, as any such Creditor reasonably have requested in connection with
such Delivery Date and the applicable Operative Documents.
3.14 TRANSACTION COSTS. On or prior to such Delivery Date, Lessee shall
have paid to Trustee, for the benefit of Trustee, Administrative Agent and the
Certificate Purchasers, any Transaction Costs invoiced to Lessee not less than
three (3) days prior to such Delivery Date and not previously paid. Such payment
shall be made by wire transfer of immediately available funds to the account
specified for the Person to whom such payment is due.
3.15 REDUCTION OF COMMITMENT - GUARANTOR LOAN AGREEMENT. On or prior to
such Delivery Date, Lessee shall have delivered (or caused to be delivered) to
Administrative Agent (for delivery by Administrative Agent to the Certificate
Purchasers) written evidence satisfactory to Administrative Agent that following
the Closing Date Guarantor shall have permanently and irrevocably reduced the
"Commitment" (as such term is used and defined in the Guarantor Loan Agreement
or, if then applicable, any Replacement Loan Agreement), by an aggregate amount
not less than the cumulative aggregate amount of Fundings made by the
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Certificate Purchasers, giving effect to the Fundings requested in the
applicable Delivery Date Notice.
ARTICLE IV
LEASE TERM, RENT AND PAYMENT
4.1 LEASE TERM. Unless earlier terminated in accordance with the terms
hereof, the term of this Lease shall consist of (a) the Interim Period, (b) a
base period commencing on and including the last day of the Interim Period and
ending on but not including the second anniversary thereof (the "BASE TERM") and
(c) any exercised Renewal Terms (collectively, the "LEASE TERM").
4.2 LEASE RENEWAL. Lessee may elect to renew this Lease for up to two
(2) successive one-year renewal terms with respect to all, but not less than
all, of the Equipment then subject to this Lease (each, a "RENEWAL TERM") as
provided in ARTICLE XI.
4.3 RENT PAYMENTS. On each Payment Date during the Interim Period and
on the last day of the Interim Period, Lessee shall pay to Trustee, for the
benefit of the Certificate Purchasers, an amount equal to the aggregate amount
of Interim Rent accrued during the Rent Period then ended with respect to all
Equipment subject to each Lease Supplement. Thereafter on each Payment Date
during the remaining Lease Term, Lessee shall pay to Trustee, for the benefit of
the Certificate Purchasers, an installment payment of rent consisting of (a)
Capital Rent as set forth opposite the applicable Payment Date on Schedule II to
each Lease Supplement and (b) Accrual Rent for the applicable Rent Period on the
outstanding Lease Balance (collectively, "BASIC RENT"). Scheduled installments
of Basic Rent shall be adjusted pursuant to SECTION 6.1. All payments of
Supplemental Rent (OTHER THAN Casualty Amounts or amounts payable by Lessee
pursuant to ARTICLE XI hereof) shall be payable within three (3) Business Days
of written demand therefor or as otherwise specified herein.
4.4 PLACE AND MANNER OF PAYMENT. Rent and all other sums due to
Trustee, Administrative Agent or any Certificate Purchaser hereunder shall be
paid in immediately available funds and if payable to Trustee, Administrative
Agent or to a Certificate Purchaser, at the office of Trustee, Administrative
Agent or such Certificate Purchaser specified on Schedule II, or at such other
office of Trustee, Administrative Agent or any Certificate Purchaser as such
Person may from time to time specify to Lessee in a notice pursuant to this
Lease. All such payments shall be received by Trustee, Administrative Agent or
Certificate Purchaser, as applicable, not later than 11:00 a.m., San Francisco
time, on the date due; funds received after such time shall for all purposes
under the Operative Documents be deemed to have been received by Trustee,
Administrative Agent or such Certificate Purchaser on the next succeeding
Business Day. Any payments received by Trustee not later than 11:00 a.m., San
Francisco time, shall be paid by Trustee to the Certificate Purchasers in
immediately available funds no later than 1:00 p.m., San Francisco time, on the
same day and any payments received by Trustee from or on behalf of Lessee after
11:00 a.m., San Francisco time, shall be paid to the Certificate
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Purchasers as soon after receipt as practicable, but not later than 1:00 p.m.,
San Francisco time, on the next succeeding Business Day.
4.5 NET LEASE. This Lease is a net lease and Lessee's obligation to pay
all Rent, indemnities and other amounts payable hereunder shall be absolute and
unconditional under any and all circumstances and, without limiting the
generality of the foregoing, Lessee shall not be entitled to any abatement or
reduction of Rent or any setoff against Rent, indemnity or other amount, whether
arising by reason of any past, present or future claims of any nature by Lessee
against Trustee or any other Creditor or otherwise. EXCEPT as otherwise
expressly provided herein, this Lease shall not terminate, nor shall the
obligations of Lessee be otherwise affected: (a) by reason of any defect in the
condition, merchantability, design, construction, quality or fitness for use of,
damage to, or loss of possession or use, obsolescence or destruction, of any or
all of the Equipment, however caused; or (b) EXCEPT as expressly provided in
SECTION 6.1 with respect to the adjustment of Basic Rent, by the taking or
requisitioning of any or all of the Equipment by Condemnation or otherwise; or
(c) by the invalidity or unenforceability or lack of due authorization by
Trustee, Administrative Agent, any Certificate Purchaser, Lessee, Guarantor or
other infirmity of this Lease or any other Operative Document; or (d) by the
attachment of any Lien of any third party to any item of Equipment; or (e) by
any prohibition or restriction of or interference with Lessee's use of any or
all of the Equipment by any Person; or (f) by the insolvency of or the
commencement by or against Trustee, Administrative Agent or any Certificate
Purchaser of any bankruptcy, reorganization or similar proceeding; or (g) by any
other cause, whether similar or dissimilar to the foregoing, any present or
future law to the contrary notwithstanding. It is the intention of the parties
that all Rent, indemnities and other amounts payable by Lessee hereunder shall
be payable in all events in the manner and at the times herein provided unless
Lessee's obligations in respect thereof have been terminated or modified
pursuant to the express provisions of this Lease. To the extent permitted by
Applicable Laws, Lessee hereby waives any and all rights which it may now have
or which may at any time be conferred upon it, by statute or otherwise, to
terminate, cancel, quit or surrender this Lease, in whole or in part, EXCEPT
strictly in accordance with the express terms hereof. Each rental, indemnity or
other payment made by Lessee hereunder shall be final, and Lessee shall not seek
to recover (EXCEPT as expressly provided in this Lease) all or any part of such
payment from Trustee, Administrative Agent or any Certificate Purchaser for any
reason whatsoever. Without affecting Lessee's obligation to pay Rent or other
amounts payable hereunder, nothing in this SECTION 4.5 shall preclude or limit
Lessee's right to seek or claim damages or other relief for a breach by any of
Trustee (in its individual capacity or as Trustee or both), Administrative Agent
(in its individual capacity or as Administrative Agent or both) or any
Certificate Purchaser of any of its representations, warranties, covenants,
agreements or other obligations under this Lease or any other Operative
Document.
4.6 OVERDUE AMOUNTS. Lessee shall pay to Trustee, for the benefit of
the applicable Creditors, on demand, interest (at a rate per annum (the "DEFAULT
RATE") which is two percent (2%) above the Interest Rate in effect from time to
time) on any overdue amount of Rent, Lease Balance, Casualty Amount or any other
payment due under this Lease and (to the extent
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permitted by Applicable Laws) interest from the date due (not taking into
account any grace period) until payment is made.
4.7 NO TERMINATION OR ABATEMENT. Lessee shall remain obligated under
this Lease in accordance with its terms and, consistent with the intention of
the parties expressed in SECTIONS 2.6 and 15.1, shall not take any action to
terminate (EXCEPT as expressly permitted by this Lease), rescind or avoid this
Lease, notwithstanding any action for bankruptcy, insolvency, reorganization,
liquidation, dissolution, or other proceeding affecting Trustee, Administrative
Agent or any Certificate Purchaser, or any action with respect to this Lease
which may be taken by any custodian, receiver, liquidator, assignee, trustee or
sequestrator (or other similar official) of such Person. Lessee hereby waives
all right (i) to terminate or surrender this Lease (EXCEPT as expressly
permitted by this Lease) or (ii) to avail itself of any abatement, suspension,
deferment, reduction, setoff, non-compulsory counterclaim or defense with
respect to any Rent. Lessee shall remain obligated under this Lease in
accordance with its terms, and Lessee hereby waives any and all rights now or
hereafter conferred by statute or otherwise to modify or to avoid strict
compliance with its obligations under this Lease and, notwithstanding any such
statute or otherwise, Lessee shall be bound by all of the terms and conditions
contained in this Lease.
ARTICLE V
POSSESSION, ASSIGNMENT, USE, MAINTENANCE
AND SUBSTITUTION OF EQUIPMENT
5.1 POSSESSION AND USE OF EQUIPMENT; COMPLIANCE WITH LAWS. Lessee
agrees that the Equipment will be used and operated in compliance with any and
all Applicable Laws, PROVIDED, HOWEVER, that Lessee may at its own expense,
contest the validity or application of any such Applicable Laws pursuant to a
Permitted Contest. Subject to Lessee's contest rights under this Lease, Lessee
shall procure and maintain in effect all licenses, registrations, certificates,
permits, approvals and consents required by Applicable Laws or by any
Governmental Agency in connection with the ownership, delivery, installation,
use and operation of each item of Equipment and, as applicable, any System.
Lessee shall not (a) use, operate, maintain or store any System, item of
Equipment or any portion thereof in violation of SECTION 5.3 or any Insurance
Requirement; (b) EXCEPT as set forth in SECTION 5.2, sell, assign or transfer
any of its rights hereunder or in any item of Equipment, or directly or
indirectly create, incur or suffer to exist any Lien on any of its rights
hereunder or in any item of Equipment, EXCEPT for Permitted Liens; or (d) EXCEPT
in connection with the return of the Equipment pursuant to ARTICLE XVI and any
maintenance or repair thereof, permit any item of Equipment to be located in any
jurisdiction OTHER THAN a jurisdiction where all action necessary to perfect the
Lien of Trustee, on behalf of the Certificate Purchasers, on such Equipment
shall have been taken and completed. Lessee will, for the benefit of the
Certificate Purchasers, defend Trustee's title to the Equipment.
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5.2 SUBLEASES AND ASSIGNMENTS.
(a) LESSEE SHALL NOT, WITHOUT THE PRIOR WRITTEN CONSENT OF TRUSTEE
AND THE REQUIRED CERTIFICATE PURCHASERS, SUBLEASE OR ASSIGN, TRANSFER OR
ENCUMBER ITS RIGHTS, INTERESTS OR OBLIGATIONS HEREUNDER AND ANY ATTEMPTED
SUBLEASE, RELINQUISHMENT, ASSIGNMENT, TRANSFER OR ENCUMBERING BY LESSEE
SHALL BE NULL AND VOID, EXCEPT as provided in this SECTION 5.2. Each
sublease entered into in accordance with this SECTION 5.2 shall be referred
to as a "Sublease" and each sublessee under any Sublease (including
Mandalay Bay Sublessee) shall be referred to as a "Sublessee".
(b) Notwithstanding the foregoing, (i) Lessee shall sublease the
Systems and items of Equipment pertaining to the Mandalay Bay Project on
each applicable Delivery Date to Mandalay Bay Sublessee pursuant to the
terms of the Mandalay Bay Sublease and (ii), so long as no Default or Event
of Default shall have occurred and be continuing, Lessee MAY sublease all
or any portion of the Equipment that does not pertain to the Mandalay Bay
Project (PROVIDED that, no System shall be "split" among more than one
Sublessee) (A) to a direct or indirect wholly-owned Subsidiary of Guarantor
without the prior written consent of Certificate Purchasers or Trustee and
(B) to any other Person with the prior written consent of each of the
Certificate Purchasers (and with notice to Trustee and Administrative
Agent); PROVIDED, that any Sublease (including the Mandalay Bay Sublease)
entered into pursuant to this SECTION 5.2 must satisfy each of the
following conditions:
(1) each Sublease shall be expressly subject and subordinate
to this Lease and the Liens created hereby, and to the applicable
Lease Supplement(s) and shall be in writing and expressly prohibit
any further assignment, sublease or transfer (EXCEPT (x) to a
wholly-owned Subsidiary of Guarantor conducting operations at the
Facility where the applicable Equipment is to be located and used,
(y) in the case of the Mandalay Bay Sublease, as may be expressly
provided for in such Sublease, and (z) in the case of any Sublease
to Circus Circus Mississippi, Inc., a Mississippi corporation, as
may be expressly provided for in such Sublease, the assignment and
sublease provisions of which Sublease shall parallel the assignment
and sublease provisions of the Mandalay Bay Sublease);
(2) all of Lessee's right, title and interest in, to and under
each Sublease shall be pledged by Lessee to Trustee, for the
benefit of the Certificate Purchasers, as collateral for Lessee's
obligations under the Operative Documents, by delivery of an
executed copy for UCC purposes, to Trustee, for the benefit of the
Certificate Purchasers, and Lessee shall do any further act and
execute, acknowledge, deliver, file, register and record any
further documents which Trustee (pursuant to a request under
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Article IV of the Trust Agreement) may reasonably request in order
to create, perfect, preserve and protect Trustee's security
interest in such Sublease;
(3) although Lessee shall have the right to delegate to any
Sublessee, in respect of such Sublessee's subleased Equipment, all
or any of Lessee's obligations (as between such Sublessee and
Lessee) hereunder, Lessee shall nonetheless remain primarily liable
hereunder for the performance of all of the terms of this Lease to
the same extent as if such Sublease had not been entered into;
(4) such Sublease shall not contain a purchase option in favor
of the Sublessee or any other provision pursuant to which the
Sublessee may obtain record or beneficial title to any item of
Equipment leased thereunder from Lessee;
(5) such Sublease shall prohibit the Sublessee from making any
alterations or modifications to any item of Equipment that would
violate this Lease;
(6) such Sublease shall require the Sublessee to maintain each
item of Equipment subleased thereunder in accordance with SECTION
5.3;
(7) Lessee shall not, without Trustee's prior written consent
(which shall be given upon instruction by Required Certificate
Purchasers) , permit or consent to any renewal or extension of a
Sublease at any time when a Default or Event of Default has
occurred and is continuing; and
(8) Lessee shall notify Trustee and Administrative Agent (on
behalf of each Certificate Purchaser) in writing not less than
thirty (30) days prior to entering into any Sublease (OTHER THAN
the Mandalay Bay Sublease or any Sublease entered into with any
wholly-owned Subsidiary of Guarantor in which case only ten (10)
days notice shall be required), which notice shall include (w) a
description of the Equipment to be leased thereunder, (x) the name
and address of the applicable Sublessee and the name, address and
telephone number of a contact employee of such Sublessee, (y) the
street address, city, county and State where such Equipment will be
located during the term of such Sublease and (z) the provision of
this SECTION 5.2 pursuant to which such Sublease has been entered
into.
The liability of Lessee with respect to this Lease, the Lease
Supplements and each of the other Operative Agreements shall not be altered or
affected in any way by the existence of any Sublease.
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5.3 MAINTENANCE. At all times during the term of this Lease, Lessee
shall, at its own cost and expense, cause the Equipment to be maintained,
repaired and preserved in accordance with the terms of all manufacturer's
warranties and all contracts in as good an operating condition, repair and
appearance as when originally delivered, ordinary wear and tear excepted, and in
any event in accordance with standards no lower than the highest of those
applied by Lessee or any of its Affiliates (including Guarantor and its
Subsidiaries) to similar equipment owned or leased by it and as required to
maintain all manufacturer's warranties relating to the Equipment. Lessee shall
maintain or cause to be maintained, and shall permit Trustee, Administrative
Agent and Certificate Purchasers to inspect, all records, logs and other
materials required by any Governmental Agency having jurisdiction over the
Equipment or Lessee, to be maintained in respect of each item of Equipment.
Lessee hereby waives any right now or hereafter conferred by law to make repairs
on the Equipment at the expense of Trustee, Administrative Agent or any
Certificate Purchaser.
5.4 ALTERATIONS, MODIFICATIONS, ETC.
(a) In case any System, item of Equipment, or any component, part
or appliance therein (each, a "PART") is required to be altered, added to,
replaced or modified in order to comply with any Applicable Laws (a
"REQUIRED ALTERATION") pursuant to SECTIONS 5.1 or 5.3 hereof, Lessee
agrees to make or cause to be made such Required Alteration at its own
expense. Lessee, directly or through any applicable Sublessee, shall have
the right to make any modification, alteration or improvement to any System
or item of Equipment (herein referred to as a "PERMITTED MODIFICATION"), or
to remove any Part which has become worn out, broken or obsolete, PROVIDED
in each case that Lessee continues to be in compliance with SECTIONS 5.1
and 5.3 hereof, that no Default or Event of Default then exists and that
any such Permitted Modification (a) will not decrease the economic value of
the applicable System or item of Equipment or impair its originally
intended use or function or decrease its economic useful life and (b) will
not cause such System or item of Equipment to become suitable for use only
by Lessee. In the event any Permitted Modification (i) is readily removable
without impairing the value or use which the System or item of Equipment
would have had at such time had such Part not been affixed or placed to or
made a component of such System or item of Equipment (a "REMOVABLE PART"),
(ii) is not a Required Alteration and (iii) is not a Part which replaces
any Part originally incorporated or installed in or attached to or made a
component of such System or item of Equipment with a value in excess of
$250,000 on the date on which such System or item of Equipment became
subject to this Lease, or any Part in replacement of or substitution for
any such original Part (each an "ORIGINAL PART"), any such Permitted
Modification, if no Default or Event of Default is continuing, shall be and
remain the property of Lessee. To the extent such Permitted Modification is
not a Removable Part, or is a Required Alteration or an Original Part, the
same shall immediately and automatically be and become the property of
Trustee, for the benefit of the Certificate Purchasers, and subject to the
terms of this Lease. Any Required Alterations, and any Parts installed or
replacements made by Lessee upon any System or item of Equipment pursuant
to its obligation to maintain and keep the Equipment in
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good order, operating condition and repair under SECTION 5.3 (collectively,
"REPLACEMENT PARTS") and all other Parts which become the property of
Trustee, for the benefit of Certificate Purchasers, pursuant to this Lease
shall be considered, in each case, accessions to such System or item of
Equipment and title thereto or security interest therein shall be
immediately and automatically vested in Trustee, for the benefit of the
Certificate Purchasers. All Replacement Parts shall be free and clear of
all Liens (OTHER THAN Permitted Liens) and shall be in as good an operating
condition as, and shall have a value and utility substantially equal to, or
better than the replaced Parts, assuming such replaced Parts and the
relevant System or Equipment were immediately prior to such replacement or
the event or events necessitating such replacement in the condition and
repair required to be maintained by the terms hereof. Any Part (OTHER THAN
a Removable Part) at any time removed from any System or item of Equipment
shall remain subject to the interests of Trustee and the Certificate
Purchasers under the Operative Documents, no matter where located, until
such time as such Part shall be replaced by a Part which has been
incorporated or installed in or attached to such System or item of
Equipment and which meets the requirements for a Replacement Part specified
above.
(b) In addition to the foregoing, Lessee shall have the option, so
long as no Default or Event of Default shall have occurred and be
continuing, to replace any System (a "REPLACED SYSTEM") with a replacement
System (a "REPLACEMENT SYSTEM"), subject to the following conditions:
(i) any such Replacement System shall satisfy one of the
following conditions: (x) the Replacement System shall consist of
items of new Equipment of identical manufacture and model as the
Equipment comprising the Replaced System, (y) such Replacement
System shall have a utility, an Appraised Value and a remaining
economic useful life at least equal to those of the Replaced System
immediately prior to such replacement, assuming that the Replaced
System was in the condition and repair required to be maintained by
the terms of this Lease, and Lessee shall have provided to Trustee
and Administrative Agent (for delivery to the Certificate
Purchasers), at Lessee's expense, an appraisal satisfactory to
Trustee and each Certificate Purchaser in their sole and absolute
discretion with respect to the determination of such utility,
Appraised Value and remaining economic useful life or (z) such
Replacement System shall otherwise be acceptable to each of the
Certificate Purchasers in its respective sole and absolute
discretion;
(ii) Lessee shall satisfy each of the conditions set forth in
SECTIONS 2.1 and ARTICLE III of this Lease insofar as the same
apply to Equipment or Systems generally; and
(iii) Lessee shall not remove the Replaced System from the
location set forth on SCHEDULE I to the Delivery Date Notice
pursuant to which the Replaced System was delivered until such time
as it has executed all documents
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reasonably requested by Trustee or any Certificate Purchaser to
perfect the security interest of Trustee, for the benefit of the
Certificate Purchasers, in the Replacement System.
Any Replacement System substituted in accordance with this SECTION 5.4(b)
shall thereafter be considered a System for all purposes of this Lease.
(c) No later than forty-five (45) days after the end of each Fiscal
Quarter of Lessee, Lessee shall deliver to Trustee, for the benefit of the
Certificate Purchasers, a Bill of Sale evidencing the conveyance by Lessee
to Trustee, for the benefit of Certificate Purchasers, of all Replacement
Parts and Replacement Systems not previously evidenced by a Bill of Sale
and such other documents in respect of such Part, Parts, System or Systems
as the Required Certificate Purchasers may reasonably request in order to
confirm that title to such Part, Parts, System or Systems has passed to
Trustee, for the benefit of the Certificate Purchasers, as hereinabove
provided. All replacements pursuant to this SECTION 5.4 shall be purchased
by Lessee with its own funds. There shall be no obligation on the part of
Trustee or any Certificate Purchaser to pay for or otherwise finance any
such replacement.
5.5 OPTIONAL EQUIPMENT SUBSTITUTIONS. Subject to the terms and
conditions set forth below, Lessee shall have the right to substitute items of
Equipment or Systems (each, a "SUBSTITUTION ITEM" or "SUBSTITUTION SYSTEM", as
applicable) for items of Equipment or Systems which it then leases (or has
theretofore proposed to lease) under this Lease. For purposes hereof,
"Substitution Items" and "Substitution Systems" are different from Replacement
Parts and Replacement Systems in that Substitution Items and Substitution
Systems are intended to mean items of equipment or systems that are not
originally contemplated to be subject to this Lease. Lessee's substitution right
pursuant to this SECTION 5.5 shall be subject to the following conditions:
(a) Lessee shall have delivered a written notice to Administrative
Agent on behalf of the Certificate Purchasers specifying: (i) its desire to
substitute a Substitution Item for the substituted item of Equipment or
Substitution System for the substituted System, (ii) a description of the
intended Substitution Item or Substitution System, as applicable, and (iii)
a proposed closing date for such substitution (the "SUBSTITUTION DATE");
(b) Lessee shall have delivered to Administrative Agent on behalf
of the Certificate Purchasers not less than thirty (30) days prior to the
proposed Substitution Date any and all further information regarding the
intended Substitution Item or Substitution System, as applicable, as may be
reasonably required by Administrative Agent or any Certificate Purchaser
for the purpose of evaluating the intended Substitution Item or
Substitution System, as applicable, and whether it should be deemed
acceptable substitution property for the substituted item of Equipment or
System, as the case may be;
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(c) Any Substitution Item or Substitution System, as applicable,
shall (i) have the same or greater Fair Market Value, economic useful life
and utility as the substituted item of Equipment or System, as the case may
be, and (ii) relate, complement or otherwise be materially associated with
the business of Lessee and its Affiliates;
(d) No Default or Event of Default shall have occurred and be
continuing; and
(e) Administrative Agent, acting at the direction of the Required
Certificate Purchasers, shall have approved the Substitution Item or
Substitution System, as applicable, as qualifying Equipment (such approval
right of the Certificate Purchasers to be exercised reasonably from the
perspective of secured creditors) and Lessee shall have otherwise satisfied
such terms and conditions regarding the inclusion of such Substitution Item
or Substitution System, as applicable, as Equipment as may be reasonably
required by Administrative Agent, acting at the direction of the Required
Certificate Purchasers, on or before the Substitution Date.
Upon a permitted substitution of Equipment or System, as applicable, pursuant to
this SECTION 5.5 and receipt of notification thereof from Administrative Agent,
Trustee shall execute such documents as may be required to release the
substituted item of Equipment or System, as applicable, from the terms of this
Lease, at Lessee's expense. Upon such substitution pursuant to this SECTION 5.5,
the substituted item of Equipment or Substitution System, as applicable, shall
become the property of Lessee, and title thereto shall automatically vest in
Lessee upon such permitted substitution.
5.6 LIENS. Lessee will not directly or indirectly create, incur, assume
or suffer to exist any Lien (OTHER THAN Permitted Liens) on or with respect to
(a) any item of Equipment or any Part thereof or any other Collateral, Trustee's
or any Certificate Purchaser's title thereto, or any interest therein or (b)
this Lease or any of Trustee's or any Certificate Purchaser's interests
hereunder, and Lessee, at its own expense, will promptly pay, satisfy and
otherwise take such actions as may be necessary to keep this Lease and the
Equipment free and clear of, and to duly discharge or eliminate or bond in a
manner satisfactory to Trustee and the Required Certificate Purchasers, any such
Lien not excepted above if the same shall arise at any time. Lessee will notify
Trustee and Administrative Agent in writing promptly upon becoming aware of any
Tax or other Lien (OTHER THAN any Lien excepted above) that shall attach to any
of the Equipment, and the reasonable details thereof. Without limiting the
foregoing, Lessee shall not assign or pledge any of its rights under any
Sublease to any Person OTHER THAN Trustee, for the benefit of Certificate
Purchasers.
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ARTICLE VI
RISK OF LOSS; INSURANCE
6.1 CASUALTY. Upon the occurrence of a Casualty prior to or during the
term of this Lease, Lessee shall give Trustee and Administrative Agent prompt
written notice thereof (a "CASUALTY NOTICE"). The Casualty Notice shall specify
whether Lessee will:
(a) pay to Trustee, for the benefit of the Certificate Purchasers,
the Casualty Amount of the Equipment suffering such Casualty (PROVIDED that
if the Equipment suffering such Casualty is part of a System and, as a
result of such Casualty, such System, taken as a whole, shall have suffered
a Casualty, then Lessee shall pay to Trustee, for the benefit of
Certificate Purchaser, a Casualty Amount for such System), which payment
(together with any Supplemental Rent (whether arising as a result of
SECTION 7.7(d) or otherwise) then due) shall be made no later than the
later of (i) sixty (60) days after the occurrence of the Casualty or (ii)
the next scheduled Payment Date occurring after such Casualty (the
"CASUALTY SETTLEMENT DATE"), PROVIDED that in any event the Casualty
Settlement Date shall be no later than the last day of the Lease Term; or
(b) replace such Equipment with respect to which the Casualty has
occurred pursuant to the following provisions of this SECTION 6.1;
PROVIDED, that upon the occurrence and during the continuance of a Default or
Event of Default, Lessee shall be obligated, at the option of the Required
Certificate Purchasers, to make the payments referred to in CLAUSE (a) above and
shall not be entitled to exercise any right of replacement pursuant to CLAUSE
(b).
If Lessee has elected, or is required, to pay the Casualty Amount
pursuant to CLAUSE (a) above, Lessee shall continue to make all payments of Rent
due under this Lease until and including the Casualty Settlement Date. Upon
payment of the Casualty Amount in respect of any item of Equipment suffering a
Casualty on such Casualty Settlement Date, the remaining scheduled payments of
Capital Rent shall be proportionately reduced by an amount equal to the product
of the scheduled amount of such Capital Rent payment (determined in each case
prior to the receipt of such Casualty Amount), MULTIPLIED BY the Affected
Equipment Value Fraction of such item of Equipment suffering such Casualty, and
the Supplement Balance shall be appropriately adjusted to reflect such reduction
in the remaining scheduled payments of Capital Rent.
If Lessee has given notice that it intends to replace the item of
Equipment suffering such Casualty and such replacement is permitted under this
SECTION 6.1, or if Lessee is required to replace the item of Equipment suffering
such Casualty pursuant to the terms of this Lease, then Lessee shall make
subject to this Lease, not more than sixty (60) days after the date of such
Casualty Notice, a replacement for such item of Equipment meeting the
suitability standards hereinafter set forth, PROVIDED, HOWEVER, that such 60-day
period shall be extended for a period equivalent to any period of delay caused
by Force Majeure PROVIDED, FURTHER that such
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extension period shall not exceed thirty (30) days. To be suitable as
replacement Equipment, an item must be of the same general type, year of
construction (or a later year of construction), function, utility, state of
repair and operating condition (immediately preceding the Casualty assuming that
such Equipment had been maintained in accordance with the terms of SECTION 5.3)
as the Equipment suffering the Casualty, must have a value of not less than the
Appraised Value (as set forth in the Appraisal of the Equipment suffering the
Casualty for the date (the "DETERMINATION DATE") set forth in the Appraisal
closest to the date of such replacement) of the Equipment suffering the Casualty
(EXCEPT as otherwise provided in the immediately succeeding paragraph) and, if
the Casualty pertained to a System, taken as a whole, then the value of such
System, after giving effect to such replacement, shall not be less than the
Appraised Value of such System (as set forth in the Appraisal of such System for
the Determination Date) and be free and clear of any Liens OTHER THAN Permitted
Liens. Lessee shall cause a Bill of Sale and new Schedule I to the applicable
Lease Supplement to be executed and delivered to Trustee and Administrative
Agent (on behalf of the Certificate Purchasers) in order to subject such
replacement item to this Lease, and upon such execution and delivery and the
receipt by Trustee and Administrative Agent (on behalf of the Certificate
Purchasers) of (i) evidence reasonably satisfactory to them of Lessee's
compliance with the insurance provisions of SECTION 6.2 with respect to such
replacement item, and (ii) an opinion of counsel to Lessee in form and substance
reasonably satisfactory to Trustee, Administrative Agent and the Certificate
Purchasers opining, among other things, to the effect that all appropriate
filings, recordings and other acts have been taken to protect the right, title
and interest of Trustee, on behalf of the Certificate Purchasers, in such
replacement item and that no other filing, recording, deposit, or giving of
notice with or to any Governmental Agency is necessary to protect such right,
title and interest in such replacement item, such replacement item shall be
deemed "Equipment" for all purposes hereof.
Notwithstanding the foregoing requirements for replacement of
Equipment, if the replacement item has a Fair Market Value of less than the
Appraised Value of the Equipment suffering the Casualty or, in the case of a
Casualty pertaining to a System, of the System taken as a whole, but the
conditions specified in the preceding paragraph would otherwise be satisfied,
then Lessee may replace the Equipment or System, as applicable, suffering the
Casualty with such item so long as the following conditions are satisfied:
(i) Trustee, Administrative Agent and Lessee shall have received an appraisal
of the replacement item (or System, as the case may be) from an Appraiser,
which appraisal shall determine the Fair Market Value of the replacement item
(or System, as applicable) as of the date of replacement, the end of the Base
Term and each Renewal Term (EXCEPT for such periods as have then already
elapsed), (ii) Trustee shall have received, as Supplemental Rent, an amount
equal to the excess of the Appraised Value of the replaced Equipment (or
System, as applicable) as of the Determination Date over the Appraised Value
of the replacement item (or System, as applicable) as of the date of
replacement, (iii) all conditions set forth in the preceding paragraph shall
have been satisfied (EXCEPT for the requirement that the replacement item
have a value of not less than the Appraised Value of the Equipment suffering
the Casualty) and (iv) Lessee shall have delivered a new Schedule I and
Schedule II to the Lease Supplement covering the replaced Equipment (or
System, as applicable) and such new Schedules shall be in form and substance
reasonably satisfactory to Required Certificate Purchasers, such new Schedule
I shall describe the replacement Equipment (or
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System, as applicable) and the Fair Market Value thereof and such new
Schedule II shall reflect such adjustments to the installments of Capital
Rent and remaining Supplemental Rent as necessary so that (x) the Equipment
(or System, as applicable) suffering the Casualty shall be treated as if the
Casualty Amount with respect thereto had been paid pursuant to SECTION 6.1,
and all reductions of Capital Rent and Supplement Balance made pursuant to
this SECTION 6.1, (y) the replacement item shall be treated as if it was
purchased on such replacement date for a purchase price equal to the value
set forth in the appraisal thereof with an amortization schedule (to be
attached to the Lease Supplement) that reflects the decay curve as set forth
in such appraisal, and (z), if the Casualty pertained to a System, taken as a
whole, such System after replacement of the applicable items of Equipment,
shall have the same function and utility, taken as a whole. After giving
effect to any replacement pursuant to the preceding sentence, the "Purchase
Price" of the replacement Equipment shall be deemed to be the Fair Market
Value thereof, as set forth for the date of such replacement in the Appraisal
delivered in connection with such replacement, for all purposes of this Lease
and the other Operative Documents.
If Trustee has received the amount payable with respect to the Casualty
and all other amounts due hereunder including amounts payable under SECTION
6.1(a) and no Default or Event of Default shall have occurred and be continuing,
Lessee shall be entitled to receive from Trustee the proceeds of any recovery in
respect of the Equipment from insurance or otherwise ("CASUALTY RECOVERIES"),
and Trustee, subject to the rights of any insurer insuring the Equipment as
provided herein, shall execute and deliver to Lessee, or to its assignee or
nominee, a quitclaim bill of sale (without representations or warranties EXCEPT
that the Equipment is free and clear of Lessor Liens) for the Equipment, and
such other documents as may be required to release the Equipment from the terms
of this Lease, in such form as may reasonably be requested by Lessee. All fees,
costs and expenses relating to a substitution as described herein shall be borne
by Lessee. EXCEPT as otherwise provided in this SECTION 6.1, Lessee shall not be
released from its obligations hereunder in the event of, and shall bear the risk
of, any Casualty to any item of Equipment prior to or during the term of this
Lease and thereafter until all of Lessee's obligations hereunder are fully
performed.
Any payments (including insurance proceeds) in an amount less than
$500,000 received at any time by Trustee or Lessee from any Governmental Agency
or other party with respect to any loss or damage to any item of Equipment not
constituting a Casualty will be paid to or retained by Lessee to be applied
directly in payment of repairs or for replacement of property in accordance with
the provisions of SECTIONS 5.1 and 5.3, if not already paid by Lessee, or if
already paid by Lessee and no Default or Event of Default shall have occurred
and be continuing, shall be applied to reimburse Lessee for such payment, and
any balance remaining after compliance with said Sections with respect to such
loss or damage shall be retained by Lessee; PROVIDED, that in the event that any
Default or Event of Default so exists, Trustee shall hold such proceeds as
collateral security for the obligations of Lessee under this Lease during the
continuance of such Default or Event of Default.
EXCEPT FOR ANY OF THE FOLLOWING OCCURRING AS A RESULT OF THE EXISTENCE
OR ENFORCEMENT OF A LESSOR LIEN, LESSEE HEREBY ASSUMES
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ALL RISK OF LOSS, DAMAGE, THEFT, TAKING, DESTRUCTION, CONFISCATION, REQUISITION,
COMMANDEERING, TAKING BY EMINENT DOMAIN OR CONDEMNATION, PARTIAL OR COMPLETE, OF
OR TO EACH ITEM OF EQUIPMENT, HOWEVER CAUSED OR OCCASIONED, SUCH RISK TO BE
BORNE BY LESSEE WITH RESPECT TO EACH ITEM OF EQUIPMENT FROM THE DATE OF THIS
LEASE, AND CONTINUING UNTIL SUCH EQUIPMENT HAS BEEN RETURNED TO TRUSTEE IN
ACCORDANCE WITH THE PROVISIONS OF ARTICLE XVI. LESSEE AGREES THAT NO OCCURRENCE
SPECIFIED IN THE PRECEDING SENTENCE SHALL IMPAIR, IN WHOLE OR IN PART, ANY
OBLIGATION OF LESSEE UNDER THIS LEASE, INCLUDING, WITHOUT LIMITATION, THE
OBLIGATION TO PAY RENT.
6.2 INSURANCE COVERAGES. Lessee shall at all times, at its expense,
cause to be carried and maintained with financially sound and reputable
insurers, (a) insurance against risks of physical loss or damage with respect to
the Equipment; (b) liability insurance against claims for bodily injury, death
or property damage; and (c) such other insurance including workmen's
compensation and business interruption insurance, in each case as is generally
carried by owners of similar facilities and equipment in the jurisdiction where
such Equipment is located; in each case, in such amounts and against such risks
as are then customary for equipment and property similar in use, PROVIDED that,
in each case, such insurance shall be maintained in amounts, with deductibles
and from reputable and financially sound insurance companies each as is
consistent with Guarantor's practices for equipment similar to the Equipment,
and PROVIDED further that, with respect to liability insurance described in
CLAUSE (b), such insurance shall be in an amount not less than $100,000,000 per
occurrence. All liability insurance shall name Trustee and the Certificate
Purchasers as additional insureds, and all casualty insurance with respect to
the Equipment shall name Trustee and the Certificate Purchasers as loss payees,
as their interests may appear. All proceeds of property and casualty insurance
of $5,000,000 or less shall be paid directly to Lessee and applied to the
repair, restoration or replacement of the damaged Equipment and such proceeds in
excess of $5,000,000 shall be paid to Trustee for distribution to Lessee upon
receipt by Trustee and Administrative Agent of invoices or other appropriate
evidence of repair, restoration or replacement of the damaged Equipment. Each
policy referred to in this SECTION 6.2 shall provide that (i) it will not be
canceled or its limits reduced, or allowed to lapse without renewal, EXCEPT
after not less than thirty (30) days' written notice to Trustee and the
Certificate Purchasers, (ii) solely with respect to the insurance referenced in
clause (a) of this SECTION 6.2, the interests of Trustee and the Certificate
Purchasers shall not be invalidated by any act or negligence of, or breach of
representation or warranty by, Lessee or any Person having an interest in any
Equipment, (iii) such insurance is primary with respect to any other insurance
carried by or available to Trustee and/or any Certificate Purchaser, (iv) the
insurer shall waive any right of subrogation, setoff, counterclaim, or other
deduction, whether by attachment or otherwise, against Trustee and the
Certificate Purchasers; (v) the insurer shall waive any right to claim any
premiums or commission against Trustee or any Certificate Purchaser; and (vi)
such policy shall contain a cross-liability clause providing for coverage of
Trustee and each Certificate Purchaser as if separate policies had been issued
to each of them. Lessee will notify Trustee and Administrative Agent (on behalf
of the Certificate Purchasers) promptly of any policy cancellation, reduction in
policy limits, modification or amendment.
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6.3 INSURANCE CERTIFICATES. Prior to the initial Delivery Date, and
thereafter not less than fifteen (15) days prior to the expiration dates of the
expiring policies theretofore delivered pursuant to SECTION 6.2, Lessee shall
deliver to Trustee certificates issued by the insurer(s) or Lessee's insurance
broker for the insurance maintained pursuant to SECTION 6.2; PROVIDED, HOWEVER,
that if the delivery of any certificate is delayed, Lessee shall not be deemed
to be in violation of the obligation to deliver such certificate if, within such
15-day period, Lessee delivers the certificate upon receipt thereof. Upon the
reasonable request of Trustee and the Required Certificate Purchasers, Lessee
will furnish to Trustee and the Certificate Purchasers an opinion of an
independent insurance broker of recognized standing, evidencing the maintenance
of all insurance required hereunder.
ARTICLE VII
INDEMNIFICATION
7.1 GENERAL INDEMNIFICATION. Whether or not the transactions
contemplated hereby are consummated, to the fullest extent permitted by
Applicable Laws, Lessee hereby (x) waives and releases any Claims now or
hereafter existing against any Indemnitee on account of, and (y) agrees to
indemnify, protect, defend, save and keep harmless each Indemnitee on an
after-tax basis (in accordance with SECTION 7.5) from and against, any and all
Claims of every kind and nature whatsoever that may be imposed on, incurred by,
or asserted against any Indemnitee, which are not directly and primarily caused
by the gross negligence or willful misconduct of the Indemnitee (PROVIDED that
the indemnification provided under this SECTION 7.1 shall specifically include
matters based on or arising from the negligence of any Indemnitee), whether or
not such Indemnitee shall also be indemnified as to any such Claim by any other
Person and whether or not such Claim arises or accrues prior to the initial
Delivery Date or after the Termination Date, and which relates in any way to or
arises in any way out of:
(a) any of the Operative Documents or any of the transactions
contemplated thereby, or any investigation, litigation or proceeding in
connection therewith, and any amendment, modification or waiver in respect
thereof;
(b) the Mandalay Bay Project (or any other Facility at which any
portion of the Equipment is at any time located), the Equipment or any part
thereof, or any interest in any of the foregoing;
(c) the acquisition, mortgaging, design, manufacture,
re-manufacture, construction, preparation, installation, inspection,
delivery, non-delivery, acceptance, rejection, purchase, ownership,
possession, rental, lease, sublease, repossession, maintenance, repair,
alteration, modification, addition or substitution, storage, titling or
retitling, transfer of title, registration or re-registration, redelivery,
use, operation, condition, financing, refinancing, return or other
application of all or any part of any interest in the Equipment or the
imposition of any Lien (or incurring of any liability to
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refund or pay over any amount as a result of any Lien) on any of the
Equipment, including (i) Claims or penalties arising from any violation of
Applicable Laws (OTHER THAN any such violation primarily caused by the
Indemnitee) or in tort (strict liability or otherwise), (ii) loss of or
damage to the environment (including investigation costs, cleanup costs,
response costs, remediation and removal costs, costs of corrective action,
costs of financial assurance, and all other damages, costs, fees and
expenses, fines and penalties, including natural resource damages), or
death or injury to any Person, and any mitigative action required by or
under Environmental Laws, (iii) latent or other defects, whether or not
discoverable, and (iv) any Claim for patent, trademark or copyright
infringement;
(d) the sale or other disposition of any of the Equipment,
including any disposition pursuant to the Sale Option, Purchase Option or
as a result of the exercise of remedies;
(e) the offer, issuance, sale or delivery of the Certificates;
(f) the breach by Lessee of any representation or warranty made by
it or deemed made by it in any Operative Document;
(g) the transactions contemplated hereby or by any other Operative
Document in respect of the application of Parts 4 and 5 of Subtitle B of
Title I of ERISA and any Prohibited Transaction described in Section
4975(c) of the Code;
(h) any Claims related to the Release from the Mandalay Bay Project
(or any other applicable Facility upon or at which any of the Equipment is
located) or any of the Equipment of any substance into the environment,
including Claims arising out of the use of any Equipment for the
transportation or storage of any Hazardous Material;
(i) any failure on the part of Lessee to perform or comply with any
of the terms of any Operative Document; or
(j) any other agreement entered into or assumed by Lessee in
connection with any item of Equipment.
It is expressly understood and agreed that this SECTION 7.1 shall not apply to
Claims to the extent resulting from:
(A) Taxes (such Claims being subject to SECTION 7.2), EXCEPT
with respect to (1) taxes or penalties included in Claims described
in CLAUSE (g) above, and (2) any payment necessary to make payments
under this SECTION 7.1 in accordance with SECTION 7.5;
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(B) as to an Indemnitee, Lessor Liens which such Indemnitee is
responsible for discharging under the Operative Documents;
(C) the gross negligence or willful misconduct of such
Indemnitee or any Affiliate or any of their respective agents,
officers, directors, servants or employees thereof;
(D) the incorrectness of any representation or warranty by
such Indemnitee in any Operative Document;
(E) the failure by any such Indemnitee to perform or observe
any term, agreement, or covenant on its part required to be
performed or observed in any Operative Document, EXCEPT to the
extent such failure results from an Event of Default;
(F) the offer or sale by or on behalf or for the account of
such Indemnitee of any Certificate or any interest in any of the
Collateral (OTHER THAN arising in connection with the Sale Option,
the Purchase Option or the exercise of rights or remedies following
an Event of Default); and
(G) any expense to any Indemnitee solely attributable to the
appointment of a successor Trustee, OTHER THAN any appointment of a
successor Trustee, that is either (x) with the prior written
consent of Lessee or (y) in connection with any Event of Default.
7.2 GENERAL TAX INDEMNITY.
(a) Lessee shall pay, defend, indemnify and hold each Indemnitee
harmless on an after-tax basis (in accordance with SECTION 7.5) from any
and all United States federal, state and local Taxes and foreign Taxes
imposed on or with respect to or in connection with any Indemnitee, the
Equipment or any portion thereof, any Operative Document, Lessee or any
sublessee or user of any Equipment, howsoever imposed, whether levied or
imposed upon or asserted against any Indemnitee, any Equipment, or any part
thereof, by any Governmental Agency (including for this purpose any
federal, state or local Governmental Agency in the United States and any
Governmental Agency of a foreign country), upon or with respect to:
(i) the acquisition, mortgaging, design, manufacture,
re-manufacture, construction, preparation, installation,
inspection, delivery, non-delivery, acceptance, rejection,
purchase, ownership, possession, rental, lease, sublease,
repossession, maintenance, repair, alteration, modification,
addition or substitution, storage, titling or retitling, transfer
of title, registration or re-registration, redelivery, use,
operation, condition, financing, refinancing, sale, return or other
application or disposition of all or any part of any interest in
the
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Equipment or the imposition of any Lien (or incurrence of any
liability to refund or pay over any amount as a result of any
Lien) thereon,
(ii) Basic Rent or Supplemental Rent or the receipts or
earnings arising from or received with respect to the Equipment or
any part thereof, or any interest therein or any applications or
dispositions thereof,
(iii) any other amount paid or payable pursuant to this Lease,
the Certificates or any other Operative Documents,
(iv) the Equipment or any part thereof or any interest
therein,
(v) all or any of the Operative Documents, any other documents
contemplated thereby and any amendments and supplements thereto,
and
(vi) otherwise with respect to or in connection with the
transactions contemplated by the Operative Documents;
PROVIDED, HOWEVER, that the indemnification obligation of this SECTION
7.2(a) shall not apply to (1) Taxes which are based upon or measured by the
Indemnitee's gross receipts and gross or net income or which are expressly
in substitution for, or relieve Indemnitee from, any actual Tax based upon
or measured by Indemnitee's gross receipts and gross or net income; (2)
Taxes characterized under local law as franchise, capital stock, net worth,
or shareholder's capital or substantially similar Taxes however denominated
(EXCLUDING, however, any value-added, license, property or similar
Equipment-related Taxes); and (3) if no Event of Default shall have
occurred and be continuing, Taxes based upon the voluntary transfer,
assignment or disposition by Trustee or any Certificate Purchaser of any
interest in any of the Equipment (OTHER THAN transfers pursuant to the
exercise of the Sale Option or the Purchase Option, or any other transfer
to Lessee or otherwise pursuant to this Lease). Notwithstanding the proviso
of the preceding sentence of this SECTION 7.2(a), Lessee shall pay or
reimburse, and indemnify and hold harmless, any Indemnitee which is not
incorporated under the laws of the United States or a state thereof and
which has timely and correctly complied with SECTION 7.2(c), from any
deduction or withholding of any United States Federal income tax.
All of the indemnities contained in this SECTION 7.2 shall continue in full
force and effect notwithstanding the expiration or earlier termination of
this Lease in whole or in part, including the termination of this Lease
with respect to any item of Equipment or all of the Equipment, and are
expressly made for the benefit of, and shall be enforceable by, each
Indemnitee.
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(b) Lessee at such time as it identifies such reports and returns,
will promptly notify Trustee and Administrative Agent (on behalf of the
Certificate Purchasers) of all reports or returns required to be made with
respect to any Tax with respect to which Lessee is required to indemnify
hereunder, and will, if permitted by Applicable Laws, file the same. If
Lessee is not permitted to so file, but is permitted to prepare such
reports or returns, Lessee shall prepare such reports or returns for
signature by Trustee or the applicable Certificate Purchaser and shall
forward the same, together with immediately available funds for payment of
any Tax due, to Trustee or such Certificate Purchaser, at least ten (10)
days in advance of the date such payment is to be made. Upon written
request, Lessee shall furnish Trustee or any Certificate Purchaser with
copies of all paid receipts or other appropriate evidence of payment for
all Taxes paid by Lessee pursuant to this SECTION 7.2.
(c) Before it signs and delivers this Lease or before it becomes a
Certificate Purchaser, each Certificate Purchaser not incorporated under
the laws of the United States or a state thereof, agrees that it will have
delivered to each of Lessee and Trustee two duly completed copies of United
States Internal Revenue Service Form W-8 and 1001 or 4224, certifying in
either case that such Certificate Purchaser is entitled to receive payments
under the Operative Documents without deduction or withholding of any
United States Federal income taxes. Each Certificate Purchaser which so
delivers a Form W-8 and 1001 or 4224 further undertakes to deliver to each
of Lessee and Trustee two additional copies of such form (or a successor
form) or a new form as may be required by applicable Tax regulations on or
before the date that such form expires (currently, three successive
calendar years for Form 1001 and one calendar year for Form 4224) or
becomes obsolete or after the occurrence of any event requiring a change in
the most recent forms so delivered by it, and such amendments thereto or
extensions or renewals thereof as may be reasonably requested by Lessee or
Trustee, in each case certifying that such Certificate Purchaser is
entitled to receive payments under the Operative Documents without
deduction or withholding of any United States Federal income taxes, unless
an event (including any change in treaty, law or regulation) has occurred
prior to the date on which any such delivery would otherwise be required
which renders all such forms inapplicable or which would prevent such
Certificate Purchaser from duly completing and delivering any such form
with respect to it and such Certificate Purchaser advises Lessee and
Trustee that it is not capable of receiving payments without any
withholding of United States Federal income tax.
(d) If a Certificate Purchaser or Trustee or Administrative Agent
shall become aware that it is entitled to receive a refund in respect of
any Taxes paid or indemnified by Lessee under this SECTION 7.2 it shall
notify Lessee and shall, promptly after receipt of a request by Lessee,
apply for and pursue such a refund. If any Certificate Purchaser or Trustee
or Administrative Agent receives a refund in respect of Taxes for which
such Certificate Purchaser, Trustee or Administrative Agent has received
payment or indemnification from Lessee hereunder it shall promptly upon
receipt pay such refund to Lessee together with any interest that it
received with payment of such refund.
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(e) A Certificate Purchaser or Trustee or Administrative Agent
claiming any amounts payable pursuant to this SECTION 7.2 shall use
reasonable efforts to file any certificate or document requested by Lessee
(to the extent that such party is legally permitted to do so) and to change
the jurisdiction of its office applicable to the Operative Documents if the
making of such filing or change would avoid the need for or reduce the
amount of any amounts that may thereafter accrue PROVIDED that such efforts
would not result in the incurrence by such Certificate Purchaser, Trustee
or Administrative Agent of any material cost for which Lessee has not
provided such security or indemnity as may be reasonably required by such
Certificate Purchaser, Trustee or Administrative Agent to indemnify it in
full for such cost.
7.3 EXCESSIVE USE INDEMNITY. In the event that at the end of the Lease
Term: (a) Lessee elects the Sale Option; and (b) after paying to Trustee, for
the benefit of the Certificate Purchasers, any Rent then due and payable,
Proceeds and the Sale Recourse Amount, Trustee does not have sufficient funds to
make all payments then due on the Certificates, then Lessee shall promptly pay
over to Trustee, for the benefit of the Certificate Purchasers, the shortfall.
In the event Lessee is required to pay any shortfall pursuant to the preceding
sentence, Trustee shall, at Lessee's expense, engage an appraiser of nationally
recognized standing reasonably acceptable to the Required Certificate Purchasers
to determine (by appraisal methods acceptable to the Required Certificate
Purchasers in their sole discretion) the Appraised Value of the Equipment as of
the last day of the Lease Term. Unless (and to the extent) such appraisal
reflects that the decline in value in the Equipment from that anticipated for
such date (as set forth in the original Appraisal delivered with respect to the
Equipment on the applicable Delivery Date(s) therefor) was due to excessive or
extraordinary use, failure to maintain or replace, failure to use, workmanship
or method of installation or removal or any other cause or condition within the
power of Lessee to control or affect (any of the foregoing constituting an
"Excessive Use Occurrence"), Lessee shall be entitled to a refund (and the
Certificate of Purchasers agree to promptly remit any such refund to Lessee) of
that portion of the shortfall previously paid by Lessee NOT due to an Excessive
Use Occurrence.
7.4 CLAIMS PROCEDURE. An Indemnitee shall, after obtaining knowledge
thereof, promptly notify Lessee of any Claim as to which indemnification is
sought; PROVIDED, HOWEVER, that the failure to give such notice shall not
release Lessee from any of its obligations under this ARTICLE VII, except to the
extent that failure to give notice of any action, suit or proceeding against
Indemnitee shall have a material adverse effect on Lessee's ability to defend
such Claim or recover proceeds under any insurance policies maintained by Lessee
hereunder. Lessee shall, after obtaining knowledge thereof, promptly notify each
Indemnitee of any indemnified Claim affecting such Person. Subject to the
provisions of the following paragraph and PROVIDED that no Default or Event of
Default shall have occurred and be continuing, Lessee shall at its sole cost and
expense be entitled to control the defense of each such Claim; PROVIDED further,
that Lessee shall keep the Indemnitee which is the subject of such proceeding
fully apprised of the status of such proceeding and shall provide such
Indemnitee with all information with respect to such proceeding as such
Indemnitee shall reasonably request.
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Notwithstanding any of the foregoing to the contrary, Lessee shall not
be entitled to control and assume responsibility for the defense of such claim
or liability if in the good faith opinion of such Indemnitee, there exists a
conflict of interest such that it is advisable for such Indemnitee to retain
control of such proceeding or such claim or liability involves the possibility
of criminal sanctions or criminal liability to such Indemnitee. In such
circumstances, the Indemnitee shall be entitled to control and assume
responsibility for the defense of such claim or liability, PROVIDED that the
Indemnitee shall use reasonable commercial efforts to keep the Lessee apprised
of the status of such proceeding and shall provide Lessee with all
non-confidential and non-privileged information with respect to such proceeding
as Lessee shall reasonably request in writing. In any event, Lessee shall pay
the reasonable costs and expenses of such defense. In addition, any Indemnitee
may participate in any proceeding controlled by Lessee pursuant to this SECTION
7.4 at its own expense. Lessee may in any event participate in all such
proceedings at its own costs. Nothing contained in this SECTION 7.4 shall be
deemed to require an Indemnitee to contest any Claim or assume responsibility
for or control of any judicial proceeding with respect thereto nor shall any
failure of an Indemnitee to keep Lessee apprised of any Claim or to provide
Lessee requested information in connection with any Claim affect in any manner
Lessee's, Guarantor's or any Sublessee's obligations under any of the Operative
Documents.
The Indemnitee shall supply Lessee with such information as is
available to the Indemnitee and is requested by Lessee as in the reasonable
opinion of counsel to Lessee is necessary or advisable for Lessee to control or
participate in any proceeding to the extent permitted by this SECTION 7.4.
Unless such Indemnitee waives its right to be indemnified with respect to a
Claim under this ARTICLE VII or, in the reasonable opinion of the Indemnitee,
such Claim exposes such Indemnitee to any risk of criminal liability, no
Indemnitee shall enter into a settlement or other compromise with respect to
such Claim without the prior written consent of Lessee, which consent shall not
be unreasonably withheld or delayed, PROVIDED that no such consent shall be
required if a Default or Event of Default shall have occurred and be continuing.
Each Indemnitee further agrees, in the case of any Claim covered by any policy
of insurance maintained pursuant to SECTION 6.2, to cooperate with the insurers
in the exercise of their rights to investigate, defend or compromise such Claim
as may be reasonably required by such policy to maintain the insurance coverage
provided. In the event Lessee proposes to settle the defense of any Claim and
such Indemnitee determines in its good faith reasonable judgment that such
proposed settlement would have a material adverse effect on such Indemnitee
unrelated to the transactions contemplated by the Operative Documents, then such
Indemnitee shall have the right to not enter into such proposed settlement and
to assume the contest of such Claim. In such event, Lessee shall be relieved of
any further obligation to defend such Claim and shall be released of any
obligation to indemnify in respect of such Claim in excess of the liability
Lessee would have accepted if such proposed settlement had been consummated. To
the extent that any Indemnitee in fact receives complete and full
indemnification payments from or on behalf of Lessee under the indemnification
provisions of this ARTICLE VII (or its insurers), Lessee shall, without any
further action, be subrogated to the extent of such payment to such Indemnitee's
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rights (OTHER THAN rights in respect of insurance policies maintained by such
Indemnitee at its own expense), with respect to the transaction or event
requiring or giving rise to such Claim.
7.5 GROSS UP. If an Indemnitee shall not be entitled at any time to a
substantially corresponding and equal deduction, credit, offset, refund or other
tax benefit with respect to any payment or Tax which Lessee is required to pay
or reimburse under any other provision of this ARTICLE VII (each such payment or
reimbursement under this ARTICLE VII, an "ORIGINAL PAYMENT") and which original
payment constitutes income to such Indemnitee, then Lessee shall pay to such
Indemnitee on demand the amount of such original payment on a gross-up basis
such that, after subtracting all Taxes imposed on such Indemnitee with respect
to such original payment by Lessee (including any Taxes otherwise excluded from
the indemnification provided under SECTION 7.2 and assuming for this purpose
that such Indemnitee was subject to taxation at the highest federal marginal
rates applicable to widely held corporations and the actual state or local rate
then applicable to such Indemnitee for the year in which such income is
taxable), such payments shall be equal to the original payment to be received
(net of any credits, deductions, offsets, refunds or other tax benefits that
arise from the payment by such Indemnitee of any amount, including Taxes, for
which the payment to be received is made).
7.6 INCREASED COMMITMENT COSTS. If any Certificate Purchaser shall
determine that the introduction after the Closing Date 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 such Certificate Purchaser (or its
Eurodollar Office) or any corporation controlling the Certificate Purchaser,
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 such Certificate Purchaser or any corporation controlling such
Certificate Purchaser and (taking into consideration such Certificate
Purchaser's or such corporation's policies with respect to capital adequacy and
such Certificate Purchaser's desired return on capital) determines that the
amount of such capital is increased, or the rate of return on capital is
reduced, as a consequence of its obligations under the Operative Documents,
then, within five (5) Business Days after demand of such Certificate Purchaser,
Lessee shall pay to such Certificate Purchaser, from time to time as specified
by such Certificate Purchaser additional amounts sufficient to compensate such
Certificate Purchaser in light of such circumstances, to the extent reasonably
allocable to such obligations under the Operative Documents. Each Certificate
Purchaser shall endeavor to assure that each demand made of Lessee under this
Section affords treatment to Lessee which is substantially similar to that which
such Certificate Purchaser affords to its other similarly situated customers.
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7.7 EURODOLLAR COSTS AND RELATED MATTERS.
(a) If, after the date hereof, the existence or occurrence of any
Special Eurodollar Circumstance shall:
(i) subject any Certificate Purchaser or its Eurodollar Office
to any tax, duty or other charge or cost with respect to any
Funding on a Eurodollar Rate basis (in each case, a "EURODOLLAR
RATE INVESTMENT"), its Certificate evidencing such Eurodollar Rate
Investments or its obligation to make Eurodollar Rate Investments,
or shall change the basis of taxation of payments to any
Certificate Purchaser of the principal of or interest on any
Eurodollar Rate Investment or any other amounts due under the
Operative Documents or in respect of any Eurodollar Rate
Investment, its Certificate evidencing Eurodollar Rate Investments
or its obligation to make Eurodollar Rate Investments, EXCLUDING,
with respect to each Creditor, and any Affiliate or Eurodollar
Office thereof, (A) Taxes imposed on or measured in whole or in
part by its net income, gross income or gross receipts or capital
and franchise taxes imposed on it, (B) any withholding Taxes or
other Taxes based on gross income (OTHER THAN withholding Taxes and
Taxes based on gross income resulting from or attributable to any
change in any law, rule or regulation or any change in the
interpretation or administration of any law, rule or regulation by
any Governmental Agency) or (C) any withholding Taxes or other
Taxes based on gross income for any period with respect to which it
has failed to provide Lessee and Trustee with the appropriate form
or forms required by SECTION 7.2(c), to the extent such forms are
then required by Applicable Laws;
(ii) impose, modify or deem applicable any reserve not
applicable or deemed applicable on the date hereof (INCLUDING any
reserve imposed by the Board of Governors of the Federal Reserve
System, BUT EXCLUDING the Eurodollar Reserve Percentage taken into
account in calculating the Eurodollar Rate), special deposit,
capital or similar requirements against assets of, deposits with or
for the account of, or credit extended by, any Certificate
Purchaser or its Eurodollar Office; or
(iii) impose on any Certificate Purchaser or its Eurodollar
Office or the Designated Eurodollar Market any other condition
materially affecting any Eurodollar Rate Investment, its
Certificate evidencing Eurodollar Rate Investments, its obligation
to make Eurodollar Rate Investments or any of the Operative
Documents, or shall otherwise materially affect any of the same;
and the result of any of the foregoing, as determined by such Certificate
Purchaser, increases the cost to such Certificate Purchaser or its
Eurodollar Office of making or maintaining any Eurodollar Rate Investment
or in respect of its Certificate evidencing Eurodollar Rate Investments or
its obligation to make Eurodollar Rate Investments or
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reduces the amount of any sum received or receivable by such Certificate
Purchaser or its Eurodollar Office with respect to any Eurodollar Rate
Investment, its Certificate evidencing Eurodollar Rate Investments or its
obligation to make Eurodollar Rate Investments (assuming such Certificate
Purchaser's Eurodollar Office had funded 100% of its Eurodollar Rate
Investment in the Designated Eurodollar Market), then, PROVIDED THAT such
Certificate Purchaser makes demand upon Lessee (with a copy to Trustee
within ninety (90) days following the date upon which it becomes aware of
any such event or circumstance, Lessee shall within five (5) Business Days
pay to such Certificate Purchaser such additional amount or amounts as will
compensate such Certificate Purchaser for such increased cost or reduction
(determined as though such Certificate Purchaser's Eurodollar Office had
funded 100% of its Eurodollar Rate Investment in the Designated Eurodollar
Market). Lessee hereby indemnifies each Certificate Purchaser against, and
agrees to hold each Certificate Purchaser harmless from and reimburse such
Certificate Purchaser within five (5) Business Days after demand for
(without duplication) all costs, expenses, claims, penalties, liabilities,
losses, legal fees and damages incurred or sustained by each Certificate
Purchaser in connection with the Operative Documents, or any of the rights,
obligations or transactions provided for or contemplated herein, as a
result of the existence or occurrence of any Special Eurodollar
Circumstance. A statement of any Certificate Purchaser 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 Certificate Purchaser agrees to endeavor promptly to
notify Lessee of any event of which it has Actual Knowledge, occurring
after the Closing Date, which will entitle such Certificate Purchaser to
compensation pursuant to this Section and agrees to designate a different
Eurodollar Office if such designation will avoid the need for or reduce the
amount of such compensa tion and will not, in the judgment of such
Certificate Purchaser, otherwise be materially disadvantageous to such
Certificate Purchaser. If any Certificate Purchaser claims compensation
under this Section, Lessee may at any time, upon at least four (4) Business
Days' prior notice to Trustee and such Certificate Purchaser 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 7.7(d),
pay in full the affected Eurodollar Rate Investments of such Certificate
Purchaser or request that such Eurodollar Rate Investments be converted to
investments based on the Base Rate (each, a "BASE RATE INVESTMENT"). To the
extent that any Certificate Purchaser which receives any payment from
Lessee under this Section later receives any funds which are identifiable
as a reimbursement or rebate of such amount from any other Person, such
Certificate Purchaser shall promptly refund such amount to Lessee.
(b) If the existence or occurrence of any Special Eurodollar
Circumstance shall, in the opinion of any Certificate Purchaser, make it
unlawful, impossible or impracticable for such Certificate Purchaser or its
Eurodollar Office to make, maintain or fund any Eurodollar Rate Investment,
or materially restrict the authority of such Certificate Purchaser to
purchase or sell, or to take deposits of, Dollars in the Designated
Eurodollar Market, or to determine or charge interest rates based upon
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the Eurodollar Rate, and such Certificate Purchaser shall so notify
Trustee, then such Certificate Purchaser's obligation to make Eurodollar
Rate Investments shall be suspended for the duration of such illegality,
impossibility or impracticability and Trustee forthwith shall give notice
thereof to the Certificate Purchasers, Administrative Agent and Lessee.
Upon receipt of such notice, the outstanding principal amount of such
Certificate Purchaser's Eurodollar Rate Investments, together with accrued
interest thereon, automatically shall be converted to Base Rate Investments
on either (i) the last day of the Rent Period applicable to such Eurodollar
Rate Investments if such Certificate Purchaser may lawfully continue to
maintain and fund such Eurodollar Rate Investments to such day(s) or (ii)
immediately if such Certificate Purchaser may not lawfully continue to fund
and maintain such Eurodollar Rate Investments to such day(s), PROVIDED that
in such event the conversion shall not be subject to payment of a
prepayment fee under SECTION 7.7(d). Each Certificate Purchaser agrees to
endeavor promptly to notify Lessee of any event of which it has Actual
Knowledge, occurring after the Closing Date, which will cause that
Certificate Purchaser to notify Trustee under this SECTION 7.7(b), and
agrees to designate a different Eurodollar Office if such designation will
avoid the need for such notice and will not, in the judgment of such
Certificate Purchaser, otherwise be disadvantageous to such Certificate
Purchaser. In the event that any Certificate Purchaser is unable, for the
reasons set forth above, to make, maintain or fund its portion of any
Funding as a Eurodollar Rate Investment, such Certificate Purchaser shall
fund such amount as a Base Rate Investment for the same period of time, and
such amount shall be treated in all respects as a Base Rate Investment. Any
Certificate Purchaser whose obligation to make Eurodollar Rate Investments
has been suspended under this SECTION 7.7(b) shall promptly notify Trustee
and Lessee of the cessation of the Special Eurodollar Circumstance which
gave rise to such suspension.
(c) If, with respect to any proposed Funding:
(1) the Required Certificate Purchasers reasonably determine
that, by reason of circumstances affecting the Designated
Eurodollar Market generally that are beyond the reasonable control
of the Certificate Purchasers, deposits in Dollars (in the
applicable amounts) are not being offered to any Certificate
Purchaser that is a commercial bank in the Designated Eurodollar
Market for the applicable Rent Period; or
(2) the Required Certificate Purchasers advise Trustee that
the Eurodollar Rate as determined by the Trustee (i) does not
represent the effective pricing to such Certificate Purchasers for
deposits in Dollars in the Designated Eurodollar Market in the
relevant amount for the applic able Rent Period, or (ii) will not
adequately and fairly reflect the cost to such Certificate
Purchasers of making the applicable Eurodollar Rate Investments;
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then Trustee forthwith shall give notice thereof to Lessee, Trustee and
the Certificate Purchasers, whereupon until Trustee notifies Lessee
that the circumstances giving rise to such suspension no longer exist,
the obligation of the Certificate Purchasers to make any future
Eurodollar Rate Investments shall be suspended.
(d) Upon payment or prepayment of any Eurodollar Rate
Investment, (OTHER THAN as the result of a conversion required under
SECTION 7.7(b)), on a day other than the last day in the applicable
Rent Period (whether voluntarily, involuntarily, by reason of
acceleration, or otherwise) or if delivery of Equipment is not made
on the Delivery Date specified in any Delivery Date Notice delivered
by Lessee, Lessee shall pay to the appropriate Certificate Purchaser
that has made a Funding with respect thereto within five (5)
Business Days after demand a prepayment fee or a failure to fund
fee, as the case may be (determined as though 100% of the Funding
had been made in the Designated Eurodollar Market) equal to the SUM
of:
(i) principal amount of the Eurodollar Rate Investment prepaid
(or not funded, as the case may be) TIMES the quotient of (A) the
number of days between the date of prepayment (or failure to fund,
as applicable) and the last day in the applicable Rent Period,
DIVIDED BY (B) 360, TIMES the applicable Interest Differential
(PROVIDED that the product of the foregoing formula must be a
positive number); PLUS
(ii) all out-of-pocket expenses incurred by the Certificate
Purchaser reasonably attributable to such payment or prepayment.
Each Certificate Purchaser's determination of the amount of any prepayment fee
payable under this SECTION 7.7(d) shall be conclusive in the absence of manifest
error.
ARTICLE VIII
EVENTS OF DEFAULT; REMEDIES
8.1 EVENTS OF DEFAULT. The following shall constitute events of default
(each an "EVENT OF DEFAULT") hereunder:
(a) (i) any payment of Interim Rent or Basic Rent shall not be paid
within two (2) Business Days after the date when due, (ii) any payment of
Purchase Option Exercise Amount, Sale Recourse Amount or any amount due
pursuant to SECTION 7.3, 11.4 or 11.5 shall not be paid on the date due; or
(iii) any payment of Supplemental Rent (OTHER THAN Supplemental Rent
described in the preceding CLAUSE (ii)) or any other payment payable by
Lessee hereunder or under any other Operative Document (including any
amount payable pursuant to ARTICLE VII to the extent not included in the
preceding CLAUSE (ii)) shall not be paid within ten (10) Business Days
after the date when due;
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(b) any representation or warranty of Lessee, Guarantor or any
Sublessee contained in any Operative Document to which such Person is a
party or in any document furnished to any Creditor in connection therewith
shall be incorrect or incomplete in any material respect when made, deemed
made or reaffirmed, as the case may be and, in the case of any Sublessee
that is not a Subsidiary of Guarantor, which is reasonably likely to result
in a Material Adverse Effect;
(c) a default shall occur in the performance or observance of any
term, covenant, condition or agreement to be performed or observed (i) on
the part of Lessee under SECTION 5.2, SECTION 6.2, or ARTICLE XI, or (ii)
on the part of the Guarantor under SECTION 13.2(a)(xi) hereof in any
respect that is materially adverse to the interests of the Creditors, or
SECTIONS 13.2(b) or (e) hereof.
(d) a default shall occur in the performance or observance of any
term, covenant, condition or agreement to be performed or observed (i) on
the part of Lessee under SECTION 5.1, SECTION 5.3 or SECTION 5.4 of this
Lease, or (ii) on the part of Guarantor under SECTION 13.2(c)(ii), and such
default shall continue unremedied for a period of ten (10) Business Days
after the earlier of the date on which any Senior Officer of Lessee or
Guarantor, as applicable, shall have Actual Knowledge of such default and
the date on which Lessee or Guarantor receives written notice thereof from
Trustee, Administrative Agent or any Certificate Purchaser;
(e) Lessee, Guarantor or any Sublessee that is a Subsidiary of
Guarantor shall default in the performance or observance of any other term,
covenant, condition or agreement on its part to be performed or observed
hereunder or under any Operative Document to which such Person is a party
(and not constituting an Event of Default under any other clause of this
SECTION 8.1), and such default shall continue unremedied for a period of
thirty (30) days after the earlier of the date on which any Senior Officer
of Lessee, Guarantor or such Sublessee, as applicable, shall have Actual
Knowledge of such default and the date on which Lessee, Guarantor or such
Sublessee, as applicable, receives written notice thereof from any
Creditor;
(f) Lessee, Guarantor or any Sublessee that is a Subsidiary of
Guarantor shall generally fail to pay, or admit in writing its inability to
pay, its debts as they become due, or shall voluntarily commence any case
or proceeding or file any petition under any bankruptcy, insolvency or
similar law or seeking dissolution, liquidation or reorganization or the
appointment of a receiver, agent, custodian, liquidator or similar Person
for itself or a substantial portion of its property, assets or business or
to effect a plan or other arrangement with its creditors, or shall file any
answer admitting the jurisdiction of the court and the material allegations
of any involuntary petition filed against it in any bankruptcy, insolvency
or similar case or proceeding, or shall be adjudicated bankrupt, or shall
make a general assignment for the benefit of creditors, or shall consent
to, or acquiesce in the appointment of, a receiver, agent, custodian,
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liquidator or similar Person for itself or a substantial portion of its
property, assets or business, or action shall be taken by Lessee, Guarantor
or any such Sublessee for the purpose of effectuating, authorizing or
furthering any of the foregoing;
(g) involuntary proceedings or an involuntary petition shall be
commenced or filed against Lessee, Guarantor or any Sublessee that is a
Subsidiary of Guarantor under any bankruptcy, insolvency or similar law or
seeking the dissolution, liquidation or reorganization of such Person or
the appointment of a receiver, agent, custodian, liquidator or similar
Person for Lessee, Guarantor or any such Sublessee or of a substantial part
of its property, assets or business, or any writ, judgment, warrant of
attachment, execution or similar process shall be issued or levied against
a substantial part of its property, assets or business, and such
proceedings or petition shall not be dismissed or stayed, or such writ,
judgment, warrant of attachment, execution or similar process shall not be
released, vacated or fully bonded, within 60 days after commencement,
filing or levy, as the case may be;
(h) Guarantor or any of its Significant Subsidiaries (including
Lessee) (i) fails to pay the principal, or any principal installment, of
any present or future indebtedness for borrowed money of $25,000,000 or
more, or any guaranty of present or future indebtedness for borrowed money
of $25,000,000 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 observed, or suffers any event to occur, in connection with any present
or future indebtedness for borrowed money of $25,000,000 or more, or of any
guaranty of present or future indebtedness for borrowed money of
$25,000,000 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;
(i) (1) the Lien granted under this Lease or (2) any Operative
Document or any payment provision thereof, shall (EXCEPT in accordance with
its terms), in whole or in part terminate, cease to be effective or cease
to be the legally valid, binding and enforceable obligation of Lessee,
Guarantor or Sublessee; or Lessee, Guarantor, any Sublessee or any of their
respective Affiliates shall contest in any manner in any court the
effectiveness, validity, binding nature or enforceability thereof; or the
Lien securing Lessee's obligations under the Operative Documents shall, in
whole or in part, cease to be a perfected first priority security interest
with respect to all or any of the Collateral;
(j) any Operative Document, at any time after its execution and
delivery and for any reason OTHER THAN the agreement of the Certificate
Purchasers or satisfaction in full of all the Obligations, ceases to be in
full force and effect in any material respect or is declared by a court of
competent jurisdiction to be null and void, invalid or unenforceable in any
respect which, in the reasonable opinion of the Required
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Certificate Purchasers, is materially adverse to the interests of the
Certificate Purchasers; or Lessee or Guarantor denies that it has any or
further liability or obligation under any Operative Document, or purports
to revoke, terminate or rescind the same;
(k) any Pension Plan maintained by Lessee or Guarantor or any of
its Significant Subsidiaries is determined to have a material "accumulated
funding deficiency" as that term is defined in Section 302 of ERISA and the
result is a Material Adverse Effect;
(l) a final judgment against Guarantor or any of its Significant
Subsidiaries (including Lessee) is entered for the payment of money in
excess of $5,000,000 and, absent procurement of a stay of execution, such
judgment remains 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 any writ or warrant of
attachment or execution or similar process is issued or levied against all
or any material part of the property of any such Person and is not
released, vacated or fully bonded within thirty (30) calendar days after
its issue or levy;
(m) the occurrence of a License Revocation with respect to a
license issued by any Governmental Agency of (1) the States of New Jersey
or Nevada or (2) any other State in which any part of the Equipment may be
then located and used, that continues for five (5) calendar days;
(n) any Sublease Event of Default under and as defined in any
Sublease has occurred and is continuing;
(o) any Event of Default under and as defined in the Guarantor Loan
Agreement or in any Replacement Loan Agreement has occurred and is
continuing; or
(p) There shall have occurred a Change in Control.
8.2 REMEDIES. If any Event of Default exists, Trustee, on behalf of the
Certificate Purchasers, shall have the rights, options and remedies of a secured
party under the UCC (regardless of whether the UCC or a law similar thereto has
been enacted in a jurisdiction wherein the rights or remedies are asserted),
and, without limiting the foregoing, Trustee, on behalf of the Certificate
Purchasers, also may exercise in any commercially reasonable manner in any order
one or more or all of the following remedies (it being understood that no remedy
herein conferred is intended to be exclusive of any other remedy or remedies,
but each and every remedy shall be cumulative and shall be in addition to every
other remedy given herein or now or hereafter existing at law or in equity or by
statute): (a) terminate this Lease by notice in writing to Lessee, but Lessee
shall remain liable as hereinafter provided; (b) declare the entire outstanding
Lease Balance to be due and payable, together with accrued unpaid Accrual Rent,
and any other amounts payable under the Operative Documents; (c) enforce the
Lien given hereunder pursuant to the UCC or any other law; (d) enter upon the
premises where any of the Collateral may be and
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take possession of all or any of such Collateral (PROVIDED that no Creditor
shall be liable for any damages for removal of the Equipment from the premises
at which the Equipment is located EXCEPT for any damages resulting from the
gross negligence or willful misconduct of such Person); (e) proceed by
appropriate court action or actions either at law or in equity, to enforce
performance by Lessee of the applicable covenants of this Lease or to recover
damages for the breach thereof; and (f) require Lessee to assemble and return
possession of the Equipment as provided in ARTICLE XVI.
Notwithstanding the foregoing,
(i) if any Event of Default described in SECTION 8.1(a) shall
have occurred and be continuing, Certificate Purchasers holding
Certificates representing more than 50% of the outstanding Lease
Balance may, by notice to Lessee, declare the then outstanding
Lease Balance to be due and payable together with all accrued
Accrual Rent, any amounts payable pursuant to SECTION 7.7, and any
other amounts accrued and payable under the Operative Documents;
and
(ii) if any Event of Default described in SECTION 8.1(f) or
8.1(g) shall have occurred and be continuing, then the entire
outstanding Lease Balance and all accrued Accrual Rent and other
amounts payable under the Operative Documents (including without
limitation Supplemental Rent) shall automatically and immediately
become due and payable, without presentment, demand, notice,
declaration, protest or other requirements of any kind, all of
which are hereby expressly waived.
8.3 SALE OF COLLATERAL. In addition to the remedies set forth in
SECTION 8.2, if any Event of Default shall occur and be continuing, Trustee, on
behalf of the Certificate Purchasers, may, but is not required to, sell the
Collateral in any commercially reasonable manner in one or more sales. To the
extent permitted by Applicable Law, any Creditor may purchase all or any part of
the Collateral at such sale. Any notice required by law of intended disposition
by Trustee shall be deemed reasonably and properly given if given at least ten
(10) days before either the time of any public sale or the time on or after
which a private sale is to occur.
8.4 APPLICATION OF PROCEEDS. The proceeds of such sale or exercise of
other remedies shall be applied in the following order:
(a) FIRST, to the payment of reasonable costs and expenses of each
Certificate Purchaser, Administrative Agent and Trustee in exercising
remedies, including expenses of foreclosure or suit, if any, and of any
sale, and of all other proper fees, expenses, liabilities and advances
(including reasonable attorneys' fees and expenses) of each Certificate
Purchaser, Administrative Agent and Trustee and of all taxes, assessments
or liens superior to the Lien of these presents, EXCEPT any taxes,
assessments or superior Lien subject to which any sale of Collateral may
have been made;
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(b) SECOND, to accrued unpaid Accrual Rent and other amounts,
EXCEPT those specified in CLAUSE (c) below, which under the terms of this
Lease have accrued but have not been paid;
(c) THIRD, to Certificate Purchasers in accordance with SECTION
10.1 to the extent of the aggregate outstanding Lease Balance, PLUS any
amounts due pursuant to ARTICLE VII; and
(d) FOURTH, to the payment of the surplus, if any, to whomsoever
may be lawfully entitled to receive the same (including Lessee), or, if no
other Person is lawfully entitled to such surplus, to Lessee.
If there is a deficiency in any amounts due hereunder after Trustee has
exercised remedies, Lessee will promptly pay the same to Trustee.
8.5 RIGHT TO PERFORM OBLIGATIONS. If Lessee fails to perform any of its
agreements contained herein, Trustee, on behalf of the Certificate Purchasers,
may, during any period when any Event of Default exists, perform such agreement,
and the fees and expenses incurred by Trustee in connection with such
performance together with interest thereon shall be payable by Lessee upon
demand. Interest on fees and expenses so incurred by Trustee shall accrue as
provided in SECTION 4.6 from the date such expense is incurred until paid in
full.
8.6 POWER OF ATTORNEY. Lessee unconditionally and irrevocably appoints
Trustee as its true and lawful attorney-in-fact, with full power of
substitution, to the extent permitted by Applicable Law, in its name and stead
and on its behalf, for the purpose of effectuating any sale, assignment,
transfer or delivery hereunder, if an Event of Default shall have occurred and
be continuing, whether pursuant to foreclosure or power of sale or otherwise,
and in connection therewith to execute and deliver all such deeds, bills of
sale, assignments, releases (including releases of this Lease on the records of
any Governmental Agency) and other proper instruments as Trustee may reasonably
consider necessary or appropriate. Lessee ratifies and confirms all that such
attorney or any substitute shall lawfully do by virtue hereof. If requested by
Trustee or any purchaser, Lessee shall ratify and confirm any such lawful sale,
assignment, transfer or delivery by executing and delivering to Trustee or such
purchaser, all deeds, bills of sale, assignments, releases and other proper
instruments to effect such ratification and confirmation as may be designated in
any such request.
8.7 REMEDIES CUMULATIVE; CONSENTS. To the extent permitted by, and
subject to the mandatory requirements of, Applicable Law, each and every right,
power and remedy herein specifically given to Trustee or any Certificate
Purchaser or otherwise in this Lease shall be cumulative and shall be in
addition to every other right, power and remedy herein specifically given or now
or hereafter existing at law, in equity or by statute, and each and every right,
power and remedy whether specifically herein given or otherwise existing may be
exercised from time to time and as often and in such order as may be deemed
expedient by Trustee or the Certificate Purchasers, and the exercise or the
beginning of the exercise of any power or remedy shall not
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be construed to be a waiver of the right to exercise at the same time or
thereafter any right, power or remedy. Trustee's or the Certificate Purchasers'
consent to any request made by Lessee shall not be deemed to constitute or
preclude the necessity for obtaining Trustee's or the Certificate Purchasers'
consent, in the future, to all similar requests. To the extent permitted by
Applicable Law, Lessee hereby waives any rights now or hereafter conferred by
statute or otherwise that may require Trustee or the Certificate Purchasers to
sell, lease or otherwise use the Equipment or any part thereof in mitigation of
Trustee's or the Certificate Purchasers' damages upon the occurrence and during
the continuance of an Event of Default or that may otherwise limit or modify any
of Trustee's or the Certificate Purchasers' rights or remedies under this
SECTION 8.
8.8 RECONVEYANCE OF TITLE. Notwithstanding any provision of any
Operative Document, upon receipt of Trustee and the Certificate Purchasers of
payment in full of the Lease Balance, all Accrual Rent thereon and all accrued
but unpaid Supplemental Rent due and payable by Lessee under the Operative
Documents, whether prior to or after termination of this Lease, exercise of any
remedies by Trustee or any Certificate Purchaser or otherwise (but before the
Equipment has been disposed of pursuant to the exercise of remedies under
SECTION 8.2 or 8.3 and before any contract for the disposition of one or more
items of Equipment has been entered into), Trustee shall transfer to Lessee or
its designee title to all Equipment then held by Trustee, without recourse or
warranty, as-is, where-is, but free of all Lessor Liens.
8.9 PURCHASE AFTER EVENT OF DEFAULT. If an Event of Default (OTHER THAN
an Event of Default described in SECTION 8.1(f) or 8.1(g)) shall have occurred
and is continuing and Trustee, Administrative Agent or any Certificate Purchaser
shall have given notice thereof to Lessee or Guarantor (with a copy to Trustee,
in the case of a notice from Administrative Agent or a Certificate Purchaser),
or Trustee shall have commenced its exercise of remedies pursuant to SECTION
8.2, then, if Lessee delivers, within five (5) Business Days of the date on
which Trustee, Administrative Agent or any Certificate Purchaser shall have
given such notice or Trustee shall have commenced such exercise of remedies,
written notice to Trustee and Administrative Agent (on behalf of the Certificate
Purchasers) of Lessee's intention to purchase all, but not less than all, of the
Equipment then subject to this Lease, then Lessee may purchase all, but not less
than all, of the Equipment then subject to this Lease for the sum of (i) all
accrued unpaid Accrual Rent payable on or prior to such date, (ii) the Lease
Balance and (iii) all other fees and expenses, indemnification payments, and
other amounts then due and payable pursuant to this Lease and the other
Operative Documents (including amounts payable pursuant to SECTION 7.7);
PROVIDED, that such purchase is consummated no more than fifteen (15) Business
Days after the date on which Trustee, Administrative Agent or any Certificate
Purchaser shall have given such notice of Event of Default or Trustee shall have
commenced such exercise of remedies. Upon the payment of such sums by Lessee in
accordance with the provisions of the preceding sentence, the obligation of
Lessee to pay Rent hereunder shall cease, the term of this Lease shall end on
the date of such payment, and Trustee, on behalf of the Certificate Purchasers,
shall execute and deliver to Lessee such documents as may be reasonably required
to release the Equipment from the terms and scope of this Lease and the other
Operative Documents and terminate all of Trustee's interest in warranties,
representations and covenants of Vendors of the Equipment (PROVIDED, that any
such release or termination shall be without representations or warranties,
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EXCEPT that the Equipment is free and clear of Lessor Liens), in such form as
may be reasonably requested by Lessee, all at Lessee's sole cost and expense.
ARTICLE IX
FEES
9.1 COMMITMENT FEES. Lessee shall pay to Trustee, for the account of
each Certificate Purchaser pro rata on the basis of such Certificate Purchaser's
Commitment Amount, a commitment fee (a "COMMITMENT FEE"), for each day during
the Commitment Period in an amount equal to (a) the Commitment Fee Rate on such
day MULTIPLIED BY (b) the unused portion of the Aggregate Commitment Amount on
such day divided by (c) 360. Such fee shall be due and payable on each date that
Interim Rent is due.
9.2 FACILITY FEES. On the Closing Date, Lessee shall pay to
Administrative Agent, for the respective accounts of the Certificate Purchasers,
facility fees in the respective amounts set forth in the "Pricing" section of
the "Executive Summary" contained in the Confidential Memorandum dated June,
1998 circulated by the Lead Arranger and Guarantor to various potential
certificate purchasers for this transaction. Such facility fees are for the
credit facility committed by each Certificate Purchaser under this Lease and the
other Operative Documents and are fully earned when paid. The facility fees paid
to each Certificate Purchaser are solely for its own account and are
non-refundable.
9.3 AGENCY FEES. Lessee shall pay to Administrative Agent, from time to
time as set forth in a letter agreement between Administrative Agent and Lessee,
agency fees in such amounts as set forth therein. The agency fees paid to
Administrative Agent are solely for its own account and are non-refundable.
9.4 SUPPLEMENTAL FEES. If at any time, and from time to time, Guarantor
is required to pay to the lenders party to the Guarantor Loan Agreement (or, if
applicable, party to any Replacement Loan Agreement), a fee or other
remuneration in connection with any amendment, modification or waiver of any
financial covenant contained in such loan agreement, Lessee shall pay to
Trustee, for the ratable benefit of the Certificate Purchasers, as Supplemental
Rent an equivalent fee or equivalent other remuneration determined on
substantially similar (if not the same) basis as used in calculating the fee or
other remuneration to be paid to such lenders.
9.5 COMPENSATION OF TRUSTEE. Lessee shall pay Trustee, from time to
time, Trustee's reasonable fees, costs and expenses for the performance of
Trustee's obligations hereunder in accordance with a letter agreement between
Guarantor and Trustee dated as of July 14, 1998.
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ARTICLE X
DISTRIBUTIONS TO CERTIFICATE PURCHASERS
All amounts of money received or realized by Trustee pursuant to this
Lease which are to be distributed to any Certificate Purchaser (as distinguished
from Lessee or any other Person) shall be distributed as follows:
10.1 PRO RATA DISTRIBUTION. All distributions by Trustee of amounts
payable to Certificate Purchasers pursuant to this Lease and the other Operative
Documents (including amounts distributable pursuant to SECTION 8.4(c)) shall be
made to the Certificate Purchasers pro rata in accordance with their respective
Investment Percentages, without preference or priority of any Certificate
Purchaser over another, and in case moneys are insufficient to pay in full the
whole amount due, owing or unpaid to Certificate Purchasers, then application
shall be made FIRST to any unpaid accrued interest pursuant to SECTION 4.6,
SECOND to any unpaid Supplemental Rent, and THIRD to any other accrued unpaid
Rent and the Lease Balance.
10.2 TIMING OF DISTRIBUTIONS. The amounts payable by Trustee to
Certificate Purchasers pursuant to this Lease will be payable upon Trustee's
receipt of such amounts pursuant to this Lease as provided in SECTION 4.4, in
immediately available funds.
ARTICLE XI
LEASE TERMINATION
11.1 LESSEE'S OPTIONS. Not later than 270 days prior to the last day of
the Base Term or any Renewal Term then in effect, Lessee shall, subject to
SECTION 11.2, by delivery of written notice to Trustee and Administrative Agent
(on behalf of the Certificate Purchasers) exercise one of the following options
(PROVIDED that Lessee may not exercise the Renewal Option if such exercise would
result in more than two Renewal Terms):
(a) renew this Lease with respect to all, but not less than all, of
the Equipment then subject hereto for an additional Renewal Term (the
"RENEWAL OPTION") on the terms and conditions set forth herein;
(b) purchase (or designate any other Person to so purchase) for
cash for the Purchase Option Exercise Amount applicable thereto all, but
not less than all, of the Equipment then subject to this Lease on the last
day of the Base Term or any Renewal Term with respect to which such option
is exercised (the "PURCHASE OPTION"); or
(c) sell (on behalf of the Certificate Purchasers) for cash to a
purchaser or purchasers not in any way affiliated with Lessee or Guarantor
all, but not less than all, of the Equipment then subject to this Lease on
the last day of the Base Term or of any Renewal Term then in effect with
respect to which such option is exercised (the "SALE OPTION").
Simultaneously with a sale pursuant to the Sale Option, Lessee shall pay to
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Trustee, as Supplemental Rent for the benefit of the Certificate
Purchasers, from the gross proceeds of the sale of the Equipment, without
deductions or expense reimbursements (the "PROCEEDS"), the aggregate
outstanding Lease Balance as of the Termination Date (as determined after
any payment of Rent on such date). If the Proceeds exceed the aggregate
outstanding Lease Balance, Lessee will retain the portion of the Proceeds
in excess thereof. If the Proceeds are less than the aggregate outstanding
Lease Balance, Lessee will pay or will cause to be paid to Trustee, as
Supplemental Rent for the benefit of the Certificate Purchasers, on the
Termination Date, in addition to the Proceeds, the Sale Recourse Amount, it
being understood, however, that the amount payable pursuant to this SECTION
11.1(c) shall in no event be construed to limit any other obligation of
Lessee under the Operative Documents, including, without limitation,
pursuant to ARTICLE VII and SECTIONS 11.3, 11.4 and 11.5. The "SALE
RECOURSE AMOUNT" shall be, at the option of the Required Certificate
Purchasers, (x) the Applicable Percentage Amount or (y) the Recourse
Deficiency Amount; PROVIDED, HOWEVER, that in no event shall the Sale
Recourse Amount exceed the Lease Balance (after taking into account all
payments of Capital Rent and Proceeds applied against the Lease Balance on
the Termination Date). Trustee, on behalf of the Certificate Purchasers and
at the direction of Required Certificate Purchasers, shall notify Lessee in
writing not later than five (5) Business Days prior to the Termination Date
whether the Sale Recourse Amount shall be determined pursuant to CLAUSE (x)
or CLAUSE (y) of the preceding sentence EXCEPT that at the end of the Base
Term the Sale Recourse Amount shall be equal to the Applicable Percentage
Amount. The obligation of Lessee to pay the amounts determined pursuant to
this SECTION 11.1(c) shall be a recourse obligation of Lessee and shall be
payable on the Termination Date. All amounts paid to Trustee pursuant to
this SECTION 11.1(c) shall be distributed in accordance with ARTICLE X.
11.2 ELECTION OF OPTIONS. Lessee's election of the Purchase Option will
be irrevocable at the time made, but if Lessee fails to make a timely election,
Lessee will be deemed, in the case of the Base Term and each Renewal Term then
in effect (OTHER THAN the last Renewal Term) to have irrevocably elected the
Renewal Option and, in the case of the last Renewal Term, Lessee will be deemed
to have irrevocably elected the Purchase Option. In addition, if there exists a
Default or Event of Default at any time after the Sale Option is properly
elected, Lessee will be deemed to have elected the Purchase Option, the Sale
Option shall automatically be revoked, and Trustee shall be entitled to exercise
all rights and remedies provided in ARTICLE VIII. Lessee may not elect the Sale
Option if there exists on the date the election is made a Default or Event of
Default.
11.3 SALE OPTION PROCEDURES. If Lessee elects the Sale Option, Lessee
shall use its best commercial efforts to obtain the highest all cash purchase
price for the Equipment. All costs related to such sale and delivery, including
the cost of sales agents, removal of the Equipment, delivery of documents and
Equipment to any location designated by a buyer within the continental United
States, certification, operation and testing of the Equipment in its final
configuration in any location chosen by the buyer or prospective buyer, legal
costs, costs of notices, any advertisement or other similar costs, or other
information and of any parts,
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configurations, repairs or modifications desired by a buyer or prospective buyer
shall be borne entirely by Lessee, without regard to whether such costs were
incurred by Trustee, Lessee or any potentially qualified buyer, and shall in no
event be paid from any of the Proceeds. None of Trustee, Administrative Agent or
any Certificate Purchaser shall have any responsibility for procuring any
purchaser. If, nevertheless, any Certificate Purchaser, Administrative Agent or
Trustee, at the direction of the Required Certificate Purchasers, undertakes any
sales efforts, Lessee shall promptly reimburse any such Certificate Purchaser,
Administrative Agent and/or Trustee for any charges, costs and expenses incurred
in such effort, including any allocated time charges, costs and expenses of
internal counsel or other attorneys' fees. Upon a sale pursuant to the Sale
Option, the Equipment shall be in the condition required by SECTION 5.3.
Trustee, at the direction of the Required Certificate Purchasers, shall
determine whether to accept the highest all cash offer for the Equipment, which
determination shall be made by the Required Certificate Purchasers. Any
purchaser or purchasers of the Equipment shall not in any way be affiliated with
Lessee or Guarantor or have any understanding or arrangement with Lessee
regarding the future use of the Equipment. On the Termination Date, so long as
no Default or Event of Default exists: (a) Lessee shall transfer all of Lessee's
right, title and interest in the Equipment, or cause the Equipment to be so
transferred, to such purchaser or purchasers, if any, in accordance with all of
the terms of this Lease; (b) subject to the simultaneous payment by Lessee of
all amounts due under CLAUSE (c) of this sentence, Trustee shall, without
recourse or warranty, EXCEPT as to the absence of Lessor Liens, transfer by
quitclaim Trustee's right, title and interest in and to the Equipment (including
the warranties, covenants and representations of Vendors of such Equipment) to
such purchaser or purchasers; and (c) Lessee shall simultaneously pay to Trustee
all of the amounts contemplated in SECTION 11.1(c).
11.4 APPRAISAL. If Lessee exercises the Sale Option at the end of any
Renewal Term, then Trustee (at the direction from any Certificate Purchaser)
shall engage an appraiser of nationally recognized standing reasonably
acceptable to the Required Certificate Purchasers, at Lessee's expense, to
determine (by appraisal methods acceptable to the Required Certificate
Purchasers in their sole discretion) the Appraised Value of the Equipment as of
the first day of such Renewal Term.
11.5 EARLY TERMINATION. If no Default or Event of Default shall exist,
on any scheduled Payment Date after the commencement of the Base Term, Lessee
may, at its option, upon at least fifteen (15) days' advance written notice to
Trustee and Administrative Agent, purchase all, but not less than all, of the
Equipment then subject to this Lease, for the sum of (a) all accrued unpaid
Accrual Rent payable on or prior to such Payment Date, (b) the Lease Balance,
and (c) all other fees and expenses and other amounts then due and payable
pursuant to this Lease and the other Operative Documents.
11.6 PROCEDURES FOR PURCHASE OPTION AND EARLY TERMINATION. If Lessee
elects the Purchase Option or purchases the Equipment pursuant to SECTION 11.5,
then, upon the payment by Lessee of all sums required by the provisions of
SECTION 11.1(b) or 11.5, as applicable, the obligation of Lessee to pay Rent
hereunder with respect to the Equipment purchased shall cease, the term of this
Lease with respect to the Equipment purchased shall end
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on the date of such payment, and Trustee, on behalf of the Certificate
Purchasers, shall execute and deliver to Lessee such documents as may be
reasonably required to release the purchased Equipment from the terms and scope
of this Lease and the other Operative Documents and terminate all of Trustee's
interest in the warranties, covenants and representations of Vendors of such
Equipment (PROVIDED that any such release or termination shall be without
representations or warranties, EXCEPT that the Equipment is free and clear of
Lessor Liens), in such form as may be reasonably requested by Lessee, all at
Lessee's sole cost and expense.
ARTICLE XII
REPRESENTATIONS AND WARRANTIES
12.1 REPRESENTATIONS AND WARRANTIES OF LESSEE. As of the date hereof
and each Delivery Date, Lessee make the representations and warranties set forth
in this SECTION 12.1 to each of the other parties hereto.
(a) EXISTENCE AND QUALIFICATION; POWER; COMPLIANCE WITH LAWS.
Lessee is a corporation duly formed, validly existing and in good standing
under the Applicable Laws of Nevada. Lessee is duly qualified or registered
to transact business and is in good standing in 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. Lessee has all requisite corporate
power and authority to conduct its business, to own and lease its
properties and to execute and deliver each Operative Document to which it
is a party and to perform its Obligations. Lessee is in compliance with all
Applicable Laws and other legal requirements applicable to its business,
has obtained all authorizations, consents, approvals, orders, licenses and
permits from, and 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 so to comply, file, register, qualify or
obtain exemptions does not constitute a Material Adverse Effect.
(b) AUTHORITY; COMPLIANCE WITH OTHER AGREEMENTS AND INSTRUMENTS AND
GOVERNMENT REGULATIONS. The execution, delivery and performance by Lessee
of the Operative Documents to which it is a party have been duly authorized
by all necessary corporate action, and do not and will not:
(i) Require any consent or approval not heretofore obtained of
any partner, director, stockholder, security holder or creditor of such
Lessee;
(ii) Violate or conflict with any provision of Lessee's
charter, articles of incorporation or bylaws, as applicable;
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(iii) Result in or require the creation or imposition of any
Lien upon or with respect to any property now owned or leased or
hereafter acquired by Lessee;
(iv) Violate any Requirement of Law applicable to Lessee,
subject to obtaining the authorizations from, or filings with, the
Governmental Agencies described in SCHEDULE VII;
(v) Result in a breach by Lessee of or constitute a default by
Lessee 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 Lessee is a party or by which Lessee or
any of its property is bound or affected where such breach, default or
acceleration would (A) result in an obligation on behalf of Lessee to
make payments in an aggregate amount which exceeds $25,000,000 or (B)
otherwise result in a Material Adverse Effect;
and Lessee is not in violation of, or default under, any Requirement of Law
or Contractual Obligation, or any indenture, loan or credit agreement
described in CLAUSE (v), in any respect that constitutes a Material Adverse
Effect.
(c) NO GOVERNMENTAL APPROVALS REQUIRED. EXCEPT as set forth in
SCHEDULE VII or previously obtained or made, no authorization, consent,
approval, order, license or permit from, or filing, registration or
qualification with, any Governmental Agency is or will be required to
authorize or permit under Applicable Laws the execution, delivery and
performance by Lessee of the Operative Documents to which it is a party.
All authorizations from, or filings with, any Governmental Agency described
in SCHEDULE VII will be accomplished as of the Closing Date or such other
date as is specified in SCHEDULE VII.
(d) FINANCIAL STATEMENTS. Lessee has furnished to the Certificate
Purchasers the audited consolidated financial statements of Guarantor and
its Subsidiaries for the Fiscal Year ended January 31, 1998. The financial
statements described above fairly present in all material respects the
financial condition, results of operations and changes in financial
position of Guarantor and its Subsidiaries as of such dates and for such
periods, in conformity with Generally Accepted Accounting Principles,
consistently applied.
(e) NO OTHER LIABILITIES; NO MATERIAL ADVERSE EFFECT. As of the
Closing Date, Lessee does not have any material liability or material
contingent liability not reflected or disclosed in the financial statements
described in SUBSECTION (d) above or on SCHEDULE VII, OTHER THAN
liabilities and contingent liabilities arising in the ordinary course of
business since the date of such financial statements. As of the Closing
Date, no circumstance or event has occurred that constitutes a Material
Adverse Effect since January 31, 1998.
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(f) INTANGIBLE ASSETS. Lessee owns, or possesses the right to use
to the extent necessary in business, all material trademarks, trade names,
copyrights, patents, patent rights, computer software, licenses and other
intangible assets that are used in the conduct of its business as now
operated, and no such intangible asset, to the best knowledge of Lessee,
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. To the best knowledge of
Lessee, there are no patents, patent rights, trademarks, service marks,
trade names, copyrights, licenses or other intellectual property rights
with respect to the Equipment that are necessary for the operation of the
Equipment.
(g) PUBLIC UTILITY HOLDING COMPANY ACT. Lessee is not a "holding
company", or a "subsidiary company" of a "holding company", or an
"affiliate" of a "holding company" or of a "subsidiary company" of a
"holding company", within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
(h) LITIGATION. EXCEPT for (a) any matter fully covered as to
subject matter and amount (subject to applicable deductibles and
retentions) by insurance for which the insurance carrier has not asserted
lack of subject matter coverage or reserved its right to do so, (b) any
matter, or series of related matters, involving a claim against Lessee of
less than $5,000,000, (c) matters of an administrative nature not involving
a claim or charge against Lessee and (d) matters set forth in SCHEDULE VII,
there are no actions, suits, proceedings or investigations pending as to
Lessee has been served or has received notice or, to the best knowledge of
Lessee, threatened against or affecting Lessee or any property of it before
any Governmental Agency.
(i) BINDING OBLIGATIONS. Each of the Operative Documents to which
Lessee is a party will, when executed and delivered by Lessee, constitute
the legal, valid and binding obligation of Lessee, enforceable against
Lessee in accordance with its terms, EXCEPT as enforcement may be limited
by Debtor Relief Laws or Gaming Laws or equitable principles relating to
the granting of specific performance and other equitable remedies as a
matter of judicial discretion.
(j) NO DEFAULT; CASUALTY. No event has occurred and is continuing
that is a Default or Event of Default and no Casualty has occurred with
respect to any item of Equipment to be delivered on each Delivery Date.
(k) ERISA.
(a) With respect to each Pension Plan:
(1) such Pension Plan complies in all material respects
with ERISA and any other Applicable Laws to the extent that
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noncompliance could reasonably be expected to have a Material
Adverse Effect;
(2) such Pension Plan has not incurred any "accumulated
funding deficiency" (as defined in Section 302 of ERISA) that
could reasonably be expected to have a Material Adverse
Effect;
(3) no "reportable event" (as defined in Section 4043 of
ERISA) has occurred that could reasonably be expected to have
a Material Adverse Effect; and
(4) Lessee has not engaged in any non-exempt Prohibited
Transaction that could reasonably be expected to have a
Material Adverse Effect.
(b) Lessee has not incurred nor does Lessee expect to
incur any withdrawal liability to any Multiemployer Plan that could
reasonably be expected to have a Material Adverse Effect.
(l) REGULATIONS T, U AND X; INVESTMENT COMPANY ACT. No part of
the proceeds of any Funding hereunder will be used to purchase or
carry, or to extend credit to others for the purpose of purchasing or
carrying, any margin stock in violation of Regulations T, U or X.
Lessee is not required to be registered as an "investment company"
under the Investment Company Act of 1940.
(m) DISCLOSURE. No written statement made by a Responsible
Official of Lessee to any Creditor in connection with this Lease, or in
connection with any Funding as of the date thereof contained any untrue
statement of a material fact or omitted a material fact necessary to
make the statement made not misleading in light of all the
circumstances existing at the date the statement was made. Without in
any way limiting the foregoing, the written information provided by
Lessee and its Affiliates to the Appraiser and forming the basis for
the conclusions set forth in each Appraisal, taken as a whole, was, as
of the date furnished, true and correct in all material respects and
did not omit any material information known and available to Lessee
necessary to make the information provided not materially misleading.
(n) TAX LIABILITY. Lessee has filed all tax returns which are
required to be filed, and 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 Lessee,
EXCEPT (a) such Taxes, if any, as are being contested pursuant to a
Permitted Contest and as to which adequate
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reserves have been established and maintained and (b) immaterial Taxes
and tax returns so long as no material item or portion of property of
Lessee is in jeopardy of being seized, levied upon or forfeited.
(o) GAMING LAWS. Lessee is in compliance in all material
respects with all Gaming Laws that are applicable to it and its
business.
(p) PURCHASE CONTRACTS. Each Purchase Contract is assignable
by Lessee (or an Affiliate thereof) in the manner provided by this
Lease. The Purchase Contracts in effect as of the Closing Date are
described on SCHEDULE V.
(q) TITLE; LIENS. Lessee has good and marketable title to each
item of Equipment title to which will be transferred by Lessee to
Trustee, for the benefit of the Certificate Purchasers, on each
Delivery Date, free and clear of all Liens OTHER THAN Permitted Liens.
Lessee has not granted, nor will it grant, any Lien on any item of
Equipment, any other Collateral or this Lease, to any Person OTHER THAN
Trustee or the Certificate Purchasers; and no Lien, OTHER THAN the Lien
granted to Trustee and the Certificate Purchasers hereunder (and any
Lien hereafter granted by Trustee and the Certificate Purchasers), has
attached to any item of Equipment, any other Collateral or this Lease,
or in any manner has affected adversely Trustee's and the Certificate
Purchasers' rights and Liens herein EXCEPT as expressly permitted by
the Operative Documents. Without limiting the generality of the
foregoing, the retention of possession by Lessee of the Equipment to be
sold and leased back following the transfer of title to the same to,
and the leaseback of the same from, Trustee (for the benefit of the
Certificate Purchasers), in each case, pursuant to this Lease, shall
not be deemed fraudulent or void as against any present or future
creditor of Lessee under the laws of the States where such Equipment
will, at the time of such sale and leaseback, be located, nor would any
subsequent bona fide purchaser from Lessee of such Equipment, in the
event of any attempted subsequent sale thereof by Lessee, acquire any
title to or rights therein superior to Trustee's title thereto and
rights therein.
(r) PERFECTION OF SECURITY INTEREST. Upon the filing of
appropriate UCC financing statements and precautionary fixture filings
with the Governmental Agencies specified on SCHEDULE IV or in any other
written notice provided by Lessee to Trustee and Administrative Agent
in connection with any Delivery Date, the payment of any applicable
fees and taxes relating to any of the foregoing, and the payment of the
aggregate Purchase Price for the Equipment by Trustee, Trustee will
have an enforceable, perfected first priority security interest of
record in the Collateral.
(s) EQUIPMENT. The Purchase Price for each item of Equipment
does not exceed the Appraised Value of such item of Equipment at the
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time of the sale to Trustee, for the benefit of the Certificate
Purchasers, hereunder and the aggregate Purchase Price for all of
the Equipment does not exceed the Appraised Value of all of the
Equipment at the time of the sale to Trustee, for the benefit of the
Certificate Purchasers, hereunder. Lessee has delivered (or will, on
or prior to each applicable Delivery Date, deliver) true, correct
and complete copies of invoices evidencing payment in full by Lessee
to the Vendors of the Equipment transferred by Lessee.
(t) NO TRANSFER TAXES. No sales, use, excise, transfer or
other tax, fee or imposition shall result from the sale, transfer or
purchase of any item of Equipment or any Certificate pursuant to
ARTICLE II, EXCEPT such taxes, fees or impositions that have been paid
in full on or prior to the applicable Delivery Date.
(u) RIGHTS IN RESPECT OF THE EQUIPMENT. Lessee is not a party
to any contract or agreement with respect to the sale by Lessee of any
interest in the Equipment or any part thereof OTHER THAN as permitted
pursuant to this Lease and the other Operative Documents.
(v) CHIEF EXECUTIVE OFFICE OF LESSEE. The principal place of
business and chief executive office, as such terms are used in Section
9-103(3) of the UCC, of Lessee are each located at Lessee's address set
forth in the introductory paragraph of this Lease.
(w) SUBJECTION TO GOVERNMENT REGULATION. No Creditor will (i)
solely by reason of entering into the Operative Documents or
consummating the transactions contemplated thereby, (x) become subject
to ongoing regulation of its operations by any Governmental Agency
(OTHER THAN upon exercise of remedies under this Lease or upon the
expiration hereof if Lessee does not consummate the Purchase Option) or
(y) be required to qualify to do business in any jurisdiction in which
the Equipment is located; or (ii) become subject to ongoing regulation
of its operations by any Governmental Agency upon exercise of remedies
under this Lease or upon the expiration hereof due solely to ownership
of the Equipment or the holding of any interest therein (EXCEPT for
regulation the applicability of which depends or upon the existence of
facts in addition to the ownership of the Equipment or the holding of
any interest therein).
(x) SOLVENCY. The consummation by Lessee of the transactions
contemplated by the Operative Documents does not render Lessee
insolvent, nor was it made in contemplation of Lessee's insolvency; the
value of the assets and properties of Lessee at fair valuation and at
their then present fair salable value is and, after such transactions,
will be greater than Lessee's total liabilities, including contingent
liabilities, as they become due; and the property remaining in the
hands of Lessee was not and will not be an unreasonably small amount of
capital.
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(y) PRIVATE OFFERING. Assuming the truth and accuracy of the
representations and warranties of each Creditor set forth in the
Operative Documents, Lessee has not offered any interest in this Lease,
the Rent, the Certificates or the Equipment or any similar security for
sale to, or solicited offers to buy any thereof from, or otherwise
directly or indirectly approached or negotiated with respect thereto
with, any prospective purchaser OTHER THAN the Creditors and not more
than thirty (30) other institutional investors, each of which was
offered such interest at a private sale for investment and each of
which Lessee had reasonable grounds to believe, and did believe, as to
the Creditors, after reasonable inquiry does believe, has such
knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of such an investment; and,
assuming the truth and accuracy of the representations set forth in
SECTIONS 12.2(e), 12.2(f) and 12.3(f), the issuance, sale and delivery
of the Certificates and the interests in this Lease represented thereby
under the circumstances contemplated by this Lease do not require the
registration of such Certificates or interests under the Securities Act
or the qualification of any of the Operative Documents under the Trust
Indenture Act of 1939, as amended. No representation or warranty
contained in this SECTION 12.1(y) shall include or cover any action or
inaction of any Creditor or any Affiliate thereof whether or not
purportedly on behalf of any Creditor or any of any Creditor's
Affiliates.
(z) YEAR 2000. Any reprogramming and/or replacement required
to permit the proper functioning, in and following the year 2000, of
(i) Lessee's computer systems and (ii) equipment containing embedded
microchips (INCLUDING systems and equipment supplied to Lessee by
others or with which the systems of Lessee interface) and the testing
of all such systems and equipment, as so reprogrammed or replaced, will
be completed in all material respects by June 30, 1999. The aggregate
cost to Lessee of such reprogramming, replacement and testing, and of
the reasonably foreseeable consequences of year 2000 to Lessee
resulting from reprogramming, errors and the failure of others' systems
or equipment, cannot reasonably be expected to have a Material Adverse
Effect. EXCEPT for such of the reprogramming and/or replacement
referred to in the preceding sentence as may be necessary, Lessee's
computer and management information systems are and, with ordinary
course upgrading, replacement and maintenance, will continue for the
term of this Lease to be, sufficient to permit Lessee to conduct its
business without the occurrence of a Material Adverse Effect.
12.2 REPRESENTATIONS AND WARRANTIES OF CERTIFICATE PURCHASERS. Each
Certificate Purchaser represents and warrants, severally and only as to itself,
to each of the other parties hereto as follows on and as of the date hereof and
on each Delivery Date as follows:
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(a) ORGANIZATION AND AUTHORITY. It is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, and has full power and authority to enter into and
perform its obligations under the Operative Documents to which it is or
will be a party and each other agreement, instrument and document to be
executed and delivered by it in connection therewith.
(b) AUTHORIZATION; EXECUTION; ENFORCEABILITY. Each of the
Operative Documents to which it is or will be a party have been or will
be, on the date required to be delivered hereby, duly authorized,
executed and delivered by it in accordance with the terms thereof, and
when executed and delivered in accordance with this Lease by each other
party thereto, will constitute valid and binding obligations of such
Certificate Purchaser, enforceable against such Certificate Purchaser
in accordance with its terms, EXCEPT as such enforceability may be
limited by Debtor Relief Laws and similar laws affecting the
enforcement of creditors' rights generally and by general equitable
principles.
(c) LESSOR LIENS. The Equipment being delivered on such
Delivery Date and all of the other Collateral is free and clear of all
Lessor Liens attributable to such Certificate Purchaser.
(d) ERISA. EITHER (i) it is not and will not be purchasing any
of its interest in the Equipment or the Certificates with the assets of
an "employee benefit plan" (as defined in Section 3(3) of ERISA) which
is subject to Title I of ERISA, or a "plan" (as defined in Section
4975(e)(1) of the Code) or (ii) the acquisition and holding of any
Certificate will not result in a Prohibited Transaction, or (iii) it
(A) is an insurance company, (B) is acquiring its Certificate with
funds held in an insurance company general account (as defined in
Section V(e) of the Prohibited Transaction Class Exemption 95-60) and
(C) the acquisition and subsequent ownership of its Certificate will
qualify for the exemption provided by Prohibited Transaction Class
Exemption 95-60.
(e) INVESTMENT IN EQUIPMENT AND CERTIFICATES. It is acquiring
its interest in the Equipment (as represented by the Certificates) for
its own account for investment, and if in the future it should decide
to dispose of its interest in the Equipment, it understands that it may
do so only in compliance with the Securities Act and the rules and
regulations of the SEC thereunder and any applicable state securities
laws. Neither it nor anyone authorized to act on its behalf nor any of
its Affiliates has, directly or indirectly, taken or will take any
action which would subject the issuance or sale of any Certificate or
any interest in the Equipment, the Collateral or this Lease to the
registration requirements of Section 5 of the Securities Act or which
has or would violate Section 5 of the Securities Act or any state
securities laws. No representation or warranty contained in this
SECTION 12.2(e) shall include or cover any action or inaction of
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Lessee or any Affiliate thereof whether or not purportedly on behalf
of any Certificate Purchaser or any of their Affiliates. Subject to
the foregoing and to the terms and conditions of the Operative
Documents, and subject to the provisions of ARTICLE XIV hereof, it is
understood among the parties that the disposition of each Certificate
Purchaser's property shall be at all times within its control.
(f) ACCREDITED INVESTOR STATUS. It is an "accredited investor"
within the meaning of Rule 501(a) of the Securities Act.
12.3 REPRESENTATIONS AND WARRANTIES OF TRUSTEE. Trustee, in its
individual capacity, hereby represents and warrants to the other parties as set
forth in this SECTION 12.3.
(a) DUE ORGANIZATION, ETC. Trustee is a national banking
association duly organized, validly existing and in good standing under
the laws of the United States of America; and has full power and
authority to enter into and perform its obligations under the Operative
Documents to which it is or is to be a party and each other agreement,
instrument and document to be executed and delivered by it in its
individual capacity and/or as Trustee, as applicable, on or before each
Delivery Date in connection with or as contemplated by each such
Operative Document to which it is or is to be a party; and the
Operative Documents to which Trustee is a party, and to which Trustee
is to be a party, have been or will be duly executed and delivered by
Trustee.
(b) AUTHORIZATION; NO CONFLICT. The execution, delivery and
performance by Trustee of the Operative Documents to which it is or is
to be a party in its individual capacity and/or as Trustee, as
applicable, have been duly authorized by all necessary action on its
part, and do not and will not: (i) contravene any applicable laws,
rules, regulations, orders, injunctions or decrees of any Governmental
Agency of the United States of America governing the banking and trust
powers of the Trust Company or of the State of Utah where such
contravention would be reasonably likely to materially and adversely
affect the ability of Trustee, either in its individual capacity, as
Trustee or both, to perform its obligations under any Operative
Documents to which it is or will be a party; (ii) violate any provision
of its charter or bylaws or of the Trust Agreement; (iii) result in a
breach of or constitute a default under any indenture, loan or credit
agreement, or any other agreement or instrument to which Trustee,
either in its individual capacity, as Trustee, or both, is a party or
by which it or its properties may be bound or affected, which breaches
or default would be reasonably likely to materially and adversely
affect the ability of Trustee, either in its individual capacity, as
Trustee, or both, to perform its obligations under any Operative
Documents to which it is or will be a party; or (iv) require any
authorizations, consents, approvals, licenses or formal exemptions
from, or any filings, declarations or registrations with, any
Governmental Agency of the United
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States of America governing the banking and trust powers of the Trust
Company or of the State of Utah or any consent or approval of any
non-governmental Person.
(c) ENFORCEABILITY, ETC. Each Operative Document to which
Trustee, in its individual capacity, as Trustee, or both, is a party
constitutes the legal, valid and binding obligation of Trustee, either
in its individual capacity, as Trustee, or both, as applicable,
enforceable against it in accordance with the terms thereof, EXCEPT as
such enforceability may be limited by Debtor Relief Laws and similar
laws affecting the enforcement of creditors' rights generally and by
general equitable principles.
(d) LITIGATION. There is no action, proceeding or
investigation pending or threatened which questions the validity of the
Operative Documents to which Trustee, in its individual capacity, as
Trustee, or both, is a party or any action taken or to be taken
pursuant to the Operative Documents to which Trustee, in its individual
capacity, as Trustee, or both, is a party.
(e) LESSOR LIENS. The Equipment and the other Collateral are
free and clear of all Lessor Liens attributable to Trustee, in its
individual capacity, as Trustee, or both.
(f) SECURITIES ACT. Neither Trustee, in its individual
capacity, as Trustee, or both, nor anyone authorized to act on behalf
of Trustee has, directly or indirectly, in violation of Section 5 of
the Securities Act or any state securities laws, offered or sold any
interest in the Certificates, any of the Equipment or this Lease, or
any interest therein, or in any security or lease the offering of
which, for purposes of the Securities Act or any state securities laws,
would be deemed to be part of the same offering as the offering of the
aforementioned securities or leases, or solicited any offer to acquire
any of the aforementioned securities or leases.
12.4 REPRESENTATIONS AND WARRANTIES OF ADMINISTRATIVE AGENT.
Administrative Agent, in its individual capacity, hereby represents and warrants
to the other parties as set forth in this SECTION 12.4.
(a) DUE ORGANIZATION, ETC. Administrative Agent is a national
banking association duly organized, validly existing and in good
standing under the laws of the United States of America; and has full
power and authority to enter into and perform its obligations under the
Operative Documents to which it is or is to be a party and each other
agreement, instrument and document to be executed and delivered by it
in its individual capacity and/or as Administrative Agent, as
applicable, on or before each Delivery Date in connection with or as
contemplated by each such Operative Document to which it is or is to be
a party; and the Operative Documents to which Administrative Agent is a
party, and to which
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Administrative Agent is to be a party, have been or will be duly
executed and delivered by Administrative Agent.
(b) AUTHORIZATION; NO CONFLICT. The execution, delivery and
performance by Administrative Agent of the Operative Documents to which
it is or is to be a party in its individual capacity and/or as
Administrative Agent, as applicable, have been duly authorized by all
necessary action on its part, and do not and will not: (i) contravene
any applicable laws, rules, regulations, orders, injunctions or decrees
of any Governmental Agency where such contravention would be reasonably
likely to materially and adversely affect the ability of Administrative
Agent, either in its individual capacity, as Administrative Agent or
both, to perform its obligations under any Operative Documents to which
it is or will be a party; (ii) violate any provision of its charter or
bylaws; (iii) result in a breach of or constitute a default under any
indenture, loan or credit agreement, or any other agreement or
instrument to which Administrative Agent, either in its individual
capacity, as Administrative Agent, or both, is a party or by which it
or its properties may be bound or affected, which breaches or default
would be reasonably likely to materially and adversely affect the
ability of Administrative Agent, either in its individual capacity, as
Administrative Agent, or both, to perform its obligations under any
Operative Documents to which it is or will be a party; or (iv) require
any authorizations, consents, approvals, licenses or formal exemptions
from, or any filings, declarations or registrations with, any
Governmental Agency or any consent or approval of any non-governmental
Person.
(c) ENFORCEABILITY, ETC. Each Operative Document to which
Administrative Agent, in its individual capacity, as Administrative
Agent, or both, is a party constitutes the legal, valid and binding
obligation of Administrative Agent, either in its individual capacity,
as Administrative Agent, or both, as applicable, enforceable against it
in accordance with the terms thereof, EXCEPT as such enforceability may
be limited by Debtor Relief Laws and similar laws affecting the
enforcement of creditors' rights generally and by general equitable
principles.
(d) LITIGATION. There is no action, proceeding or
investigation pending or threatened which questions the validity of the
Operative Documents to which Administrative Agent, in its individual
capacity, as Administrative Agent, or both, is a party or any action
taken or to be taken pursuant to the Operative Documents to which
Administrative Agent, in its individual capacity, as Administrative
Agent, or both, is a party.
(e) LESSOR LIENS. The Equipment being delivered on such
Delivery Date and all of the other Collateral is free and clear of all
Lessor Liens attributable to Administrative Agent.
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ARTICLE XIII
COVENANTS
13.1 COVENANTS OF LESSEE. Lessee covenants with each of the other
parties hereto as follows:
(a) FURTHER ASSURANCES. At its own cost and expense, Lessee shall
cause to be promptly and duly taken, executed, acknowledged and delivered
all such further acts, documents and assurances as any Creditor reasonably
may request from time to time in order to carry out more effectively the
intent and purposes of this Lease and the other Operative Documents to
which it is a party and the transactions contemplated thereby, and cause
all financing statements (including precautionary financing statements),
fixture filings and other documents, to be recorded or filed at such places
and times in such manner, and take all such other actions or cause such
actions to be taken, as may be necessary or as may be reasonably requested
by any Creditor in order to establish, preserve, protect and perfect the
title of Trustee, for the benefit of the Certificate Purchasers, to the
Equipment and Trustee's rights under this Lease and the other Operative
Documents and to perfect, preserve and protect the first and prior Lien in
favor of the Certificate Purchasers on the Trust Estate.
(b) CONSOLIDATION, MERGER. Lessee shall not merge or consolidate
with any Person.
(c) PAYMENT OF TAXES AND OTHER POTENTIAL LIENS. Lessee shall pay
and discharge promptly all Taxes, assessments and governmental charges or
levies imposed upon it or its property or any part thereof and upon its
income or profits or any part thereof, EXCEPT that Lessee shall not be
required to pay or cause to be paid (a) any Tax, assessment, charge or levy
that is not yet past due, or is being contested pursuant to a Permitted
Contest so long as Lessee has established and maintains adequate reserves
for the payment of the same or (b) any immaterial Tax so long as no
material property of Lessee is at impending risk of being seized, levied
upon or forfeited.
(d) PRESERVATION OF EXISTENCE. Lessee shall preserve and main tain
its existence in the jurisdiction of its formation and all material
authorizations, rights, franchises, privileges, consents, approvals,
orders, licenses, permits, or registrations from any Governmental Agency
that are necessary for the transaction of its business EXCEPT where the
failure to so preserve and maintain any such authorization would not
constitute a Material Adverse Effect; 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
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of its properties EXCEPT where the failure to so qualify or remain
qualified would not constitute a Material Adverse Effect.
(e) MAINTENANCE OF PROPERTIES. Lessee shall maintain, preserve and
protect all of its 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 part of the Collateral
and is not of significant value, either intrinsically or to the operations
of Lessee, shall not constitute a violation of this covenant.
(f) COMPLIANCE WITH LAWS. Lessee shall comply, within the time
period, if any, given for such compliance by the relevant Governmental
Agency or Agencies with enforcement authority, with all Requirements of Law
noncompliance with which constitutes a Material Adverse Effect, EXCEPT that
Lessee need not comply with a Requirement of Law then being contested
pursuant to a Permitted Contest.
(g) INSPECTION RIGHTS. Upon reasonable notice, at any time during
regular business hours and as often as reasonably requested (but not so as
to materially interfere with the business of Lessee), Lessee shall permit
any Creditor, or any authorized employee, agent or representative thereof,
to examine, audit and make copies and abstracts from the records and books
of account to visit and inspect the Equipment and properties upon which the
Equipment is at any time located and to discuss the affairs, finances and
accounts of Lessee with any of its officers, managers, key employees or
accountants and, upon request, furnish promptly to any Creditor true copies
of all financial information made available to the Board of Directors or
audit committee of the Board of Directors of Lessee.
(h) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. Lessee shall keep
adequate records and books of account reflecting all financial transactions
in conformity with Generally Accepted Accounting Principles, consistently
applied, and in material conformity with all applicable requirements of any
Governmental Agency having regulatory jurisdiction over Lessee.
(i) COMPLIANCE WITH AGREEMENTS. Lessee shall promptly and fully
comply with all Contractual Obligations under all material agreements,
indentures, leases and/or instruments to which Lessee is a party, whether
such material agreements, indentures, leases or instruments are with a
Certificate Purchaser or another Person, EXCEPT for any such Contractual
Obligations (i) the performance of which would cause a Default, (ii) then
being contested by Lessee in good faith by appropriate proceedings or (iii)
if the failure to comply with such agreements, indentures, leases or
instruments does not constitute a Material Adverse Effect.
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(j) ERISA. Lessee shall (i) not permit any Pension Plan to (A)
engage in any non-exempt Prohibited Transaction, (B) fail to comply with
ERISA or any other Applicable Laws, (C) incur any material "accumulated
funding deficiency" (as defined in Section 302 of ERISA), or (D) terminate
in any manner, which, with respect to each event listed above, could
reasonably be expected to result in a Material Adverse Effect, or (ii)
withdraw, completely or partially, from any Multiemployer Plan if to do so
could reasonably be expected to result in a Material Adverse Effect.
(k) FINANCIAL AND OTHER INFORMATION. Lessee shall deliver to the
Administrative Agent (for delivery by the Administrative Agent to each of
the Creditors) the following financial and other information:
(i) Promptly and in any event within two (2) Business Days
after a Senior Officer of Lessee obtains knowledge of the occurrence of
any Default or Event of Default, telephonic notice specifying the
nature and period of existence thereof, and no more than two (2)
Business Days after such telephonic notice, a certificate of a Senior
Officer of Lessee setting forth the details thereof and the action that
Lessee is taking and proposes to take with respect thereto;
(ii) Promptly and in any event within five (5) Business Days
after a Senior Officer of Lessee obtains knowledge of the commencement
of any litigation, action or proceeding, in either case against or
affecting Lessee or any of its properties, businesses, assets or
revenue, which is reasonably likely to have a Material Adverse Affect
(taking into account applicable insurance coverage therefor), notice
thereof and an explanation thereof in reasonable detail; and
(iii) From time to time, such additional information regarding
the financial position or business of Lessee as any Creditor may
reasonably request.
(l) SUBLEASE. Lessee shall not amend, modify, supplement or
otherwise change the terms and provisions of any Sublease or terminate any
Sublease as a result of an event of default under any Sublease without the
prior written consent of Trustee, and the Required Certificate Purchasers.
(m) PAYMENT OF OBLIGATIONS. Lessee (i) will pay and discharge at or
before maturity, all of its material obligations and liabilities, including
Tax liabilities, EXCEPT where the same may be contested pursuant to a
Permitted Contest, and (ii) will maintain in accordance with Generally
Accepted Accounting Principles, appropriate reserves for the accrual of any
of the same.
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(n) USE OF FUNDS. None of the proceeds of any amounts advanced by
Trustee to or for the benefit of Lessee in connection with the purchase (or
reimbursement for the purchase) of Equipment will be used in violation of
applicable law or regulation including Regulations T, U and X of the Board
of Governors of the Federal Reserve System.
(o) CHANGE OF NAME OR LOCATION. Lessee shall furnish to Trustee and
Administrative Agent notice on or before the thirtieth (30th) day prior to
(1) any relocation of its chief executive office or principal place of
business to a location OTHER THAN in Clark County, Nevada, or (2) any
change of its name.
(p) ENVIRONMENTAL MATTERS. Lessee shall (i) use and operate the
Equipment in compliance in all material respects with all Environmental
Laws, keep all necessary permits, approvals, certificates, licenses and
other authorizations relating to environmental matters in effect and remain
in material compliance therewith, and handle all Hazardous Material in
compliance with all applicable Environmental Laws and (ii) promptly notify
Trustee and the Certificate Purchasers and provide copies upon receipt, of
all material written claims, complaints, notices or inquiries relating to
the condition or compliance of the Equipment in so far as they relate to
Environmental Laws, and promptly cure in all material respects (and have
dismissed with prejudice) to the satisfaction of the Required Certificate
Purchasers any actions and proceedings relating to such compliance with
Environmental Laws; PROVIDED, HOWEVER, that Lessee may contest by Permitted
Contest any such actions or proceedings. In addition, if the estimated
damages including costs of remediation are reasonably expected to exceed
$500,000, Lessee shall, prior to the institution of any such Permitted
Contest by Lessee, provide such additional security as Trustee or any
Certificate Purchaser shall reasonably request. Lessee shall provide such
information and certifications which Trustee or any Certificate Purchaser
may reasonably request from time to time to evidence compliance with this
SECTION 13.1(p).
(q) SECURITIES. Lessee shall not, nor shall it permit anyone
authorized to act on its behalf to, take any action which would subject the
issuance or sale of the Certificates, any of the Equipment or the Lease, or
any security or lease the offering of which, for purposes of the Securities
Act or any state securities laws, would be deemed to be part of the same
offering as the offering of the aforementioned items, to the registration
requirements of Section 5 of the Securities Act or any state securities
laws.
(r) NO DISPOSITION OF THE EQUIPMENT. Lessee shall not sell,
contract to sell, assign, lease, transfer, convey or otherwise dispose of,
or permit to be sold, assigned, leased, transferred, conveyed or otherwise
disposed of, all or
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any of the Equipment or any part thereof EXCEPT as permitted by the
Operative Documents.
(s) NO SUBSIDIARIES. Lessee shall not at any time have any
Subsidiaries.
(t) YEAR 2000. Lessee shall use reasonable efforts to ensure that
any computer systems and/or software used in the operation of Lessee's
business are modified or replaced to the extent necessary to prevent or
avoid the occurrence of any Material Adverse Effect as a result of the
commencement of the year 2000.
(u) MANDALAY BAY EQUIPMENT COMPLETION. Lessee shall cause the
Mandalay Bay Equipment Completion to occur not later than the earlier of
(a) the date the aggregate Commitments are reduced to zero or (b) the last
day of the Interim Period and, on such date, certify in writing to Trustee
and Administrative Agent that the Mandalay Bay Equipment Completion has
occurred.
13.2 COVENANTS OF GUARANTOR. Without in any way limiting its
obligations under the Guaranty and the provisions contained therein, Guarantor
covenants with each of the Creditors as follows:
(a) FINANCIAL AND OTHER INFORMATION. Guarantor shall deliver to the
Administrative Agent (for prompt delivery by the Administrative Agent to
each of the Creditors) the following financial information:
(i) As soon as practicable, and in any event within 60 days
after the end of each Fiscal Quarter (OTHER THAN the fourth Fiscal
Quarter in any Fiscal Year), (i) the consolidated balance sheet of
Guarantor and its Subsidiaries as at the end of such Fiscal Quarter and
the consolidated statement of operations for such Fiscal Quarter, and
its statement of cash flows for the portion of the Fiscal Year ended
with such Fiscal Quarter and (ii) the consolidating (in accordance with
past consoli dating practices of Guarantor) balance sheets and
statements of operations as at 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
Guarantor as fairly presenting the financial condition, results of
operations and cash flows of Guarantor and its Subsidiaries in
accordance with Generally Accepted Accounting Principles (OTHER THAN
footnote disclosures), consistently applied, as at such date and for
such periods, subject only to normal year-end accruals and audit
adjustments;
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(ii) As soon as practicable, and in any event within 60 days
after the end of the fourth Fiscal Quarter in a Fiscal Year, a
certificate of a Responsible Official of Guarantor setting forth the
Total Debt Ratio as of the last day of such Fiscal Quarter, and
providing reasonable detail as to the calculation thereof, which
calculations shall be based on the preliminary unaudited financial
statements of Guarantor and its Subsidiaries for such Fiscal Quarter;
(iii) As soon as practicable, and in any event within 100 days
after the end of each Fiscal Year, (i) the consolidated balance sheet
of Guarantor and its Subsidiaries as at the end of such Fiscal Year and
the consolidated statements of operations, stockholders' equity and
cash flows, in each case of Guarantor and its Subsidiaries for such
Fiscal Year and (ii) consolidating (in accordance with past
consolidating practices of Guarantor) balance sheets and statements of
operations, in each case as at the end of and for the Fiscal Year, all
in reasonable detail. Such financial statements shall be prepared in
accordance with Generally Accepted Accounting Principles, consistently
applied, and such consolidated balance sheet and consolidated
statements shall be accompanied by a report of Arthur Andersen LLP or
other independent public accountants of recognized standing selected by
Guarantor and reasonably satisfactory to the Required Certificate
Purchasers, which report shall be prepared in accordance with generally
accepted auditing standards as at such date, and shall not be subject
to any qualifications or exceptions as to the scope of the audit nor to
any other qualification or exception determined by the Required
Certificate Purchasers in their good faith business judgment to be
adverse to the interests of the Required Certificate Purchasers. Such
accountants' report and opinion shall be accompanied by a certificate
stating that, in making the examination pursuant to generally accepted
auditing standards necessary for the certification of such financial
statements and such report, such accountants have obtained no knowledge
of any Default or, if, in the opinion of such accountants, any such
Default shall exist, stating the nature and status of such Default, and
stating that such accountants have reviewed Guarantor's financial
calculations as at the end of such Fiscal Year (which shall accompany
such certificate) under SECTION 13.2(b), have read such Section
(including the covenants and definitions incorporated therein) and that
nothing has come to the attention of such accountants in the course of
such examination that would cause them to believe that the same were
not calculated by Guarantor in the manner prescribed by the Guarantor
Loan Agreement or any Replacement Loan Agreement as incorporated
therein;
(iv) As soon as practicable, and in any event within 100 days
after the commencement of each Fiscal Year, a budget and
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projection by Fiscal Quarter for that Fiscal Year and by Fiscal Year
for the next four succeeding Fiscal Years, INCLUDING for the first
such Fiscal Year, projected quarterly consolidated balance sheets,
statements of operations and statements of cash flow and, for the
remaining four Fiscal Years, projected annual consolidated condensed
balance sheets and statements of operations and cash flow, of
Guarantor and its Subsidiaries, all in reasonable detail;
(v) Promptly after request by any Creditor, copies of any
detailed audit reports, management letters or recommendations submitted
to the Board of Directors (or the audit committee of the Board of
Directors) of Guarantor by independent accountants in connection with
the accounts or books of Guarantor or any of its Subsidiaries, or any
audit of any of them;
(vi) As soon as practicable, and in any event (A) within 30
days after the end of the first three Fiscal Quarters in each Fiscal
Year, and (B) 60 days after the end of the fourth Fiscal Quarter in
each Fiscal Year, a written report, in form and detail mutually
acceptable to Guarantor and Administrative Agent, with a narrative
report describing the results of operations of Guarantor and its
Subsidiaries during such Fiscal Quarter and detailing the status of
development of each "New Venture Entity," including the amounts of
"Capital Expenditures" and "Investments" made, and reasonably
anticipated to be made, with respect thereto (in each case, as such
terms are defined in the Guarantor Loan Agreement or any Replacement
Loan Agreement);
(vii) Promptly after the same are available, copies of each
annual report, proxy or financial statement or other report or
communication sent to the stockholders of Guarantor, and copies of all
annual, regular, periodic and special reports and registration
statements which Guarantor may file or be required to file with the SEC
under Section 13 or 15(d) of the Securities Exchange Act, and not
otherwise required to be delivered to the Certificate Purchasers
pursuant to other provisions of this Section;
(viii) Promptly after the same are available, copies of the
Nevada "Regulation 6.090 Report" and "6-A Report", and copies of any
written communication to Guarantor or any of its Restricted
Subsidiaries from any Gaming Board advising it of a violation of or
non-compliance with any Gaming Law by Guarantor or any of its
Restricted Subsidiaries;
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(ix) Promptly after request by any Creditor, copies of any
other report or other document that was filed by Guarantor or any of
its Restricted Subsidiaries with any Governmental Agency;
(x) Promptly upon a Senior Officer becoming aware, and in any
event within five (5) Business 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 in connection
with any Pension Plan or any trust created thereunder, telephonic
notice specifying the nature thereof, and, no more than five (5)
Business Days after such telephonic notice, written notice again
specifying the nature thereof and specifying what action Guarantor or
any of its Restricted Subsidiaries is taking or proposes to take with
respect thereto, and, when known, any action taken by the Internal
Revenue Service with respect thereto;
(xi) As soon as practicable, and in any event within two (2)
Business Days after a Senior Officer becomes aware of the existence of
any condition or event which constitutes a Default, telephonic notice
specifying the nature and period of existence thereof, and, no more
than two (2) Business Days after such telephonic notice, written notice
again specifying the nature and period of existence thereof and
specifying what action Lessee is taking or proposes to take with
respect thereto;
(xii) Promptly upon a Senior Officer becoming aware that (A)
any Person has commenced a legal proceeding with respect to a claim
against Guarantor or any of its Restricted Subsidiaries that is
$10,000,000 or more in excess of the amount thereof that is fully
covered by insurance, (B) any creditor or certificate purchaser under a
credit agreement or material lease has asserted a default thereunder
on the part of Guarantor or any of its Restricted Subsidiaries, (C) any
Person has commenced a legal proceeding with respect to a claim against
Guarantor or any of its Restricted Subsidiaries under a contract that
is not a credit agreement or material lease, which claim is in excess
of $10,000,000 or which otherwise may reasonably be expected to result
in a Material Adverse Effect, (D) any labor union has notified
Guarantor of its intent to strike Guarantor or any of its Restricted
Subsidiaries on a date certain and such strike would involve more than
100 employees of Guarantor or any of its Restricted Subsidiaries, or
(E) any Gaming Board has indicated its intent to consider or act upon a
License Revocation or a fine or penalty of $1,000,000 or more with
respect to Guarantor or any of its Restricted Subsidiaries, a written
notice describing the pertinent facts relating thereto and what action
Guarantor or any of its Restricted Subsidiaries are taking or propose
to take with respect thereto;
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(xiii) Promptly, and in any event within five (5) Business
Days of the effective date thereof, copies of (A) any and all
amendments, modifications and waivers pertaining in any manner to the
Guarantor Loan Agreement (or if applicable, any Replacement Loan
Agreement) and (B) any and all Replacement Loan Agreements and the
material agreements, documents and instruments relating thereto.
(xiv) Such other data and information as from time to time may
be reasonably requested by any Creditor through Trustee or
Administrative Agent, as the case may be; and
(xv) A certificate addressed to the Creditors in a form
acceptable to the Creditors with respect to its compliance with the
Operative Documents to which it is a party concurrently with the
financial statements described in CLAUSES (a)(i) and (a)(iii) above and
setting forth Lessee's determination of the applicable Pricing Level
(which determination shall be subject to verification by the
Certificate Purchasers); PROVIDED that such certificate may attach and
incorporate by reference any compliance certificate required under the
Guarantor Loan Agreement or Replacement Loan Agreement (as applicable)
with respect to compliance with SECTION 13.2(b).
(b) FINANCIAL COVENANTS. Guarantor shall comply at all times with
the financial covenants contained in SECTIONS 6.11 and 6.12 of the
Guarantor Loan Agreement, as such covenants may from time to time be
amended or waived by the lenders party thereto (OTHER THAN amendments or
waivers that occur after the occurrence of a "Default" (as such term is
used and defined in such Guarantor Loan Agreement), which amendments and
waivers shall NOT be incorporated herein) or, if the Guarantor Loan
Agreement is terminated and a Replacement Loan Agreement then exists, with
such financial covenants as may from time to time exist under such
Replacement Loan Agreement (EXCEPT to the extent such financial covenants
are amended or waived after the occurrence of a "Default" (as such term is
used and defined in such Replacement Loan Agreement), in which case such
financial covenants as they existed immediately prior to such amendment or
waiver shall be incorporated herein); PROVIDED that if the Guarantor Loan
Agreement is terminated and no Replacement Loan Agreement then exists, then
the financial covenants (including related definitions) in the Guarantor
Loan Agreement or the Replacement Loan Agreement (whichever last existed)
in the form that existed immediately prior to such termination (after
giving effect to the two parenthetical provisions above) shall be deemed
incorporated herein by this reference.
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(c) CONDUCT OF BUSINESS, MAINTENANCE OF EXISTENCE AND COMPLIANCE
WITH LAWS.
(i) Guarantor will preserve, renew and keep in full force and
effect, and will cause Lessee and each Restricted Subsidiary to
preserve, renew and keep in full force and effect, their respective
corporate existence and respective material authorizations, rights,
franchises, privileges, consents, approvals, orders, licenses, permits,
or registrations from any Governmental Agency that are necessary for
the transaction of their respective business, EXCEPT where the failure
to so preserve and maintain the existence of any Restricted Subsidiary
and such authorizations would not constitute a Material Adverse Effect
and EXCEPT that a merger permitted by SECTION 13.2(e) below shall not
constitute a violation of this covenant.
(ii) Guarantor will comply, and will cause Lessee and each
Restricted Subsidiary to comply, within the time period, if any, given
for such compliance by the relevant Governmental Agency or Agencies
with enforcement authority, with all Requirements of Law noncompliance
with which constitutes (or would reasonably be likely to constitute) a
Material Adverse Effect, EXCEPT that Guarantor and its Restricted
Subsidiaries need not comply with a Requirement of Law then being
contested by any of them in good faith pursuant to a Permitted Contest.
(d) INSPECTION OF PROPERTY, BOOKS AND RECORDS. Guarantor will keep,
and will cause Lessee and each Restricted Subsidiary to keep, adequate
records and books of account reflecting all financial transactions in
conformity with Generally Accepted Accounting Principles, consistently
applied, and in material conformity with all applicable requirements of any
Governmental Agency having regulatory jurisdiction over Guarantor, Lessee
or any of the Restricted Subsidiaries. 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 Guarantor, Lessee or any of the
Restricted Subsidiaries), Guarantor shall permit, and will cause Lessee and
each Restricted Subsidiary to permit, Trustee or any other Creditor, or any
authorized employee, agent or representative thereof, to examine, audit,
make copies and abstracts from the records and books of account of, and to
inspect the properties of, Guarantor, Lessee and the Restricted
Subsidiaries and to discuss the affairs, finances and accounts of
Guarantor, Lessee and the Restricted Subsidiaries with any of their
officers, key employees or accountants and, upon request, furnish promptly
to Trustee or any other Creditor true copies of all financial information
made available to the Board of Directors or audit committee of the Board of
Directors of Guarantor.
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(e) CONSOLIDATION, MERGERS AND SALES OF ASSETS. Guarantor shall not
merge or consolidate with or into any Person, or permit Lessee or any
Restricted Subsidiary to merge or consolidate with or into any Person,
EXCEPT:
(i) Mergers and consolidations of a Subsidiary of Guarantor
(OTHER THAN Lessee, unless permitted pursuant to SECTION 13.1(b)) into
Guarantor or a Restricted Subsidiary (with Guarantor or the Restricted
Subsidiary as the surviving entity) or of Restricted Subsidiaries of
Guarantor with each other, PROVIDED that Guarantor and each of its
Subsidiaries has executed such amendments to the Operative Documents as
Trustee, acting at the direction of the Required Certificate
Purchasers, may reasonably determine are appropriate as a result of
such merger or consolidation; and
(ii) A merger or consolidation of Guarantor or any Restricted
Subsidiary with any other Person, PROVIDED that (A) either (1)
Guarantor or the Restricted Subsidiary is the surviving entity, or (2)
the surviving entity is a corporation organized under the laws of a
State of the United States of America and, as of the date of such
merger or consolidation, expressly assumes, by an instrument
satisfactory in form and substance to the Required Certificate
Purchasers, the Obligations of Guarantor or the Restricted Subsidiary
(if any), as the case may be, (B) giving effect thereto on a pro-forma
basis, no "Default" or "Event of Default" (as such terms are defined in
the Guarantor Loan Agreement or any Replacement Loan Agreement, as
applicable) exists or would result therefrom and (C) as a result
thereof, no Change in Control has occurred. Guarantor shall not make
any "Disposition" (as such term is defined in the Guarantor Loan
Agreement or any Replacement Loan Agreement, as applicable) of its
property, and shall not permit Lessee or any Restricted Subsidiary to
make any Disposition of its property, whether now owned or hereafter
acquired, EXCEPT as may be permitted by the terms of the Operative
Documents or, in the case of Guarantor and its Restricted Subsidiaries
(EXCLUDING Lessee), the Guarantor Loan Agreement or any Replacement
Loan Agreement, as the case may be.
(f) YEAR 2000. Guarantor shall use reasonable efforts to ensure
that any computer systems and/or software used in the operation of
Guarantor's or any of its Subsidiaries' businesses are modified or replaced
to the extent necessary to prevent or avoid the occurrence of any Material
Adverse Effect as a result of the commencement of the year 2000.
(g) MANDALAY BAY COMPLETION DATE. Guarantor shall cause the
Mandalay Bay Completion Date to occur not later than May 31, 1999.
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13.3 COVENANTS OF TRUSTEE. Trustee, in its individual capacity,
covenants with each of the other parties hereto as follows, it being understood
that the sole remedies for the breach of these covenants shall be to sue for
damages or for specific performance and that any such breach shall not modify or
terminate Lessee's obligations under this Lease or any other Operative Document:
(a) So long as this Lease remains in effect or so long as the
obligations of Lessee arising hereunder have not been fully and finally
discharged, Trustee, whether in its individual capacity or as Trustee, will
not create, incur, assume or suffer to exist any Liens attributed to
Trustee, in its individual capacity and/or as Trustee, and shall indemnify,
reimburse and hold each Certificate Purchaser and Lessee harmless from any
and all claims, losses, damages, obligations, penalties, liabilities,
demands, suits, or causes of action and all legal proceedings, and any
costs or expenses in connection therewith, including reasonable legal fees
and expenses, of whatever kind and nature, imposed on, incurred by or
asserted against any Certificate Purchaser or Lessee in any way relating
to, or arising in any manner out of, failure by Trustee in its individual
capacity or as Trustee to comply with this SECTION 13.3(a);
(b) Trustee shall apply funds held by it in its capacity as Trustee
hereunder as required by this Lease and the Trust Agreement;
(c) Trustee may resign or be removed by the Certificate Purchasers
as Trustee, a successor Trustee may be appointed, and a corporation may
become Trustee under the Trust Agreement, only in accordance with the
provisions of Section 4.10 of the Trust Agreement. Notwithstanding anything
to the contrary contained in this Lease or the Trust Agreement, so long as
no Event of Default shall be continuing, the appointment of a successor
Trustee shall be subject to the consent of Lessee (such consent not to be
unreasonably withheld); and
(d) Trustee on behalf of the Trust shall not contract for, create,
incur or assume any indebtedness, or enter into any business or other
activity, OTHER THAN pursuant to or under the Operative Documents and, for
the benefit of Lessee and the Certificate Purchasers, agrees to be bound by
Section 4.2 of the Trust Agreement.
13.4 COVENANTS OF CERTIFICATE PURCHASERS. Each Certificate Purchaser,
severally and not jointly, covenants with each of the other parties hereto as
follows, it being understood that the sole remedies for the breach of these
covenants shall be to sue for damages or for specific performance and that any
such breach shall not modify or terminate Lessee's obligations under SECTION
4.5:
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(a) PROVIDED that no Event of Default shall have occurred and be
continuing, it will not, through its own actions, interfere with Lessee's
(or any permitted sublessee's or assignee's) rights hereunder with respect
to any Equipment during the term of this Lease; and
(b) it will keep the Equipment, this Lease and all other Collateral
free and clear from all Lessor Liens attributable to it, PROVIDED that it
may contest any such Lessor Lien pursuant to a Permitted Contest.
13.5 TRUST AGREEMENT. Without prejudice to any right under the Trust
Agreement of Trustee to resign, or to Certificate Purchasers' right under the
Trust Agreement to remove Trustee, each of the Certificate Purchasers and
Trustee hereby agrees with Lessee, (a) not to terminate or revoke the trust
created by the Trust Agreement EXCEPT as permitted by Article VI of the Trust
Agreement prior to the later of the Termination Date or the payment in full of
the obligations under this Lease, (b) not to amend, supplement, terminate or
revoke or otherwise modify any provision of the Trust Agreement prior to the
Termination Date in such a manner as to materially and adversely affect the
rights of any such party, and (c) to comply with all of the terms of the Trust
Agreement applicable to it the nonperformance of which would adversely affect
Lessee.
ARTICLE XIV
ASSIGNMENT BY CERTIFICATE PURCHASERS; PARTICIPATIONS
14.1 ASSIGNMENTS.
(a) All or any of the right, title or interest and obligations of
any Certificate Purchaser in and to this Lease and the rights, benefits,
advantages and obligations of any Certificate Purchaser hereunder,
including the rights to receive payment of rental or any other payment
hereunder, and the rights, titles and interests in and to the Equipment may
be assigned or transferred by such Certificate Purchaser to an Eligible
Assignee at any time by transfer of the Certificate representing such
interest in accordance with the provisions of this ARTICLE XIV; PROVIDED,
HOWEVER, that (i) such Eligible Assignee, if not then a Certificate
Purchaser or an Affiliate of the assigning Certificate Purchaser having a
combined capital and surplus in excess of $100,000,000, shall be approved
by each of Trustee (which approval shall not be unreasonably withheld) and
Lessee (which approval shall not be unreasonably withheld but will not be
required if an Event of Default has occurred and remains continuing), (ii)
such assignment shall be evidenced by an Assignment and Acceptance in
substantially the form attached hereto as EXHIBIT A (each, an "ASSIGNMENT
AND ACCEPTANCE"), (iii) EXCEPT in the case of an assignment to an Affiliate
of the assigning Certificate Purchaser, to another Certificate Purchaser or
of the entire remaining Commitment of the assigning Certificate Purchaser,
the assignment shall not assign a Commitment
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Amount which is less than $2,500,000, (iv) the effective date of any such
assignment shall be as specified in the Assignment and Acceptance, but not
earlier than the date which is five (5) Business Days after the date
Trustee has received the Assignment and Acceptance, and (v) such assignment
shall comply with all applicable securities laws. Upon the effective date
of such Assignment and Acceptance, the Eligible Assignee named therein
shall be a Certificate Purchaser for all purposes of this Lease and the
other Operative Documents, with the Commitment Amount therein set forth
and, to the extent of such Commitment Amount, the assigning Certificate
Purchaser shall be released from its further obligations under this Lease
and the other Operative Documents. Trustee agrees that it shall execute and
deliver (against delivery by the assigning Certificate Purchaser to Trustee
of its Certificate) to such assignee Certificate Purchaser, a Certificate
evidencing that assignee Certificate Purchaser's Commitment Amount, and to
the assigning Certificate Purchaser, a Certificate evidencing the remaining
Commitment Amount retained by the assigning Certificate Purchaser.
(b) By executing and delivering an Assignment and Acceptance, 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 Commitment Amount being assigned thereby free and clear of any
adverse claim, the assigning Certificate Purchaser 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 Lease or the execution, legality, validity, enforceability,
genuineness or sufficiency of this Lease or any other Operative Document;
(ii) the assigning Certificate Purchaser has made no representation or
warranty and assumes no responsibility with respect to the financial
condition of Lessee or Guarantor or any of its Subsidiaries for the
performance by Lessee or Guarantor or any such Subsidiaries of the
Obligations; (iii) it has received a copy of this Lease and the other
Operative Documents, together with copies of the most recent financial
statements pursuant to SECTIONS 13.1(k)(i) and 13.2(a) and such other
documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into such Assignment and Acceptance;
(iv) it will, independently and without reliance upon any other Creditor
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 Lease and the other Operative Documents; (v) it appoints
and authorizes Trustee, on behalf of the Certificate Purchasers, to take
such action and exercise such powers under this Lease and the other
Operative Documents as are delegated to Trustee by this Lease and the other
Operative Documents; (vi) it will perform in accordance with their terms
all of the obligations which by the terms of this Lease and the other
Operative Documents are required to be performed by it as a Certificate
Purchaser; (vii) it represents to the other Creditors (A) as set forth in
SECTION 12.2 with respect to such Certificate Purchaser and (B) that, and
also covenants to such Persons that, it will not transfer
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its Certificate unless the proposed transferee makes the foregoing
representations and covenants.
(c) Trustee shall maintain a copy of each Assignment and Acceptance
delivered to it. After receipt of a completed Assignment and Acceptance
executed by any Certificate Purchaser and Eligible Assignee, and receipt of
an assignment fee of $2,500 from such Eligible Assignee (PROVIDED that such
fee shall be waived if such Eligible Assignee is an Affiliate of the
assigning Certificate Purchase or an existing Certificate Purchaser),
Trustee shall, promptly following the effective date thereof, provide to
Lessee and the Certificate Purchasers a revised SCHEDULE I giving effect
thereto.
(d) If any Eligible Assignee is not incorporated under the laws of
the United States or any state thereof, such assignee shall deliver to
Lessee a properly completed and executed Internal Revenue Service Form 4224
or 1001 or other applicable form, certificate or document prescribed by the
Internal Revenue Service of the United States certifying as to such
assignee's compliance with SECTION 7.2(c).
(e) Notwithstanding anything in this SECTION 14.1 to the contrary,
any Certificate Purchaser may at any time pledge its Certificate or any
other instrument evidencing its rights as a Certificate Purchaser under
this Lease and the other Operative Documents to a Federal Reserve Bank, but
no such pledge shall release that Certificate Purchaser from its
obligations hereunder or grant to such Federal Reserve Bank the rights of a
Certificate Purchaser hereunder absent foreclosure of such pledge.
14.2 PARTICIPATIONS. Any Certificate Purchaser may at any time sell to
one or more commercial banks or other financial institutions (each of such
commercial banks and other financial institutions being herein called a
"PARTICIPANT") participating interests in all or a portion of its rights and
obligations under this Lease, the other Operative Documents, the Equipment or
its Certificate (including all or any portion of the Rent owing to it);
PROVIDED, HOWEVER, that:
(a) no participation contemplated in this SECTION 14.2 shall
relieve such Certificate Purchaser from its obligations hereunder or under
any other Operative Document;
(b) such Certificate Purchaser shall remain solely responsible for
the performance of its Commitment and other obligations;
(c) Lessee shall continue to deal solely and directly with such
Certificate Purchaser in connection with such Certificate Purchaser's
rights and obligations under this Lease and the other Operative Documents
and such
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Certificate Purchaser shall have the sole right to enforce its rights under
the Operation Documents;
(d) no Participant, unless such Participant is an Affiliate of such
Certificate Purchaser, shall be entitled to require such Certificate
Purchaser to take or refrain from taking any action hereunder or under any
other Operative Document or have any direct or indirect voting or approval
rights on any matter other than voting or approval rights relating to (A)
an extension of the Termination Date, (B) a decrease in the Interest Rate
or change to the definition thereof, (C) a release of all or any
substantial portion of the Collateral from the Liens created under the
Operative Documents in favor of Trustee and the Certificate Purchasers
(EXCEPT in accordance with the Operating Documents), or (D) a reduction of
the Lease Balance or any Supplement Balance or any amount of Rent due
hereunder EXCEPT pursuant to SECTION 6.1;
(e) the participation interest shall not restrict an increase in
the Aggregate Commitment Amount or in the granting Certificate Purchaser's
Commitment so long as the amount of the participation interest is not
affected thereby; and
(f) no Participant shall be entitled to any reimbursement for any
Taxes, funding losses, additional costs, capital costs or reserve
requirements pursuant to any of SECTIONS 7.5, 7.6 and 7.7 in excess of a
proportionate amount which would have been payable to the initial
Certificate Purchaser from whom such Person directly or indirectly acquired
its participation.
14.3 MISCELLANEOUS PROVISIONS REGARDING ASSIGNMENTS AND PARTICIPATIONS.
Notwithstanding anything contained in this ARTICLE XIV to the contrary:
(a) The rights of the Certificate Purchasers to make assignments
of, and grant participations in, their respective Commitments shall be
subject to the approval of any Gaming Board, to the extent required by
applicable Gaming Laws; and
(b) Any Certificate Purchaser (a "GRANTING CERTIFICATE PURCHASER")
may grant to a special purpose funding vehicle (an "SPC") of such Granting
Certificate Purchaser, identified as such in writing from time-to-time by
the Granting Certificate Purchaser to Trustee and Lessee, the option to
provide to Trustee all or any part of the Funding that such Granting
Certificate Purchaser would otherwise be obligated to make to Trustee
pursuant to SECTION 2.2, PROVIDED that (i) nothing herein shall constitute
a commitment to make any Funding by any SPC and (ii) if an SPC elects not
to exercise such option or otherwise fails to provide all or any part of
such required Funding, the Granting Certificate Purchaser shall be
obligated to make such Funding pursuant to the terms hereof.
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The making of any Funding by an SPC hereunder shall utilize the Commitment
of the Granting Certificate Purchaser to the same extent, and as if, such
Funding were made by the Granting Certificate Purchaser. Each party hereto
hereby agrees that no SPC shall be liable for any indemnity or similar
payment obligation under this Lease (all liability for which shall remain
with the related Granting Certificate Purchaser). In furtherance of the
foregoing, each party hereto hereby agrees (which agreement shall survive
the termination of this Lease and the other Operative Documents) that,
prior to the date that is one year and one day after the payment in full of
all outstanding senior indebtedness of any SPC, it will not institute
against, or join any other Person in instituting against, such SPC any
bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings or similar proceedings under the laws of the United States or
any State thereof, PROVIDED that the Granting Certificate Purchaser for
each SPC hereby agrees to indemnify, save and hold harmless each other
party hereto for any loss, cost, damage and expense arising out of their
inability to institute any such proceeding against its SPC. In addition,
notwithstanding anything to the contrary contained in this ARTICLE XIV, any
SPC may (A) with notice to, but without the prior consent of, Lessee or
Trustee and without paying any processing fee therefor, assign all or any
portion of its interests in any and all Rent payable to it, or in any other
interest arising under this Lease or the other Operative Documents, to its
Granting Certificate Purchaser or to any financial institutions providing
liquidity and/or credit facilities to or for the account of such SPC to
fund the amounts due from such SPC to Trustee or to support securities (if
any) issued by such SPC to fund such amounts (but nothing contained herein
shall be construed in derogation of the obligation of the Granting
Certificate Purchaser to make fundings hereunder), PROVIDED that neither
the consent of the SPC nor any such assignee shall be required for
amendments or waivers of provisions of the Operative Documents EXCEPT for
those amendments or waivers for which the consent of Participants is
required under SECTION 14.2(d), and (B) disclose on a confidential basis,
in the same manner as described in SECTION 18.7 any non-public information
relating to its interests under this Lease and the other Operative
Documents including to any rating agency, commercial paper dealer or
provider of a surety, guaranty or credit or liquidity enhancement to such
SPC.
ARTICLE XV
OWNERSHIP AND GRANT OF SECURITY INTEREST
15.1 GRANT OF SECURITY INTEREST. Title to the Equipment shall remain in
Trustee, for the benefit of the Certificate Purchasers, as security for the
obligations of Lessee hereunder and under the other Operative Documents to which
it is a party until Lessee has fulfilled all of its obligations hereunder and
thereunder. Lessee hereby assigns, hypothecates, transfers and pledges to
Trustee for the benefit of Certificate Purchasers, Administrative Agent and
Trustee, and grants to Trustee a security interest
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for the benefit of Certificate Purchasers, Administrative Agent and Trustee in
all of Lessee's right, title and interest in and to each item of Equipment and
each Sublease covering any item of Equipment that may be entered into from time
to time in accordance with the provisions of this Lease, and Lessee hereby
grants to Trustee for the benefit of Certificate Purchasers, Administrative
Agent and Trustee a continuing security interest in all of the other Collateral,
to secure the payment of all sums due hereunder and under the other Operative
Documents to which it is a party and the performance of all other obligations
hereunder and under the other Operative Documents to which it is a party.
15.2 RETENTION OF PROCEEDS. If Lessee would be entitled to any amount
(including any Casualty Recoveries) or title to any item of Equipment hereunder
but for the existence of any Default or Event of Default, Trustee shall hold
such amount or Equipment as part of the Collateral and shall be entitled to
apply such amounts against any amounts due hereunder; PROVIDED, that Trustee
shall distribute such amount or transfer such Equipment, to the extent not
theretofore applied, in accordance with the other terms of this Lease if and
when no Default or Event of Default exists.
ARTICLE XVI
RETURN OF EQUIPMENT
Unless the Equipment is purchased by Lessee pursuant to SECTION 11.1(b)
at the expiration of the Lease Term or is sold to third party purchasers
pursuant to the Sale Option, Lessee shall forthwith deliver exclusive possession
of the Equipment to Trustee, for the benefit of the Certificate Purchasers, at a
location designated by Trustee, together with a copy of an inventory list of the
Equipment then subject to this Lease, all then current plans, specifications and
operating, maintenance and repair manuals, if any, relating to the Equipment
that have been received or prepared by Lessee, appropriately protected and in
the condition required by ARTICLE V (and in any event each item of Equipment
shall be in condition to be placed in immediate revenue service and demonstrated
then to be in condition to be operated in commercial operation at design
capacity). If Trustee shall rightfully demand possession of any Equipment
pursuant to this Lease or otherwise, Lessee, at its expense, shall promptly
deliver possession of such Equipment to Trustee by delivering the Equipment,
appropriately protected and in the condition required by ARTICLE V and this
ARTICLE XVI, to Trustee at such place or places as may be specified by Trustee.
In addition, if Trustee has terminated this Lease pursuant to SECTION 8.2,
Lessee shall, at the request of Trustee, for 180 days after delivery of the
Equipment, maintain (or cause to be maintained) the Equipment in the condition
required by ARTICLE V, store the Equipment on site without cost to Certificate
Purchaser or any Certificate Purchaser and keep all of the Equipment insured in
accordance with SECTION 6.2. This ARTICLE XVI shall survive termination of this
Lease.
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ARTICLE XVII
ADMINISTRATIVE AGENT
17.1 AUTHORIZATION AND ACTION. Each Certificate Purchaser hereby
appoints and authorizes Administrative Agent to take such action as
Administrative Agent on such Certificate Purchaser's behalf and to exercise such
powers under this Lease and the other Operative Documents as are delegated to
Administrative Agent by the terms hereof and thereof, together with such powers
as are reasonably incidental thereto (including any delegation by Trustee of any
of its obligations under the Operative Documents in accordance with the
provisions of such Operative Documents). This appointment and authorization is
intended solely for the purpose of facilitating certain administrative and
ministerial functions relating to this Lease (including (a) the determination of
certain Interest Rate components and applicable Pricing Levels, and (b) the
receipt and distribution of certain information, received by Administrative
Agent for distribution to the Certificate Purchasers, Trustee or Lessee, as
applicable (including Equipment delivery dates, subleases, substitutions and
purchases, Guarantor financial information, Eurodollar Rate Investment matters
and other information specified herein or in the other Operative Documents) and
does not constitute the appointment of Administrative Agent as trustee for any
Certificate Purchaser or as representative of any Certificate Purchaser for any
other purpose. As to any matters not expressly provided for by this Lease or the
other Operative Documents, Administrative Agent shall not be required to
exercise any discretion or take any action, but shall be required to act or to
refrain from acting (and shall be fully protected in so acting or refraining
from acting) upon the instructions of the Required Certificate Purchasers
(EXCEPT actions requiring the consent of all Certificate Purchasers, in which
case Administrative Agent shall act or refrain from acting upon instructions
consented to by all Certificate Purchasers), and such instructions shall be
binding upon all Certificate Purchasers; PROVIDED, HOWEVER, that Administrative
Agent may rely upon the instructions of the Required Certificate Purchasers or
all Certificate Purchasers, as the case may be, and shall not be required to
take any action which exposes Administrative Agent to personal liability or
which is contrary to this Lease or Applicable Laws. Administrative Agent agrees
to give to each Certificate Purchaser prompt notice of each notice given to it
by Lessee, Guarantor and Trustee pursuant to the terms of the Operative
Documents.
17.2 ADMINISTRATIVE AGENT'S RELIANCE, ETC. NEITHER ADMINISTRATIVE AGENT
NOR ANY OF ITS AFFILIATES OR SUBSIDIARIES, NOR ANY OF THE DIRECTORS, OFFICERS,
AGENTS OR EMPLOYEES OF ANY OF THEM, SHALL BE LIABLE FOR ANY ACTION TAKEN OR
OMITTED TO BE TAKEN BY IT OR THEM UNDER OR IN CONNECTION WITH THIS LEASE OR THE
OTHER OPERATIVE DOCUMENTS, EXCEPT FOR ITS OR THEIR OWN GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT, IT BEING THE INTENT THAT SUCH PERSONS SHALL NOT BE LIABLE
FOR ANY SUCH ACTION OR INACTION THAT CONSTITUTES ORDINARY NEGLIGENCE. Without
limiting the generality of the foregoing, Administrative Agent: (i) may consult
with legal counsel, independent public accountants and other experts selected by
it and shall not be liable for any action taken or omitted to be taken in good
faith by it in accordance with the advice
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of such counsel, accountants or experts; (ii) makes no warranty or
representation to any Certificate Purchaser and shall not be responsible to any
Certificate Purchaser for any statements, warranties or representations made in
or in connection with this Lease or the other Operative Documents; (iii) shall
not have any duty to ascertain or to inquire as to the performance or observance
of any of the terms, covenants or conditions of this Lease or the other
Operative Documents on the part of Lessee or Guarantor, or to inspect the
property (including the books and records) of Lessee or Guarantor; (iv) shall
not be responsible to any Certificate Purchaser for the due execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Lease, the
other Operative Documents or any other instrument or document furnished pursuant
hereto or thereto; and (v) shall incur no liability under or in respect of this
Lease or the other Operative Documents by acting upon any notice, consent,
certificate or other instrument or writing in accordance with the terms hereof
or thereof believed by it to be genuine and signed or sent by the proper party
or parties.
17.3 BANK OF AMERICA AND AFFILIATES. Bank of America and any of its
Affiliates that are now or hereafter become Certificate Purchasers shall have
the same rights and powers under this Lease, any Certificate and the other
Operative Documents as any other Certificate Purchaser and may exercise the same
as though Bank of America or such Affiliate were not Administrative Agent; and
the terms "Certificate Purchaser" or "Certificate Purchasers" shall, unless
otherwise expressly indicated, include Bank of America in its individual
capacity or any such Affiliate, and Bank of America and its Affiliates may
accept deposits from, lend money to, act as trustee under indentures of, and
generally engage in any kind of business with, Lessee, Guarantor and any
Subsidiary or Affiliate thereof and any Person who may do business with or own
securities of Lessee, Guarantor or any Subsidiary or Affiliate of Guarantor, all
as if Bank of America were not Administrative Agent and without any duty to
account therefor to the Certificate Purchasers.
17.4 CERTIFICATE PURCHASER CREDIT DECISION. Each Certificate Purchaser
agrees that it has, independently and without reliance upon Administrative
Agent, any other Creditor or the directors, officers, agents, employees or
attorneys of any other Creditor, and instead in reliance upon information
supplied to it by or on behalf of Lessee and Guarantor and upon such other
information as it has deemed appropriate, made its own independent credit
analysis and decision to enter into this Lease. Each Certificate Purchaser also
agrees that it shall, independently and without reliance upon any other Creditor
or the directors, officers, agents, employees or attorneys of any other
Creditor, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own independent credit analyses
and decisions with respect to this Lease or any of the other Operative
Documents.
17.5 INDEMNIFICATION. Each Certificate Purchaser shall, ratably
according to the respective aggregate principal and stated amounts of the
Certificates then held by such Certificate Purchaser, indemnify and hold
Administrative Agent, Lead
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Arranger and their respective 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 and allocated costs of attorneys employed by Administrative
Agent or Lead Arranger) that may be imposed on, incurred by or asserted against
it or them in any way relating to or arising out of this Lease or any other
Operative Document or any action taken or omitted by Administrative Agent or
Lead Arranger under this Lease or any other Operative Document, EXCEPT such as
result from their own gross negligence or willful misconduct. Without limitation
of the foregoing, each Certificate Purchaser agrees to reimburse Administrative
Agent and Lead Arranger promptly upon demand for its ratable share of any
out-of-pocket expenses (including reasonable counsel fees) incurred by
Administrative Agent or Lead Arranger in connection with the preparation,
execution, delivery, administrative, modification, amendment or enforcement
(whether through negotiations, legal proceedings or otherwise) of, or legal
advice in respect of rights or responsibilities under, this Lease or any other
Operative Document to the extent that Administrative Agent or Lead Arranger, as
the case may be, is not reimbursed for such expenses by Lessee. Nothing in this
SECTION 17.5 shall entitle Administrative Agent or Lead Arranger to recover any
amount from the Certificate Purchasers if and to the extent that such amount has
theretofore been recovered from Lessee, Guarantor or any of Guarantor's
Subsidiaries, and Administrative Agent shall promptly refund to the Certificate
Purchasers any amount for which it is indemnified for which it later receives
duplicative reimbursement.
17.6 SUCCESSOR ADMINISTRATIVE AGENT. Administrative Agent may resign at
any time as Administrative Agent under this Lease by giving written notice
thereof to the Certificate Purchasers, Trustee and Lessee and may be removed at
any time with or without cause by the Required Certificate Purchasers. Upon any
such resignation or removal, the Required Certificate Purchasers, subject to the
consent of Lessee (which consent shall not be unreasonably withheld), shall have
the right to appoint a successor Administrative Agent which shall be a
commercial bank or trust company organized under the laws of the United States
of America or any state thereof (or otherwise authorized by law to conduct a
banking business in the United States or any State thereof) reasonably
acceptable to Lessee. If no successor Administrative Agent shall have been so
appointed by the Required Certificate Purchasers, and shall have accepted such
appointment, or any successor Administrative Agent appointed shall not have
accepted such appointment, in either case, within 30 days after the retiring
Administrative Agent's giving of notice of resignation or the Required
Certificate Purchasers' removal of the retiring Administrative Agent, then the
retiring Administrative Agent may, on behalf of the Certificate Purchasers,
appoint a successor Administrative Agent, which shall be a Certificate Purchaser
which is a commercial bank organized under the laws of the United States of
America or of any State thereof. Upon the acceptance of any appointment as
Administrative Agent under this Lease by a successor Administrative Agent, such
successor Administrative Agent shall thereupon succeed to and become vested with
all the rights, powers, privileges and duties of the retiring Administrative
Agent and shall
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function as Administrative Agent under this Lease, and the retiring
Administrative Agent shall be discharged from its duties and obligations as
Administrative Agent (OTHER THAN those which arise prior to such Administrative
Agent's removal or resignation) under this Lease. After any retiring
Administrative Agent's resignation hereunder as Administrative Agent, the
provisions of this ARTICLE XVII shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Administrative Agent under this
Lease.
ARTICLE XVIII
MISCELLANEOUS
18.1 CUMULATIVE REMEDIES; NO WAIVER. The rights, powers, privileges and
remedies of the Creditors provided herein or in any Certificate or other
Operative Document are cumulative and not exclusive of any right, power,
privilege or remedy provided by Applicable Law or equity. No failure or delay on
the part of any Creditor 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 III hereof are inserted for the sole benefit of the
Creditors; the same may be waived in whole or in part, with or without terms or
conditions, in respect of any Funding on any proposed Delivery Date or otherwise
without prejudicing the Creditors' rights to assert them in whole or in part in
respect of any other Funding.
18.2 COSTS, EXPENSES AND TAXES. Lessee shall pay within five (5)
Business Days after demand, accompanied by an invoice therefor, the reasonable
costs and expenses of Trustee, Administrative Agent and Lead Arranger in
connection with the negotiation, preparation, syndication, execution and
delivery of the Operative Documents and any amendment thereto or waiver thereof.
Lessee shall also pay on demand, accompanied by an invoice therefor, the
reasonable costs and expenses of the Creditors in connection with the
refinancing, restructuring, reorganization (INCLUDING a bankruptcy
reorganization) and enforcement or attempted enforcement of the Operative
Documents, and any matter related thereto. The foregoing costs and expenses
shall include 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 allocated costs of legal
counsel employed by any Creditor), independent public accountants and other
outside experts retained by any Creditors, whether or not such costs and
expenses are incurred or suffered by the Creditors in connection with or during
the course of any bankruptcy or insolvency proceedings of Lessee or Guarantor or
any Subsidiary thereof. Such costs and expenses shall also include, in the case
of any amend ment or waiver of any Operative Document requested by Lessee, the
administrative costs of Certificate Purchaser reasonably attributable thereto.
Any amount payable to the Creditors, or any one or more of them, under this
Section shall bear interest from the second Business Day following the date of
demand for payment at the Default Rate.
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18.3 NATURE OF CERTIFICATE PURCHASERS' OBLIGATIONS. The obligations of
the Certificate Purchasers hereunder are several and not joint or joint and
several. Nothing contained in this Lease or any other Operative Document and no
action taken by the Creditors or any of them pursuant hereto or thereto may, or
may be deemed to, make the Creditors a partnership, an association, a joint
venture or other entity, either among themselves or with Lessee or any Affiliate
of Lessee. Each Certificate Purchaser's obligation to advance its portion of any
Funding to Trustee pursuant hereto is several and not joint or joint and
several, and in the case of the initial Funding only is conditioned upon the
performance by all other Certificate Purchasers of their obligations to advance
their respective portions of the initial Funding to Trustee. A default by any
Certificate Purchaser in advancing its portion of any Funding shall be subject
to the provisions of SECTION 2.2(C).
18.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties contained herein or in any other Operative Document, or in any
certificate or other writing delivered by or on behalf of any one or more of the
parties to any Operative Document, will survive the making of all Fundings
hereunder and the execution and delivery of the Certificates, and have been or
will be relied upon by the Creditors, not withstanding any investigation made by
the Creditors on their behalf.
18.5 NOTICES. EXCEPT as otherwise expressly provided in the Operative
Documents, all notices, requests, demands, directions and other communications
provided for hereunder or under any other Operative Document must be in writing
and must be mailed, telegraphed, telecopied, or delivered to the appropriate
party: (a) if to Trustee, Administrative Agent, Lessee or Guarantor, at the
address set forth below the signature of such party on the signature pages
hereof, or at such other addresses as may hereafter be furnished in accordance
with this SECTION 18.5 by any such party to all other parties, (b) if to any
Certificate Purchaser, at its address set forth in SCHEDULE II hereto or in the
register maintained pursuant to SECTION 2.8 of the Trust Agreement, or (c) as to
any party to any Operative Document, at any other address as may be designated
by it in a written notice sent to all other parties to such Operative Document
in accordance with this Section. EXCEPT as otherwise expressly provided in any
Operative Document, if any notice, request, demand, direction or other
communication required or permitted by any Operative Document is given by mail
it will be effective on the earlier of receipt or the third (3rd) calendar 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 telecopier, when sent; or if given by personal
delivery, when delivered.
18.6 EXECUTION OF OPERATIVE DOCUMENTS. Unless Trustee or Administrative
Agent otherwise specifies with respect to any Operative Document, (a) this Lease
and any other Operative Document may be executed in any number of counterparts
and any party hereto or thereto may execute any counterpart, each of which
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when executed and delivered will be deemed to be an original and all of which
counterparts of this Lease or any other Operative Document, as the case may be,
when taken together will be deemed to be but one and the same instrument and (b)
execution of any such counterpart may be evidenced by a telecopier transmission
of the signature of such party. The execution of this Lease or any other
Operative 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. This Lease has been executed in several
numbered counterparts. Only the counterpart designated as counterpart "No. 1"
shall evidence a monetary obligation of Lessee or shall be deemed to be an
original or to be chattel paper for purposes of the Uniform Commercial Code, and
such copy shall be held by Trustee.
18.7 CONFIDENTIALITY. Each Creditor agrees to hold any confidential
information that it may receive from Lessee or Guarantor pursuant to this Lease
or other Operative Documents in confidence, EXCEPT for disclosure: (a) to
Affiliates of that Creditor and to other Creditors; (b) to legal counsel and
accountants for Lessee, Guarantor or any Creditor; (c) to other professional
advisors to Lessee, Guarantor or any Creditor, PROVIDED that the recipient has
accepted such information subject to a confidentiality agreement substantially
similar to this SECTION 18.7 or such Creditor has notified such professional
advisors of the confidentiality of such information; (d) to regulatory officials
having jurisdiction over that Creditor; (e) to any Gaming Board having
regulatory jurisdiction over Lessee or Guarantor or its Subsidiaries, PROVIDED
that each Creditor agrees to use its best efforts to notify Lessee and Guarantor
of any such disclosure unless prohibited by Applicable Laws; (f) as required by
Applicable Law or legal process (PROVIDED that the relevant Creditor shall
endeavor, to the extent it may do so under Applicable Law, to give Lessee and
Guarantor reasonable prior notice thereof to allow Lessee and Guarantor to seek
a protective order) or in connection with any legal pro ceeding to which that
Creditor and Lessee or Guarantor are adverse parties; and (g) to another
financial institution in connection with a disposition or proposed disposition
to that financial institution of all or part of that Creditor's interests
hereunder or a parti cipation interest in its Certificate, PROVIDED that the
recipient has accepted such informa tion subject to a confidentiality agreement
substantially similar to this Section. For purposes of the foregoing,
"confidential information" shall mean any information respecting Lessee or
Guarantor or its Subsidiaries reasonably considered by Lessee or Guarantor, as
applicable, to be confidential, 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 Creditor, and (iii) information previously disclosed by Lessee or Guarantor
to any Person not associated with Lessee or Guarantor without a confidentiality
agreement or obligation substantially similar to this Section. Nothing in this
Section shall be construed to create or give rise to any fiduciary duty on the
part of any Creditor to Lessee.
18.8 INTEGRATION. This Lease, together with the other Operative
Documents to which Trustee, Lessee, Guarantor, Administrative Agent, the
Certificate
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Purchasers or any of them are party, and the letter agreements referred to in
SECTIONS 2.1(m) and 9.2, 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. In the event of any conflict
between the provisions of this Lease and those of any other Operative Document,
the provisions of this Lease shall control and govern; PROVIDED that the
inclusion of supplemental rights or remedies in favor of any Creditor in any
other Operative Document shall not be deemed a conflict with this Lease.
18.9 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, THE LOCAL LAWS OF CALIFORNIA APPLICABLE TO
CONTRACTS MADE AND PERFORMED IN CALIFORNIA.
18.10 SEVERABILITY OF PROVISIONS. Any provision in any Operative
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
Operative Documents are declared to be severable.
18.11 HEADINGS. Article and Section headings in this Lease and the
other Operative Documents are included for convenience of reference only and are
not part of this Lease or the other Operative Documents for any other purpose.
18.12 TIME OF THE ESSENCE. Time is of the essence of the Operative
Documents.
18.13 GAMING BOARDS. The Creditors agree to cooperate with all Gaming
Boards in connection with the administration of their regulatory jurisdiction
over Lessee and Guarantor and its Subsidiaries, INCLUDING the provision of such
documents or other information as may be requested by any such Gaming Board
relating to Lessee or Guarantor or any of its Subsidiaries or to the Operative
Documents.
18.14 RELEASE OF LIEN. Each Certificate Purchaser hereby instructs
Trustee to release the Lien created by this Lease against the Equipment at the
expense of Lessee promptly upon Lessee's payment in full in immediately
available funds of the Lease Balance and of all other amounts then due and owing
under the Operative Documents. Each Creditor, at the expense of Lessee, will
promptly and duly execute and deliver all documents and take such further action
as may be necessary to release, in accordance with the preceding sentence, the
Liens, including if requested by Lessee the recording or filing of any document
evidencing the release of such Liens in accordance with the laws of the
appropriate jurisdictions.
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18.15 BROKERS. None of the parties hereto has engaged or authorized any
broker, finder, investment banker or other third party to act on its behalf,
directly or indirectly, as a broker, finder, investment banker, agent or any
other like capacity in connection with this Lease or the transactions
contemplated hereby, EXCEPT that Lessee and Guarantor have engaged the Lead
Arranger to act as such.
18.16 MODIFICATION. No variation, modification, amendment or waiver of
this Lease or any other Operative Document shall be valid unless in writing and
signed by the parties thereto and, in the case of Trustee, with the consent of
the Required Certificate Purchasers and by Lessee. No variation, modification,
amendment or waiver of this Lease or any other Operative Document purporting to
(i) postpone, reduce or forgive, in whole or in part, any payment of Rent, Lease
Balance, interest or other amount payable hereunder, or modify the definition
(including the definition of any defined term used in any such definition), or
method of calculation, of any payment of Rent, Lease Balance, interest or other
amount payable hereunder, (ii) increase the Aggregate Commitment Amount, (iii)
extend the Lease Term beyond the two (2) Renewal Terms specified herein, (iv)
waive any of the conditions precedent to the effectiveness of this Lease or to
any Funding, (v) release any Collateral granted hereunder (EXCEPT as expressly
provided in this Lease), (vi) consent to any assignment by Guarantor or any
release of Guarantor from its obligations under the Guaranty EXCEPT as expressly
permitted by SECTION 13.2(e) hereof or SECTION 12 of the Guaranty, or (vii)
modify this sentence or the definition of "Required Certificate Purchasers",
shall be valid unless in writing and signed by Trustee with the consent of all
Certificate Purchasers EXCEPT, in the case of clause (iv), to the extent
expressly provided herein otherwise. No variation, modification amendment or
waiver of any Certificate shall be valid unless in writing and signed by Trustee
with the consent of the registered holder of such Certificate and no increase in
the Commitment of any Certificate Purchaser shall be valid without the consent
of such Certificate Purchaser.
18.17 CONSIDERATION FOR CONSENTS TO WAIVERS AND AMENDMENTS. Lessee
hereby agrees that it will not, and that it will not permit any of its
Affiliates to, offer or give any consideration or benefit of any kind whatsoever
to any Certificate Purchaser in connection with, in exchange for, or as an
inducement to, such Certificate Purchaser's consent to any waiver in respect of,
any modification or amendment of, any supplement to, or any other consent or
approval under, any Operative Document unless such consideration or benefit is
offered ratably to all Certificate Purchasers.
18.18 SHARING OF SETOFFS. Each Certificate Purchaser severally agrees
that if it, through the exercise of any right of setoff, banker's lien or
counterclaim against Lessee or Guarantor, or otherwise, receives payment of the
Obligations held by it that is ratably more than any other Certificate
Purchaser, through any means, receives in payment of the Obligations held by
that Certificate Purchaser, then, subject to Applicable Laws: (a) the
Certificate Purchaser exercising the right of setoff, banker's lien or
counterclaim or otherwise receiving such payment shall purchase, and shall be
deemed
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to have simultaneously purchased, from the other Certificate Purchaser, a
participation in the Obligations held by the other Certificate Purchaser and
shall pay to the other Certificate Purchaser a purchase price in an amount so
that the share of the Obligations held by each Certificate Purchaser 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 and shall be equitable to ensure that all of the Certificate
Purchasers share any payment obtained in respect of the Obligations ratably in
accordance with each Certificate Purchaser'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 Certificate Purchaser by Lessee,
Guarantor or any Person claiming through or succeeding to the rights of Lessee
or Guarantor, the purchase of a participation shall be rescinded and the
purchase price thereof shall be restored to the extent of the recovery, but
without interest. Each Certificate Purchaser 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 Lease with respect to the portion of the Obligations
purchased to the same extent as though the purchasing Certificate Purchaser were
the original owner of the Obligation purchased. Lessee and Guarantor expressly
consent to the foregoing arrangements and agree that any Certificate Purchaser
holding a participation in an Obligation so purchased may exercise any and all
rights to setoff, banker's lien or counterclaim with respect to the
participation as fully as if the Certificate Purchaser were the owner of the
Obligation purchased.
18.19 WAIVER OF RIGHT TO TRIAL BY JURY. EACH PARTY TO THIS LEASE HEREBY
EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION ARISING UNDER ANY OPERATIVE DOCUMENT OR IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF
THEM WITH RESPECT TO ANY OPERATIVE DOCUMENT, OR THE TRANS ACTIONS RELATED
THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER
SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HERETO HEREBY AGREES
AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE
DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS LEASE MAY FILE
AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO
TRIAL BY JURY.
18.20 PURPORTED ORAL AMENDMENTS. EACH OF LESSEE AND GUARANTOR EXPRESSLY
ACKNOWLEDGES THAT THIS LEASE AND THE
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OTHER OPERATIVE 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 18.16. EACH OF LESSEE AND GUARANTOR AGREES THAT IT WILL
NOT RELY ON ANY COURSE OF DEALING, COURSE OF PERFORMANCE, OR ORAL OR WRITTEN
STATEMENTS BY ANY REPRESENTATIVE OF ANY OF THE CREDITORS THAT DOES NOT COMPLY
WITH SECTION 18.16 TO EFFECT AN AMENDMENT, MODIFICATION, WAIVER OR SUPPLEMENT TO
THIS LEASE OR THE OTHER OPERATIVE DOCUMENTS.
18.21 LIMITATIONS. It is expressly understood and agreed by and among
the parties hereto that, EXCEPT as otherwise provided herein or in the other
Operative Documents: (a) this Lease and the other Operative Documents to which
either Trustee or Administrative Agent is a party are executed by Trustee and/or
Administrative Agent, not in their individual capacity (EXCEPT with respect to
the representations and covenants of Trustee in SECTIONS 12.3 and 13.3 and of
Administrative Agent in SECTION 12.4), but solely as Trustee or Administrative
Agent, as the case may be, under the Operative Documents in the exercise of the
power and authority conferred and vested in them as such Trustee and
Administrative Agent; (b) each and all of the undertakings and agreements herein
made on the part of Trustee and/or Administrative Agent are each and every one
of them made and intended not as personal undertakings and agreements by Trustee
or Administrative Agent, as applicable, or for the purpose or with the intention
of binding Trustee or Administrative Agent, as the case may be, personally, but
are made and intended for the purpose of binding only the Collateral unless
expressly provided otherwise; (c) actions to be taken by Trustee or
Administrative Agent, as applicable, pursuant to its respective obligations
under the Operative Documents may, in certain circumstances, be taken by it only
upon specific authority of the Certificate Purchasers or Required Certificate
Purchasers, as applicable; (d) nothing contained in the Operative Documents
shall be construed as creating any liability on Trustee or Administrative Agent,
individually or personally, or any incorporator or any past, present or future
subscriber to the capital stock of, or stockholder, officer or director,
employee or Trustee or Administrative Agent, of, Trustee or Administrative
Agent, as the case may be, to perform any covenants either express or implied
contained herein, all such liability, if any, being expressly waived by the
other parties hereto and by any Person claiming by, through or under them; and
(e) so far as Trustee and Administrative Agent, individually or personally, are
concerned, the other parties hereto and any Person claiming by, through or under
them shall look solely to the Collateral, Lessee and Guarantor (and any
Sublessee, if appropriate) and any applicable Sublessee for the performance of
any obligation under any of the instruments referred to herein; PROVIDED,
HOWEVER, that nothing in this SECTION 18.21 shall be construed to limit in scope
or substance the general corporate liability of Trustee or Administrative Agent
in respect of its gross negligence or willful misconduct or those
representations, warranties and covenants of Trustee or
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Administrative Agent, as applicable, in its individual capacity set forth herein
or in any of the other agreements contemplated hereby.
[REMINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of
the day and year first above written.
CIRCUS CIRCUS LEASING, INC.,
as Lessee
By: MICHAEL S. ENSIGN
-----------------------------------
Michael S. Ensign,
President, Treasurer and Secretary
Address:
2880 Las Vegas Boulevard South
Las Vegas, Nevada 89109
Facsimile No.: (702) 691-5840
Attention: Chief Financial Officer
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<PAGE>
CIRCUS CIRCUS ENTERPRISES, INC.,
as Guarantor
By: GLENN SCHAEFFER
-----------------------------------
Name: Glenn W. Schaeffer
Title: President, CFO, Treasurer
Address:
2880 Las Vegas Boulevard South
Las Vegas, Nevada 89109
Facsimile No.: (702) 691-5840
Attention: Chief Financial Officer
S-2
<PAGE>
FIRST SECURITY BANK, NATIONAL
ASSOCIATION,
not in its individual capacity except as
expressly set forth herein, but solely as
Trustee
By: NANCY M. DAHL
-----------------------------------
Nancy M. Dahl
Vice President
Address:
79 South Main Street, Third Floor
Salt Lake City, Utah 84111
Facsimile No.: (801) 246-5053
Attention: Corporate Trust Services
S-3
<PAGE>
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Administrative Agent and Lead Arranger
By: ALBERT Z. NORONA
-----------------------------------
Albert Z. Norona
Vice President
Address:
Bank of America National Trust and
Savings Association
555 California Street
San Francisco, California 94104
Facsimile No.: (415) 765-7373
Telephone No.: (415) 765-1838
Attention: Christine Lee
Vice President
S-4
<PAGE>
BA LEASING & CAPITAL CORPORATION,
as a Certificate Purchaser
By: SONIA T. DELEN
-----------------------------------
Name: Sonia T. Delen
Title: Vice President
S-5
<PAGE>
PNC LEASING CORP,
as Syndication Agent and a Certificate
Purchaser
By: DAVID J. KEENER
-----------------------------------
Name: David J. Keener
Title: Vice President
S-6
<PAGE>
SOCIETE GENERALE FINANCIAL
CORPORATION,
as Documentation Agent and a
Certificate Purchaser
By: RW CRANNELL, JR.
-----------------------------------
Name: Richard W. Crannell, Jr.
Title: Vice President
S-7
<PAGE>
THE BANK OF NOVA SCOTIA,
as Managing Agent and a Certificate Purchaser
By: ALAN W. PENDERGAST
-----------------------------------
Name: Alan W. Pendergast
Title: Relationship Manager
S-8
<PAGE>
BANK OF SCOTLAND,
as a Certificate Purchaser
By: JANET TAFFE
-----------------------------------
Name: Janet Taffe
Title: Asst. Vice President
S-9
<PAGE>
FLEET BANK N.A.,
as a Certificate Purchaser
By: JOHN T. HARRISON
-----------------------------------
Name: John T. Harrison
Title: Senior Vice President
S-10
<PAGE>
KEYBANK NATIONAL ASSOCIATION,
as a Certificate Purchaser
By: MARY K. YOUNG
-----------------------------------
Name: Mary K. Young
Title: Assistant Vice President
S-11
<PAGE>
CREDIT LYONNAIS LOS ANGELES BRANCH,
as a Certificate Purchaser
By: DIANNE M. SCOTT
-----------------------------------
Name: Dianne M. Scott
Title: First Vice President and Manager
By:
-----------------------------------
Name:
Title:
S-12
<PAGE>
MICHIGAN NATIONAL BANK,
as a Certificate Purchaser
By: JOHN M. BEBB
-----------------------------------
Name: John M. Bebb
Title: Relationship Manager
S-13
<PAGE>
COMMERZBANK AKTIENGESELLSCHAFT,
LOS ANGELES BRANCH,
as a Certificate Purchaser
By: CHRISTIAN JAGENBERG
-----------------------------------
Name: Christian Jagenberg
Title: SVP and Manager
By: WERNER SCHMIDBAUER
-----------------------------------
Name: Werner Schmidbauer
Title: Vice President
S-14
<PAGE>
EXHIBIT 10(b)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GUARANTY
dated as of October 30, 1998
of
CIRCUS CIRCUS ENTERPRISES, INC.
in favor of
FIRST SECURITY BANK, NATIONAL ASSOCIATION
and
CERTAIN OTHER PERSONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
GUARANTY
This GUARANTY (this "GUARANTY"), dated as of October 30, 1998, of
CIRCUS CIRCUS ENTERPRISES, INC., a Nevada corporation (the "GUARANTOR"), is made
in favor of FIRST SECURITY BANK, NATIONAL ASSOCIATION, in both its individual
capacity and as trustee (the "TRUSTEE"), and certain other Persons now or
hereafter identified as certificate purchasers (the "CERTIFICATE PURCHASERS") in
the Lease described below. Capitalized terms used herein and not otherwise
defined shall have the meaning assigned to such term in the Lease Intended as
Security, dated as of October 30, 1998, entered into among Trustee, Circus
Circus Leasing, Inc., a Nevada corporation, as Lessee, Circus Circus
Enterprises, Inc., a Nevada corporation, the Lead Arranger and Agents identified
therein, and the Certificate Purchasers (the "LEASE"), unless the context
otherwise requires.
WHEREAS, Guarantor is the direct beneficial owner of not less than 78%
of the issued and outstanding capital stock of Lessee;
AND WHEREAS, Trustee and the other "Beneficiaries" (as defined below)
are unwilling to enter into the Lease and other Operative Documents unless
Guarantor executes this Guaranty and, as an inducement to Trustee and such other
Beneficiaries, Guarantor is entering into this Guaranty and the guaranty
provided for herein;
AND WHEREAS, it is in the best interest of Guarantor to execute this
Guaranty inasmuch as Guarantor will derive substantial direct and indirect
benefits from the transactions contemplated by the Lease.
NOW, THEREFORE, Guarantor covenants and agrees as follows:
SECTION 1. GUARANTY. Guarantor, as primary obligor and not as surety,
hereby unconditionally and irrevocably guarantees to Trustee and each other
Indemnitee and their respective successors and permitted assigns
(individually, a "BENEFICIARY" and, collectively, the "BENEFICIARIES") as
their respective interests may appear: (a) the due, punctual and full
payment by Lessee of all amounts (including, without limitation, amounts
payable as damages in case of default and all such amounts which would become
due but for the operation of the automatic stay under Section 362(a) of the
United States Bankruptcy Code, 11 U.S.C. Section 362(a) and the operation of
Sections 502(b) and 506(b) of the United States Bankruptcy Code, 11 U.S.C.
502(b) and Section 506(b)) to be paid by Lessee in accordance with the Lease
and/or any other Operative Document to which Lessee is or is to be a party
whether such obligations now exist or arise hereafter, as and when the same
shall become due and payable in accordance with the terms thereof; and (b)
the due, prompt and faithful performance when due of, and compliance with,
all other obligations, covenants, terms, conditions and undertakings of
Lessee contained in the Lease or any and all other Operative Documents to
which Lessee is or is to be a party in accordance with the terms thereof
(such obligations referred to in clauses (a) and (b) above being hereinafter
called the "OBLIGATIONS"). Guarantor further agrees to pay any and all
reasonable costs and expenses (including reasonable fees and disbursements of
counsel) that may be paid or incurred by any
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Beneficiary in collecting any Obligations and/or in preserving or enforcing any
rights under this Guaranty or under the Obligations.
The Guaranty is a guaranty of payment, performance and compliance and
not of collectability, is in no way conditioned or contingent upon any attempt
to collect from or enforce performance or compliance by Lessee or upon any other
event, contingency or circumstance whatsoever, and shall be binding upon and
against Guarantor without regard to the validity or enforceability of the Lease
or any other Operative Document.
If for any reason whatsoever Lessee shall fail or be unable duly,
punctually and fully to pay such amounts as and when the same shall become due
and payable or to perform or comply with any such obligation, covenant, term,
condition or undertaking when due to be performed or observed, in each case, in
accordance with the Operative Documents, Guarantor will immediately pay or cause
to be paid such amounts to the Person or Persons entitled to receive the same
(according to their respective interests) under the terms of the Operative
Documents, as appropriate, or perform or comply with any such obligation,
covenant, term, condition or undertaking or cause the same to be performed or
complied with, together with interest on any amount due and owing from the date
the same shall have become due and payable to the date of payment.
SECTION 2. GUARANTOR'S OBLIGATIONS UNCONDITIONAL. The covenants and
agreements of Guarantor set forth in this Guaranty shall be primary
obligations of Guarantor, and such obligations shall be continuing, absolute
and unconditional, shall not be subject to any counterclaim, setoff,
deduction, diminution, abatement, recoupment, suspension, deferment,
reduction or defense (other than full and strict compliance by Guarantor with
its obligations hereunder or the full and strict compliance by Lessee of all
of the Obligations), whether based upon any claim that Lessee, Guarantor, or
any other Person may have against any Beneficiary or any other Person or
otherwise, and shall remain in full force and effect without regard to, and
shall not be released, discharged or in any way affected by, any circumstance
or condition whatsoever (whether or not Guarantor or Lessee shall have any
knowledge or notice thereof) including, without limitation:
(a) Any amendment, modification, addition, deletion, supplement or
renewal to or of or other change in the Obligations or any Operative Document
or any of the agreements referred to in any thereof, or any other instrument
or agreement applicable to any Operative Document or any of the parties to
such agreements, or to the Equipment, or any assignment, mortgage or transfer
thereof or of any interest therein, or any furnishing or acceptance of
additional security for, guaranty of or right of offset with respect to, any
of the Obligations; or the failure of any security or the failure of any
Beneficiary to perfect or insure any interest in any collateral;
(b) Any failure, omission or delay on the part of Lessee or any
Beneficiary to conform or comply with any term of any instrument or agreement
referred to in CLAUSE (a) above;
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<PAGE>
(c) Any waiver, consent, extension, indulgence, compromise, release
or other action or inaction under or in respect of any instrument, agreement,
guaranty, right of offset or security referred to in CLAUSE (a) above or any
obligation or liability of Lessee or any Beneficiary, or any exercise or
non-exercise by any Beneficiary of any right, remedy, power or privilege
under or in respect of any such instrument, agreement, guaranty, right of
offset or security or any such obligation or liability;
(d) Any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or similar proceeding with respect to
Lessee, any Beneficiary or any other Person or any of their respective
properties or creditors, or any action taken by any trustee or receiver or by
any court in any such proceeding;
(e) Any limitation on the liability or obligations of any Person
under the Lease or any other Operative Document, the Obligations, any
collateral security for the Obligations or any other guaranty of the
Obligations or any discharge, termination, cancellation, frustration,
irregularity, invalidity or unenforceability, in whole or in part, of any of
the foregoing, or any other agreement, instrument, guaranty or security
referred to in CLAUSE (a) above or any term of any thereof;
(f) Any defect in the title, compliance with specifications,
condition, design, operation or fitness for use of, or any damage to or loss
or destruction of, or any interruption or cessation in the use of any of the
Equipment by Lessee or any other Person for any reason whatsoever (including,
without limitation, any governmental prohibition or restriction,
condemnation, requisition, seizure or any other act on the part of any
governmental or military authority, or any act of God or of the public enemy)
regardless of the duration thereof (even though such duration would otherwise
constitute a frustration of a lease), whether or not resulting from accident
and whether or not without fault on the part of Lessee or any other Person;
(g) Any merger or consolidation of Lessee or Guarantor into or with
any other corporation or any sale, lease or transfer of any of the assets of
Lessee or Guarantor to any other Person;
(h) Any change in the ownership of any shares of capital stock of
Lessee or any corporate change in Lessee; or
(i) Any other occurrence or circumstance whatsoever, whether
similar or dissimilar to the foregoing and any other circumstance that might
otherwise constitute a legal or equitable defense or discharge of the
liabilities of a guarantor or surety or that might otherwise limit recourse
against Guarantor.
The obligations of Guarantor set forth herein constitute the full
recourse obligations of Guarantor enforceable against it to the full extent of
all its assets and properties, notwithstanding any provision in any agreements
limiting the liability of any Beneficiary or any other Person.
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<PAGE>
SECTION 3. WAIVER AND AGREEMENT. Guarantor waives any and all notice of
the creation, renewal, extension or accrual of any of the Obligations and
notice of or proof of reliance by any Beneficiary upon this Guaranty or
acceptance of this Guaranty, and the Obligations, and any of them, shall
conclusively be deemed to have been created, contracted or incurred in
reliance upon this Guaranty. Guarantor unconditionally waives, to the extent
permitted by law: (a) acceptance of this Guaranty and proof of reliance by
any Beneficiary hereon; (b) notice of any of the matters referred to in
SECTION 2 hereof, or any right to consent or assent to any thereof; (c) all
notices that may be required by statute, rule of law or otherwise, now or
hereafter in effect, to preserve intact any rights against Guarantor,
including without limitation, any demand, presentment, protest, proof or
notice of nonpayment under the Lease or any other Operative Document, and
notice of default or any failure on the part of Lessee to perform and comply
with any covenant, agreement, term or condition of the Lease or any other
Operative Document; (d) EXCEPT to the extent expressly provided in SECTION 4,
any right to the enforcement, assertion or exercise against Lessee of any
right, power, privilege or remedy conferred in the Lease or any other
Operative Document or otherwise; (e) any requirement of diligence on the part
of any Person; (f) any requirement of any Beneficiary to take any action
whatsoever, to exhaust any remedies or to mitigate the damages resulting from
a default by any Person under the Lease or any other Operative Document; (g)
EXCEPT as otherwise required by law, any notice of any sale, transfer or
other disposition by any Person of any right under, title to or interest in
the Lease, any other Operative Document or any of the Equipment; (h) any and
all benefits under California Civil Code Sections 2787 through 2855
(inclusive), 2899 and 3433 and California Code of Civil Procedure Sections
580a, 580b, 580d and 726; (i) 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; (j) any
failure of any Beneficiary to file or enforce a claim in any bankruptcy or
other proceeding with respect to any Person; (k) the election by any
Beneficiary, in any bankruptcy proceeding of any Person, of the application
or non-application of Section 1111(b)(2) of the Bankruptcy Code; (l) any
extension of credit or the grant of any Lien under Section 364 of the
Bankruptcy Code; (m) any use of cash collateral under Section 363 of the
Bankruptcy Code; (n) any agreement or stipulation with respect to the
provision of adequate protection in any bankruptcy proceeding of any Person;
(o) the avoidance of any Lien in favor of any Beneficiary for any reason; (p)
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 Obligations (or any interest thereon) in or as a result of any
such proceeding; (q) 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 (r) any other circumstance whatsoever that might
otherwise constitute a legal or equitable discharge, release or defense of a
guarantor or surety, or that might otherwise limit recourse against Guarantor.
Guarantor represents and warrants to the Beneficiaries that it has
established adequate means of obtaining from Lessee and the Sublessees, if any,
on a continuing basis, financial and other information pertaining to the
businesses, operations and condition (financial and otherwise) of each of Lessee
and any such Sublessees and their properties, and Guarantor now is and hereafter
will be completely familiar with the businesses, operations and condition
(financial and otherwise) of each of Lessee and any such Sublessees and their
properties.
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<PAGE>
Guarantor hereby expressly waives and relinquishes any duty on the part of any
Beneficiary (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 any Lessee or any Sublessee or such party's properties, whether
now known or hereafter known by any Beneficiary during the life of this
Guaranty. With respect to any of the Obligations, no Beneficiary need inquire
into the powers of Lessee or any Sublessee or the officers or employees acting
or purporting to act on such party's behalf, and all Obligations made or created
in good faith reliance upon the professed exercise of such power shall be
guarantied hereby.
Guarantor agrees that this Guaranty shall be automatically reinstated
if and to the extent that for any reason any payment by or on behalf of Lessee
is rescinded or must be otherwise restored by any of the Beneficiaries, whether
as a result of any proceedings in bankruptcy or reorganization or otherwise.
Guarantor further agrees that, without limiting the generality of this
Guaranty, if an Event of Default shall have occurred and be continuing and
Trustee is prevented by applicable law from exercising its remedies under the
Lease, Trustee shall be entitled to receive hereunder from Guarantor, upon
demand therefor, the sums which would have otherwise been due from Lessee had
such remedies been exercised.
SECTION 4. WAIVER OF SUBROGATION. Guarantor hereby irrevocably waives
any claim or other rights which it may now or hereafter acquire against
Lessee that arise from the existence, payment, performance or enforcement of
Guarantor's obligations under this Guaranty or any other Operative Document,
including any right of subrogation, reimbursement, exoneration, or
indemnification, any right to participate in any claim or remedy of the
Beneficiaries against Lessee or any Collateral which Trustee, on behalf of
the Certificate Purchasers, now has or hereafter acquires, whether or not
such claim, remedy or right arises in equity, or under contract, statute or
common law, including the right to take or receive from Lessee, directly or
indirectly, in cash or other property or by set-off or in any manner, payment
or security on account of such claim or other rights, in each case, unless
and until the Obligations shall have been fully and finally paid in cash and,
in the case of a bankruptcy or insolvency of Lessee, one year has elapsed
from the date the Obligations shall have been fully and finally paid in cash.
If any amount shall be paid to Guarantor in violation of the preceding
sentence and the Obligations shall not have been fully and finally paid in
cash, such amount shall be deemed to have been paid to Guarantor for the
benefit of, and held in trust for, the Beneficiaries, and shall forthwith be
paid to Trustee to be credited and applied pursuant to the terms of the
Lease. Guarantor acknowledges that it will receive direct and indirect
benefits from the financing arrangements contemplated by the Lease and that
the waiver set forth in this SECTION 4 is knowingly made in contemplation of
such benefits. Guarantor hereby absolutely, unconditionally and irrevocably
waives and agrees not to assert or take advantage of any defense based upon
an election of remedies by Trustee, including an election to proceed by
non-judicial rather than judicial foreclosure, which destroys or impairs any
right of subrogation of Guarantor or the right of Guarantor to proceed
against any Person for reimbursement or both.
SECTION 5. RIGHTS OF THE BENEFICIARIES. This Guaranty is made for the
benefit of, and shall be enforceable by, each Beneficiary as its interest may
appear.
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SECTION 6. TERM OF GUARANTY AGREEMENT. This Guaranty and all guaranties,
covenants and agreements of Guarantor contained herein shall continue in full
force and effect and shall not be discharged until such time as all the
Obligations shall be fully and finally paid in full in cash and all the
agreements of Lessee and Guarantor hereunder and under the Lease and the
other Operative Documents shall have been duly performed. If, as a result of
any bankruptcy, dissolution, reorganization, insolvency, arrangement or
liquidation proceedings (or proceedings similar in purpose or effect) or if
for any other reason, any payment received by any Beneficiary in respect of
the Obligations is rescinded or must be returned by such Beneficiary, this
Guaranty shall continue to be effective as if such payment had not been made
and, in any event, as provided in the preceding sentence.
SECTION 7. REPRESENTATIONS AND WARRANTIES OF GUARANTOR. As of the date
hereof and each Delivery Date, Guarantor hereby represents and warrants to
Trustee and each of the Beneficiaries on and as of the Closing Date:
(a) CORPORATE EXISTENCE AND POWER. Guarantor is a
corporation duly incorporated, validly existing and in good standing under
the laws of the State of Nevada, and has all corporate powers and all
material governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted.
(b) CORPORATE AND GOVERNMENTAL AUTHORIZATION, ETC. The
execution, delivery and performance by Guarantor of this Guaranty and the
performance, on behalf of Lessee or in accordance with the terms hereof, of
the Lease and each other Operative Documents, are within the corporate powers
of Guarantor, have been duly authorized by all necessary corporate action,
requires no action by or in respect of, or filing with, any governmental
body, agency or official and do not contravene, or constitute a default
under, any provision of applicable law or regulation or of the certificate of
incorporation or by-laws of Guarantor or of any agreement, judgment,
injunction, order, decree or other instrument binding upon Guarantor or any
of its Subsidiaries or result in the creation or imposition of any Lien on
any asset of Guarantor or any of its Subsidiaries. This Guaranty has been or
will be duly executed and delivered by Guarantor.
(c) BINDING EFFECT. This Guaranty constitutes a legal, valid
and binding agreement of Guarantor and when executed and delivered in
accordance with the term hereof will constitute legal, valid and binding
obligations of Guarantor, EXCEPT as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium and similar
laws affecting the enforcement of creditor's rights generally and by general
equitable principles.
(d) FINANCIAL INFORMATION.
(i) The consolidated balance sheet of Guarantor and
its Subsidiaries as of January 31, 1998 and the related consolidated
statements of operations, cash flows and stockholders' equity for the
fiscal year then ended, reported on by Arthur Andersen LLP and set
forth in Guarantor's Form 10-K for the fiscal year ended January 31,
1998, a copy of which has been delivered to each
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of the Certificate Purchasers, fairly present, in conformity with
Generally Accepted Accounting Principles, the consolidated financial
position of Guarantor and its Subsidiaries as of such date and their
consolidated results of operations and cash flows for such fiscal
year.
(ii) Since January 31, 1998 there has been no
material adverse change in the business, financial position, results
of operations or prospects of Guarantor and its Subsidiaries,
considered as a whole.
(e) LITIGATION. There is no action, suit or proceeding
pending against, or to the knowledge of Guarantor threatened against or
affecting, Guarantor or any of its Subsidiaries before any court or
arbitrator or any governmental body, agency or official in which there is a
significant possibility of an adverse decision which could constitute a
Material Adverse Effect or, in any event, which in any manner draws into
question the validity of this Guaranty or any other Operative Document.
(f) ENVIRONMENTAL MATTERS. In the ordinary course of its
business, Guarantor conducts an ongoing review of the effect of Environmental
Laws on the business, operations and properties of Guarantor and its
Subsidiaries, in the course of which it identifies and evaluates associated
liabilities and costs (including any capital or operating expenditures
required for clean-up or closure of properties presently or previously owned,
any capital or operating expenditures required to achieve or maintain
compliance with environmental protection standards imposed by law or as a
condition of any license, permit or contract, any related constraints on
operating activities, including any periodic or permanent shutdown of any
facility or reduction in the level of or change in the nature of operations
conducted thereat and any actual or potential liabilities to third parties,
including employees, and any related costs and expenses). On the basis of
this review, Guarantor has reasonably concluded that Environmental Laws are
unlikely to have a Material Adverse Effect.
(g) TAXES. Guarantor and its Subsidiaries have filed all
United States Federal and state income tax returns and all other material tax
returns which are required to be filed by them and have paid all taxes due
pursuant to such returns or pursuant to any assessment received by Guarantor
or any Subsidiary, OTHER THAN taxes contested in good faith by Guarantor or
such Subsidiary pursuant to a Permitted Contest. The charges, accruals and
reserves on the books of Guarantor and its Subsidiaries in respect of taxes
or other governmental charges are, in the opinion of Guarantor, adequate.
(h) NOT AN INVESTMENT COMPANY. Guarantor is not an
"investment company" within the meaning of the Investment Company Act of
1940, as amended.
(i) FULL DISCLOSURE. All written information heretofore
furnished by Guarantor to Trustee, Administrative Agent or any Certificate
Purchaser for purposes of or in connection with this Guaranty or any other
Operative Document or any transaction contemplated hereby or thereby is, and
all such written information hereafter furnished by Guarantor to Trustee,
Administrative Agent or any Certificate Purchaser will be, true and accurate
in all material respects on the date as of which such information is stated
or certified. Guarantor has disclosed
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<PAGE>
to the Certificate Purchasers in writing any and all facts (EXCLUDING matters
relating to the economy in general) which materially and adversely affect or may
so affect (to the extent Guarantor can now reasonably foresee), the business,
financial position or results of operations of Guarantor and its Subsidiaries,
taken as a whole, or the ability of Guarantor to perform its obligations under
this Guaranty.
(j) YEAR 2000. Any reprogramming and/or replacement required
to permit the proper functioning, in and following the year 2000, of (i) the
computer systems of Guarantor and its Subsidiaries and (ii) equipment
containing embedded microchips (INCLUDING systems and equipment supplied to
Guarantor and its Subsidiaries by others or with which the systems of
Guarantor and its Subsidiaries interface) and the testing of all such systems
and equipment, as so reprogrammed and/or replaced, will be completed in all
material respects by June 30, 1999. The aggregate cost to Guarantor and its
Subsidiaries of such reprogramming, replacement and testing, and of the
reasonably foreseeable consequences of the year 2000 to Guarantor and its
Subsidiaries resulting from reprogramming errors and the failure of others'
systems or equipment, cannot reasonably be expected to have a Material
Adverse Effect. EXCEPT for such of the reprogramming and/or replacement
referred to in the preceding sentence as may be necessary, the computer and
management information systems of Guarantor and its Subsidiaries are and,
with ordinary course upgrading, replacement and maintenance, will continue
for the term of this Guaranty to be, sufficient to permit Guarantor and its
Subsidiaries to conduct their respective businesses without the occurrence of
a Material Adverse Effect.
(k) MANDALAY BAY PROJECT. Guarantor and its Subsidiaries
have taken such action as reasonably necessary to cause the previously
disclosed subsidence of the Mandalay Bay Project to stabilize to acceptable
levels in accordance with the project's design and, as of the date hereof,
Guarantor has received written information from one or more nationally
reputable engineering firms that indicates such subsidence has stabilized to
acceptable levels in accordance with the project's design.
SECTION 8. COVENANTS OF GUARANTOR. Guarantor covenants and agrees with
each Beneficiary that, so long as this Guaranty shall remain in effect, it
shall comply with all of the covenants specified in SECTION 13.2 of the Lease.
SECTION 9. NOTICES, ETC. All notices, demands, requests, consents,
approvals and other instruments hereunder shall be in writing and shall be
deemed to have been properly given if given as provided for in SECTION 18.5
of the Lease to Guarantor at the address set forth below the signature of
Guarantor on the signature page hereof, or such other address as may
hereafter be furnished by Guarantor to all Beneficiaries in accordance with
SECTION 18.5 of the Lease.
SECTION 10. SEVERABILITY OF THIS GUARANTY. In case any provisions of
this Guaranty or any application thereof shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions and statements and any other application thereof shall not in any
way be affected or impaired thereby. To the extent permitted by law,
Guarantor hereby waives any provision of law that renders any term or
provision hereof invalid or unenforceable in any respect.
-8-
<PAGE>
SECTION 11. MISCELLANEOUS. THIS GUARANTY SHALL IN ALL RESPECTS BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
CALIFORNIA APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN
SUCH STATE, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.
This Guaranty shall be binding upon Guarantor and its successors, transferees
and assigns and inure to the benefit of and be enforceable by the respective
successors, permitted transferees, and permitted assigns of the
Beneficiaries, PROVIDED, HOWEVER, that Guarantor may not assign any of its
obligations hereunder without the prior written consent of Trustee (acting at
the direction of all Certificate Purchasers) EXCEPT pursuant to a transaction
permitted by SECTION 13.2(e) of the Lease). The table of contents and
headings in this Guaranty are for purposes of reference only, and shall not
limit or otherwise affect the meaning hereof. This Guaranty constitutes the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof.
SECTION 12. TERMINATION. Subject to the provisions of SECTION 6 above,
this Guaranty shall remain in full force and effect until the date on which
all Obligations of Guarantor hereunder shall have been satisfied by full and
final payment in cash and performance in full.
[remainder of page intentionally left blank]
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<PAGE>
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be
executed as of the date first above written.
CIRCUS CIRCUS ENTERPRISES, INC.,
a Nevada corporation
By GLENN SCHAEFFER
Name: Glenn W. Schaeffer
Title: President, CFO, Treasurer
ADDRESS:
2880 Las Vegas Boulevard South
Las Vegas, Nevada 89109
Fax: (702) 634-3450
Attn: Glenn W. Schaeffer
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TABLE OF CONTENTS
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SECTION 1. Guaranty. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2. Guarantor's Obligations Unconditional . . . . . . . . . . . . 2
SECTION 3. Waiver and Agreement. . . . . . . . . . . . . . . . . . . . . 4
SECTION 4. Waiver of Subrogation . . . . . . . . . . . . . . . . . . . . 5
SECTION 5. Rights of the Beneficiaries . . . . . . . . . . . . . . . . . 5
SECTION 6. Term of Guaranty Agreement. . . . . . . . . . . . . . . . . . 6
SECTION 7. Representations and Warranties of Guarantor . . . . . . . . . 6
(a) Corporate Existence and Power . . . . . . . . . . . . . . . . 6
(b) Corporate and Governmental Authorization, etc.. . . . . . . . 6
(c) Binding Effect. . . . . . . . . . . . . . . . . . . . . . . . 6
(d) Financial Information . . . . . . . . . . . . . . . . . . . . 6
(e) Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . 7
(f) Environmental Matters . . . . . . . . . . . . . . . . . . . . 7
(g) Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(h) Not an Investment Company . . . . . . . . . . . . . . . . . . 7
(i) Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . 7
(j) Year 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(k) Mandalay Bay Project. . . . . . . . . . . . . . . . . . . . . 8
SECTION 8. Covenants of Guarantor. . . . . . . . . . . . . . . . . . . . 8
SECTION 9. Notices, etc. . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 10. Severability of this Guaranty . . . . . . . . . . . . . . . . 8
SECTION 11. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 12. Termination . . . . . . . . . . . . . . . . . . . . . . . . . 9
</TABLE>
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<PAGE>
EXHIBIT 10(c)
CIRCUS CIRCUS ENTERPRISES, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
EFFECTIVE AS OF JUNE 18, 1998
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
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1. PURPOSE OF THE PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
2. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
2.1 Administrative Committee . . . . . . . . . . . . . . . . . . . . . . . . .2
2.2 Beneficiary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
2.3 Benefit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
2.4 Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
2.5 Change of Control. . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
2.6 Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
2.7 Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
2.8 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
2.9 Disability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
2.10 Early Retirement Age . . . . . . . . . . . . . . . . . . . . . . . . . . .5
2.11 Early Retirement Benefit . . . . . . . . . . . . . . . . . . . . . . . . .5
2.12 Early Retirement Date. . . . . . . . . . . . . . . . . . . . . . . . . . .5
2.13 Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
2.14 Eligible Employee. . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
2.15 Final Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
2.16 Normal Retirement Age. . . . . . . . . . . . . . . . . . . . . . . . . . .6
2.17 Normal Retirement Benefit. . . . . . . . . . . . . . . . . . . . . . . . .6
2.18 Normal Retirement Date . . . . . . . . . . . . . . . . . . . . . . . . . .6
2.19 Participant. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
2.20 Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
2.21 Plan Year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
2.22 Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
2.23 Trust Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
2.24 Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
2.25 Years of Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
3. ELIGIBILITY AND PARTICIPATION . . . . . . . . . . . . . . . . . . . . . . . . .7
3.1 Eligible Employee. . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
4. BENEFIT FORMULA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
</TABLE>
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TABLE OF CONTENTS
(CONTINUED)
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4.1 Eligibility for Benefits . . . . . . . . . . . . . . . . . . . . . . . . .8
4.2 Amount of Benefit. . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
5. VESTING; FORFEITURE FOR COMPETITION . . . . . . . . . . . . . . . . . . . . . 10
5.1 Vesting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.2 Forfeiture for Competition . . . . . . . . . . . . . . . . . . . . . . . 10
6. BENEFIT PAYMENT FORMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.1 Retirement Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.2 Benefit Distribution Forms . . . . . . . . . . . . . . . . . . . . . . . 14
(a) Normal Form of Benefit/Life Annuity . . . . . . . . . . . . . . . . 14
(b) Optional Forms of Benefit . . . . . . . . . . . . . . . . . . . . . 14
(c) Actuarial Equivalence . . . . . . . . . . . . . . . . . . . . . . . 15
6.3 Time of Payment of Benefits Following Termination of Employment. . . . . 16
6.4 Disability Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.5 Death Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.6 Section 280G Adjustments . . . . . . . . . . . . . . . . . . . . . . . . 18
7. SOURCE OF BENEFITS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8. ADMINISTRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.2 Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.3 Administrative Committee Decisions . . . . . . . . . . . . . . . . . . . 20
8.4 Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.5 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9. AMENDMENT AND TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.1 Amendment or Termination . . . . . . . . . . . . . . . . . . . . . . . . 23
9.2 Accrued Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
10. CHANGE OF CONTROL OF THE COMPANY. . . . . . . . . . . . . . . . . . . . . . . 23
11. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
11.1 No Right to Continued Employment . . . . . . . . . . . . . . . . . . . . 24
11.2 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . 24
11.3 Assignment or Alienation . . . . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
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(CONTINUED)
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11.4 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
11.5 Gender and Number. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
11.6 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
EXHIBIT I. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
</TABLE>
<PAGE>
CIRCUS CIRCUS ENTERPRISES, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
EFFECTIVE AS OF JUNE 18, 1998
CIRCUS CIRCUS ENTERPRISES, INC., a Nevada corporation (the "Company"),
hereby adopts the Circus Circus Enterprises, Inc. Supplemental Executive
Retirement Plan (the "Plan") for specified employees of the Company upon the
terms and conditions set forth below. The Plan is effective on June 18, 1998.
This Plan is adopted and is to be administered in connection with a related
Trust to which amounts may be contributed hereunder. The funds of the Trust are
and at all times will be subject to the claims of the general creditors of the
Company in the event of the insolvency or bankruptcy of the Company, as provided
in the Trust Agreement. It is intended that the Plan and Trust shall constitute
an unfunded deferred compensation supplemental retirement arrangement for a
select group of management or highly compensated employees for purposes of the
Federal income tax laws and the Employee Retirement Income Security Act of 1974
("ERISA"), and all documents, agreements or instruments made or given pursuant
to the Plan shall be interpreted so as to effect such intent.
1. PURPOSE OF THE PLAN.
The purpose of this Plan is to attract and motivate key employees who
render valuable services to the Company by:
(i) improving the Company's overall compensation program and making
it more competitive in the market;
(ii) rewarding the loyalty of the most productive key employees of
the Company;
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(iii) encouraging key employees by providing an attractive
retirement benefit as a reward for continued service;
(iv) providing an incentive for key employees to seek promotion
within the Company;
(v) providing an incentive that is independent of fluctuations in
the value of the Company's stock for key employees to continue their
employment with the Company;
(vi) offering a favorable recruiting tool for the hiring of key
employees in mid-career; and
(vii) providing a retirement incentive for key employees.
2. DEFINITIONS.
The capitalized terms defined in this Section 2 shall have the meanings set
forth below.
2.1 ADMINISTRATIVE COMMITTEE. The Administrative Committee of the Plan,
as appointed from time to time by the Company. Initially, the Administrative
Committee for Tier I participants shall consist of the members of the
Compensation Committee of the Board of Directors and the Chief Executive
Officer. The Administrative Committee for Tiers II & III participants shall
consist of the Chief Executive Officer and a minimum of two other officers
designated by the Chief Executive Officer.
2.2 BENEFICIARY. The Beneficiary designated by a Participant to receive
any Benefits due under the Plan after the Participant's death. If no
Beneficiary is designated, the Beneficiary shall be the Participant's surviving
spouse or, if none, the Participant's estate.
2.3 BENEFIT. The benefits provided under this Plan. Benefit shall refer
to the Normal Retirement Benefit, the Early Retirement Benefit, the Delayed
Retirement Benefit, the Disability Benefit or the Death Benefit, as applicable.
2.4 BOARD. The Board of Directors of the Company.
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2.5 CHANGE OF CONTROL. A Change of Control for purposes of the Plan shall
be deemed to have occurred if any of the events described in clauses (i), (ii),
(iii) or (iv) below shall occur:
(i) during any twenty-four (24) month period ending on or after the date
hereof, individuals who at the beginning of such period constituted the Board of
the Company (together with any new directors whose election by such Board or
whose nomination for election by the stockholders of the Company was approved by
a vote of at least 66-2/3% of the directors then still in office who were either
directors 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 Board of the Company then in office (a "Clause (i) Change of
Control"); or
(ii) any "person" (as such term is used in Section 13(d) of the Securities
and Exchange Act of 1934 (the "Exchange Act")), other than a trust established
for the purpose of providing retirement benefits for employees of the Company,
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act, except that a person shall be deemed to have "beneficial
ownership" of all securities that such person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time),
directly or indirectly, of more than 30% of the total voting power of the voting
stock of the Company (unless such ownership is previously approved by a
resolution duly adopted by the Board of the Company prior to a Clause (i) Change
of Control); or
(iii) the Company consolidates with, or merges with or into another
corporation or sells, assigns, conveys, transfers, leases or otherwise disposes
of all or substantially all of its assets to any person, or any corporation
consolidates with, or merges with or into, the Company, in any such event
pursuant to a transaction in which the outstanding voting
3
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stock of the Company is changed into or exchanged for cash, securities or
other property; provided, however, that any such transactions that satisfy
the requirements to be treated as a "Permitted Clause (iii) Transaction" (as
hereinafter defined) shall not be treated as a Change of Control; or
(iv) the Company is liquidated or dissolved or adopts a plan of
liquidation. For purposes of this Section 2.5, a Permitted Clause (iii)
Transaction is any transaction described in clause (iii) of this Section 2.5
if such transaction is previously approved by a resolution duly adopted by
the Board of the Company prior to a Clause (i) Change of Control or if as a
result of such transaction, the outstanding voting stock of the Company is
changed into or exchanged for voting stock of the surviving or transferee
corporation (the "Surviving Corporation") and/or for cash, securities
(whether or not including voting stock) or other property, and the holders of
the voting stock of the Company immediately prior to such transaction own,
directly or indirectly, not less than 50% of the voting power of the voting
stock of the Surviving Corporation immediately after such transaction (in
substantially the same proportions as the voting stock of the Company was
held by such stockholders immediately prior to such transaction). In the
event a Permitted Clause (iii) Transaction shall occur, then from and after
the time such transaction becomes effective all references in the Plan to the
Company shall be deemed to be references to the Surviving Corporation and all
references in the Plan to the Board of the Company shall be deemed to be
references to the Board of the Surviving Corporation.
2.6 CODE. The Internal Revenue Code of 1986, as it may be amended from
time to time.
2.7 COMPANY. Circus Circus Enterprises, Inc., or any designated
subsidiary, affiliate or successor corporation.
4
<PAGE>
2.8 COMPENSATION. All of the compensation received by a Participant from
the Company for a calendar year for his or her service as an employee, including
only salary and bonus, with bonus being no more than one hundred percent (100%)
of salary for Tier II and III Participants and 150% of salary for Tier I
Participants. In any year in which a Change of Control occurs, Compensation
shall be annualized and used in the calculation of Final Compensation.
2.9 DISABILITY. A mental or physical disability due to sickness or injury
that renders a Participant permanently incapable of performing services as an
employee of the Company. Evidence of disability satisfactory to the
Administrative Committee will be required.
2.10 EARLY RETIREMENT AGE. Age 55.
2.11 EARLY RETIREMENT BENEFIT. A Participant's Early Retirement Benefit is
the Benefit payable to a Participant who has terminated employment with the
Company and has attained an Early Retirement Date. A Participant's Early
Retirement Benefit shall be determined by reducing the Participant's Normal
Retirement Benefit by five percent (5%) for each year, and the fraction thereof,
the Participant's Early Retirement Date precedes the Participant's attainment of
age 60, up to a maximum reduction of 25 % for any Early Retirement Benefit
payable at the Early Retirement Age.
2.12 EARLY RETIREMENT DATE. A Participant's Early Retirement Date is the
first day of the month immediately following the month in which both of the
following events have occurred: the Participant's attainment of Early
Retirement Age and the Participant's termination of employment with the Company.
2.13 EFFECTIVE DATE. The Plan is effective June 18, 1998.
2.14 ELIGIBLE EMPLOYEE. An employee of the Company who meets the
eligibility requirements of Section 3.1.
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2.15 FINAL COMPENSATION. Final Compensation for any Participant shall be
the highest total annual Compensation received by the Participant during the
Participant's last five (5) Years of Service with the Company, or such shorter
period that the Participant has been employed by the Company, if the Participant
has been employed for less than five (5) years.
2.16 NORMAL RETIREMENT AGE. Age 65.
2.17 NORMAL RETIREMENT BENEFIT. A Participant's Normal Retirement Benefit
is the annual Benefit payable to a Participant who terminates employment with
the Company and has attained a Normal Retirement Date. A Participant's Normal
Retirement Benefit is determined under Section 4.
2.18 NORMAL RETIREMENT DATE. A Participant's Normal Retirement Date is the
first day of the month immediately following the month in which both of the
following events have occurred: the Participant's attainment of Normal
Retirement Age and the Participant's termination of employment with the Company.
2.19 PARTICIPANT. Any Eligible Employee, current or former, who may
receive benefits under the Plan.
2.20 PLAN. This Circus Circus Enterprises, Inc. Supplemental Executive
Retirement Plan, as amended from time to time.
2.21 PLAN YEAR. For the first Plan Year, the Plan Year will be the period
from the date the Plan is approved by the Board to December 31, 1998. For
subsequent Plan Years, the Plan Year will be the calendar year.
2.22 TRUST. The Trust established in order to hold funds to provide the
Benefits under this Plan.
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2.23 TRUST AGREEMENT. The Trust Agreement, as amended from time to time,
entered into between the Company and the Trustee with respect to the Trust.
2.24 TRUSTEE. The trustee(s) of the Trust.
2.25 YEARS OF SERVICE. A Year of Service for Vesting and Benefit accrual
purposes shall mean twelve full months of service with the Company. An Eligible
Employee shall be credited with a Year of Service for every twelve full months
of employment with the Company; PROVIDED, HOWEVER, that for employment with the
Company prior to January 1, 1998, a Participant shall be credited with the
lesser of the Participant's actual full or partial Years of Service with the
Company or ten (10) Years of Service. An Eligible Employee shall be credited
with all of his or her full or partial Years of Service with the Company earned
after January 1, 1998. The Administrative Committee, in its sole and absolute
discretion, may include prior service with predecessor or acquired entities in
determining Years of Service under this Plan.
3. ELIGIBILITY AND PARTICIPATION.
3.1 ELIGIBLE EMPLOYEE.
(a) An Eligible Employee is a manager or highly compensated employee
who is selected by the Administrative Committee to participate in the Plan.
Exhibit I summarizes the criteria that may be used by the Administrative
Committee for selecting Eligible Employees for the initial Plan Year and
identifying the Tier into which each Eligible Employee shall be placed. Such
criteria may be changed by the Administrative Committee at any time and from
time to time in its sole and absolute discretion. Notwithstanding anything
contained herein to the contrary, no employee of the Company shall qualify as an
Eligible Employee unless such employee is employed by the Company on or after
the Effective Date on a substantially full-time basis. Whether an employee is
employed on a full-time basis shall be determined by the Administrative
Committee at it's discretion.
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(b) In all cases, the Administrative Committee's determination of
eligibility and Tier level shall be final and binding on all persons. The
Administrative Committee also may change an Eligible Employee from one Tier
category to another or change an employee's status from eligible to ineligible;
provided, however, that such a change shall not cause any vested benefits of
such Eligible Employee to be reduced below the level of such Eligible Employee's
Benefits determined immediately prior to the change in Tier category.
(c) Each Eligible Employee who is an Eligible Employee on the
Effective Date shall become a Participant in the Plan as of the Effective Date.
Each Eligible Employee who becomes an Eligible Employee subsequent to the
Effective Date shall become a Participant in the Plan on the first day of the
month following the month in which such person becomes an Eligible Employee.
4. BENEFIT FORMULA.
4.1 ELIGIBILITY FOR BENEFITS. A Participant who is fully vested, as
described in Section 5 shall be eligible to receive a Benefit under this Plan
following his or her termination of employment with the Company. The amount,
form and timing of a vested Participant's Benefit shall be determined in
accordance with the terms of this Plan.
4.2 AMOUNT OF BENEFIT.
(a) An Eligible Employee's Normal Retirement Benefit payable under
the Plan is an annual Benefit amount that shall be determined by multiplying the
Eligible Employee's applicable percentage ("Applicable Percentage"), as
determined from the following table based on the Eligible Employee's final Tier
placement, times the Eligible Employee's Final Compensation.
8
<PAGE>
<TABLE>
<CAPTION>
APPLICABLE PERCENTAGE
---------------------------------
YEARS OF SERVICE TIER I TIER II TIER III
---------------- ------- ------- --------
<S> <C> <C> <C>
Less than four (4) 0% 0% 0%
Four (4), but less than six (6) 20% 15% 5%
Six (6), but less than eight (8) 25% 20% 10%
Eight (8), but less than ten (10) 30% 25% 15%
Ten (10), but less than twelve (12) 40% 30% 20%
Twelve (12), but less than fourteen (14) 50% 35% 25%
Fourteen (14) or more 60% 40% 30%
</TABLE>
Notwithstanding the foregoing rule that the Applicable Percentage is determined
by an Eligible Employee's final Tier placement; reduction in an Eligible
Employee's Tier level shall not cause a reduction in the Eligible Employee's
Applicable Percentage.
Example (1): A Tier I Eligible Employee who has earned 10 Years of Service with
the Company, who has reached his Normal Retirement Date and whose Final
Compensation is $300,000 shall receive an annual Normal Retirement Benefit
calculated under the following formula:
40% x $300,000 = $120,000 annual Benefit.
Example (2): The Administrative Committee determines to change the status of an
Eligible Employee who has earned 6 Years of Service from a Tier II to a Tier III
Participant. At the time of the change in status, the Participant's applicable
percentage was 20%. Following the change, the Participant's applicable status
remains at 20% until the Participant earns 12 or more Years of Service, at which
time the applicable percentage will be determined by reference to the schedule
of applicable percentages for Tier III.
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<PAGE>
(b) Subject to the provisions of Sections 2.10, 2.11 and 2.12, or as
otherwise approved by the Administrative Committee, an Eligible Employee who
terminates employment with the Company prior to the Participant's Normal
Retirement Age shall receive either the Early Retirement Benefit or the Normal
Retirement Benefit as elected by the Participant.
(c) A Participant who terminates employment with the Company after
having attained the Normal Retirement Age shall receive a Delayed Retirement
Benefit. A Delayed Retirement Benefit is payable upon a Participant's
termination of employment with the Company.
The Delayed Retirement Benefit for Tier II and Tier III Participants shall
be equal to the Normal Retirement Benefit which would have been payable upon the
Participant's Normal Retirement Age. The Delayed Retirement Benefit for Tier I
Participants shall be determined based upon the Participant's Final Compensation
and Years of Service at the Participant's actual termination of employment with
the Company.
5. VESTING; FORFEITURE FOR COMPETITION.
5.1 VESTING. A Participant shall become fully vested in his or her
Benefit under the Plan after the Participant has completed four (4) Years of
Service. A Participant shall have no vested interest in Benefits under the Plan
and shall receive no Benefits under the Plan prior to the Employee's completion
of four (4) Years of Service.
5.2 FORFEITURE FOR COMPETITION.
(a) NOTWITHSTANDING any provision of this Plan to the contrary except
as specifically provided for in Sections 5.2(b) and 5.2(c), no Participant shall
directly or indirectly engage in activities (similar or reasonably related to
those in which the Participant engaged as an employee of the Company during the
two years immediately preceding the termination of the
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<PAGE>
Participant's employment with the Company) or render services (similar or
reasonably related to those the Participant rendered to the Company during
such two years), in either case with or to any firm or business organization
which directly competes with the Company in any line of business engaged in
(or planned to be engaged in) by the Company, whether now existing or
hereafter established, or engage in such activities or render such services
to any other person or entity engaged or about to become engaged in such
activities to, for, or on behalf of, any such firm or business organization,
or entice, induce or encourage any of the Company's other employees to engage
in any activity which, were it done by the Participant, would violate this
Section 5.2(a) or would violate any provision of any proprietary information
agreement entered between the Participant and the Company. Any Participant
who violates the provisions of this Section 5.2(a) shall forfeit Benefits
under this Plan as follows: (i) a Participant who receives a lump sum payment
under this Plan shall be obligated to restore such lump sum to the Plan upon
engaging in any of the prohibited activities described above; and, (ii) a
Participant who receives a form of benefit under the Plan other than a lump
sum shall receive no further payments of Benefits from the Plan following the
date the Company becomes aware that the Participant has engaged in any of the
prohibited activities described above and shall be obligated to restore to
the Plan any Benefits paid to the Participant prior to the date the Company
became aware that the Participant has engaged in any of the prohibited
activities described above.
(b) NOTWITHSTANDING THE FOREGOING, the Company may grant to a
Participant written approval(s) to engage personally in any activity or render
services referred to in Section 5.2(a) if it secures written assurances
(satisfactory to the Company and its counsel) from the Participant and from the
prospective employer(s) that the integrity of any proprietary information
agreement entered into between the Participant and the Company will not in any
11
<PAGE>
way be jeopardized by such activities, provided the burden of so establishing
the foregoing to the satisfaction of the Company and said counsel shall be upon
the Participant and the Participant's prospective employer(s).
(c) If, following the occurrence of a Change of Control, (i) the
Company terminates a Participant's employment without Cause (as hereinafter
defined), or (ii) a Participant terminates his or her employment with the
Company for Good Reason (as hereinafter defined), such Participant shall not be
subject to a forfeiture of benefits under Section 5.2(a). For purposes of this
Section 5.2(c), the terms "Cause" and "Good Reason" shall have the following
meanings:
"Cause" shall mean fraud, misappropriation, embezzlement, or other act of
material misconduct against the Company or any of its affiliates; substantial
and willful failure to perform specific and lawful directives of the Board of
Directors or of a supervisor; willful and knowing violation of any rules or
regulations of any governmental or regulatory body, which may be materially
injurious to the financial condition of the Company; conviction of or plea of
guilty or nolo contendere to any felony; or any loss by the Participant of any
personal gaming or related regulatory approval or license required to perform
his or her duties.
"Good Reason" shall mean a demotion of the Participant such that the
Participant's overall annual compensation is forty percent (40%) less than his
or her overall compensation for the one-year period ending on the date of the
Change of Control; a reduction in the Participant's annual base salary in effect
immediately prior to the Change of Control by more than fifteen percent (15%); a
change in the Participant's site of principal employment to a location that is
more than 50 miles from the location at which he or she was principally employed
immediately prior to the date of the Change of Control (not including required
travel on the Company's
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<PAGE>
business to an extent substantially consistent with the Participant's
business travel obligations immediately prior to the Change of Control); any
failure by the Company to pay to the Participant any portion of his or her
compensation within fifteen (15) days of the date such compensation is due;
or any failure of the Company to obtain the unqualified agreement from any
successor to assume or adopt this Plan. Notwithstanding the foregoing, no
event enumerated above shall constitute Good Reason if the Participant gives
his or her express written consent to such change in the terms of his or her
employment.
In the event there is, following the occurrence of a Change of Control, any
dispute between the Company and a Participant with respect to the provisions of
this Section 5.2(c), such dispute shall not be subject to the claims procedures
set forth in the Plan, but shall be settled by binding arbitration between the
Participant and the Company in Las Vegas, Nevada, before a panel of three (3)
arbitrators pursuant to the rules and procedures of the American Arbitration
Association in effect from time to time, or as otherwise may be agreed by the
Participant and the Company. The arbitrators shall be as mutually agreed to by
the Employer and the Executive, or as otherwise determined by the rules and
procedures of the American Arbitration Association absent such agreement. The
arbitrators shall render an opinion in writing setting forth the basis of their
decision which shall be final and binding upon the parties hereto. The parties
hereto specifically agree that neither party may appeal or subject the award or
decision of any such arbitrator to appeal or review in any court of law or in
equity or by any other tribunal, arbitration system or otherwise. Judgment upon
any award granted by such an arbitrator may be enforced in any court having
jurisdiction thereof.
6. BENEFIT PAYMENT FORMS.
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<PAGE>
6.1 RETIREMENT BENEFITS. A Participant shall elect the form in which the
Participant's Benefit shall be distributed. If the Participant does not elect a
distribution form, the Participant shall be deemed to have elected the Normal
Retirement Benefit or Single Life Annutiy.
6.2 BENEFIT DISTRIBUTION FORMS. A Participant may elect a distribution
form from among the following forms of distribution:
(a) NORMAL RETIREMENT BENEFIT/SINGLE LIFE ANNUITY. The Normal
Retirement Benefit is the amount of the Participant's annual Benefit paid in
equal quarterly installments for the life of the Participant, commencing on the
first day of the calendar quarter coincident with or next following the
Participant's Normal Retirement Date. Under the Normal Retirement Benefit, no
Benefits shall be paid to any Beneficiary following the death of the
Participant.
(i) SINGLE LIFE ANNUITY. A Participant who retires on or after
attainment of age 60 shall, absent an election to receive an Optional Form of
Benefit, receive a Single Life Annuity determined using the formula set forth in
the Plan (based only upon years of service, compensation and Tier), with no
reduction for commencement prior to age 65. A Participant who retires before
attainment of age 60 (but on or after attainment of age 55), shall, absent an
election to receive an Optional Form of Benefit, receive a Single Life Annuity
first determined under the formula set forth in the Plan and then reduced by the
appropriate percentage described in Section 2.11 (e.g., 15% reduction if
commencement is at age 57).
Example: A participant retiring with $300,000 Final Compensation and a 60%
benefit level will have a Normal Retirement Benefit of $180,000 per year for
life commencing at age 65. The Single Life Annuity payable to this Participant
on retirement at age 60 would also be $180,000
14
<PAGE>
per year for life, commencing at age 60. The Single Life Annuity payable to
this Participant as an Early Retirement Benefit at age 55, would be $135,000
($180,000 reduced by 5% per year of early retirement, 5 years, or 25%) per
year for life commencing at age 55.
(b) OPTIONAL FORMS OF BENEFIT. The Optional Forms of Benefit are
described in this Section 6.2(b). Each Optional Form of Benefit shall be
actuarially adjusted as described below.
(i) JOINT AND SURVIVOR ANNUITY. This Optional Form of Benefit
is the Actuarial Equivalent of the Participant's Single Life Annuity as
determined under Section 6.2(a)(i) paid in equal quarterly installments for the
life of the Participant and after the Participant's death, a 50%, 75% or 100%
continuation of such Benefit, as elected by the Participant, payable to the
Participant's Beneficiary for life.
(ii) LIFE ANNUITY WITH TERM CERTAIN. This Optional Form of
Benefit is the Actuarial Equivalent of the Participant's Single Life Annuity as
determined under Section 6.2(a)(i) paid in equal quarterly installments for the
life of the Participant with fixed payments over a period of 5, 10, 15 or 20
years, as elected by the Participant.
(iii) LUMP SUM. This Optional Form of Benefit pays a single
Lump Sum to the Participant and is available only at the discretion of the
Administrative Committee. The amount of this benefit payment shall be the
Actuarial Equivalent of the Participant's Normal Retirement Benefit as
determined in accordance with Sections 6.2(b)(vi) and 6.2(c).
Example: Assume a Participant retires and elects a Lump Sum benefit at age 60,
with $300,000 of Final Compensation and a 60% benefit level. The Normal
Retirement Benefit of $180,000 per year commencing at age 65 would have a
present value (determined as of the date the Participant would attain age 65 and
assuming survival until age 65) of approximately $1,728,000. At age
15
<PAGE>
60, this would have a present value of approximately $1,291,000 (reflecting a
6% discount rate over 5 years).
(iv) ESTATE PRESERVATION ALTERNATIVE. A Participant may enter
into such agreements or other documents as may be required by the Company in
order to have the Participant's Benefit applied to the purchase of a life
insurance policy or policies. If the Participant elects such life insurance
alternative form of distribution, the Participant's Benefit payable under the
Plan shall be determined by the terms of such agreements and documents,
including, without limitation, the life insurance policy, and shall not be
determined under the formulas specified in this Section 6.
This Estate Preservation Alternative is available only at the discretion of
the Administrative Committee and shall have a present value that is the
Actuarial Equivalent of the Participant's Normal Retirement Benefit as
determined in accordance with Sections 6.2(b)(vi) and 6.2(c).
(v) OTHER FORMS OF PAYMENT. Tier I Participants may request
from the Administrative Committee, pursuant to Section 6.1, prior to the
Participant's termination of employment, approval of a method of payment
different from those listed in Section 6.2 (a) or (b), which method of payment
must be the Actuarial Equivalent of the Participant's Normal Retirement Benefit
as determined in accordance with Sections 6.2(b)(vi) and 6.2(c) and must consist
of substantially equal annual or quarterly payments over a period of no less
than five (5) years. Such approval shall be within the full discretion of the
Administrative Committee.
(vi) LUMP-SUM, ESTATE PRESERVATION, OTHER FORMS OF PAYMENT.
These benefit forms are to be payable by first determining the amount of the
benefit that would be payable as the Normal Retirement Benefit using the
Participant's years of service,
16
<PAGE>
compensation and Tier. Where the calculation is determined with reference to
a payment date prior to attainment by the Participant of age 65, the future
value (using the Actuarial Equivalence assumptions in effect under the Plan
as of the date of determination) of the Normal Retirement Benefit (determined
as of the first date it would be payable following the attainment of age 65
by the Participant) is determined, and then reduced to a present value using
the discount rate in effect under the Plan as of the date of determination
(initially, 6%). This present value is the amount of the Lump Sum, the
amount that would be payable for the purchase of an insurance policy (under
the Estate Preservation form of benefit), or the amount used to determine the
installment payments payable under Sections 6.2(b)(v).
Example: Assume a Participant retires and elects an installment payment of his
or her benefit in the form of 10 equal annual payments commencing at age 55,
with $300,000 of Final Compensation and a 60% benefit level.
Step 1-Calculate the Participant's Normal Retirement Benefit commencing
at age 65. This will be an annual benefit of $180,000.
Step 2-Determine the value of the Normal Retirement Benefit at age 65 using
the Plan's Actuarial Equivalence assumption then in effect. This equals
approximately $1,728,000.
Step 3-Discount this amount at 6% per year to reflect the payment at age
55, 10 years before the assumed commencement date of the Participant's Normal
Retirement Benefit. This yields a present value of approximately $964,000 at
age 55.
Step 4-Determine the installment payments needed to amortize this amount
over 10 years using a 6% factor. The annual payment equals approximately
$123,000.
(c) ACTUARIAL EQUIVALENCE. For the purpose of calculating the
Optional Forms of Benefit in Sections 6.2(b)(i) and (ii), Actuarial Equivalent
shall be determined by using
17
<PAGE>
a discount rate and a mortality assumption adopted from time to time by the
Administrative Committee. The initial factors to be used are a discount rate
of 6% and a mortality assumption based upon the 1984 Uniform Pension
Mortality Table. For the purpose of calculating the Optional Forms of
Benefit in Sections 6.2(b)(iii), (iv) and (v), Actuarial Equivalent shall be
determined by calculating the present value of the Normal Retirement Benefit
as of the date the Participant would attain age 65 and assuming survival
until age 65, using the discount rate and mortality assumption identified in
this Section 6(c), and then reducing that amount to a present value by using
the discount rate in effect for this purpose under the Plan (initially, 6%).
Where Actuarial Equivalent is determined with respect to an Optional Form of
Benefit that is payable after the attainment by a Participant of age 65, the
determination shall be made by reference to the Normal Retirement Benefit
that would be payable to such Participant if no Optional Form of Benefit had
been elected.
6.3 TIME OF PAYMENT OF BENEFITS FOLLOWING TERMINATION OF EMPLOYMENT. A
Participant who is fully Vested and who has terminated his or her employment
with the Company shall commence receiving Benefits upon the first day of the
calendar quarter next following the Participant's Early Retirement Date if the
Participant has not reached his or her Normal Retirement Age upon termination of
employment, or the first day of the calendar quarter next following the
Participant's Normal Retirement Date, if the Participant has reached his or her
Normal Retirement Age upon termination of employment, PROVIDED, HOWEVER, that
upon becoming a Participant in the Plan, a Participant may elect such other date
upon which the Participant's Benefit payments shall commence following
termination of employment, but such other date shall not be earlier than the
first day of the calendar quarter next following the Participant's Early
Retirement Date. Notwithstanding the foregoing, no election to defer
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<PAGE>
payment of benefits shall be applicable to benefits that are payable under
Sections 6.2(a)(i), 6.2(b)(i) or 6.2(b)(ii) above (in the form of a single
life annuity, a joint and survivor annuity or a life annuity with a term
certain), all of which shall in all cases commence to be paid as of the first
to occur of the Participant's Early Retirement Date or Normal Retirement
Date, as the case may be. Such election of a Benefit payment commencement
date shall be irrevocable; PROVIDED, HOWEVER, that a Participant may change
his or her election of a Benefit payment commencement date if the election to
change the Benefit payment commencement date is made at least one (1) year
prior to the earlier of (a) the date that Benefit payments would have
commenced if no change in the election of Benefit payment commencement date
had been made and (b) the date Benefit payments would commence after giving
effect to the Participant's election to change his or her Benefit payment
commencement date. If an election to change a Participant's Benefit
commencement date does not meet the requirements of the preceding sentence,
such election shall have no effect. If the Participant does not elect a
Benefit commencement date upon becoming a Participant in the Plan, the
Participant shall be deemed to have elected to begin receiving Benefit
payments on the Participant's Early Retirement Date or Normal Retirement
Date, as applicable. Notwithstanding the foregoing, the Administrative
Committee, in its sole and absolute discretion, and in accordance with
Section 8, may cause the Benefits to be payable to a Participant at an
earlier or a later date.
6.4 DISABILITY BENEFITS.
(a) If a Participant terminates employment with the Company prior to
Normal Retirement Age as a result of the Participant's Disability, the
Participant shall receive a Disability Benefit. The Disability Benefit payments
shall commence on the first day of the calendar quarter coincident with or next
following the date the Participant terminates or attains
19
<PAGE>
the Early Retirement Date, whichever is later. The Participant's Disability
Benefit shall be calculated in the same manner as the Participant's Normal
Retirement Benefit and shall be paid in the Normal Form of Benefit, unless
the Participant previously elected, in accordance with Section 6.2, an
alternate form of distribution.
(b) If a Participant terminates employment with the Company as a
result of the Participant's Disability coincident with or following the
attainment of the Participant's Normal Retirement Age, the Participant's
Disability Benefit shall be calculated in the same manner as the Participant's
Normal Retirement Benefit and shall be paid in the Normal Form of Benefit unless
the Participant previously elected, in accordance with Section 6.2, an alternate
form of distribution. The amount of the payments made to a Participant who has
terminated employment as a result of his or her Disability shall not be subject
to any reduction on account of the commencement of such payments prior to such
Participant's Normal Retirement Age.
(c) Notwithstanding the foregoing, no Participant shall be eligible
for any Disability Benefit unless such Participant is fully vested under the
Plan as of the date such Participant's employment terminates as a result of his
or her Disability. In addition, for purposes of benefits payable as Disability
Benefits under this Section 6.4, the Normal Form of Benefit payable to a
disabled Participant who has made no election as to any alternative form of
Benefit prior to his or her termination of employment on account of Disability
shall, with respect to an unmarried Participant, be a Single Life Annuity as
described in Section 6.2(a), and shall, with respect to a married Participant,
be a 100% Joint and Survivor Annuity as described in Section 6.2(b)(i), with the
Participant's spouse as the beneficiary.
(d) If a Participant who has terminated employment with the Company
as a result of his or her Disability ceases to suffer from a Disability on or
after attainment of age 60,
20
<PAGE>
his or her Benefit shall continue to be paid without any adjustment. If a
Participant who has terminated employment with the Company as a result of his
or her Disability ceases to suffer from a Disability, as determined at the
discretion of the Administrative Committee, prior to attainment of age 60,
the Benefit payable to such Participant shall be adjusted on a prospective
basis as follows:
(i) If Disability Benefit payments have not already commenced,
the Participant shall be paid in the same form of benefit as elected or
otherwise paid under the provisions of this Section 6.4, but shall be adjusted
in amount so as to be equal to the Benefit payment that would be made if the
Participant had terminated his or her employment as of the date the
Administrative Committee has determined the Participant's Disability ceased,
with the Applicable Percentage and Final Compensation determined as of the date
the Participant actually terminated employment as a result of his or her
Disability. In all other respects, the Participant's Benefit shall be subject to
all of the terms and conditions of the Plan, including but not limited to the
provisions of Section 5.2 relating to Forfeiture for Competition.
(ii) If Disability Benefit payments have already commenced in the
Normal Form of Benefit as defined for purposes of this Section 6.4, the Benefit
payments made on or after the date the Administrative Committee has determined
the Participant's Disability ceased, shall be adjusted so that each such Benefit
payment shall be equal to the amount that would have been payable under the Plan
if the Participant had terminated employment as of the date his or her
Disability is determined to have ceased with the Applicable Percentage and Final
Compensation determined as of the date the Participant actually terminated
employment as a result of his or her Disability, with commencement of Benefit
payments immediately thereafter. In all other respects, the Participant's
Benefit shall be subject to all of the terms and conditions of
21
<PAGE>
the Plan, including but not limited to the provisions of Section 5.2 relating
to Forfeiture for Competition.
(iii) If any Participant who has terminated his or her employment
as a result of a Disability returns to employment, such Participant shall
thereafter have no rights to any Disability Benefit unless his or her employment
terminates subsequent to such reemployment under conditions that are determined
to create a right to a Disability Benefit at that time. Any such reemployed
Participant shall have his or her benefits determined under the Provisions of
the Plan as generally applicable to Participants who have not terminated
employment as a result of a Disability. No reduction in benefit payments shall
be made on account of Disability Benefits, if any, paid to a Participant prior
to his or her reemployment.
6.5 DEATH BENEFITS. If a Participant dies prior to or while receiving
Benefits hereunder, Benefits, if any, shall be paid to the Participant's
Beneficiary as follows:
(a) If a Participant who is Vested in his or her Benefit under the
Plan dies prior to terminating employment with the Company, a Lump Sum payment
which is the Actuarial Equivalent of the Participant's Normal Retirement
Benefit, shall be paid to the Participant's Beneficiary.
(b) If a Participant dies after the Participant terminates employment
with the Company, the death Benefit payable to the Participant's Beneficiary
shall be determined by the distribution form of Benefit previously elected by
the Participant. For this purpose, the Participant, if not yet in pay status at
the time of his or her death, shall be deemed to have commenced receiving
distributions on the day prior to the date of his or her death.
6.6 SECTION 280G ADJUSTMENTS.
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(a) Notwithstanding any other provision of this Plan to the contrary,
if any distribution received or to be received by a Participant pursuant to the
Plan ("Distribution") would (i) constitute a "parachute payment" within the
meaning of Section 280G of the Code and (ii) but for this subsection (a), be
subject to the excise tax imposed by Section 4999 of the Code (the "Excise
Tax"), then, subject to the provisions of subsection (b) hereof, such
Distribution shall be reduced to the largest amount which the Participant, in
his or her sole discretion, determines would result in no portion of the
Distribution being subject to the Excise Tax. The determination by a
Participant of any required reduction pursuant to this subsection (a) shall be
conclusive and binding upon the Company. The Company shall reduce a
Distribution in accordance with this subsection (a) only upon written notice by
the Participant indicating the amount of such reduction, if any. If the
Internal Revenue Service (the "IRS") determines that a Distribution is subject
to the Excise Tax, then subsection (b) hereof shall apply, and the enforcement
of subsection (b) shall be the exclusive remedy to the Company for a failure by
the Participant to reduce the Distribution so that no portion thereof is subject
to the Excise Tax.
(b) If, notwithstanding any reduction described in subsection (a)
hereof (or in the absence of any such reduction), the IRS determines that a
Participant is liable for the Excise Tax as a result of the receipt of a
Distribution, then the Participant shall be obligated to pay back to the
Company, within 30 days after final IRS determination, an amount of the
Distribution equal to the "Repayment Amount." The Repayment Amount with respect
to a Distribution shall be the smallest such amount, if any, as shall be
required to be paid to the Company so that the Participant's net proceeds with
respect to any Distribution (after taking into account the payment of the Excise
Tax imposed on such Distribution) shall be maximized. Notwithstanding the
foregoing, the Repayment Amount with respect to a Distribution shall be zero if
a Repayment
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<PAGE>
Amount of more than zero would not eliminate the Excise Tax imposed on such
Distribution. If the Excise Tax is not eliminated pursuant to this
subsection (b), the Participant shall pay the Excise Tax.
7. SOURCE OF BENEFITS.
7.1 Benefits payable under this Plan shall be paid out of the Trust except
to the extent such Benefits are paid by the Company out of the Company's general
assets.
7.2 Notwithstanding any other provisions of this Plan or the Trust
Agreement, the assets of the Trust are subject to the claims of the general
creditors of the Company to the extent provided in the Trust Agreement.
Participants shall have no preferred claim on or beneficial ownership interest
in any Trust assets prior to the time actual payments of Benefits are received,
and all rights of the Participants to Benefits are mere unsecured contractual
rights against the Company. Except in the event of a Change of Control, as set
forth in Section 10, the Company has no duty or obligation to fund the Trust.
The Company may, however, in its discretion, make contributions of cash or
property to the Trust in such amounts and from time to time as the Company shall
determine.
8. ADMINISTRATION.
8.1 GENERAL. This Plan shall be administered by the Administrative
Committee, which shall exercise all administrative powers and duties under the
Plan in accordance with the terms and purposes of the Plan and the Trust
Agreement, including, without limitation, the authority to amend or terminate
the Plan. The Administrative Committee shall determine the amount of the
Benefits due to or on behalf of each Participant or Beneficiary from this Plan
and shall cause them to be paid accordingly.
The Administrative Committee shall have the power to employ agents,
attorneys, accountants or other persons (who also may be employed by the
Company) and to allocate or
24
<PAGE>
delegate to them such powers, rights and duties as the Administrative
Committee may consider necessary or advisable to properly carry out
administration of the Plan, provided that such allocation or delegation and
the acceptance thereof by such agents, attorneys, accountants or other
persons, shall be in writing.
8.2 PROCEDURES. The Administrative Committee may adopt such rules and
regulations not inconsistent with the provisions of the Plan as it deems
necessary or appropriate for the proper administration of the Plan and shall
have the authority, in its sole and absolute discretion, to interpret and
construe any provision of the Plan. All such rules, regulations,
interpretations and constructions shall be final and binding on all Participants
and their legal representatives, beneficiaries, successors, and assigns, subject
to review as provided in Section 8.4.
8.3 ADMINISTRATIVE COMMITTEE DISCRETION. Notwithstanding anything set
forth in the Plan to the contrary, the Administrative Committee shall have the
right, at its sole discretion, to impose any conditions it deems appropriate, or
to make any modifications it deems appropriate, with respect to the manner in
which any individual participates in the Plan, which discretion shall include,
but is not limited to, the right to modify the manner in which a Participant's
service for either Vesting or for Benefit accrual is determined, to impose
individual conditions which are required to be met prior to the payment of any
Benefits under the Plan, the establishment of events which, with respect to any
individual or any group of Participants, shall be events of forfeiture, the
occurrence of which shall result in a forfeiture of all or a portion of the
Benefits otherwise payable to a Participant or Participants; provided, however,
that no change in the terms of a Participant's participation in the Plan shall
be applicable to any Benefits that have accrued prior to the date such change is
made by the Administrative Committee.
25
<PAGE>
8.4 CLAIMS. A submission of a written request for Benefits by the
Participant or a Beneficiary (the "Claimant") will constitute a claim. If,
after review, the claim is approved, the Benefits will be distributed as
provided in the Plan. If the claim is denied in whole or in part, the Company
will notify the Claimant in writing within 90 days after receiving the claim.
In this event, the Company will provide the specific reasons for its decision
and references to the Plan provisions on which the decision is based. The
Company also will specify any additional information or material that must be
submitted to prove the claim and explain how to appeal a denied claim.
While the Company ordinarily has 90 days after receipt of a claim to
respond in writing, there may be times when the Company requires more time to
process the claim. Should this situation occur, the Company will notify the
Claimant within the initial 90-day period that the Company requires an extension
of time to make its decision. However, the extension of time will not exceed an
additional 90 days from the end of the initial 90-day period. If the Claimant
has not received a response from the Company within 90 days or any extension of
such period, the Claimant may treat the claim as denied, and the Claimant may
appeal and seek a review of the claim.
Should a claim for Benefits be denied, or deemed denied, in whole on in
part, the Claimant may appeal the denial by submitting a written request for
review to the Company after receiving the denial (or the deemed denial). The
written request should set forth all the grounds on which it is based. The
Claimant, or the Claimant's representative, also may review pertinent Plan
documents and submit issues and comments in writing to the Company. The Company
will review the appeal, and will notify the Claimant of its decision in writing,
ordinarily within 60 days. There may be times when the Company will require
more time to review an appeal. If
26
<PAGE>
this happens, the Claimant will be notified within the initial 60-day period
that the Company requires an extension of time to make its decision. The
extension will be no longer than 120 days after receipt of the appeal. The
Company's written response to the appeal will give the reasons for its
decision and references to Plan provisions on which the decision is based.
8.5 INDEMNIFICATION. To the extent permitted by applicable state law,
the Company shall indemnify and save harmless the Administrative Committee and
each member thereof, the Board and any delegate of the Administrative Committee
who is an employee of the Company against any and all expenses, liabilities and
claims, including legal fees to defend against such liabilities and claims
arising out of their discharge in good faith of responsibilities under or
incident to the Plan, other than expenses and liabilities arising out of willful
misconduct or gross negligence. This indemnity shall not preclude such further
indemnities as may be available under insurance purchased by the Company or
provided by the Company under any bylaw, agreement or otherwise, as such
indemnities are permitted under state law.
9. AMENDMENT AND TERMINATION.
9.1 AMENDMENT OR TERMINATION. While the Company intends and expects the
Plan to continue to fulfill its purposes and serve the best interests of the
Company in its present form, the Company reserves the right to amend or
terminate the Plan at any time, subject to the provisions of Section 9.2 and
Section 10. The Company has delegated to the Administrative Committee the
authority to amend or terminate the Plan.
9.2 ACCRUED BENEFITS. No termination of the Plan or Trust Agreement or
any amendments thereto which affect Benefits under the Plan shall, without the
written consent of a Participant, eliminate or reduce any Benefit of the
Participant under the Plan to which, as of the date of such termination or
amendment, such Participant would be entitled under the provisions
27
<PAGE>
of the Plan had he or she terminated employment with the Company immediately
prior to such date.
10. CHANGE OF CONTROL OF THE COMPANY.
In the event of a Change of Control of the Company, the Company shall make
a contribution to the Trust in an amount necessary to fully fund the Trust in
order to pay each Participant his or her Normal Retirement Benefit. For this
full funding calculation, each Participant shall be deemed to have continued
employment with the Company to the Participant's Normal Retirement Age (taking
into account for this full funding calculation the Participant's enhanced
Benefit as described in the next sentence). In addition, each Tier II and Tier
III Participant in the Plan, as of the effective date of the Change of Control,
shall receive enhanced Benefits under the Plan calculated as if the Participant
had earned two additional Years of Service as of the effective date of the
Change of Control. For example, if, upon the effective date of a Change of
Control, a Participant has earned six (6) Years of Service, the Participant's
Benefit shall, for all purposes under this Plan, effective as of and following
the effective date of the Change of Control, be calculated as if the Participant
had earned two (2) additional Years of Service. Each Tier I Participant in the
Plan, as of the effective date of the Change of Control, shall receive Benefits
determined at the Applicable Rate of sixty percent (60%). For purposes of this
Section 10, a Participant's Tier level shall be determined as of the effective
date of the Change of Control
In any event, no Change of Control shall, without the written consent of a
Participant, eliminate or reduce any Benefit to which such Participant otherwise
would be entitled under the terms of the Plan. For purposes of this paragraph,
such Benefits shall be calculated as if the Participant had terminated
employment as of the effective date of the Change of Control.
28
<PAGE>
11. MISCELLANEOUS.
11.1 NO RIGHT TO CONTINUED EMPLOYMENT. Nothing contained in this Plan or
in any agreement or instrument executed pursuant to the Plan shall be construed
as conferring upon any Participant the right to continued employment with the
Company or to interfere with the right of the Company to discharge any employee
or any other person at any time or for any reason, which right is hereby
reserved.
11.2 SUCCESSORS AND ASSIGNS. This Plan shall be binding upon the Company
and its successors and assigns.
11.3 ASSIGNMENT OR ALIENATION. Benefits of Participants under this Plan
may not be anticipated, assigned (either by law or in equity), transferred,
alienated or subject to attachment, garnishment, levy, execution or other legal
or equitable process.
11.4 HEADINGS. The headings herein are for reference only. In the event
of a conflict between a heading and content of a Section of this Plan, the
content of the Section shall control.
11.5 GENDER AND NUMBER. Whenever used herein, the masculine shall be
interpreted to include the feminine and neuter, the neuter to include the
masculine and feminine, the singular to include the plural and the plural to
include the singular, unless the context requires otherwise.
11.6 GOVERNING LAW. The place of administration of this Plan shall
conclusively be deemed to be within the State of Nevada, and the Plan shall be
governed by and in all respects construed in accordance with the substantive
laws of the State of Nevada, except where such laws are superseded by applicable
federal laws.
29
<PAGE>
IN WITNESS WHEREOF, the Company has executed this Plan effective as of
June 18, 1998.
CIRCUS CIRCUS ENTERPRISES, INC.
By: Michael S. Ensign
-------------------------------
Title: Chairman of the Board, Chief
Executive Officer & Chief
Operating Officer
30
<PAGE>
EXHIBIT I
CIRCUS CIRCUS ENTERPRISES, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Proposed Schedule of Eligibility Criteria for Initial 1998 Plan Year.
The criteria presented in this Exhibit I may be used by the Administrative
Committee for selecting Eligible Employees for the Plan's initial 1998 year.
The Administrative Committee reserves the right to change the criteria presented
in this Exhibit I at any time and from time to time, in its sole and absolute
discretion.
(a) Eligible Employees shall be classified as Tier I Eligible
Employees, Tier II Eligible Employees or Tier III Eligible Employees.
(i) Tier I Eligible Employees shall consist generally of
employees who are Corporate Vice Presidents or above, General Managers of
major properties and certain other key executives, in any case having total
annual Compensation of not less than $250,000.
(ii) Tier II Eligible Employees shall consist generally of
employees who are General Managers of small properties, major Department
Heads of major properties, and other corporate level employees who are
designated by the Administrative Committee as eligible to participate in the
Plan at the Tier II level, in any case having a total annual Compensation of
not less than $100,000.
(iii) Tier III Eligible Employees shall consist generally of
other Department Heads of major properties having total annual Compensation
of not less than $100,000 and major Department Heads of small properties.
31
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<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-END> OCT-31-1998
<CASH> 59,176
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<RECEIVABLES> 22,278
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<CURRENT-ASSETS> 136,258
<PP&E> 3,603,628
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<BONDS> 2,094,824
0
0
<COMMON> 1,894
<OTHER-SE> 1,192,682
<TOTAL-LIABILITY-AND-EQUITY> 3,717,110
<SALES> 1,124,072
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