<PAGE>
UNITED STATES
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: DECEMBER 31, 1995
----------------------------
[ ] 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: 1-9481
----------------------------
SAHARA GAMING CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
NEVADA 88-0304348
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
4949 N. RANCHO DRIVE, LAS VEGAS, NEVADA 89130
- --------------------------------------------------------------------------------
(Address of principal executive office and zip code)
(702) 658-4300
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by a 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
----- -----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. YES NO
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
6,195,356 as of February 12, 1996
- ----------------------------------- --------------------------------------
Amount Outstanding Date
<PAGE>
SAHARA GAMING CORPORATION
INDEX
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Condensed Financial Statements
Balance sheets at December 31, 1995
(unaudited) and September 30, 1995...................... 2
Statements of Operations for the three months
ended December 31, 1995 and 1994 (unaudited)............ 3
Statement of Changes in Stockholders' Equity
for the three months ended December 31, 1995
(unaudited)............................................. 4
Statements of Cash Flows for the three months
ended December 31, 1995 and 1994 (unaudited)............ 5
Notes to Consolidated Condensed Financial
Statements (unaudited).................................. 6
Independent Accountants' Review Report................. 12
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations.............................................. 13
PART II. OTHER INFORMATION........................................... 22
1
<PAGE>
SAHARA GAMING CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, September 30,
ASSETS 1995 1995
------ ------------ -------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and short-term investments $ 35,161,475 $ 42,749,932
Accounts receivable, net 3,400,295 6,189,109
Accounts receivable, officer 556,952 545,042
Inventories 1,406,606 1,776,427
Prepaid expenses & other 5,840,400 5,758,808
Assets held for sale 0 98,712,541
------------ ------------
Total current assets 46,365,728 155,731,859
Land held for development 40,618,886 19,114,486
Property and equipment, net 122,314,145 126,311,847
Goodwill 47,148,228 47,506,348
Deferred income taxes 5,663,665
Other assets 9,100,329 12,309,796
------------ ------------
Total assets $265,547,316 $366,638,001
============ ============
LIABILITIES and STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Current portion of long-term debt $ 3,379,710 $ 6,234,550
Accounts payable 5,417,919 7,024,980
Interest payable 2,535,428 9,516,776
Accrued and other liabilities 11,551,644 15,709,850
Debt due upon sale of assets 0 114,612,680
------------ ------------
Total current liabilities 22,884,701 153,098,836
Deferred income taxes 6,555,335 0
Long-term debt - less current portion 197,589,248 198,655,174
Stockholders' Equity:
Common Stock, $.01 par value; authorized-100,000,000
shares; issued and outstanding-6,195,356 shares 61,944 61,944
Preferred stock, exchangeable, redeemable 8%
cumulative, stated at $2.14 liquidation value,
authorized-10,000,000 shares; issued and
outstanding-7,570,895 shares 17,521,385 17,521,385
Additional paid-in capital 51,513,504 51,513,504
Accumulated deficit (30,491,027) (54,125,068)
------------ ------------
Total 38,605,806 14,971,765
Less treasury stock - 4,875 shares, at cost (87,774) (87,774)
------------ ------------
Total stockholders' equity 38,518,032 14,883,991
------------ ------------
Total liabilities and stockholders' equity $265,547,316 $366,638,001
============ ============
</TABLE>
See the accompanying Notes to Consolidated Condensed Financial Statements.
2
<PAGE>
SAHARA GAMING CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
December 31, 1995 December 31, 1994
----------------- -----------------
(Unaudited) (Unaudited)
<S> <C> <C>
Revenues:
Casino $21,998,864 $38,620,676
Hotel 1,013,267 9,625,342
Food and beverage 2,835,139 7,285,647
Other revenues 2,218,721 6,108,249
Gain on sale of assets 40,753,738 0
----------- -----------
Total revenues 68,819,729 61,639,914
----------- -----------
Operating expenses:
Casino 10,617,544 17,051,723
Hotel 439,858 4,125,914
Food and beverage 3,734,860 9,056,991
Other operating expenses 947,512 3,390,404
Selling, general & administrative 4,096,628 7,363,443
Utilities & property expenses 2,384,706 6,001,063
Depreciation & amortization 3,923,318 6,776,382
----------- -----------
Total operating expenses 26,144,426 53,765,920
----------- -----------
Operating income 42,675,303 7,873,994
Interest expense 6,822,262 11,092,468
----------- -----------
Net income (loss) before income tax
expense (benefit) 35,853,041 (3,218,474)
Federal income tax expense (benefit) 12,219,000 (950,000)
----------- -----------
Net income (loss) 23,634,041 (2,268,474)
Dividends on preferred shares 350,428 324,034
----------- -----------
Net income (loss) applicable to common shares $23,283,613 ($2,592,508)
=========== ===========
Average common shares outstanding 6,195,356 6,195,356
=========== ===========
Income (loss) per common share $3.76 ($0.42)
=========== ===========
</TABLE>
See the accompanying Notes to Consolidated Condensed Financial Statements.
3
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SAHARA GAMING CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Additional
Common Preferred Paid-in Accumulated Treasury
Stock Stock Capital Deficit Stock Total
------- ----------- ----------- ------------ -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balances, October 1, 1995 $61,944 $17,521,385 $51,513,504 ($54,125,068) ($87,774) $14,883,991
Net Income 23,634,041 23,634,041
------- ----------- ----------- ------------ -------- -----------
Balances, December 31, 1995 $61,944 $17,521,385 $51,513,504 ($30,491,027) ($87,774) $38,518,032
======= =========== =========== ============ ======== ===========
</TABLE>
See the accompanying Notes to Consolidated Condensed Financial Statements.
4
<PAGE>
SAHARA GAMING CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
December 31, 1995 December 31, 1994
----------------- -----------------
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Cash and short-term investments
provided by operations $ 27,904,763 $ 4,992,421
Gain on sale of subsidiary assets (40,753,738) 0
Decrease (increase) in accounts receivable, net 2,788,814 (535,639)
Increase in due from officer (11,910) (9,203)
Decrease in inventories 369,821 11,852
Decrease (increase) in prepaid expenses & other (401,724) 57,039
Decrease (increase) in deferred income taxes 12,219,000 (950,000)
Decrease (increase) in other assets 1,324,860 (1,443,523)
Increase (decrease) in accounts payable (1,607,061) 5,284,019
Decrease in interest payable (6,981,348) (6,204,463)
Decrease in other current liabilities (4,158,206) (1,610,449)
------------ ------------
Net cash used in operating activities (9,306,729) (407,946)
------------ ------------
Cash flows from investing activities:
Proceeds from sale of subsidiary assets 128,508,377 0
Decrease in restricted cash 64,976 1,681,925
Capital expenditures (1,860,330) (15,793,062)
------------ ------------
Net cash provided by (used in) investing activities 126,713,023 (14,111,137)
------------ ------------
Cash flows from financing activities:
Cash paid on long-term debt (124,994,751) (2,261,067)
------------ ------------
Net cash used in financing activities (124,994,751) (2,261,067)
------------ ------------
Decrease in cash and short-term investments (7,588,457) (16,780,150)
Cash and short-term investments,
beginning of year 42,749,932 55,582,503
------------ ------------
Cash and short-term investments,
end of year $ 35,161,475 $ 38,802,353
============ ============
</TABLE>
See the accompanying Notes to Consolidated Condensed Financial Statements.
5
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SAHARA GAMING CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 - BASIS OF PRESENTATION AND GENERAL INFORMATION
Sahara Gaming Corporation (the "Company" or "Sahara Gaming"), a publicly traded
Nevada corporation, is the successor corporation of two affiliates, Sahara
Resorts and Sahara Casino Partners, L.P., which combined in a business
combination in September, 1993. The Company's primary business operations have
been conducted through four wholly owned subsidiary corporations, Sahara Nevada
Corp. ("SNC"), Hacienda Hotel Inc. ("HHI"), Santa Fe Hotel Inc. ("SFHI") and
Pioneer Hotel Inc. ("PHI") (the "Operating Companies"). HHI sold substantially
all the assets of the Hacienda Resort Hotel and Casino (the "Hacienda") and SNC
sold substantially all the assets of the Sahara Hotel and Casino (the "Sahara")
in October 1995. SFHI owns and operates the Santa Fe Hotel and Casino (the
"Santa Fe"), located in Las Vegas, Nevada, and PHI owns and operates the Pioneer
Hotel & Gambling Hall (the "Pioneer") in Laughlin, Nevada.
These consolidated condensed financial statements should be read in conjunction
with the consolidated financial statements and notes thereto included in the
Company's Annual Report to stockholders for the year ended September 30, 1995.
The results of operations for the three month period ended December 31, 1995
are not necessarily indicative of the results to be expected for the entire
year.
In the opinion of the Company, the accompanying unaudited consolidated condensed
financial statements contain all adjustments (consisting of only normal
accruals) necessary to present fairly the financial position of the Company at
December 31, 1995, the results of its operations for the three month period
ended December 31, 1995 and 1994, the changes in stockholders' equity for the
three month period ended December 31, 1995, and cash flows for the three month
periods ended December 31, 1995 and 1994.
NOTE 2 - CASH AND SHORT-TERM INVESTMENTS
Approximately $14.8 million of the Company's consolidated cash and short-term
investments is held by PHI and is subject to certain restrictions, including
restrictions on its availability for distribution to the Company, by the terms
of an indenture pursuant to which $120.0 million principal amount of 13 1/2%
Guaranteed First Mortgage Bonds due 1998 ("13 1/2% Notes") of Pioneer Finance
Corp. was issued, the proceeds of which were loaned to PHI.
6
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In November 1995, the Company made an equity contribution of $15 million in cash
to PHI, in accordance with terms of an agreement reached with holders of 13 1/2%
Notes pursuant to which the holders of the 13 1/2% Notes consented to the sale
of the Hacienda and Sahara. In December 1995, the Pioneer used $3 million of
such funds together with cash on hand to make the December 1, 1995 semi-annual
interest payment of $5.6 million on the 13 1/2% Notes. The remaining funds from
the equity contribution representing $12.0 million of the $14.8 of cash and
short term investments held at the Pioneer, are restricted in use for debt
service on the 13 1/2% Notes, repurchase of 13 1/2% Notes, capital expenditures
at the Pioneer, and, with respect to $10 million, contribution to capital to a
wholly-owned subsidiary of PHI that owns real property in Henderson, Nevada.
In addition, approximately $4.4 million of the Company's consolidated cash and
short term investments is held by SFHI and is subject to certain restrictions
and limitations on its use, including restrictions on its availability for
distribution to the Company, by the terms of an indenture pursuant to which
$115.0 million principal amount of Guaranteed First Mortgage Notes due 2000
("11% Notes") of SFHI was issued.
Upon consummation of the sale of the Sahara and the concurrent in substance
defeaseance on October 2, 1995 of the 12 1/8% Guaranteed First Mortgage Notes
due 1996 (the "12 1/8% Notes") issued by Sahara Finance Corp., certain covenants
restricting the use of $10 million held by SNC at September 30, 1995, were
extinguished.
NOTE 3 - ASSETS HELD FOR SALE
On October 2, 1995, the Company sold substantially all of the assets of the
Sahara for $128 million in cash and exchanged 22 acres of land, a portion of
which was utilized by the Sahara as a parking lot, for 27 acres of land just
south of the Sahara on Las Vegas Boulevard, on which a water theme park
currently operates. The Company utilized approximately $122 million in proceeds
to retire and defease the approximately $115 million outstanding principal
amount of 12 1/8% Notes issued by Sahara Finance Corp and secured by the Sahara
assets and to pay costs associated with the transaction, including approximately
$6 million of costs associated with the defeasance of the 12 1/8% Notes. The net
proceeds of approximately $6 million were added to working capital. The Company
recorded a pre-tax gain of approximately $40 million (net of the extinguishment
of debt charge discussed in Note 5) on the sale in the quarter ended December
31, 1995.
NOTE 4 - PROPERTY, PLANT AND EQUIPMENT, NET
In connection with the acquisition of the 27 acre parcel, the Company assumed
the operating lease under which a water theme park operates. The lease may be
terminated by the Company at any time after December 1996. The Company has
guaranteed payments by the tenant of a loan to the prior owner of the property
("tenant loan") and has
7
<PAGE>
agreed to pay the loan in full in certain situations, including in the event the
lease is terminated for any reason prior to 2004. The tenant loan, which is
amortized through monthly principal and interest payments through December 2004,
had an outstanding balance of $6.2 million as of December 31, 1995. Under the
terms of the lease, as amended, the water-theme park remits a base rent of
approximately $16,000 monthly plus an annual rent payment based on gross
receipts. The 27 acre parcel was valued at approximately $22 million for
purposes of the Sahara Sale and is reported as land held for development in the
December 31, 1995 consolidated balance sheet.
In October 1995, the Company entered into an agreement to transfer its rights
and obligations under contracts with members of Camperland, a recreational
vehicle park located on approximately 14 acres of Hacienda property that is
operated by the Company under a lease with the new owners of the Hacienda, to
the developer of a recreational vehicle park currently under construction.
Pursuant to the agreement, the Company will pay $4 million to the developer and
the developer will assume all obligations relating to Camperland contracts. The
Company will remain contingently liable for such obligations. Upon receipt of
approval for rezoning the property for use as a recreational vehicle park and
for construction of the park, an earnest money deposit of $250,000 will be
released from escrow to the developer, and the remaining $3,750,000 will be
deposited into escrow and will be disbursed for the purchase of the land for the
new park, and to pay for the cost of construction of the new recreational
vehicle park. The performance by the developer of its obligations under the
agreement will be secured by, among other things, a first deed of trust against
the property designated for development of the new park. If that agreement is
not consummated, the Company will be obligated to transfer the Camperland
operations to another location on or before February 1997 and continue to
service existing contracts. The Company has acquired a 40 acre parcel of
property for such purposes.
In November 1995, the Company sold the Spirit of America barge vessel ("Spirit")
for $3.3 million in cash. The Spirit was acquired in connection with the
Company's proposed development of a casino entertainment complex in Parkville,
Missouri. Net proceeds of $3.2 million from the sale were added to general
working capital.
NOTE 5 - DEBT DUE UPON SALE OF ASSETS
In connection with the sale of the Sahara, the Company made a tender offer to
purchase for cash all outstanding 12 1/8% Notes at a price of $1,047 per $1,000
principal amount, plus accrued interest. The Company accepted for payment and
retired $89.2 million original principal amount of 12 1/8% Notes tendered in the
offer and the Company defeased the remaining approximately $27 million balance
of 12 1/8% Notes. In November 1995, the Company purchased and retired the
remaining $27 million original principal amount of 12 1/8% Notes that were
defeased upon consummation of the sale. The Company recorded an approximate $6.0
million charge for extinguishment of debt against the gain on the sale of the
Sahara in the quarter ended December 31, 1995.
8
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NOTE 6 - LONG-TERM DEBT
In December 1995, the Company acquired $2.6 million principal amount of 10 1/4%
Subordinated Debentures due 1998 (the "10 1/2% Debentures"). The Company
retired $2.3 million to meet a sinking fund payment due in June 1996 and
$300,000 to partially satisfy the sinking fund payment due in June 1997.
NOTE 7 - SUBSEQUENT EVENTS - REPURCHASE OF FIRST MORTGAGE NOTES
In January 1996, the Company completed the repurchase of an aggregate of $38.1
million principal amount of long-term debt, comprised of $25.6 million principal
amount of 11% Notes and $12.5 million principal amount 13 1/2% Notes. The
Company will retire $5.6 million principal amount of the 11% Notes and the
entire $12.5 million principal amount of the 13 1/2% Notes acquired. As a
result, the outstanding balance of the 11% Notes will be approximately $99.4
million and of the 13 1/2% Notes will be approximately $70.0 million.
The Company financed the repurchase of debt with $7.5 million of working capital
and the net proceeds of a private placement of $20 million principal amount of
12% Notes due 1999 (the "12% Notes") issued by the Company's subsidiary, Sahara
Las Vegas Corp. The 12% Notes are secured by, among other things, the Company's
27 acre parcel of real property on the Las Vegas Strip and $20 million principal
amount of the 11% Notes acquired. The 12% Notes are guaranteed by the Company.
In connection with these transactions, the Company satisfied a contingent
obligation to make additional equity contributions to its subsidiary, Pioneer
Hotel Inc.
The Company expects to record a gain of approximately $10.6 million (pre-tax)
related to the transactions in the quarter ending March 31, 1996.
NOTE 8 - SUBSEQUENT EVENTS - OTHER
In February 1996, the Company completed a $1.75 million sale leaseback
transaction with respect to gaming equipment at the Santa Fe. The lease
requires an approximate $70,000 per month rental payment over a 24 month term.
In February 1996, SFHI prepaid in full and terminated the agreement the $1.6
million principal balance on its working capital loan agreement. The working
capital loan agreement required monthly principal and interest payments of
$157,000 monthly and matured in December 1996.
9
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NOTE 9 - SUPPLEMENTAL INFORMATION
Supplemental statement of cash flows information for the three month period
ended December 31, 1995 and 1994 is presented below:
1995 1994
----------- -----------
Operating Activities:
Cash paid during the period
for interest, net of amount
capitalized of $1,804,035
for 1994 $13,456,207 $16,812,419
=========== ===========
Supplemental Schedule of Non Cash
Investing and Financing Activities
Land acquired in exchange
of assets $21,504,400
===========
10
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10. SUPPLEMENTAL STATEMENT OF SUBSIDIARY INFORMATION
The Company's primary operations are in the hotel/casino industry and are
conducted in fiscal 1996 primarily through PHI and SFHI, and in fiscal 1995 were
conducted primarily through SNC, HHI, PHI and SFHI. The Company sold
substiantially all the assets of the Hacienda in August 1995 and of the Sahara
in October 1995. "Other" below includes financial information for SNC, HHI and
the Company's other operations. In addition to the financial information set
forth in the table below (dollars in thousands) for the three months ended
December 31, 1995 and 1994, see notes 2, 7 and 8 for additional discussion of
subsidiary operations.
<TABLE>
<CAPTION>
Year PHI SFHI Other TOTAL
---- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Operating revenues 1995 $11,373 $15,409 $42,038 $68,820
======== ======== ======== ========
1994 $11,408 $16,195 $34,037 $61,640
======== ======== ======== ========
Operating Income (loss) 1995 $866 $1,039 $40,770 $42,675
======== ======== ======== ========
1994 $1,797 $3,660 $2,417 $7,874
======== ======== ======== ========
Interest Expense 1995 $2,807 $3,520 $495 $6,822
======== ======== ======== ========
1994 $3,475 $3,245 $4,372 $11,092
======== ======== ======== ========
Depreciation and Amortization 1995 $1,508 $2,251 $164 $3,923
======== ======== ======== ========
1994 $1,251 $2,036 $3,489 $6,776
======== ======== ======== ========
Capital Expenditures 1995 $558 $1,036 $ 266 $ 1,860
======== ======== ======== ========
1994 $1,453 $13,078 $1,262 $15,793
======== ======== ======== ========
Identifiable Assets 1995 $125,659 $90,677 $49,211 $265,547
======== ======== ======== ========
1994 $100,791 $148,586 $223,192 $472,569
======== ======== ======== ========
</TABLE>
11
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INDEPENDENT ACCOUNTANTS' REVIEW REPORT
Sahara Gaming Corporation:
We have reviewed the accompanying consolidated condensed balance sheet of Sahara
Gaming Corporation and subsidiaries as of December 31, 1995, the related
consolidated condensed statements of operations and of cash flows for the three-
month periods ended December 31, 1995 and 1994, and of stockholders' equity for
the three-month period ended December 31, 1995 in accordance with Statements on
Standards for Accounting and Review Services issued by the American Institute of
Certified Public Accountants. All information included in these financial
statements is the representation of the Company's management.
A review of interim financial information consists principally of inquiries of
Company personnel and analytical procedures applied to financial data. It is
substantially less in scope than an audit in accordance with generally accepted
auditing standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole. Accordingly, we do not
express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to such consolidated condensed financial statements in order for them to
be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Sahara Gaming Corporation and
subsidiaries as of September 30, 1995, and the related consolidated statements
of operations, stockholders' equity and cash flows for the year then ended (not
presented herein); and in our report dated December 5, 1995 we expressed an
unqualified opinion on those consolidated financial statements. In our opinion,
the information set forth in the accompanying consolidated condensed balance
sheet as of September 30, 1995 is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.
DELOITTE & TOUCHE LLP
Las Vegas, Nevada
February 13, 1996
12
<PAGE>
SAHARA GAMING CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - Three Months Ended December 31, 1995 and 1994
- ---------------------------------------------------------------------
CONSOLIDATED
The Company sold substantially all the assets of HHI in August 1995 and
of SNC in October 1995. Accordingly, consolidated results of operations
for the three months ended December 31, 1995 are not comparable to the same
period in the prior year.
Consolidated revenues for the three month period ended December 31, 1995 were
$68.8 million, a $7.2 million or 11.6% increase from $61.6 million for the same
period in fiscal 1994. The increase in the current period is due to the
approximately $40 million gain on the sale of substantially all the assets of
the Sahara. The Hacienda and Sahara contributed $34.0 million in the prior
year revenues. Revenues at the Santa Fe and Pioneer decreased $800,000 and
$35,000, respectively when compared to the prior year period.
Consolidated operating income for the three month period ended December 31, 1995
was $42.7 million, a $34.8 million or 442.0% increase from $7.9 million for the
same period in fiscal 1994. Included in operating income in the current period
is an approximately $40 million gain on the sale of substantially all the assets
of SNC. The Hacienda and Sahara contributed $2.4 million in the prior year to
operating income. Operating income at the Santa Fe and Pioneer decreased $2.6
million and $900,000, respectively in the three months ended December 31, 1995
compared to the three months ended December 31, 1994.
Consolidated interest expense for the three month period ended December 31, 1995
was $6.8 million, a $4.3 million decrease compared to $11.1 million for the same
period in fiscal 1994. The Hacienda and Sahara contributed $3.7 million to the
prior year interest expense. Interest expense increased by $300,000 at the Santa
Fe and decreased by $700,000 at the Pioneer in the 1995 period.
Consolidated net income before income taxes for the three month period ended
December 31, 1995 was $35.9 million, a $39.1 million increase compared to the
net loss of $3.2 million in the same period in the prior year. The increase in
the current period resulted from the approximately $40 million gain on the sale
of substantially all the assets of the Sahara. The Hacienda and Sahara were
responsible for $1.3 million of the $3.2 million net loss before income tax in
the prior year. Net loss before income taxes at the Santa Fe and Pioneer
increased $2.9 million and $300,000, respectively in the quarter ended December
31, 1995 compared to the prior year period.
13
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SANTA FE
Revenues at the Santa Fe decreased 4.9%, or $800,000, in the three months ended
December 31, 1995 to $15.4 million as compared to $16.2 million in the same
period in the prior year. Casino revenues decreased 5.8%, or $700,000, to $11.6
million from $12.3 million when compared to the same three month period of 1994.
Management believes the decrease is due primarily to increased competition
resulting from the opening of two competing facilities within five miles of the
Santa Fe in December 1994 and July 1995. The food and beverage departments
posted an increase in revenues of $200,000 or 11.3% over the same period in the
prior year. This increase is believed to be primarily due to the opening of
additional food and beverage facilities in December 1994.
Operating expenses increased by 14.6%, or $1.8 million. Casino expenses
increased by 8.1%, or $400,000, primarily due to increased payroll and other
costs associated with operating an additional 15,000 square feet of casino
space, which includes a new race book, and increased promotional costs incurred
to compete with the expanding competition in the area. Food and beverage
expenses had volume related increases of 27.2%, or $500,000 over the prior year
period, resulting from the opening of additional food and beverage facilities in
December 1994. Selling, general and administrative expenses increased 42.2%, or
$800,000, primarily as a result of increased advertising and promotional costs,
in addition to increased promotional costs relating primarily to the casino
operations. Increases in depreciation and amortization of 10.5% or $200,000,
were related to the expansion project. Accordingly, operating income decreased
$2.6 million or 68.9% to $1.0 million in 1995 from $3.7 million in 1994.
Interest expense increased $300,000, or 8.5% to $3.5 million in 1995 compared
to $3.2 million 1994. The increase is primarily due to the expensing of interest
costs commencing in July 1995, which were previously capitalized in connection
with the development of the Company's proposed Parkville project. The Company
wrote off its investment in the Parkville project in the fourth quarter of
fiscal 1995.
PIONEER
Revenues at the Pioneer slightly decreased 0.3%, or $35,000, to $11.4 million.
Casino revenues were $10.0 million in 1995, representing a decrease of 1.4%, or
$100,000, comprised mostly of a decrease in slot revenue of 3.1%, or $300,000,
offset by an increase of 14.0% or $200,000 in table games revenues. The
decrease in 1995 is believed to be primarily due to the competitive gaming
market environment in and around Laughlin, including Indian gaming facilities
opened in Arizona and Southern California. Food and beverage revenues increased
27.3% or $200,000.
14
<PAGE>
Operating expenses increased $900,000 or 9.3% to $10.5 million. Casino expenses
increased 4.2%, or $200,000, primarily due to increased promotional expenses.
Food and beverage expenses had a volume related increase of $300,000 or 24.0% to
$1.3 million in 1995 from $1.0 million in 1994. Increases in depreciation and
amortization expenses of 20.6% or $300,000 were related to the expansion project
completed in December 1994. Accordingly, operating income decreased by 51.8% or
$900,000, to $900,000 in fiscal 1995 from $1.8 million in fiscal 1994.
Interest expense decreased $700,000 or 19.2% to $2.8 million in 1995 compared to
$3.5 million in 1994, primarily due to the repurchase of $20 million principal
amount of 13 1/2% notes in September 1995.
LIQUIDITY AND CAPITAL RESOURCES; TRENDS AND FACTORS RELEVANT TO FUTURE
OPERATIONS
The Company's earnings before interest, taxes, depreciation and amortization
("EBITDA") were $46.6 million for the three months ended December 31, 1995,
including a $40.8 million gain from the sale of the Sahara. Excluding the gain,
EBITDA was $5.8 million for the three month period, as compared to $14.6 million
for the prior year period of which the Hacienda and the Sahara contributed $6
million in the aggregate. The Company expects EBITDA in future periods to be
reduced due to the sale of the Hacienda and Sahara, which contributed $17.9
million in the aggregate to EBITDA in fiscal 1995, exclusive of the gain on
the sale of the Hacienda. EBITDA is presented to enhance the understanding of
the financial performance of the Company and its ability to service its
indebtedness, but should not be construed as an alternative to operating income
as an indicator of the Company's operating performance, or to cash flows from
operating activities as a measure of liquidity.
The Company historically generated sufficient cash liquidity from operations to
finance operations, meet existing debt service obligations, complete capital
improvements, maintain existing facilities, and provide working capital to the
Company. However, indenture restrictions on SFHI and PHI restrict the
distribution of cash to the Company by these subsidiaries, and cash flow of
these subsidiaries is not currently, and is not expected in the foreseeable
future to be, available for distribution to the Company. Therefore, the Company
and its subsidiaries other than PHI and SFHI (collectively "Corporate") must
rely on existing cash resources to provide liquidity to fund cash requirements
of the parent company.
Liquidity - Corporate - Approximately $21.1 million of the Company's current
- ---------------------
assets at December 31, 1995, including approximately $15.9 million of cash and
short-term investments, was held by Corporate. Corporate had working capital
of approximately $14.8 million at December 31, 1995.
15
<PAGE>
Corporate's principal uses of cash are to satisfy the debt service on $9.0
million principal amount outstanding of the 10-1/4% Subordinated Debentures due
1998 (the "10 1/4% Subordinated Debentures") and on a note payable to Sierra
Construction due 1998. In addition, Corporate expects to incur costs in
connection with evaluation and development of proposed projects and for
professional services rendered to the parent company.
The Company has in the past and expects in fiscal 1996 to satisfy the semi-
annual dividend payments on its preferred stock through the issuance of paid-in-
kind dividends. Commencing in fiscal 1997, dividends paid on the preferred
stock, to the extent declared, must be paid in cash. In the event not declared,
dividends would accrue on the preferred stock. The Company is party to
indentures and other financing arrangements that restrict the Company's ability
to declare and pay dividends or make distributions with respect to the Company's
capital stock which would prohibit the payment of cash dividends on the
preferred stock.
In January 1996, the Company completed the repurchase of an aggregate of $38.1
million principal amount of long-term debt, comprised of $25.6 million principal
amount of the 11% Guaranteed First Mortgage Notes due 2000, ("11% Notes") issued
by SFHI and $12.5 million principal amount 13 1/2% Guaranteed First Mortgage
Bonds due 1998 ("13 1/2% Notes") issued by Pioneer Finance Corp. The Company
intends to retire $5.6 million principal amount of the 11% Notes and the entire
$12.5 million principal amount of the 13 1/2% Notes acquired. As a result, the
outstanding balance of 11% Notes will be approximately $99.4 million and of
the 13 1/2% Notes will be approximately $70.0 million. The Company expects to
record a gain of approximately $10.6 million (pre-tax) related to the
transactions in the quarter ending March 31, 1996.
The Company financed the repurchase of debt with $7.5 million of working capital
and the net proceeds of a private placement of $20 million principal amount of
12% Notes due 1999 (the "12% Notes") issued by the Company's subsidiary, Sahara
Las Vegas Corp. The 12% Notes are secured by, among other things, the Company's
27 acre parcel of real property on the Las Vegas Strip and $20 million principal
amount of the 11% Notes acquired. The 12% Notes are guaranteed by the Company.
In connection with these transactions, the Company satisfied a contingent
obligation to make additional equity contributions to its subsidiary, Pioneer
Hotel, Inc.
In October 1995, the Company entered into an agreement to transfer its rights
and obligations under contracts with members of Camperland, a recreational
vehicle park located on approximately 14 acres of Hacienda property that is
operated by the Company under a lease with the new owners of the Hacienda, to
the developer of a recreational vehicle park currently under construction.
Pursuant to the agreement, the Company will pay $4 million to the developer and
the developer will assume all obligations relating to Camperland contracts. The
Company will remain contingently liable for such obligations. Upon receipt of
approval for rezoning the property for use as a recreational vehicle park and
for construction of the park, an earnest money deposit of $250,000 will be
released from escrow to the developer, and the remaining $3,750,000 will be
deposited into escrow and will be disbursed for the purchase of the land for the
new park, and to pay for the cost of construction of the new recreational
vehicle park. The performance by the developer of its obligations under the
agreement will be secured by, among other things, a first deed of trust against
the property designated for development of the new park. If that agreement is
not consummated, the Company will be obligated to transfer the Camperland
operations to another location on or before February 1997 and continue to
service existing contracts. The Company has acquired a 40 acre parcel of
property for such purposes.
16
<PAGE>
In November 1995, the Company filed an amended plan of reorganization (the
"Plan") for Treasure Bay Gaming and Resorts ("Treasure Bay") in United States
bankruptcy court in the Southern District of Mississippi. The Company's plan of
reorganization for Treasure Bay contemplates that, subject to various
conditions, the various classes of secured and unsecured creditors of Treasury
Bay agree to accept modifications to, and reductions in outstanding amounts of,
Treasure Bay's outstanding obligations and the Company makes a cash equity
contribution to acquire 100% of the equity interests in Treasure Bay. Any plan
must be approved by the bankruptcy court, and no assurance can be given that the
Company's plan of reorganization will be approved, that the various classes of
creditors would agree to the plan or that the Company would elect to proceed
with the plan. Additionally, any plan of reorganization may be amended,
resulting in changes to the amount and terms of debt of the reorganized debtor
and equity ownership acquired. The Company is incurring and expects to continue
to incur professional expenses and other expenses associated with legal
proceedings involving Treasure Bay and the Company's investment in Treasure Bay.
In the event that cash resources at the Santa Fe or Pioneer are insufficient to
meet operating or debt service requirements, Corporate may be required to make
contributions or loans to either the Santa Fe or Pioneer to prevent an event of
default under debt instruments to which SFHI or Pioneer Finance Corp. is a
party. Additionally, the Company may purchase 11% Notes, 13 1/2% Notes and
10 1/4% Subordinated Debentures from time to time in the market and in privately
negotiated transactions or refinance existing indebtedness in order to reduce
outstanding indebtedness and debt service obligations.
Liquidity - Santa Fe - The indenture under which the 11% Notes were issued
- --------------------
contains restrictions on payments to and investments in affiliates by SFHI,
including the Company. As a result of these restrictions, all of the cash flow
generated from operations by SFHI is not currently, and is not expected in the
foreseeable future to be, available for distribution to the Company.
Approximately $7.9 million of the Company's current assets, including
approximately $4.4 million of cash and short term investments, were held by SFHI
at December 31, 1995.
17
<PAGE>
Results of operations at the Santa Fe for the three months ended December 31,
1995, generated EBITDA of $3.3 million, approximately .93 times interest expense
during the same period compared to $5.7 million of EBITDA in the first quarter
of 1994 or approximately 1.76 times interest expense.
In February 1996, the Company completed a $1.75 million sale leaseback
transaction with respect to gaming equipment at the Santa Fe. The lease
requires an approximate $70,000 per month rental payment over a 24 month term.
In February 1996, the Santa Fe prepaid in full the $1.6 million principal
balance on its working capital loan agreement. The working capital loan
agreement required monthly principal and interest payments of $157,000 and
matured in December 1996.
SFHI's principal uses of funds generated from operations are for interest
payments on indebtedness and capital expenditures to maintain the facility.
Interest expense for the three month period ended December 31, 1995 and 1994
was $3.5 million and $3.3 million, respectively. Interest expense attributable
to the 11% Notes is expected to increase in fiscal 1996 as a result of the
expensing of interest costs on approximately $32 million of debt commencing in
the fourth quarter of fiscal 1995. Such costs were previously capitalized in
connection with the development of SFHI's proposed project in Parkville,
Missouri. Such increased interest expense will be offset in part due to the
repurchase of $21.5 million of 11% Notes pursuant to the terms of the indenture
under which the 11% Notes were issued and by the retirement of an additional
$5.6 million principal amount of 11% Notes. (See Liquidity-Corporate, above)
Capital expenditures for the three month period ended December 31, 1995 and 1994
were $1.0 million and $13.1 million, respectively. Management believes capital
expenditures to maintain the facility will be less than that expended in the
prior period in which expansion projects were undertaken. (See Capital
Expenditures below).
Management believes that, based on current operations and available resources,
barring unforeseen circumstances, SFHI will have sufficient cash resources to
meet its operating requirements and debt service requirements through the twelve
month period ending December 31, 1996. However, in the event SFHI is unable to
meet debt service payments through current operations and available resources,
SFHI will explore financing alternatives, including but not limited to
refinancing or modification of existing indebtedness, and the incurrence of
additional permitted indebtedness.
Liquidity - Pioneer - The indenture under which the 13 1/2% Notes were issued
- -------------------
contains restrictions on payments to and investments in affiliates by PHI,
including to the Company. As a result of these restrictions, all of the cash
flow generated by PHI is not currently, and is not expected in the foreseeable
future to be, available for distribution to the Company. Approximately $17.3
million of the Company's current assets, including approximately
18
<PAGE>
$14.8 million of cash and short term investments, was held by PHI at
December 31, 1995.
In November 1995, the Company made an equity contribution of $15 million in cash
to Pioneer Inc., in accordance with terms of an agreement reached with holders
of the 13 1/2% Notes pursuant to which the holders of the 13 1/2% Notes
consented to the sale of the Hacienda and Sahara. In December 1995, the Pioneer
used $3 million of such funds together with cash on hand to make the December 1,
1995 semi-annual interest payment of $5.6 million on the 13 1/2% Notes. The
remaining funds representing $12.0 million of the $14.8 million of cash and
short term investments held at the Pioneer are restricted in use for debt
service on the 13 1/2% Notes, repurchase of 13 1/2% Notes, capital expenditures
at the Pioneer, and, with respect to $10 million, contribution to capital to a
wholly-owned subsidiary of Pioneer Inc. that owns the real property in
Henderson, Nevada.
Results from operations at the Pioneer for the three months ended December 31,
1995 generated EBITDA of $2.4 million, approximately .85 times interest expense
during the same period, compared with $3.0 million of EBITDA in the first
quarter of fiscal 1995 or approximately .88 times interest expense.
PHI's principal uses of funds are for interest payments on indebtedness and
capital expenditures to maintain the facility. Interest expense for the three
month period ended December 31, 1995 and 1994 was $2.8 million and $3.5 million,
respectively. Interest expense attributable to the 13 1/2% Notes will decrease
as a result of the retirement of $12.5 million principal amount of 13 1/2%
Notes. (See Liquidity--Corporate above). Capital expenditures for the three
month period ended December 31, 1995 and 1994 were $600,000 and $1.5 million,
respectively. Management believes capital expenditures to maintain the facility
will be less than that expended in the year ended September 30, 1995, in which
an expansion project was undertaken. (See Capital Expenditures below).
Management believes that, based on current operations and available resources,
including the $15 million cash contribution discussed above and taking into
account the retirement of $12.5 million in principal amount of 13 1/2% notes in
January 1996, barring unforeseen circumstances, PHI will have sufficient cash
resources to meet its operating requirements and debt service requirements
through the 12 months ending December 31, 1996, although no assurance can be
given to that effect. In the event PHI is unable to meet debt service payments
through current operations and available resources, PHI will explore financing
alternatives, including but not limited to refinancing or modification of
existing indebtedness, and the incurrence of additional permitted indebtedness.
19
<PAGE>
Capital Expenditures - In January 1996, the Company substantially completed
- --------------------
the installation of an automated slot tracking system at the Santa Fe. The
Company estimates the tracking system to cost approximately $2 million,
including pre-opening expenses of which approximately $263,000 has been
incurred as of December 31, 1995.
Debt Obligations - For the remaining nine months of fiscal 1996 and for the
- ----------------
fiscal year 1997, scheduled maturities of long-term debt due to third parties
are $1.1 million and $4.1 million, respectively, representing primarily
principal amortization payments under notes payable and capital leases. The
scheduled maturities applicable in fiscal 1996 and 1997 are $300,000 and
$1.3 million at the Santa Fe and $500,000 and $300,000 at the Pioneer
respectively. In addition, SFHI has an $8 million note payable to an affiliate
which matures in August 1996.
Additionally, approximately $18.0 million of long-term debt is scheduled to
mature during fiscal 1998 consisting primarily of a $10.3 million sinking fund
payment due on the 13 1/2% Notes in December 1997 and $6.9 million due in June
1998 at maturity of the 10 1/4% Subordinated Debentures. Although management
has in the past and is currently exploring refinancing alternatives, as well as
possible dispositions of certain assets, in order to satisfy long-term debt
obligations as they become due, no assurance can be given that the Company will
be able to refinance some or all of its indebtedness or dispose of any assets.
Any such refinancing would be subject to the Company's future operations and the
prevailing market conditions at the time of such proposed refinancing and would
require the approval of the Nevada Gaming Authorities and potentially other
state gaming authorities. If the Company is ultimately unable to refinance such
debt prior to maturity, and/or obtain sufficient proceeds from asset
dispositions to repay the debt, and if the holders of the various debt
instruments were to demand payment upon the maturity dates, events of default
would occur which would lead to cross-defaults in other material agreements of
the Company including, without limitations, agreements relating to substantially
all of the outstanding long-term debt of the Company and its subsidiaries.
Related Parties LICO, a company wholly-owned by Mr. Lowden, Chairman of the
- ---------------
Board, Chief Executive Officer and 52% stockholder of the Company, borrowed
$476,000 from HHI pursuant to an unsecured demand loan which bears interest at
2% over the prime rate. The outstanding balance of the loan including accrued
interest was $557,000 as of December 31, 1995.
In November 1993, Mr. Lowden and Bank of America entered into a personal loan
agreement under which the principal balance of the loan is amortized through
quarterly principal payments through April 1998, with any remaining principal
balance due July 31, 1998. In July 1995, Mr. Lowden prepaid $1.0 million
principal amount of the loan balance. At January 31, 1996, the principal balance
of the loan was approximately $2,989,917. The loan is secured by substantially
all of the common stock of the Company owned by Mr. Lowden (the "Pledged
Shares"). Mr. Lowden's loan agreement provides that in the event the market
value of the Pledged Shares is less than three times the outstanding loan
balance, the bank, at its sole option, may require either an immediate reduction
in the outstanding balance or the pledging of additional collateral acceptable
to the bank such
20
<PAGE>
that the value of the pledged collateral is at least three times the outstanding
loan balance. As of February 12, 1996, the market value of the Pledged Shares
was less than three times the outstanding loan balance. Mr. Lowden and the bank
are in discussions regarding the collateral supporting the loan. If an event of
default were to occur under Mr. Lowden's personal loan with the bank, and if the
bank acquired the Pledged Shares upon foreclosure, Mr. Lowden's ownership of the
Company's outstanding common stock would be reduced to below 50%. If Mr. Lowden
ceases to own more than 50% of the outstanding shares of the Company's common
stock, an event of default would result under certain of the Company's long-term
indebtedness, which could result in cross-defaults under substantially all of
the Company's other long-term indebtedness.
Effects of Inflation
- --------------------
The Company has been generally successful in recovering costs associated with
inflation through price adjustments in its hotel and contract sales operations.
Any such increases in costs associated with casino operations and maintenance of
properties may not be completely recovered by the Company.
21
<PAGE>
SAHARA GAMING CORPORATION
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
The Company has previously reported that from August 1994 to October 1995,
complaints alleging unlawful interference by the Company with employee and union
rights under the National Labor Relations Act were filed with the National Labor
Relations Board (the "NLRB") by several unions relating to the Sahara, Hacienda,
Santa Fe and Pioneer, including allegations of unilateral changes in terms and
conditions of employment at Santa Fe. Hearings before administrative law judges
of the NLRB involving the Santa Fe commenced January 29, 1996. In order to avoid
the substantial cost of continuing the hearings, the Company, the NLRB and the
unions at the Santa Fe reached the following settlement with respect to the
various complaints. Complaints that the Santa Fe interfered with protected union
activity have been informally settled. The settlement agreement states the Santa
Fe does not admit it has violated the law, but provides for the posting of a
Notice to Employees for 60 days at the Santa Fe, and does not require payment by
the Santa Fe of any monies. Another complaint based upon the unions' disputed
claim to be the bargaining representative of certain Santa Fe employees has by
agreement with the NLRB and the unions been put on hold pending the resolution
of SFHI's appeal to the United States Court of Appeals for the District of
Columbia (Washington, D.C.). If that appeal is decided in SFHI's favor, the
complaint will be dismissed with respect to that matter, the results of the
election will be voided and SFHI will not be required to bargain with the
unions. If the appeal is decided in the unions' favor, their right to bargain
will be acknowledged by SFHI. In that event, SFHI will restore wages or benefits
employees may have lost, if any, in connection with events referred to in that
complaint.
It is possible that after reviewing the record, the Court of Appeals may remand
the case to the NLRB with directions that the NLRB decide whether the unions'
use of a voter eligibility list during the election was lawful or unlawful.
That conduct by the unions and the NLRB's failure to review it are the bases for
the Santa Fe's appeal.
The only complaints that continue to be litigated deal with the Santa Fe's
contention that solicitation, including handbilling by off-duty employees at
entrances to the Santa Fe, is prohibited by Santa Fe's no solicitation policies;
and the unions' claim that their handbills can be distributed by off-duty
employees anywhere on the Santa Fe property.
NLRB complaints involving the Sahara and Hacienda alleging interference with
employees' protected rights were withdrawn shortly after the sale by the Company
of those properties. However, pursuant to agreements with the purchasers, the
Company is responsible for NLRB complaints issued against the Sahara and
Hacienda alleging the decision by those properties several months prior to the
sales to discontinue wage deductions for dues payable by employees to Culinary
Workers Local 226 and Bartenders Local 165, was unlawful. Management believes
those complaints are without merit and intends to vigorously defend against the
allegations. However, if it is ultimately determined the Company improperly
ceased such deductions, the Company would be required to pay the difference
between dues owed by employees and dues voluntarily paid during the periods in
question.
Item 2 - Changes in Securities
None
Item 3 - Defaults Upon Senior Securities
None
Item 4 - Submission of Matters to a vote of Security Holders
None
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
A. Exhibits:
10.119 Note Purchase Agreement, dated as of January 16, 1996, by
and among Sahara Gaming Corporation, Sahara Las Vegas
Corp. and SunAmerica Life Insurance Company.
10.120 Deed of Trust, Fixture Filing and Financing Statement and
Security Agreement with Assignment of Rents, dated as of
January 16, 1996, by and among Sahara Las Vegas Corp., as
trustor, Stewart Title of Nevada, as trustee, and
SunAmerica Life Insurance Company, as beneficiary.
10.121 Security Agreement, dated as of January 16, 1996, by and
between Sahara Las Vegas Corp. and SunAmerica Life
Insurance Company.
10.122 Guaranty, dated as of January 16, 1996, made by Sahara
Gaming Corporation in favor of SunAmerica Life Insurance
Company.
23 Consent of Deloitte & Touche LLP.
27 Financial Data Schedule.
B. Reports: None
22
<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 authorized.
SAHARA GAMING CORPORATION, Registrant
By: /s/ Thomas K. Land
---------------------------------------------
Thomas K. Land, Chief Financial Officer
Dated: February 14, 1996
23
<PAGE>
EXHIBIT 10.119
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SAHARA GAMING CORPORATION
SAHARA LAS VEGAS CORP.
NOTE PURCHASE AGREEMENT
12% NOTES DUE DECEMBER 15, 1999
____________________________
AS OF JANUARY 16, 1996
____________________________
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
SAHARA GAMING CORPORATION
SAHARA LAS VEGAS CORP.
NOTE PURCHASE AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. DEFINITIONS............................................ 1
1.1 Certain Defined Terms.................................. 1
1.2 Accounting Terms; Utilization of GAAP for Purposes of
Calculations Under Agreement........................... 14
1.3 Other Definitional Provisions.......................... 14
SECTION 2. THE NOTES; CLOSING; DELIVERY........................... 14
2.1 Authorization of Notes................................. 14
2.2 Purchase and Sale of Notes............................. 14
2.3 Closing and Delivery of Initial Note................... 15
2.4 Certain Terms of the Notes; Payment of Interest........ 15
2.5 General Provisions Regarding Payments; Optional
Redemption; Mandatory Redemption and Change in
Control Repurchase; Release of SFHI Notes as
Collateral............................................. 16
2.6 Replacement of Notes................................... 22
2.7 Taxes.................................................. 23
2.8 Registration; Transfer; Registration of Transfer and
Exchange............................................... 23
2.9 Representation of SunAmerica........................... 24
SECTION 3. REPRESENTATIONS AND WARRANTIES......................... 24
3.1 Organization, Powers, Qualification, Good Standing and
Other Matters.......................................... 24
3.2 Authorization of Notes and Other Basic Documents
and Related Matters.................................... 25
3.3 Financial Condition.................................... 27
3.4 No Material Adverse Change; No Restricted
Junior Payments........................................ 27
3.5 Title to Properties; Liens............................. 27
3.6 Litigation; Adverse Facts.............................. 27
3.7 Payment of Taxes....................................... 28
3.8 Performance of Agreements; Materially Adverse
Agreements............................................. 28
3.9 Governmental Regulation................................ 29
3.10 Employee Benefit Plans and Employee Matters............ 29
3.11 Environmental Protection............................... 29
3.12 Solvency............................................... 30
3.13 Certain Fees........................................... 31
3.14 Disclosure............................................. 31
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
SECTION 4. CONDITIONS TO CLOSING.................................. 31
4.1 Conditions to Obligations of SunAmerica................ 31
4.2 Conditions to Note Issuances Subsequent to the Closing
Date................................................... 36
SECTION 5. AFFIRMATIVE COVENANTS OF SGC AND COMPANY............... 38
5.1 Financial Statements and Related Information........... 38
5.2 Inspection............................................. 40
5.3 Corporate Existence, Etc. ............................. 40
5.4 Payment of Taxes and Claims; Tax Consolidation......... 40
5.5 Maintenance of Properties; Insurance................... 41
5.6 Compliance with Laws, etc. ............................ 41
5.7 Environmental Disclosure and Inspection................ 41
5.8 Remedial Action Regarding Hazardous Material........... 43
SECTION 6. NEGATIVE COVENANTS OF SGC AND COMPANY.................. 43
6.1 Restricted Junior Payments............................. 43
6.2 Liens and Related Matters.............................. 43
6.3 When SGC May Merge, etc. .............................. 44
6.4 Indebtedness of Company................................ 45
6.5 Fundamental Changes.................................... 45
6.6 Transactions with Shareholders and Affiliates.......... 45
6.7 Amendments to Existing Lease Documents................. 46
6.8 Stay, Extension and Usury Laws......................... 46
6.9 Government Regulation.................................. 46
SECTION 7. EVENTS OF DEFAULT...................................... 46
7.1 Failure to Make Payments When Due...................... 46
7.2 Default in Other Agreements............................ 46
7.3 Breach of Certain Covenants............................ 47
7.4 Breach of Warranty..................................... 47
7.5 Other Defaults Under Basic Documents................... 47
7.6 Involuntary Bankruptcy; Appointment of Receiver, etc. . 47
7.7 Voluntary Bankruptcy; Appointment of Receiver, etc. ... 48
7.8 Judgments and Attachments.............................. 48
7.9 Dissolution............................................ 48
7.10 Employee Benefit Plans................................. 48
7.11 Material Adverse Effect................................ 48
7.12 Invalidity of Environmental Indemnity or Guaranties.... 48
7.13 Impairment of Collateral............................... 49
7.14 Ownership of Company................................... 49
7.15 Purchase of Pioneer Bonds.............................. 49
SECTION 8. COLLATERAL AGENT AND RELATIONS AMONG HOLDERS, ETC. .... 50
8.1 Appointment of the Collateral Agent, Powers and
Immunities............................................. 50
8.2 Reliance by Collateral Agent........................... 51
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
8.3 Defaults............................................... 52
8.4 Rights as a Holder..................................... 52
8.5 Indemnification........................................ 52
8.6 Non-Reliance on Collateral Agent and Other Holders..... 53
8.7 Resignation or Removal of Collateral Agent............. 53
8.8 Authorization.......................................... 53
SECTION 9. MISCELLANEOUS.......................................... 54
9.1 Amendments and Waivers................................. 54
9.2 Expenses............................................... 54
9.3 Indemnity.............................................. 55
9.4 Ratable Sharing........................................ 56
9.5 Independence of Covenants.............................. 57
9.6 Notices................................................ 57
9.7 Survival of Representations, Warranties and Agreements. 57
9.8 Failure or Indulgence Not Waiver; Remedies Cumulative.. 57
9.9 Marshalling; Payments Set Aside........................ 57
9.10 Severability........................................... 58
9.11 Obligations Several; Independent Nature of
Holders' Rights........................................ 58
9.12 Headings............................................... 58
9.13 Applicable Law......................................... 58
9.14 Successors and Assigns................................. 58
9.15 Consent to Jurisdiction and Service of Process......... 58
9.16 Waiver of Jury Trial................................... 59
9.17 Counterparts; Effectiveness............................ 59
9.18 Proposed Substitution of the Collateral Granted Under
the Deed of Trust...................................... 60
9.19 Conflicts With Other Basic Documents................... 60
</TABLE>
iii
<PAGE>
SCHEDULES
1.1 Premises
2 Information Relating to Initial Holder
3.1B Subsidiaries and Joint Ventures of SGC
3.10 Employee Benefit Plans
3.11 Environmental Liabilities
6.2 Existing Liens
EXHIBITS
I Form of Note
II Form of Note Issuance Notice
III Form of Guaranty
IV Form of Security Agreement
V Form of Deed of Trust
VI Form of Environmental Indemnity
VII Form of Subordination, Non-Disturbance and Attornment Agreement
VIII Form of Collateral Account Agreement
IX-A Form of Opinion of Gibson, Dunn & Crutcher
IX-B Form of Opinion of Nevada Counsel to SGC and Company
X Form of Collateral Account Letter
iv
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SAHARA GAMING CORPORATION
SAHARA LAS VEGAS CORP.
NOTE PURCHASE AGREEMENT
THIS NOTE PURCHASE AGREEMENT is made as of this 16th day of January,
1996 by and among Sahara Gaming Corporation, a Nevada corporation ("SGC"),
Sahara Las Vegas Corp., a Nevada corporation ("Company"), and SunAmerica Life
Insurance Company, an Arizona corporation ("SunAmerica"), and any other person
or persons party hereto from time to time after the date hereof as a holder
(individually, including SunAmerica, a "Holder" and collectively, "Holders").
RECITALS
The Company desires to issue and sell to SunAmerica up to $20,000,000
in principal amount of Company's 12% Notes Due December 15, 1999 (the "Notes")
for a purchase price equal to the principal amount thereof. SGC has agreed to
guaranty the Notes and the other Obligations. Company has agreed to grant to
Collateral Agent on behalf of the Holders a first priority security interest in
certain of Company's property to secure its Obligations.
Accordingly, in consideration of the premises and the agreements,
provisions and covenants herein contained, SGC, Company and Holders agree as
follows:
SECTION 1. DEFINITIONS
1.1 CERTAIN DEFINED TERMS. The following terms used in this Agreement
---------------------
shall have the following meanings:
"AFFILIATE" means, with respect to any Person, any other Person that,
directly or indirectly, is in control of, is controlled by, or is under common
control with, such Person. For the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling", "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of that Person, whether through the
ownership of voting securities or by contract or otherwise. Without limiting
the foregoing, a Person shall be deemed to be "controlled by" another Person if
such other (i) possesses, directly or indirectly, power to vote 10% or more of
the securities having ordinary voting power for the election of directors of
such Person or (ii) with respect to any other Person that is not a corporation,
owns 10% or more of the equity interests of such Person.
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"AGREEMENT", "HEREOF" and "HEREUNDER" and words of similar import refer
to this Note Purchase Agreement, as it may be amended, supplemented or otherwise
modified from time to time.
"APPRAISAL" means an MAI appraisal of the Premises and Improvements
prepared to USPAP standards for loan purposes by a MAI appraiser acceptable to
SunAmerica and licensed as an appraiser in the State of Nevada which shall be
satisfactory in form, scope and substance to SunAmerica.
"BANKRUPTCY CODE" means Title 11 of the United States Code entitled
"Bankruptcy", as now and hereafter in effect, or any successor statute.
"BASIC DOCUMENTS" means this Agreement, the Notes, the Guaranty, the
Security Agreement, the Deed of Trust, the Environmental Indemnity, the
Collateral Account Agreement, the Subordination, Non-Disturbance and Attornment
Agreement and all other instruments or documents now or hereafter granting Liens
on the property of Company or any of its Affiliates to Collateral Agent for the
benefit of Holders and any other instruments or agreements now or hereafter
entered into with Collateral Agent or any Holder in connection herewith.
"BOARD OF DIRECTORS" means the Board of Directors of SGC or Company or
one of their respective Subsidiaries, as the context requires, or any committee
thereof duly authorized to act on behalf of such Board.
"BUSINESS DAY" means any day excluding Saturday, Sunday and any day
which is a legal holiday under the laws of the State of California or Nevada or
is a day on which banking institutions located in either such state are
authorized or required by law or other governmental action to close.
"CAPITAL LEASE", as applied to any Person, means any lease of any
property (whether real, personal or mixed) by that Person as lessee that, in
conformity with GAAP, is accounted for as a capital lease on the balance sheet
of that Person.
"CAPITAL STOCK" of any Person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including, with
limitation, any preferred stock or any interests in a Joint Venture.
"CASH" means money, currency or a credit balance in a Deposit Account.
"CHANGE OF CONTROL" means an event or series of events by which (i) SGC
or SFHI sells, conveys, transfers or leases, directly or indirectly, all or
substantially all of its properties and assets to any Person or group (as such
term is used in Section 13(d) and 14(d) of the Exchange Act); (ii) any Person or
group (other than the Lowden Family) is or becomes the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person or
group shall be deemed to have "beneficial
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ownership" of all shares that any such Person or group has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time), directly or indirectly of securities representing (a) 25% or more of the
combined voting power of SGC's or SFHI's, as the case may be, Voting Stock and
at such time the Lowden Family together shall fail to beneficially own, directly
or indirectly, securities representing at least 30% of the combined voting power
of SGC's or SFHI's, as the case may be, Voting Stock or (b) more than 50% of the
combined voting power of SGC's or SFHI's Voting Stock, as the case may be; (iii)
SGC or SFHI consolidates with or merges into another Person or conveys,
transfers or leases all or substantially all its properties and assets to any
Person or any Person consolidates with or merges into SGC or SFHI, in either
event pursuant to a transaction in which the outstanding Voting Stock of SGC or
SFHI is changed into or exchanged for cash, securities or other property with
the effect that any Person or group (other than the Lowden Family) becomes the
"beneficial owner," directly or indirectly, of securities representing (a) 25%
or more of the combined voting power of the Voting Stock of the Person that
continues after such consolidation or merger or who acquires such assets and at
such time the Lowden Family together shall fail to beneficially own, directly or
indirectly, securities representing at least 30% of the combined voting power of
such Voting Stock or (b) more than 50% of the combined voting power of the
Voting Stock of the Person that continues after such consolidation or merger or
who acquires such assets, (iv) during any period of 24 consecutive months,
individuals who at the beginning of such period constituted SGC's or SFHI's
Board of Directors, as the case may be, (together with any new or replacement
directors whose election by the Board of Directors or whose nomination for
election by the stockholders of SGC or SFHI, as the case may be, was approved by
a vote of at least a majority 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 directors then in office; (v) SFHI ceases to own any of the
outstanding Capital Stock, or all or substantially all of the assets, of any
Restricted Subsidiary (as defined in the SFHI Indenture) except where such
Capital Stock or such assets are disposed of pursuant to Section 4.13 of the
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SFHI Indenture or where such assets are disposed of pursuant to Section 3.9 of
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the SFHI Indenture; or (vi) SGC ceases to own any of the outstanding Capital
Stock, or all or substantially all of the assets, of SFHI or any of its
Consolidated Subsidiaries (as defined in the SFHI Indenture), except where such
Capital Stock or such assets are disposed of pursuant to Section 4.13 of the
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SFHI Indenture.
"CLOSING" has the meaning set forth in Section 2.3 hereof.
"CLOSING DATE" means the date on which the Closing occurs.
"COLLATERAL" means all the real, personal and mixed property made
subject to a Lien pursuant to the Security Agreement, the Deed of Trust, the
Collateral Account Agreement or any other Basic Documents.
"COLLATERAL ACCOUNT" means account number 241275072 designated as the
"Sahara Las Vegas Collateral Account" and established with Donaldson, Lufkin &
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Jenrette Securities Corporation and any successor account established with any
institution pursuant to the Collateral Account Letter.
"COLLATERAL ACCOUNT AGREEMENT" means the Collateral Account Agreement
executed and delivered by Company and Collateral Agent on or prior to the
Closing Date, substantially in the form of Exhibit VIII annexed hereto, as it
may hereafter be amended, supplemented or otherwise modified from time to time.
"COLLATERAL ACCOUNT LETTER" means the letter from Company to Donaldson,
Lufkin & Jenrette Securities Corporation and acknowledged by Donaldson, Lufkin &
Jenrette Securities Corporation, substantially in the form of Exhibit X annexed
hereto, relating to the Collateral Account and any other similar letter entered
into with any successor institution.
"COLLATERAL AGENT" means SunAmerica Life Insurance Company in its
capacity as collateral agent for the Holders, and any successor Collateral Agent
appointed pursuant to this Agreement.
"COMMISSION" means the Securities and Exchange Commission.
"COMPANY" has the meaning set forth in the Introduction to this
Agreement.
"CONTINGENT OBLIGATION," as applied to any Person, means any direct or
indirect liability, contingent or otherwise, of that Person (i) with respect to
any Indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent thereof by the Person incurring the Contingent
Obligation is to provide assurance to the obligee of such obligation of another
Person that such obligation of another will be paid or discharged, or that any
agreements relating thereto will be complied with, or that the holders of such
obligation will be protected (in whole or in part) against loss in respect
thereof, (ii) with respect to any letter of credit issued for the account of
that Person or as to which that Person is otherwise liable for reimbursement of
drawings, or (iii) under interest rate agreements and currency agreements.
Contingent Obligations shall include, without limitation, (a) the direct or
indirect guaranty, endorsement (otherwise than for collection or deposit in the
ordinary course of business), co-making, discounting with recourse or sale with
recourse by such Person of the obligation of another Person, (b) the obligation
to make take-or-pay or similar payments if required regardless of non-
performance by any other party or parties to an agreement, and (c) any liability
of such Person for the obligation of another Person through any agreement
(contingent or otherwise) (X) to purchase, repurchase or otherwise acquire such
obligation or any security therefor, or to provide funds for the payment or
discharge of such obligation (whether in the form of loans, advances, stock
purchases, capital contributions or otherwise) or (Y) to maintain the solvency
or any balance sheet item, level of income or financial condition of another if,
in the case of any agreement described under subclauses (X) or (Y) of this
sentence, the primary purpose or intent thereof is as described in the preceding
sentence. For purposes of this definition, the amount of any Contingent
Obligation at any time of determination shall be computed as
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the amount that, in light of all the facts and circumstances existing at such
time represents the amount that reasonably can be expected at such time of
determination to become an actual or matured liability.
"CONTRACTUAL OBLIGATION", as applied to any Person, means any security
issued by that Person or any indenture, mortgage, deed of trust, contract,
undertaking, agreement or other instrument to which that Person is a party or by
which it or any of its properties is bound or to which it or any of its
properties is subject.
"DEED OF TRUST" means that certain Deed of Trust, Fixture Filing and
Financing Statement and Security Agreement with Assignment of Rents executed and
delivered on or prior to the Closing Date, substantially in the form of Exhibit
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V annexed hereto, by Company in favor of Collateral Agent, as beneficiary
- -
thereunder, pursuant to which Company granted to Stewart Title Company of
Nevada, as trustee, for the benefit of Collateral Agent on behalf of the Holders
a first priority Lien on, among other things, the Premises and Company's right,
title and interest in and to the Improvements to secure the obligations of
Company as it may be amended, supplemented or otherwise modified from time to
time.
"DEPOSIT ACCOUNT" means a demand, time, savings, passbook or like
account with a bank, savings and loan association, credit union or like
organization, other than an account evidenced by a negotiable certificate of
deposit.
"DOLLARS" and the sign "$" mean the lawful money of the United States
of America.
"EMPLOYEE BENEFIT PLAN" means any "employee benefit plan" as defined in
Section 3(3) of ERISA which is, or was maintained or contributed to by SGC,
Company or any ERISA Affiliate.
"ENVIRONMENTAL CLAIM" means any accusation, allegation, notice of
violation, claim, demand, abatement order, cleanup order, removal order, or
other order or direction (conditional or otherwise) by any Governmental
Authority or other Person for any injury, loss or damage, including, without
limitation, personal injury (including sickness, disease or death), tangible or
intangible property damage, contribution, indemnity, indirect or consequential
damages, damage to the environment, nuisance, pollution, contamination or other
adverse effects on the environment, or for fines, penalties or restrictions or
to compel cleanup or remediation, in each case relating to, resulting from or in
connection with any Hazardous Material and relating to the Premises or
Improvements.
"ENVIRONMENTAL INDEMNITY" means the Environmental Indemnity Agreement
from Company and SGC in favor of Collateral Agent for the benefit of Holders and
certain other indemnified parties therein, substantially in the form of Exhibit
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VI annexed hereto, pursuant to which Company and SGC indemnify Collateral Agent
- --
for the benefit of Holders and certain other indemnified parties therein against
environmental risks.
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"ENVIRONMENTAL LAWS" has the meaning set forth in the Deed of Trust.
"ENVIRONMENTAL REPORT" means the Phase I Environmental Site Assessment
dated December 29, 1995 prepared by Western Technologies, Inc. as job number
4185JL436 relating to the Premises and Improvements delivered to SunAmerica
prior to the Closing Date.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute.
"ERISA AFFILIATE" means (i) any corporation which is a member of a
controlled group of corporations within the meaning of Section 414(b) of the
Internal Revenue Code of which SGC or Company is, or was at any time, a member;
(ii) any trade or business (whether or not incorporated) which is, or was at any
time, a member of a group of trades or businesses under common control within
the meaning of Section 414(c) of the Internal Revenue Code of which SGC or
Company is, or was at any time, a member; and (iii) any member of an affiliated
service group within the meaning of Section 414(m) or (o) of the Internal
Revenue Code of which SGC or Company is a member.
"ERISA EVENT" means (i) a "reportable event" within the meaning of
Section 4043(c) of ERISA and the regulations issued thereunder with respect to
any Pension Plan (excluding those for which the provision for 30-day notice to
the PBGC has been waived by regulation); (ii) the failure to meet the minimum
funding standard of Section 412 of the Internal Revenue Code with respect to any
Pension Plan (whether or not waived in accordance with Section 412(d) of the
Internal Revenue Code) or the failure to make by its due date a required
installment under Section 412(m) of the Internal Revenue Code with respect to
any Pension Plan or the institution of a proceeding on behalf of a Multiemployer
Plan against Company, SGC or any Affiliate to enforce Section 515 of ERISA,
which proceeding is not dismissed within 30 days; (iii) the provision by the
administrator of any Pension Plan pursuant to Section 4041(a)(2) of ERISA of a
notice of intent to terminate such plan in a distress termination described in
Section 4041(c) of ERISA; (iv) the withdrawal by SGC, Company or any ERISA
Affiliates from any Pension Plan with two or more contributing sponsors or the
termination of any such Pension Plan resulting in liability pursuant to Sections
4063 or 4064 of ERISA; (v) the institution by the PBGC of proceedings to
terminate any Pension Plan, or the occurrence of any event or condition which
might constitute grounds under ERISA for the termination of, or the appointment
of a trustee to administer, any Pension Plan; (vi) the imposition of liability
on SGC, Company or any ERISA Affiliates pursuant to Section 4062(e) or 4069 of
ERISA or by reason of the application of Section 4212(c) of ERISA; (vii) the
withdrawal by SGC, Company or any of their respective ERISA Affiliates in a
complete or partial withdrawal (within the meaning of Sections 4203 and 4205 of
ERISA) from any Multiemployer Plan if there is any potential liability therefor,
or the receipt by SGC, Company or any of their respective ERISA Affiliates of
notice from any Multiemployer Plan that it is in reorganization or insolvency
pursuant to Section 4241 or 4245 of ERISA, or that it intends to terminate or
has terminated under Section 4041A or 4042 of ERISA;
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(viii) the occurrence of an act or omission which could give rise to the
imposition on SGC, Company or any of their respective ERISA Affiliates of fines,
penalties, taxes or related charges under Chapter 43 of the Internal Revenue
Code or under Section 409 or 502(c), (i) or (l) of ERISA in respect of any
Employee Benefit Plan; (ix) the assertion of a material claim (other than
routine claims for benefits) against any Employee Benefit Plan other than a
Multiemployer Plan or the assets thereof, or against SGC, Company or any of
their respective ERISA Affiliates in connection with any such Employee Benefit
Plan; (x) receipt from the Internal Revenue Service of notice of the failure of
any Pension Plan (or any other Employee Benefit Plan intended to be qualified
under Section 401(a) of the Internal Revenue Code) to qualify under Section
401(a) of the Internal Revenue Code, or the failure of any trust forming part of
any Pension Plan to qualify for exemption from taxation under Section 501(a) of
the Internal Revenue Code; or (xi) the adoption of an amendment to any Pension
Plan that, pursuant to Section 401(a)(29) of the Internal Revenue Code or
pursuant to Section 307 of ERISA, would require Company, SGC or any ERISA
Affiliate timely to provide security to the plan or would result in loss of tax
exempt status of the trust of which such plan is a part if not timely provided,
or the imposition of a lien pursuant to Section 412(n) of the Internal Revenue
Code.
"EVENT OF DEFAULT" has the meaning set forth in Section 7 hereof.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as it may
from time to time be amended, and the related regulations and published
interpretations.
"EXISTING LEASE" means that certain ground lease dated as of January 1,
1987, as amended by (i) the assignment of the Ground Lease dated March 1, 1987
from Wet 'N' Wild Florida to Tenant, (ii) the First Amendment to Ground Lease
dated as of March 1, 1993 between Company (as successor to HHP), as landlord,
and Tenant (as successor to Wet 'N' Wild Florida), (iii) the Assignment
Agreement dated as of October 2, 1995 between HHP and Company, and (iv) the
Letter Agreement dated August 24, 1995 and effective October 2, 1995 between
Company and Tenant.
"EXISTING LEASE DOCUMENTS" means the Existing Lease, the Existing Lease
Guaranty, the Existing Lease Note, the Existing Lease Security Agreement, the
Tenant Sale Agreement and any other agreements or instruments relating to any of
the foregoing agreements.
"EXISTING LEASE GUARANTY" means that certain Guaranty Agreement dated
as of October 2, 1995 between Company and HHP.
"EXISTING LEASE NOTE" means that certain promissory note dated January
1, 1987 in the original principal amount of $9,000,000 issued by Tenant (as
successor to Wet 'N' Wild Florida) to HHP (as successor to Hughes Entertainment,
Ltd., a Nevada limited partnership).
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"EXISTING LEASE SECURITY AGREEMENT" means that certain Security
Agreement dated as of January 1, 1987 between Tenant (as successor to Wet 'N'
Wild Florida) and HHP (as successor to Hughes Entertainment, Ltd., a Nevada
limited partnership).
"FACILITY" means the Premises and Improvements.
"FISCAL YEAR" means the Fiscal Year of SGC and Company, the last day of
which occurs on September 30th of each year.
"FLOOD ACT" means the National Flood Insurance Act of 1968 as amended
by the Flood Disaster Protection Act of 1973 (42 U.S.C. (S)(S)4013 et. seq.).
-- ---
"GAAP" means, subject to the limitations on the application thereof set
forth in subsection 1.2, generally accepted accounting principles set forth in
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession (including, without limitation, to the extent applicable in the AICPA
Audit and Accounting Guide; Audits of Casinos), in each case as the same are
applicable to the circumstances as of the date of determination.
"GAMING AUTHORITIES" means, collectively, (a) the Nevada Gaming
Commission, (b) the Nevada State Gaming Control Board, and (c) any other
Governmental Authority that holds regulatory, licensing or permit authority over
gambling, gaming or casino activities conducted by SGC, Company or any of their
respective Subsidiaries within its jurisdiction.
"GAMING LAWS" means all statutes, rules, regulations, ordinances, codes
and administrative or judicial precedents (including, without limitation, the
Nevada Gaming Control Act (N.R.S. Ch. 463)) pursuant to which any Gaming
Authority possesses regulatory, licensing or permit authority over gambling,
gaming or casino activities conducted by SGC, Company or any of their respective
Subsidiaries within its jurisdiction.
"GAMING LICENSE" means every license, franchise or other authorization
required on the date hereof or hereafter to own, lease, operate or otherwise
conduct gaming operations at the Santa Fe Hotel & Casino and the Pioneer Hotel &
Gambling Hall or other gaming activities of SGC or any of its Subsidiaries,
including, without limitation, all such licenses granted by any Gaming Authority
and any Gaming Laws.
"GOVERNMENTAL AUTHORITY" means any agency, authority, board, bureau,
commission, department, office or instrumentality of any nature whatsoever of
any governmental or quasi-governmental unit, whether federal, state, county,
district, city or other political subdivision or otherwise and whether now or
hereafter in existence, or any officer or official thereof.
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"GUARANTY" means the SGC Guaranty issued by SGC substantially in the
form of Exhibit III annexed hereto, as such Guaranty may be amended,
supplemented or otherwise modified from time to time.
"HAZARDOUS MATERIALS" has the meaning set forth in the Deed of Trust.
"HHP" means Howard Hughes Properties, Limited Partnership, a Delaware
limited partnership.
"HOLDER" and "HOLDERS" has the meaning set forth in the Introduction to
this Agreement and shall include the successors and assigns of any Holder.
"IMPROVEMENTS" means all buildings, structures, facilities and other
improvements of every kind and description now or hereafter located on the
Premises, including all parking areas, roads, driveways, walks, fences, walls,
beams, recreation facilities, drainage facilities, lighting facilities and other
site improvements, all water, sanitary and storm sewer, drainage, electricity,
steam, gas, telephone and other utility equipment and facilities, all plumbing,
lighting, heating, ventilating, air-conditioning, refrigerating, incinerating,
compacting, fire protection and sprinkler, surveillance and security, vacuum
cleaning, public address and communications equipment and systems, all screens,
awnings, floor coverings, partitions, elevators, escalators, motors, machinery,
pipes, fittings and other items of equipment and personal property of every kind
and description now or hereafter located on the Premises or attached to the
improvements that by the nature of their location thereon or attachment thereto
are real property under applicable law; and including all materials intended for
the construction, reconstruction, repair, replacement, alteration, addition or
improvement of or to such buildings, equipment, fixtures, structures and
improvements.
"INDEBTEDNESS," as applied to any Person, means, without duplication,
(i) all indebtedness for borrowed money, (ii) that portion of obligations with
respect to Capital Leases that is properly classified as a liability on a
balance sheet in conformity with GAAP, (iii) notes payable and drafts accepted
representing extensions of credit whether or not representing obligations for
borrowed money, (iv) any obligation owed for all or any part of the deferred
purchase price of property or services (excluding any such obligations incurred
under ERISA), which purchase price is (a) due more than six months from the date
of incurrence of the obligation in respect thereof or (b) evidenced by a note or
similar written instrument, (excluding any trade payables payable in the
ordinary course of business), (v) all indebtedness secured by any Lien on any
property or asset owned or held by that Person regardless of whether the
indebtedness secured thereby shall have been assumed by that Person or is
nonrecourse to the credit of that Person and (vi) any Contingent Obligation.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended, or any successor statute.
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"JOINT VENTURE" means a joint venture, partnership or other similar
arrangement, whether in corporate, partnership, limited liability company or
other legal form; provided that in no event shall any corporate Subsidiary of
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any Person be considered to be a Joint Venture to which such Person is a party.
"JUNIOR SUBORDINATED NOTES" means the Junior Subordinated Notes under
and as defined in the Certificate of Designation of the SGC Preferred Stock or
any other securities that are issued in exchange for or to redeem, acquire or
otherwise pay SGC Preferred Stock.
"LIEN" means any lien, mortgage, pledge, assignment, security interest,
charge or encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof, any agreement to give any
security interest and any mechanic's liens) and any option, trust or other
preferential arrangement having the practical effect of any of the foregoing.
"LOWDEN FAMILY" means Mr. Paul Lowden and Mrs. Suzanne Lowden and the
executors, administrators or legal representatives of their estates, heirs,
distributees and beneficiaries, any trust as to which any of the foregoing is a
settlor or co-settlor, any trustee of the estate of any of the foregoing that is
bankrupt or insolvent, any guardian or conservator of any of the foregoing that
is adjudged disabled or incompetent, and any corporation, partnership or other
entity which is an Affiliate of any of the foregoing. Lowden Family shall also
mean any lineal descendants of the grandparents of such Persons, but only to the
extent that the beneficial ownership of the Voting Stock held by such lineal
descendants was directly received (by gift, trust or sale) from any such Person.
"MATERIAL ADVERSE EFFECT" means (i) a material adverse effect upon the
business, operations, properties, assets, liabilities, condition (financial or
otherwise) of SGC and its Subsidiaries, taken as a whole, Company or the
Premises and Improvements, or (ii) the impairment of the ability of SGC or
Company to perform, or of Collateral Agent or any Holder to enforce, any of the
Obligations.
"MULTIEMPLOYER PLAN" means a "multiemployer plan", as defined in
Section 3(37) of ERISA, to which SGC, Company or any of their respective ERISA
Affiliates is contributing or has an obligation to contribute to, or to which
such an obligation existed, or contribution was made within the last six years,
or to which Company or any of its ERISA Affiliates has, or ever has had, an
obligation to contribute.
"NOTE ISSUANCE NOTICE" means a Note Issuance Notice in substantially
the form of Exhibit II annexed hereto.
"NOTES" means the 12% Notes Due December 15, 1999 of Company to be
issued and sold pursuant to this Agreement. A form of Note is attached hereto
as Exhibit I.
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"OBLIGATIONS" means all obligations of every nature of SGC or Company
from time to time owed to Collateral Agent, Holders or any of them under this
Agreement, the Notes or any other Basic Document, whether for principal,
interest, fees, expenses, indemnification or otherwise and whether or not the
obligation is allowed as a claim in any proceeding referred to in subsection 7.6
or 7.7.
"OFFICERS' CERTIFICATE" means, as applied to any corporation, a
certificate executed on behalf of such corporation by (i) its chairman of the
board (if an officer) or its president or one of its vice presidents and (ii)
its chief financial officer or its treasurer.
"PBGC" means the Pension Benefit Guaranty Corporation (or any successor
thereto).
"PENSION PLAN" means any Employee Benefit Plan, other than a
Multiemployer Plan, which is subject to Section 412 of the Internal Revenue Code
or Section 302 of ERISA.
"PERMITTED ENCUMBRANCES" means the following types of Liens (other than
any such Lien imposed pursuant to Section 401(a)(29) or 412(n) of the Internal
Revenue Code or by ERISA):
(i) Liens for taxes, assessments or governmental charges or claims the
payment of which is not, at the time, required by subsection 5.4;
(ii) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics and materialmen and other Liens imposed by law incurred in the
ordinary course of business for sums not yet delinquent or being contested
in good faith, if such reserve or other appropriate provision, if any, as
shall be required by GAAP shall have been made therefor; and
(iii) easements, rights of tenants, reservations, covenants, rights-
of-way, restrictions, minor defects, minor encroachments or minor
irregularities in title and other similar immaterial charges or encumbrances
that (a) arise prior to Closing and are approved in writing by SunAmerica or
(b) arise after Closing and would not, individually or in the aggregate,
result in a Material Adverse Effect.
"PERSON" means and includes natural persons, corporations, limited
liability companies, limited partnerships, general partnerships, joint stock
companies, joint ventures, associations, companies, trusts, banks and other
organizations, whether or not legal entities, and governments and agencies and
political subdivisions thereof.
"PIONEER FINANCE" means Pioneer Finance Corp., a Nevada corporation.
"PIONEER BONDS" means the 13 1/2% First Mortgage Bonds due 1998 of
Pioneer Finance Corporation issued pursuant to the Pioneer Indenture.
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"PIONEER INDENTURE" means that certain Indenture dated as of December
1, 1988 between Pioneer Finance, SGC, as guarantor, and IBJ Schroder Bank &
Trust Company, as trustee.
"POTENTIAL EVENT OF DEFAULT" means a condition or event that, after
notice or lapse of time or both, would constitute an Event of Default.
"PREMISES" means the real property situated in Las Vegas, Nevada, and
more particularly described in SCHEDULE 1.1 annexed hereto.
------------
"RELEASE" has the meaning set forth in the Deed of Trust.
"REQUISITE HOLDERS" means Holders having or holding more than 50% of
the principal balance of the outstanding Notes.
"RESTRICTED JUNIOR PAYMENT" means (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class of
capital stock of SGC or Company now or hereafter outstanding, except a dividend
payable solely in shares of that class of capital stock to the holders of that
class or in options, warrants or other rights to purchase such capital stock,
(ii) any redemption, retirement, sinking fund or similar payment, purchase or
other acquisition for value, direct or indirect, of any shares of any class of
capital stock of SGC or Company now or hereafter outstanding (other than in
exchange for capital stock of SGC or Company or options, warrants or other
rights to purchase such capital stock), (iii) any payment made to retire, or to
obtain the surrender of, any outstanding warrants, options or other rights to
acquire shares of any class of capital stock of SGC or Company now or hereafter
outstanding, and (iv) any payment or prepayment of principal of, premium, if
any, or redemption, purchase, retirement, defeasance (including in-substance or
legal defeasance), sinking fund or similar payment with respect to, any
indebtedness of Company to SGC or any of SGC's Subsidiaries or Affiliates or
with respect to any Junior Subordinated Notes.
"SECURITIES ACT" means the Securities Act of 1933, as it may from time
to time be amended, and the related regulations and published interpretations.
"SECURITY AGREEMENT" means the Security Agreement executed and
delivered by Company and Collateral Agent on or prior to the Closing Date,
substantially in the form of Exhibit IV annexed hereto, pursuant to which
----------
Company grants to Collateral Agent on behalf of Holders a security interest in
all of Company's assets including personal property and fixtures, as it may
hereafter be amended, supplemented or otherwise modified from time to time.
"SFHI" means the Santa Fe Hotel Inc., a Nevada corporation.
"SFHI CASH FLOW" means, for any period, the sum of the following
amounts for such period with respect to SFHI and its consolidated Subsidiaries:
(i) net income, (ii) provisions for taxes based on income, (iii) interest
expense, (iv) lease payments made
12
<PAGE>
with respect to equipment leased pursuant to the sale/leaseback transactions
contemplated by subsection 2.5C(ii) hereof, (v) depreciation expense, (vi)
amortization expenses and (vii) other non-cash items reducing net income but
excluding any component of items (ii) through (vi) not deducted in calculating
net income minus non-cash items increasing net income, other than items excluded
-----
from the calculation thereof, all as determined for SFHI in conformity with
generally accepted accounting principles.
"SFHI INDENTURE" means that certain Indenture dated as of December 29,
1993 among SFHI, SGC, as guarantor, and IBJ Schroder Bank & Trust Company as
trustee.
"SFHI NOTES" means the 11% First Mortgage Notes issued by SFHI pursuant
to the terms of the SFHI Indenture.
"SGC" has the meaning set forth in the Introduction to this Agreement.
"SGC PREFERRED STOCK" means SGC's Exchangeable Redeemable Preferred
Stock, $2.14 liquidation preference per share, issued prior to the Closing Date
pursuant to the Certificate of Designation for Exchangeable Redeemable Preferred
Stock and any such Exchangeable Redeemable Preferred Stock issued after the
Closing Date to pay dividends in kind with respect thereto.
"SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT" means the
Subordination, Non-Disturbance and Attornment Agreement executed and delivered
by Company, Tenant, and Collateral Agent on or prior to the Closing Date,
substantially in the form of Exhibit VII annexed hereto as it may be hereafter
-----------
be amended, supplemented or otherwise modified from time to time.
"SUBSEQUENT CLOSING DATE" or "SUBSEQUENT CLOSING DATES" means the date
or dates on which the closing of a Note issuance to SunAmerica subsequent to the
Closing Date occurs.
"SUBSIDIARY" means, with respect to any Person, any corporation,
partnership, association, limited liability company, joint venture or other
business entity of which more than 50% of the total voting power of shares of
stock or other ownership interests entitled (without regard to the occurrence of
any contingency) to vote in the election of the Person or Persons (whether
directors, managers, trustees or other Persons performing similar functions)
having the power to direct or cause the direction of the management and policies
thereof is at the time owned or controlled, directly or indirectly, by that
Person or one or more of the other Subsidiaries of that Person or a combination
thereof.
"SUNAMERICA" has the meaning set forth in the Introduction to this
Agreement.
"TENANT" means Wet 'N' Wild Nevada, Inc., a Nevada corporation and
assignee of Wet 'N' Wild Florida's interest under the Existing Lease.
13
<PAGE>
"TENANT SALE AGREEMENT" means the Agreement for Sale of Partnership
Interest and Dissolution of Partnership dated as of January 1, 1987 among Hughes
Entertainment, Ltd., a Nevada limited partnership, Wet 'N' Wild, Ltd., a Florida
limited partnership and Wet 'N' Wild Florida.
"TITLE COMPANY" has the meaning assigned to such term in subsection
4.1E.
"TITLE POLICY" has the meaning assigned to such term in subsection
4.1E.
"VOTING STOCK" means any class of Capital Stock of any Person then
outstanding entitled to vote in elections of directors (without regard to the
occurrence of any contingency).
"WET 'N' WILD FLORIDA" means Wet 'N' Wild Florida, Inc., a Florida
corporation.
1.2 ACCOUNTING TERMS; UTILIZATION OF GAAP FOR PURPOSES OF CALCULATIONS
------------------------------------------------------------------
UNDER AGREEMENT. Except as otherwise expressly provided in this Agreement, all
- ---------------
accounting terms not otherwise defined herein shall have the meanings assigned
to them in conformity with GAAP. Financial statements and other information
required to be delivered by SGC or Company to Holders pursuant to subsections
5.1A and 5.1B shall be prepared in accordance with GAAP as in effect at the time
of such preparation (and delivered together with the reconciliation statements
provided for in subsection 5.1D). Calculations in connection with the
definitions, covenants and other provisions of this Agreement shall utilize
accounting principles and policies in conformity with those used to prepare the
financial statements referred to in subsection 3.3.
1.3 OTHER DEFINITIONAL PROVISIONS. References to "Sections" and
-----------------------------
"subsections" shall be to Sections and subsections, respectively, of this
Agreement unless otherwise specifically provided. Any of the terms defined in
subsection 1.1 may, unless the context otherwise requires, be used in the
singular or the plural, depending on the reference.
SECTION 2. THE NOTES; CLOSING; DELIVERY
2.1 AUTHORIZATION OF NOTES. Company has authorized the issuance and sale
----------------------
to SunAmerica, as a Holder, pursuant to the terms and conditions hereof, of
Notes in an aggregate principal amount of $20,000,000 as provided herein and in
the Notes.
2.2 PURCHASE AND SALE OF NOTES. Subject to the terms and conditions
--------------------------
hereof, Company will issue and sell to SunAmerica, as a Holder, and SunAmerica
will purchase from Company, up to $20,000,000 in principal amount of Notes, of
which $10,000,000 in principal amount of Notes shall be issued to SunAmerica on
the Closing Date and up to $10,000,000 in principal amount of Notes may be
issued on one or more Subsequent Closing Dates specified by the Company in a
notice to SunAmerica to be received not less than three Business Days prior to
the applicable anticipated Subsequent Closing
14
<PAGE>
Date; provided that the principal amount of a Note issued on any Subsequent
Closing Date shall not be less than $1,000,000 and in no event shall more than
three Subsequent Closing Dates occur. In no event shall a Subsequent Closing
Date occur after February 15, 1996. On the Closing Date and on any Subsequent
Closing Date, subject to the terms and conditions hereof, SunAmerica shall pay
the subscription price of the Note (which shall be 100% of the principal amount
of each Note) issued on such date against delivery of such Note.
2.3 CLOSING AND DELIVERY OF INITIAL NOTE. A pre-closing of the purchase
------------------------------------
and sale of the initial Note shall be held at O'Melveny & Myers, 1999 Avenue of
the Stars, Los Angeles, CA on January 17, 1996 or at such other time and place
as the parties may agree upon. The "Closing", as used herein, shall mean the
date that the Deed of Trust is recorded and all conditions to Closing hereunder
have been satisfied or waived by SunAmerica. Subject to the terms of this
Agreement, at the Closing, unless otherwise requested, Company will deliver to
SunAmerica a single Note in the aggregate principal amount of $10,000,000 and
will satisfy the terms and conditions of Closing set forth in subsection 4.1.
If at the Closing, Company shall fail to tender the Note to SunAmerica as
provided above in this Section 2.3, or any of the terms or conditions specified
in Section 4.1 shall not have been fulfilled to SunAmerica's satisfaction,
SunAmerica shall, at its election, be relieved of all further obligations under
this Agreement. In no event shall the Closing occur after January 22, 1996.
2.4 CERTAIN TERMS OF THE NOTES; PAYMENT OF INTEREST.
-----------------------------------------------
A. INTEREST. The Notes shall bear interest at a rate of 12% per
annum, computed on the basis of a 360-day year of twelve 30-day months.
Interest on the Notes shall be payable semi-annually on June 30 and December 31
of each year, commencing on June 30, 1996 and at the scheduled maturity of the
Notes on December 15, 1999. In addition to the foregoing, interest on the Notes
shall be payable on and to any date of any prepayment, redemption or other
payment of the Notes (to the extent accrued on the amount of the prepayment,
redemption or other payment) and at maturity (including at any accelerated
maturity).
B. STATED MATURITY. The principal evidenced by the Notes matures on
December 15, 1999, and on such date, or on any accelerated maturity, the full
amount of principal then outstanding, and all accrued and unpaid interest
thereon, shall be due and payable.
C. POST-MATURITY INTEREST. From the occurrence and during the
continuance of an Event of Default, the principal of the Notes and, to the
extent permitted by applicable law, all accrued interest on the Notes and any
fees or other amounts owed hereunder shall bear interest (including post-
petition interest in any proceeding under the Bankruptcy Code or other
applicable bankruptcy laws) compounded monthly payable on demand at a rate which
is 2% per annum in excess of the interest rate otherwise payable under this
Agreement with respect to the Notes (or, in the case of any such fees and other
amounts, at a rate which is 2% per annum in excess of the
15
<PAGE>
interest rate otherwise payable under the Notes). Payment or acceptance of the
increased rates of interest provided for in this subsection 2.4C is not a
permitted alternative to timely payment and shall not constitute a waiver of any
Event of Default or otherwise prejudice or limit any rights or remedies of
Collateral Agent or any Holder. For the purpose of complying with NRS 99.050,
Company hereby declares that it understands that to the extent interest accrued
under the Notes, late charges or other fees and accruals under this Agreement
and the other Basic Documents are added to the outstanding principal owing
hereunder and the other Basic Documents, a compounding of interest results which
compounding is agreed to by Company as a part of the terms of this Agreement and
the other Basic Documents.
D. LATE CHARGES. If any payment of principal and/or interest or any
other amount payable hereunder or under the other Basic Documents is not paid
when due, Company shall pay to each Holder, on demand, a late charge (the "Late
Charge") of five cents ($0.05) for each dollar so overdue in order to compensate
such Holder for its loss of the timely use of the money and frustration of such
Holder in the meeting of its financial commitments. Nothing contained herein
shall constitute an extension of any due date for, or a waiver of any obligation
to pay, any amounts payable hereunder or under the other Basic Documents.
2.5 GENERAL PROVISIONS REGARDING PAYMENTS; OPTIONAL REDEMPTION; MANDATORY
---------------------------------------------------------------------
REDEMPTION AND CHANGE IN CONTROL REPURCHASE; RELEASE OF SFHI NOTES AS
- ---------------------------------------------------------------------
COLLATERAL.
- -----------
A. GENERAL PROVISIONS REGARDING PAYMENTS.
(i) Manner and Time of Payment. All payments by Company of principal,
--------------------------
interest, fees and other Obligations hereunder and under the Notes shall be
made in Dollars in same day funds, without reductions of any payment on
account of any defense, setoff or counterclaim, free of any restriction or
condition and without surrender or presentation of such Note, and delivered
to the applicable Holder not later than 11:00 A.M. (Los Angeles time) on the
date due at its address and in the manner set forth in Schedule 2 annexed
hereto (or at such other place and in such other manner as such Holder may
designate from time to time by written notice to Company); funds received by
the applicable Holder after that time on such due date shall be deemed to
have been paid by Company on the next succeeding Business Day. Whenever any
payment to be made hereunder shall be stated to be due on a day that is not
a Business Day, such payment shall be made on the next succeeding Business
Day.
(ii) Application and Apportionment of Payments. While there exists no
-----------------------------------------
Event of Default, all payments made hereunder shall be applied first to
fees, late charges, costs and expenses owing to Collateral Agent and then to
Holders hereunder and under the other Basic Documents, second to accrued
interest due under the Note, and third to the principal balance of the Note.
While any Event of Default exists that has not been waived or cured,
payments made hereunder shall be applied against amounts due as Collateral
Agent chooses, application as to
16
<PAGE>
particular obligations or against principal or interest to be in Collateral
Agent's absolute discretion. Aggregate principal, interest and applicable
late charge payments shall be ratably apportioned among all outstanding
Notes to which such payments relate.
(iii) Notation of Payment. Each Holder agrees that before disposing
-------------------
of any Note held by it, or any part thereof (other than by granting
participations therein), that Holder will make a notation thereon of all
principal payments previously made thereon and of the date to which interest
thereon has been paid; provided that the failure to make (or any error in
--------
the making of) a notation of the Note shall not limit or otherwise affect
the obligations of Company hereunder or under such Note or any payments of
principal or interest on such Note.
B. OPTIONAL REDEMPTION.
(i) Optional Redemption. The Notes shall not be redeemable prior to
-------------------
October 1, 1997. During the period from October 1, 1997 to January 17,
1998, the Notes shall be redeemable at any time in whole or in part at the
option of Company, but only in the event that the sinking fund payment
required with respect to all of the Pioneer Bonds in 1997 has been satisfied
in full, at a price paid in immediately available funds of 102 1/2% of the
principal amount thereof, or, if a Note is redeemed only in part, the
appropriate prorated amount, together with accrued interest to the
redemption date. During the period from January 17, 1998 to January 17,
1999, the Notes shall be redeemable at any time in whole or in part at the
option of Company, at a price paid in immediately available funds of 102% of
the principal amount thereof, or, if a Note is redeemed only in part, the
appropriate prorated amount, together with accrued interest to the
redemption date. After January 17, 1999, the Notes shall be redeemable at
any time in whole or in part at the option of Company, at a price paid in
immediately available funds of 101% of the principal amount thereof, or, if
a Note is redeemed only in part, the appropriate prorated amount, together
with accrued interest to the redemption date. Company shall give Holders
not less than two Business Days prior written notice of a redemption
pursuant to this subsection 2.5B.
(ii) Release of SFHI Notes Transferred In Connection With An Optional
----------------------------------------------------------------
Redemption. In the event that Company elects to optionally redeem Notes
----------
pursuant to this subsection 2.5B in connection with the sale or other
transfer of SFHI Notes constituting Collateral and, after giving effect to
such redemption, Company would be entitled to have Collateral Agent release
its Lien on such SFHI Notes as provided in subsection 2.5F, then, upon not
less than five Business Day's prior written notice, Collateral Agent shall
release its Lien on such SFHI Notes in connection with such optional
redemption immediately after Collateral Agent receives confirmation that
Holders have received the full redemption price as provided in subsection
2.5A together with accrued interest to the redemption date.
17
<PAGE>
(iii) Redemption Upon Sale of Premises Prior to October 1, 1997.
---------------------------------------------------------
Notwithstanding clause (i) above, if prior to October 1, 1997, Company
transfers the Premises to an unaffiliated third party or to another Person
(only if SGC and its Subsidiaries and Affiliates or the Lowden Family do not
collectively own, legally or beneficially, more than 50% of the ownership or
similar interests of such Person), the Notes shall be immediately redeemed
by Company in whole at a price paid in cash of 102 1/2% of the principal
amount thereof, plus accrued but unpaid interest thereon to the redemption
date.
C. MANDATORY REDEMPTION AND CHANGE IN CONTROL REPURCHASE.
(i) Scheduled Redemption. On December 31 of 1996, 1997 and 1998,
--------------------
Company will redeem $500,000 in principal amount of Notes together with
accrued interest thereon to such date, at a redemption price equal to 100%
of the principal amount so redeemed, plus accrued and unpaid interest
thereon to the redemption date.
(ii) Redemption Based on Sale/Leasebacks. If on June 30, 1996, there
-----------------------------------
is an outstanding principal amount of Notes in excess of $17,000,000 and (a)
SFHI has not consummated one or more sale/leaseback transactions after the
Closing Date as permitted under the SFHI Indenture with respect to gaming or
other equipment at the Santa Fe Hotel and Casino with gross proceeds to SFHI
of not less than $5,000,000 in the aggregate (the "SFHI Sale/Leasebacks"),
used $2,000,000 of the proceeds thereof to repay and permanently reduce an
existing working capital facility and also acquired directly or indirectly
SFHI Notes (other than with the proceeds of the Notes) for an aggregate
purchase price of not less than $3,000,000 and retired such SFHI Notes (such
aggregate amount, the "SFHI Buyback Amount"), a principal amount of Notes
shall be redeemed in an amount equal to the greater of (a) the amount by
which the SFHI Sale/Leasebacks are less than $5,000,000 or (b) the amount by
which the SFHI Buyback Amount is less than $3,000,000, at a redemption price
equal to 100% of the principal amount so redeemed, plus accrued and unpaid
interest thereon to the redemption date; provided, however, that,
-------- -------
notwithstanding the foregoing Company's obligation to redeem Notes pursuant
to this subsection 2.5(C)(ii) shall be reduced to the extent SGC has made a
capital contribution in cash to SFHI after the Closing Date and prior to
June 30, 1996 and in no event shall Company be obligated to redeem Notes in
a principal amount that would reduce the outstanding principal amount of
Notes to less than $17,000,000 pursuant to this subsection 2.5C(ii). Any
redemption of Notes required pursuant to this subsection 2.5C(ii) shall
occur on or prior to July 10, 1996.
(iii) Payment Required Under Deed of Trust. Company shall redeem or
------------------------------------
otherwise pay the principal amount of the Notes and accrued interest thereon
as required pursuant to the Deed of Trust, at a redemption price equal to
the redemption price payable in connection with the optional redemption of
Notes (or
18
<PAGE>
if prior to October 1, 1997, at 102 1/2% of the principal amount so
redeemed), plus accrued and unpaid interest thereon to the redemption date.
(iv) Redemption Based on Redemption or Transfer of SFHI Notes. If any
--------------------------------------------------------
SFHI Notes that constitute Collateral are redeemed or otherwise paid for any
reason under the SFHI Indenture, the same principal amount of Notes shall be
immediately redeemed with accrued interest thereon to the redemption date,
at a redemption price equal to 100% of the principal amount so redeemed,
plus accrued and unpaid interest thereon to the redemption date.
(v) Redemption Based on SFHI Cash Flow. If as of the end of any fiscal
----------------------------------
quarter commencing as of the fiscal quarter ending on December 31, 1996,
SFHI Cash Flow for the preceding four quarter period is less than
$13,500,000, Company will be required to redeem a principal amount of Notes
equal to $3,500,000 at a redemption price equal to 100% of the principal
amount so redeemed plus accrued and unpaid interest thereon to the
redemption date which shall be within 30 days after the date of delivery by
SGC of financial statements for such fiscal quarter pursuant to subsection
5.1A; provided, that Company's obligation to redeem Notes as provided in
this sentence may be reduced on a dollar for dollar basis to the extent
that, within such 30 day period after delivery of such financial statements,
Company acquires SFHI Notes and pledges such SFHI Notes to the Collateral
Agent under the Security Agreement or contributes such SFHI Notes to SFHI
and causes the cancellation of such SFHI Notes; provided, further, that
-------- -------
Company may at its option exclude a fiscal quarter occurring after the
Closing Date from the calculation of SFHI Cash Flow as provided above if a
portion of the capital expenditures project by SFHI previously disclosed to
SunAmerica will occur during such fiscal quarter by notifying Collateral
Agent in writing not less than 30 days prior to the end of such quarter to
be excluded in which case, to the extent applicable, SFHI Cash Flow will be
calculated based on four preceding quarters (excluding such excluding fiscal
quarter but including the results of the fifth most recent fiscal quarter).
Company shall only be required to redeem Notes or acquire SFHI Notes as
provided in this subsection 2.5C(v) on one occasion and any SFHI Notes
pledged to Collateral Agent pursuant to this clause (v) shall not be subject
to release or otherwise taken into account under subsection 2.5F.
(vi) Change-of-Control Repurchase. If there is a Change of Control
----------------------------
(the date of such Change of Control being the "Change of Control Date"),
----------------------
then the Company shall promptly thereafter notify each Holder in writing of
such occurrence and not later than ten Business Days after such Change of
Control Date shall commence an offer to repurchase (the "Change of Control
-----------------
Repurchase Offer") all of the outstanding Notes on the Change of Control
----------------
Payment Date (as defined below) at a purchase price in cash equal to 101% of
the aggregate principal amount of the Notes plus accrued and unpaid interest
to the date of repurchase (and at no other premium). The Change of Control
Repurchase Offer shall remain open for 20 Business Days following the date
the Company mails notice of the Change of Control Repurchase Offer to the
Holders or such longer
19
<PAGE>
period required by applicable law. Notice of a Change of Control Repurchase
Offer shall be mailed by Company to the Holders of the Notes at their last
registered addresses with copies to Collateral Agent. The notice shall
contain all instructions and materials necessary to enable such Holders to
tender Notes pursuant to the Change of Control Repurchase Offer. The notice
shall state:
(1) that the Change of Control Repurchase Offer is being made
pursuant to this subsection 2.5C(vi), that Notes may be surrendered in
-------------------
whole or in part (in denominations of $1,000 and integral multiples
thereof), and that all Notes tendered will be accepted for payment;
(2) that any Notes not tendered will continue to accrue interest;
(3) that any Notes accepted for payment pursuant to the Change of
Control Repurchase Offer shall cease to accrue interest after the date
on which such Notes are paid;
(4) that Holders electing to have Notes purchased pursuant to a
Change of Control Repurchase Offer will be required to surrender their
Notes, with the form entitled "Option of Holder to Elect Repurchase" on
the reverse of the Note completed, to Company prior to the close of
business on the expiration date of the Change of Control Repurchase
Offer;
(5) that Holders will be entitled to withdraw their election if
the Company receives, not later than the close of business on the
Business Day immediately preceding the expiration date of the Change of
Control Repurchase Offer, a telegram telex, facsimile transmission or
letter setting forth the name of the Holder, the principal amount of
Notes the Holder delivered for purchase and a statement that such
Holder is withdrawing such Holder's election to have such Notes
purchased;
(6) that the Holders whose Notes are tendered only in part will be
issued Notes representing the unpurchased portion of the Notes
surrendered;
(7) the instructions Holders must follow in order to tender their
Notes; and
(8) the circumstances and relevant facts regarding such Change of
Control (including but not limited to information with respect to pro
forma historical financial information after giving effect to such
Change of Control, information regarding the persons acquiring control
and such person's business plans going forward).
On the expiration of the Change of Control Repurchase Offer, Company
shall (A) accept for payment Notes or portions thereof tendered pursuant to the
Change of Control Repurchase Offer, (B) promptly transfer to the Holders
immediately available
20
<PAGE>
funds sufficient to pay the purchase price of all Notes or portions thereof so
tendered and (C) promptly deliver to such Holders a new Note equal in principal
amount to any unpurchased portion of the Note surrendered. If the events which
give rise to a Change of Control Repurchase Offer cease to exist prior to
completion of such repurchase offer, then Company shall not be obligated to
repurchase any of the Notes and may revoke any offer set forth above (whether
before or after acceptance thereof by any Holder) and will not be liable to make
the payments set forth above with respect to any revoked offer.
(vii) Redemption on February 16, 1996. In the event any proceeds from
-------------------------------
the purchase of the Notes by Holders have not been used in accordance with
subsection 3.2F on or prior to February 16, 1996 (the "Unused Note
Proceeds"), a principal amount of Notes equal to such Unused Note Proceeds
shall be redeemed on February 16, 1996 at a redemption price equal to 100%
of the principal amount so redeemed plus accrued and unpaid interest thereon
to such redemption date.
D. REPURCHASE PURSUANT TO ANY GAMING LAW.
(i) If required to be found suitable by any Gaming Authority, all
Holders and beneficial owners of Notes, whether initial Holders, beneficial
owners or subsequent transferees, shall be subject to the suitability provisions
of the applicable Gaming Law and shall apply for a finding of suitability within
the earlier of (i) 30 days after the applicable Gaming Authority requests that
such Holder or beneficial owner apply for a finding of suitability, or (ii) the
time period prescribed by such Gaming Authority for such application. The
Holder or beneficial owner required to be found suitable shall pay all costs of
the investigation for such finding. In the event that any Gaming Authority
determines that a Holder or beneficial owner is not suitable under such Gaming
Authority's Gaming Laws or such Holder or beneficial owner fails to submit for a
finding of suitability as required by such Gaming Authority in its sole
discretion, then, promptly after the date that such Holder or beneficial owner
(the "Unsuitable Holder") is found unsuitable or fails to submit for a finding
of suitability (the "Unsuitability Date"), SGC and Company shall provide written
notice to that effect to such Unsuitable Holder and the Unsuitable Holder must
thereafter dispose of, pursuant to subsection 2.5D(ii), all Notes the Unsuitable
Holder than possesses, either directly, indirectly or beneficially. Immediately
upon the Unsuitability Date, the Unsuitable Holder shall have no further right
(a) to exercise, directly or indirectly, through any trustee or nominee or any
other person or entity, any right conferred by any Note(s) and (b) to receive
any interest or any other distribution or payment with respect to any such
Note(s) or any remuneration in any form from Company or SGC; provided, however,
that after the Unsuitability Date, interest on any such Note(s) shall continue
to accrue for the benefit of any subsequent Holder thereof.
(ii) Within 30 days after receipt of the notice referred to in clause
(i) above or such shorter period as the Gaming Authorities may prescribe, (i)
the Unsuitable Holder shall sell its Note(s) either directly or through a bona
fide brokerage transaction, in either case on arms-length terms, to a Person who
has not previously been found unsuitable by the Gaming Authorities and who is
not an Affiliate of the Unsuitable
21
<PAGE>
Holder or (2) at the election of Company, Company may redeem such Holder's Notes
at the lower of (i) the principal amount thereof, or (ii) the amount which the
Unsuitable Holder paid for the Note(s), together in either case with accrued
interest up to the Unsuitability Date.
(iii) The provisions of this subsection 2.5D shall be construed in
accordance with the provisions of the applicable Gaming Laws.
E. PRO RATA REDEMPTION. In the event of any redemption in which the
aggregate principal amount of Notes to be redeemed is less than the entire
principal amount of Notes outstanding, Company shall select the Notes to be
redeemed on a pro rata basis (with such adjustments as may be deemed appropriate
by Company so that only Notes in denominations of $1,000, or integral multiples
thereof, shall be purchased). Holders whose Notes are purchased only in part
will be issued new Notes equal in principal amount to the unpurchased portion of
the Notes surrendered in connection with a redemption.
F. RELEASE OF SFHI NOTES AS COLLATERAL. If and to the extent that
the principal amount of SFHI Notes held as Collateral under the Security
Agreement exceeds the principal amount of outstanding Notes (the amount of such
excess, the "Excess Principal Amount"), then, so long as no Event of Default or
Potential Event of Default has occurred and is continuing, Collateral Agent
shall release its security interest held on behalf of Holders in SFHI Notes in a
principal amount not to exceed the Excess Principal Amount within five (5)
Business Days after receiving the written request of Company directing that such
release occur which request shall certify that no Event of Default or Potential
Event of Default has occurred and is continuing; provided that Collateral Agent
--------
shall not release its security interest in any such SFHI Notes unless and until
Company has demonstrated in a manner satisfactory to Collateral Agent that
immediately upon such release, the SFHI Notes released will be contributed or
otherwise transferred to SFHI and retired or otherwise cancelled; it being
--------
understood that Collateral Agent shall have no obligation to deliver to Company
- ----------
any instrument or instruments evidencing the SFHI Notes that is in excess of the
Excess Principal Amount prior to receiving in exchange therefore a substitute
instrument or instruments evidencing SFHI Notes in a principal amount not less
than the principal amount required to be pledged hereunder and under the
Security Agreement. Company agrees that at all times after February 15, 1996
that the principal amount of SFHI Notes held as collateral shall equal or exceed
the principal amount of outstanding Notes.
2.6 REPLACEMENT OF NOTES. Upon receipt of evidence reasonably satisfactory
--------------------
to Company of the loss, theft, destruction or mutilation of a Note and upon
delivery of an unsecured indemnity agreement reasonably satisfactory to Company
from any Holder of such Note or, in the case of any such mutilation, upon the
surrender of such Note for cancellation to Company at its principal office,
Company, at its expense, will execute and deliver, in lieu thereof, a new Note
of like tenor, dated in the case of a Note, so that there will be no loss of
interest. Any Note in lieu of which any such new Note has been so executed and
delivered by Company, thereupon shall not be deemed an outstanding
22
<PAGE>
Note for any purpose under this Agreement. Notwithstanding the foregoing
provisions of this subsection 2.6, if any Note of which SunAmerica or any other
institutional Holder is the owner is lost, stolen or destroyed, then the
affidavit of such Holder's Treasurer or Assistant Treasurer (or other
responsible officials), setting forth the name of the owner of such Note and the
circumstances with respect to such loss, theft or destruction, shall be accepted
as satisfactory evidence thereof, and no indemnity shall be required as a
condition to the execution and delivery by Company of a new Note in lieu of such
Note (or as a condition to the payment thereof, if due and payable) other than
SunAmerica's or such Holder's written agreement to indemnify Company.
2.7 TAXES. In the event of the passage of any state, Federal, municipal or
-----
other governmental law, order, rule or regulation subsequent to the date hereof
(i) deducting from the value of real property for the purpose of taxation any
lien or encumbrance thereon or in any manner changing or modifying the laws now
in force governing the taxation of the Deed of Trust or debts secured by
mortgages (other than laws governing income, franchise and similar taxes
generally) or the manner of collecting taxes thereon and (ii) imposing a tax to
be paid by Collateral Agent or any Holder, either directly or indirectly, on the
Deed of Trust, this Agreement, the Guaranty or any of the Basic Documents or to
require an amount of taxes to be withheld or deducted therefrom, SGC and Company
will promptly notify Collateral Agent or such Holder, as applicable, of such
event. In such event, SGC and Company shall (i) jointly and severally agree to
enter into such further instruments as may be reasonably necessary or desirable
to obligate Trustor to make additional payments to fully and timely discharge
such items and (ii) jointly and severally guarantee such additional payments.
If SGC and Company are not permitted by law to do that which is required by the
preceding sentence, Collateral Agent or such Holder, as applicable, shall be
entitled to exercise any or all of its rights and remedies under the Basic
Documents, including the right to accelerate the Obligations. The obligations
of SGC and Company under this subsection shall survive the payment of the Notes.
2.8 REGISTRATION; TRANSFER; REGISTRATION OF TRANSFER AND EXCHANGE.
-------------------------------------------------------------
A. Company shall maintain a register for its Notes, which shall
provide for the registration of the Notes and of transfers of the Notes. Upon
surrender for registration or transfer of any Note, Company, at its expense,
shall execute and deliver, in the name of the designated transferee or
transferees, one or more new Notes, as applicable; provided, however, that in
connection with any such transfer, the Holder requesting the transfer shall
provide to Company evidence reasonably satisfactory to it that the transfer is
to a "qualified institutional buyer" or an "accredited investor," as such terms
are defined in Rule 144A and 501, respectively, of the Securities Act, and is
exempt from the registration requirements of the Securities Act or, if the
transfer is to an entity or person other than a "qualified institutional buyer"
or an "accredited investor," Company shall be provided with an opinion of
counsel reasonably satisfactory to it that the transfer is so exempt from the
registration requirements of the Securities Act; provided, further, that Company
-------- -------
shall not be required to register the transfer of Notes to a transferee with a
principal amount of less than $2,000,000; provided, further, that Company shall
-------- -------
have the
23
<PAGE>
right to consent (which consent shall not unreasonably be withheld or delayed)
to any transfer of Notes that causes SunAmerica to hold less than 51% of the
legal or beneficial interests in all outstanding Notes. Notes may be exchanged
at the option of any Holder thereof for Notes of a like aggregate principal
amount in the same name but in different denominations. Whenever any Notes are
so surrendered for exchange, Company, at its expense, shall execute and deliver
the Notes which the Holder making the exchange is entitled to receive. All
Notes issued upon any registration of transfer or exchange thereof shall be the
valid obligations of Company, evidencing the same debt, and entitled to the same
benefits, as Notes surrendered upon such registration of transfer or exchange.
Each Note presented or surrendered for registration or transfer or exchange
shall (if so required by Company) be duly endorsed, or be accompanied by a
written instrument of transfer in form satisfactory to Company, duly executed by
the Holder thereof or its attorney duly authorized in writing.
B. In connection with any transfer of the Notes pursuant to the
exemption from the provisions of Section 5 of the Securities Act afforded by
Rule 144A promulgated thereunder, Company hereby agrees to provide (i) at the
request of any transferring Holder, including any transferee thereof or Person
who has been granted a participation in any Note pursuant to this Agreement, to
such Holder and to any prospective transferee designated to Company in writing
by such Holder, and (ii) at such prospective transferee's request to such Holder
to Company, the information required by paragraph (d)(4)(i) (or any successor
provision) of Rule 144A under the Securities Act.
2.9 REPRESENTATION OF SUNAMERICA. SunAmerica represents to SGC and Company
----------------------------
that on the Closing Date SunAmerica is an "accredited investor" within the
meaning of Section 501 of the Securities Act, is acquiring the Notes for
investment and is not acquiring the Notes with a view to the distribution or
sale of the securities within the meaning of the Securities Act, subject,
however, to any requirement of law that the disposition of its property be at
all times within its control.
SECTION 3. REPRESENTATIONS AND WARRANTIES
To induce SunAmerica to enter into this Agreement and to purchase the
Notes hereunder, SGC and Company each represent, warrant and covenant to
SunAmerica and any other Holder, as of the date hereof, as follows:
3.1 ORGANIZATION, POWERS, QUALIFICATION, GOOD STANDING AND OTHER MATTERS.
--------------------------------------------------------------------
A. ORGANIZATION AND POWERS; QUALIFICATION AND GOOD STANDING. Each of
SGC and Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Nevada. Each of SGC and Company has all
requisite corporate power and authority to own and operate its properties, to
carry on its business as now conducted and as proposed to be conducted, to enter
into the Basic Documents to which it is party and to carry out the transactions
contemplated thereby. Each of SGC and Company is qualified to do business and
in good standing in Nevada and in every
24
<PAGE>
other jurisdiction where its assets are located and wherever necessary to carry
out its business and operations, except in such other jurisdictions where the
failure to be so qualified or in good standing has not had and will not have a
Material Adverse Effect.
B. SUBSIDIARIES AND JOINT VENTURES. All of the Subsidiaries and
Joint Ventures of SGC as of the Closing Date are identified in Schedule 3.1B
-------------
annexed hereto. Company does not have any ownership interest in any Subsidiary
or Joint Venture. The capital stock of each of the Subsidiaries of SGC and
Company identified in Schedule 3.1B annexed hereto is duly authorized, validly
-------------
issued, fully paid and nonassessable. Each of the Subsidiaries and Joint
Ventures of SGC identified in Schedule 3.1B annexed hereto is a corporation or
-------------
other entity duly organized or formed, validly existing and in good standing
under the laws of its respective jurisdiction of incorporation set forth
therein, has all requisite power and authority to own and operate its properties
and to carry on its business as now conducted and as proposed to be conducted,
and is qualified to do business and in good standing in every jurisdiction where
its assets are located and wherever necessary to carry out its business and
operations, in each case except where failure to be so qualified or in good
standing or a lack of such corporate power and authority has not had and will
not have a Material Adverse Effect. Schedule 3.1B annexed hereto correctly sets
-------------
forth, as of the Closing Date, the ownership interest of SGC and each of its
Subsidiaries in each of their respective Subsidiaries and Joint Ventures.
C. CAPITALIZATION. The authorized capital stock of SGC consists of
100,000,000 shares of common stock, par value .01 per share, of which 6,195,356
shares are outstanding and 10,000,000 shares of preferred stock, par value .01
per share, of which 8,187,563 shares of SGC Preferred Stock are outstanding.
The authorized capital stock of Company consists of 20,000 shares of common
stock, par value $10 per share, of which 50 are issued and outstanding, all of
which are owned by SGC.
D. COMPANY AND EXISTING LEASE INDEBTEDNESS. As of the Closing and
after giving effect to the transactions contemplated hereby, Company will not be
liable with respect to any Indebtedness except for the Notes and the Existing
Lease Guaranty and the outstanding principal amount of the Existing Lease Note
will not be greater than $6,163,227.
3.2 AUTHORIZATION OF NOTES AND OTHER BASIC DOCUMENTS AND RELATED MATTERS.
--------------------------------------------------------------------
A. AUTHORIZATION OF NOTES AND OTHER BASIC DOCUMENTS. The execution
and delivery by each of SGC and Company of each Basic Document to which each is
a party and the performance by each of SGC and Company of their respective
obligations thereunder have been duly authorized by all necessary corporate
action on the part of SGC and Company, as applicable.
B. NO CONFLICT. The execution, delivery and performance by SGC and
Company of each Basic Document to which it is party and the consummation of the
transactions contemplated by the Basic Documents, do not and will not (i)
violate any provision of any law or any governmental rule or regulation
(including any Gaming Laws
25
<PAGE>
or, based on the representation and warranty of SunAmerica contained in Section
2.9 hereof, federal securities laws) applicable to SGC or Company or any of
their respective Subsidiaries, the Certificate or Articles of Incorporation or
Bylaws of SGC or Company or any of their respective Subsidiaries or any order,
judgment or decree of any court or other agency of government binding on SGC or
Company or any of their respective Subsidiaries, (ii) conflict with, result in a
breach of or constitute (with due notice or lapse of time or both) a default
under the SFHI Indenture, the Pioneer Indenture, the Existing Lease Documents or
any other material Contractual Obligation of SGC or Company or any of their
respective Subsidiaries, (iii) result in or require the creation or imposition
of any Lien upon any of the properties or assets of SGC or Company or any of
their respective Subsidiaries (other than any Liens created under any of the
Basic Documents in favor of Collateral Agent or Holders), or (iv) require any
approval of stockholders or any approval or consent of any Person under any
Contractual Obligation of SGC or Company or any of their respective
Subsidiaries, except for such approvals or consents which will be obtained on or
before the Closing Date and disclosed in writing to SunAmerica.
C. GOVERNMENTAL CONSENTS. Assuming the accuracy of SunAmerica's
representation contained in subsection 2.9, the execution, delivery and
performance by each of SGC and Company and their respective Subsidiaries of each
Basic Document and the consummation of the transactions contemplated by each
Basic Document do not and will not require any registration with, consent or
approval of, or notice to, or other action to, with or by, any federal, state or
other Governmental Authority or regulatory body, including but not limited to
any Gaming Board.
D. BINDING OBLIGATION. Each of the Basic Documents to which SGC and
Company, as the case may be, are parties has been duly executed and delivered by
SGC and Company, as the case may be, and is the legally valid and binding
obligation of SGC and Company, as applicable, enforceable against SGC and
Company, as applicable, in accordance with its respective terms, except as may
be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or limiting creditors' rights generally or by equitable principles
relating to enforceability.
E. OFFERINGS. None of SGC, Company or any of their respective
Subsidiaries has, directly or indirectly, offered the Notes, or any part
thereof, or (within the last six months) any similar securities for sale to, or
solicited any offer to buy any of the same from, or otherwise approached or
negotiated in respect thereof with, anyone other than SunAmerica and not more
than 10 other institutional investors. Assuming the accuracy of the
representations and warranties of SunAmerica contained in subsection 2.9, the
offer, issuance and sale of the Notes to SunAmerica in conformity with the terms
of this Agreement constitute transactions exempt from the registration
requirements of Section 5 of the Securities Act and comply or will comply with
federal securities and state blue sky laws applicable to such offer, sale and
issuance.
F. USE OF PROCEEDS. Company will use all of the proceeds received
from the sale of the Notes on the Closing Date or any Subsequent Closing Date to
acquire by
26
<PAGE>
purchase SFHI Notes (or reimburse itself for previous purchases made on or after
December 30, 1995 of SFHI Notes); provided that Company may use up to $2,500,000
--------
of the proceeds received from the sale of the Notes on the Closing Date to
transfer such proceeds to SGC, cause SGC to make a capital contribution in cash
of such proceeds to Pioneer Hotel, Inc. and have Pioneer Hotel, Inc. purchase
and cancel Pioneer Bonds with such proceeds as soon as practicable but in no
event later than February 15, 1996 and may also use proceeds of the Notes on the
Closing Date to pay closing costs, including the fees of O'Melveny & Myers and
Gibson, Dunn & Crutcher.
3.3 FINANCIAL CONDITION. SGC and Company have heretofore delivered to
-------------------
SunAmerica at SunAmerica's request, the following financial statements and
information: the audited consolidated financial statements of SGC and its
Subsidiaries for the fiscal years ended September 30, 1995, 1994 and 1993. All
such statements were prepared in conformity with GAAP and fairly present the
consolidated financial position of the entities described in such financial
statements as at the respective dates thereof and the results of operations and
cash flows (on a consolidated basis) of the entities described therein for each
of the periods then ended. SGC and Company do not (and will not following the
issuance of the Notes) have any material Contingent Obligation or liability for
taxes, long-term lease or unusual forward or long-term commitment that is not
reflected in the aforementioned financial statements or the notes thereto and
which in any such case is material in relation to the business, operations,
properties, assets, condition (financial or otherwise) or prospects of SGC,
Company or any of their respective Subsidiaries.
3.4 NO MATERIAL ADVERSE CHANGE; NO RESTRICTED JUNIOR PAYMENTS. Since
---------------------------------------------------------
September 30, 1995, no event or change has occurred that has caused or
evidences, either in any case or in the aggregate, a Material Adverse Effect.
Neither SGC or Company has directly or indirectly declared, ordered, paid or
made, or set apart any sum or property for, any Restricted Junior Payment or
agreed to do so except as permitted by subsection 6.1.
3.5 TITLE TO PROPERTIES; LIENS. SGC and Company have (i) good, sufficient
--------------------------
and legal title to (in the case of fee interests in real property), (ii) valid
leasehold interests in (in the case of leasehold interests in real or personal
property), or (iii) good title to (in the case of all other property, including
personal property), the Premises and Improvements and all of their other
respective properties and assets reflected in the financial statements referred
to in subsection 3.3, in each case except as disclosed in the notes to such
financial statements and for assets disposed of since the date of such financial
statements in the ordinary course of business or as otherwise permitted under
Section 6. Except as permitted by this Agreement, the properties and assets of
Company are free and clear of Liens.
3.6 LITIGATION; ADVERSE FACTS. Except as disclosed in SGC's Annual Report
-------------------------
on Form 10-K for the fiscal year ending September 30, 1995, there are no
actions, suits, proceedings, arbitrations or governmental investigations
(whether or not purportedly on behalf of SGC, Company or any of their respective
Subsidiaries) at law or in equity or
27
<PAGE>
before or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
pending or, to the knowledge of SGC or Company, threatened against SGC or
Company, or any of their respective Subsidiaries or any property of SGC or
Company or any of their respective Subsidiaries that, individually or in the
aggregate, could reasonably be expected to result in a Material Adverse Effect.
None of SGC, Company or any of their respective Subsidiaries is (i) in violation
of any applicable laws that, individually or in the aggregate, could reasonably
be expected to result in a Material Adverse Effect or (ii) subject to or in
default with respect to any final judgments, writs, injunctions, decrees, rules
or regulations of any court or any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, that, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect.
3.7 PAYMENT OF TAXES. Except to the extent permitted by subsection 5.4,
----------------
all tax returns and reports of SGC, Company and their respective Subsidiaries
required to be filed by any of them have been timely filed, and all taxes,
assessments, fees and other governmental charges upon SGC, Company and their
respective Subsidiaries and upon their respective properties, assets, income,
businesses and franchises which are due and payable have been paid or are being
contested in good faith by appropriate proceedings. Neither SGC or Company
knows of any proposed tax assessment against SGC, Company or any of their
respective Subsidiaries which is not being actively contested by SGC, Company or
such Subsidiary in good faith and by appropriate proceedings; provided that such
--------
reserves or other appropriate provisions, if any, as shall be required in
conformity with GAAP shall have been made or provided therefor. No governmental
entity has, during the past three years, examined, or is in the process of
examining, any tax return of SGC, Company or any of their respective
Subsidiaries. No governmental entity has proposed (tentatively or
definitively), asserted or assessed, or, to the knowledge of SGC and Company,
threatened to propose or assert, any deficiency, assessment or claim for taxes,
which delinquency, assessment or claim could reasonably be expected to have a
Material Adverse Effect and, to the best knowledge of SGC and Company, there
would be no basis for any such delinquency, assessment or claim. There are no
agreements, waivers or other arrangements providing for an extension of time
with respect to the assessment of any tax or deficiency against SGC, Company or
any of their respective Subsidiaries or with respect to any tax return filed or
to be filed by SGC, Company or any of their respective Subsidiaries. Following
the Closing, the assessment of any additional taxes for periods for which
returns have been filed is not expected to exceed the liability recorded
therefor on the financial statements delivered to SunAmerica pursuant to
subsection 3.3. There are no material unresolved questions or claims concerning
the tax liability of SGC, Company or any of their respective Subsidiaries.
3.8 PERFORMANCE OF AGREEMENTS; MATERIALLY ADVERSE AGREEMENTS. None of SGC,
--------------------------------------------------------
Company or any of their respective Subsidiaries is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any of its Contractual Obligations where such default
could reasonably be expected to result in a Material Adverse Effect and, to the
knowledge of SGC and Company, no condition exists
28
<PAGE>
that, with the giving of notice or the lapse of time or both, would constitute
such a default.
3.9 GOVERNMENTAL REGULATION. None of SGC, Company or any of their
-----------------------
respective Subsidiaries is subject to regulation under the Public Utility
Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act
or the Investment Company Act of 1940 or under any other federal or state
statute or regulation which may limit its ability to incur Indebtedness or which
may otherwise render all or any portion of the Obligations unenforceable.
3.10 EMPLOYEE BENEFIT PLANS AND EMPLOYEE MATTERS.
-------------------------------------------
A. SGC, Company and each of their respective ERISA Affiliates are in
compliance in all material respects with all applicable provisions and
requirements of ERISA and the regulations and published interpretations
thereunder with respect to each Employee Benefit Plan, and have performed all
their obligations under each Employee Benefit Plan. No ERISA Event has occurred
or is reasonably expected to occur.
B. Schedule 3.10 annexed hereto lists all Employee Benefit Plans.
-------------
Except to the extent required under Section 4980B of the Internal Revenue Code,
no Employee Benefit Plan provides health or welfare benefits (through the
purchase of insurance or otherwise) for any retired or former employees of SGC,
Company or any of their respective ERISA Affiliates. As of the most recent
valuation date for any Pension Plan, no Pension Plan has any unfunded benefit
liabilities (as defined in Section 4001(a)(18) of ERISA).
3.11 ENVIRONMENTAL PROTECTION. Except as set forth in Schedule 3.11 annexed
------------------------ -------------
hereto, in each particular instance, with respect to the particular clause of
this subsection 3.11 to which such exception is taken:
(i) the operations of Company (including, without limitation, all
operations and conditions at or in any Facility) related to the Facility
comply in all material respects with all Environmental Laws;
(ii) Company has obtained all Governmental Authorizations under
Environmental Laws necessary to its operations related to the Facility, and
all such Governmental Authorizations are in good standing, and Company is in
compliance with all material terms and conditions of such Governmental
Authorizations;
(iii) Company has not received (a) any notice or claim to the effect
that it is or may be liable to any Person as a result of or in connection
with any Hazardous Material related to the Facility or (b) any letter or
request for information under Section 104 of the Comprehensive Environmental
Response, Compensation, and Liability Act (42 U.S.C. (S) 9604) or comparable
state laws, with respect to the Facility and, none of the operations of
Company is the subject of any federal or state investigation relating to or
in connection with any Hazardous
29
<PAGE>
Material at the Facility or any Hazardous Material in any other manner
related to the Facility;
(iv) Company is not a party to any judicial or administrative
proceeding alleging the violation of or liability under any Environmental
Laws which if adversely determined could reasonably be expected to have a
Material Adverse Effect;
(v) Neither Company nor the Facility is subject to any outstanding
written order or agreement with any governmental authority or private party
relating to (a) any Environmental Laws or (b) any Environmental Claims;
(vi) Company has no contingent liability in connection with any Release
of any Hazardous Material related to the Facility which could reasonably be
expected to have a Material Adverse Effect;
(vii) Company and, to the best knowledge of any officer of SGC or
Company, none of its predecessors has filed any notice under any
Environmental Law indicating past or present treatment or Release of
Hazardous Material at the Facility and none of Company's operations involves
the generation, transportation, treatment, storage or disposal of hazardous
waste, as defined under 40 C.F.R. Parts 260-270 or any state equivalent;
(viii) except as disclosed in the Environmental Report, no Hazardous
Material exists on, under or about the Facility in a manner that has a
reasonable possibility of giving rise to an Environmental Claim having a
Material Adverse Effect, and Company has not filed any notice or report of a
Release of any Hazardous Material that has a reasonable possibility of
giving rise to an Environmental Claim having a Material Adverse Effect;
(ix) None of Company and, to the best knowledge of any officer of SGC
and Company, any of its predecessors has disposed of any Hazardous Material
in a manner that has a reasonable possibility of giving rise to an
Environmental Claim having a Material Adverse Effect;
(x) to the knowledge of SGC and Company, no underground storage tanks
or surface impoundments are on or at the Facility; and
(xi) no Lien in favor of any Person relating to or in connection with
any Environmental Claim has been filed or has been attached to the Facility.
3.12 SOLVENCY. Upon the consummation of all the transactions contemplated
--------
by this Agreement and the Basic Documents: (i) the present fair salable value
of the assets of Company as an entirety will exceed the amount that will be
required to pay its probable liability on existing debts (whether matured or
unmatured, liquidated or unliquidated, absolute, fixed or contingent), as they
become absolute and matured; (ii) the
30
<PAGE>
sum of the debts (whether matured or unmatured, liquidated or unliquidated,
absolute, fixed or contingent) of Company will not exceed the aggregate value of
all of its property, fairly valued, assuming sale in an orderly manner and not
subject to any type of distressed or forced liquidation; (iii) the capital of
Company will not be unreasonably small for Company to carry on its businesses;
and (iv) Company does not intend to, nor does it or believe it will, by virtue
of consummating the transactions contemplated hereby, incur debts that will be
beyond its ability to pay as they mature.
3.13 CERTAIN FEES. No broker's or finder's fee or commission will be
------------
payable with respect to this Agreement or any of the transactions contemplated
hereby and SGC and Company hereby jointly and severally indemnifies each Holder
against, and agrees that it will hold each Holder harmless from, any claim,
demand or liability for any such broker's or finder's fees alleged to have been
incurred in connection herewith or therewith and any expenses (including
reasonable fees, expenses and disbursements of counsel) arising in connection
with any such claim, demand or liability.
3.14 DISCLOSURE. No representation or warranty of SGC or Company or any
----------
of their respective Subsidiaries contained in any Basic Document or in any other
document, certificate or written statement furnished to SunAmerica by or on
behalf of SGC or Company or any of their respective Subsidiaries for use in
connection with the transactions contemplated by this Agreement, taken as a
whole, contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein or
therein not misleading in light of the circumstances in which the same were
made.
SECTION 4. CONDITIONS TO CLOSING
4.1 CONDITIONS TO OBLIGATIONS OF SUNAMERICA. SunAmerica's obligation to
---------------------------------------
purchase the Notes pursuant to this Agreement is subject to the fulfillment, at
or prior to the Closing, of the following conditions, any one or more of which
may be waived SunAmerica:
A. SGC AND COMPANY DOCUMENTS. On or before the Closing, SGC and
Company shall deliver or cause to be delivered to SunAmerica the following:
(i) Certified copies of its Articles or Certificate of Incorporation
(including, in the case of SGC, the Certificate of Designations for the
Preferred Stock), together with a good standing certificate from the
Secretary of State of the State of Nevada and, to the extent generally
available, a certificate or other evidence of good standing as to payment of
any applicable franchise or similar taxes from the appropriate taxing
authority of such state, each dated a recent date prior to the Closing Date;
(ii) Copies of its Bylaws, certified as of the Closing Date by its
corporate secretary or an assistant secretary;
31
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(iii) Resolutions of its Board of Directors approving and authorizing
the execution, delivery and performance of this Agreement and the other
Basic Documents to which it is a party, certified as of the Closing Date by
its corporate secretary or an assistant secretary as being in full force and
effect without modification or amendment;
(iv) Signature and incumbency certificates of its officers executing
this Agreement and the other Basic Documents to which it is a party;
(v) in the case of Company, executed originals of this Agreement, the
Note to be issued to SunAmerica on the Closing Date (duly executed in
accordance with subsection 2.3, payable to SunAmerica and with appropriate
insertions), the Security Agreement, the Deed of Trust, the Environmental
Indemnity, the Collateral Account Agreement, the Collateral Account Letter
and the other Basic Documents to which it is party;
(vi) in the case of SGC, executed originals of this Agreement, the
Guaranty, the Environmental Indemnity and the other Basic Documents to which
it is party;
(vii) Such other documents as SunAmerica may reasonably request.
B. LEGAL OPINIONS. SunAmerica shall have received (i) originally
executed copies of one or more favorable written opinions of Gibson, Dunn &
Crutcher and Vargas & Bartlett, counsel for SGC and Company dated as of the
Closing Date and setting forth substantially the matters in the opinions
designated in Exhibit IX-A and Exhibit IX-B annexed hereto and as to such other
------------ ------------
matters as SunAmerica may reasonably request and (ii) evidence satisfactory to
SunAmerica that SGC and Company have requested such counsel to deliver such
opinions to SunAmerica.
C. OFFICERS CERTIFICATE REGARDING CERTAIN CONDITIONS. The following
conditions shall be satisfied and SGC and Company shall have delivered to
SunAmerica an Officers' Certificate, in form and substance satisfactory to
SunAmerica, to that effect:
(i) The representations and warranties of SGC or Company, as the case
may be, contained herein and in the other Basic Documents shall be true,
correct and complete in all material respects on and as of the Closing Date
to the same extent as though made on and as of that date.
(ii) No event shall have occurred and be continuing as of the Closing
Date, or would result from the consummation of the purchase of the Notes or
the other transactions contemplated by the Basic Documents, that would
constitute an Event of Default or a Potential Event of Default.
(iii) SGC and Company shall have performed all agreements and satisfied
all conditions which this Agreement and the other Basic Documents provide
shall
32
<PAGE>
be performed or satisfied by each of SGC and Company on or before the
Closing Date.
D. PERFECTION OF SECURITY INTERESTS AND RELATED MATTERS. Company
shall have taken or caused to be taken such actions in such a manner so that
Collateral Agent, for the benefit of Holders, has a valid and perfected first
priority security interest in all Collateral in which a Lien is purported to be
granted by the Basic Documents or any of them, executed as of the Closing Date.
Such actions shall include, without limitation: (i) the delivery to Collateral
Agent of Uniform Commercial Code financing statements, executed by Company as to
the Collateral granted by Company for all jurisdictions as may be necessary or
desirable to perfect Collateral Agent's security interest in such collateral;
(ii) evidence that counterparts of the Deed of Trust and the Subordination, Non-
Disturbance and Attornment Agreement were recorded in all locations to the
extent necessary or desirable, in the judgment of Collateral Agent, effectively
to create a valid and enforceable first priority Lien (subject only to Permitted
Encumbrances) on the Premises in favor of Collateral Agent for the benefit of
Holders, (iii) evidence satisfactory to Collateral Agent that SFHI Notes in an
aggregate principal amount not less than the principal amount of the Note to be
issued SunAmerica at Closing will be purchased with the proceeds of the Notes
deposited in the Cash Collateral Account and pledged to Collateral Agent, (iv)
Company and Donaldson, Lufkin & Jenrette shall have entered into the Collateral
Account Letter, the Collateral Account shall have been established and the
proceeds of the Note issued on the Closing Date shall have been deposited in the
Collateral Account, (v) the delivery to the trustee under the SFHI Indenture of
a Notice to the Trustee under the SFHI Indenture pursuant to Section 2.9 thereof
satisfactory to SunAmerica indicating that, among other things, SFHI Notes have
been and may be from time to time pledged to Collateral Agent under the Security
Agreement, that Collateral Agent will be entitled to vote such SFHI Notes as
provided in the Security Agreement and that all payments in respect of SFHI
Notes pledged as Collateral shall be paid directly to the Collateral Account,
and (vi) evidence reasonably satisfactory to Collateral Agent that all other
filings, recordings and other actions Collateral Agent deems necessary or
advisable to establish, preserve and perfect the first priority Liens (subject
to the Liens permitted under subsection 6.2) granted to Collateral Agent, for
the benefit of Holders, in the Collateral shall have been made.
E. TITLE POLICY. SunAmerica shall have received a 1970 Form B
American Land Title Association ("ALTA") extended coverage mortgagee form of
title insurance policy in the amount of $20,000,000 (the "TITLE POLICY") (with
proof of the payment of the premiums thereon) or commitment therefor in form and
substance acceptable to SunAmerica issued by Stewart Title Guaranty Company (the
"TITLE COMPANY"), insuring the lien of the Deed of Trust to be a first lien
against the Premises, free and clear of all defects, encumbrances and
exceptions, except those approved by SunAmerica and its counsel in writing,
together with such affirmative insurance as SunAmerica may require. The Title
Policy shall contain, among other things:
(i) full coverage against mechanic's liens (filed and inchoate);
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(ii) a foundation endorsement;
(iii) a contiguity endorsement;
(iv) a reference to the survey but no survey exceptions except those
theretofore approved in writing by SunAmerica and its counsel;
(v) Form 100, 116 and 116.1 endorsements;
(vi) an access to public streets endorsement; and
(vii) such other items and endorsements requested by SunAmerica.
F. UCC AND JUDGMENT SEARCHES. SunAmerica shall have received current
searches of the UCC filing offices and judgment searches with the Offices of the
Secretary of State of Nevada and the local recorder's office in Clark County and
elsewhere showing no security interests or judgments affecting the Premises, the
Improvements or Company other than those provided for herein.
G. SURVEY. SunAmerica shall have received a current survey prepared
by a surveyor acceptable to SunAmerica and licensed as a land surveyor in the
State of Nevada, that shall (a) be satisfactory, in form, scope and substance,
to SunAmerica, and (b) contain the legal description of the Premises and
certifications in form, scope and substance satisfactory to SunAmerica, from the
surveyor to SunAmerica and the Title Company and other persons reasonably
requested by SunAmerica.
H. FLOOD INSURANCE. SunAmerica shall have been provided with
satisfactory evidence, which may be in the form of a letter from an insurance
broker, municipal engineer, land surveyor or other knowledgeable source
unaffiliated with Company, as to whether (a) the Premises is located in an area
designated by the Department of Housing and Urban Development as having special
flood or mudslide hazards, and (b) the community in which the Premises is
located is participating in the National Flood Insurance Program. If both of
the aforesaid conditions exist, SunAmerica shall receive satisfactory policies
of flood insurance covering the Improvements as required by the Flood Act.
I. INSURANCE. SunAmerica shall have received evidence, satisfactory
to SunAmerica, of insurance required to be procured and maintained pursuant to
subsection 5.5 hereof and Section 8 of the Security Agreement and Section 6 of
the Deed of Trust indicating that, with respect to casualty insurance, such
policies of insurance have been endorsed to name SunAmerica, on behalf of
Holders, as loss payee pursuant to a standard mortgagee clause and, with respect
to liability insurance, such policies of insurance name SunAmerica, on behalf of
Holders, as an additional insured.
J. APPRAISAL. SunAmerica shall have received an Appraisal.
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K. NECESSARY CONSENTS AND APPROVALS. On or before the Closing Date,
SGC and Company shall have obtained all consents and approvals to the
transactions contemplated under this Agreement and the other Basic Documents and
to the continuing operations of the business of SGC, Company and their
Subsidiaries, of any Person required under any Contractual Obligation or other
obligation (including obligations imposed by law) of SGC or Company or any of
their respective Affiliates and of any governmental entity. Such consents and
approvals shall be in full force and effect, and any applicable waiting periods
shall have expired by the Closing Date without any action taken or threatened to
be taken by any competent governmental authority which might restrain, prevent
or otherwise impose adverse conditions on the transactions contemplated under
this Agreement.
L. ENVIRONMENTAL INFORMATION AND ENVIRONMENTAL INDEMNITY. SunAmerica
shall have received the Environmental Report and the Environmental Indemnity.
M. CHANGES IN STRUCTURE. Any changes in the management, capital or
ownership structure of SGC or its Subsidiaries not previously disclosed to
SunAmerica shall be satisfactory to SunAmerica in all respects.
N. NO MATERIAL ADVERSE EFFECT. Since September 30, 1995, no Material
Adverse Effect (in the sole opinion of SunAmerica) shall have occurred.
O. COMPLETION OF PROCEEDINGS. All corporate and other proceedings
taken or to be taken in connection with the transactions contemplated hereby and
all documents incidental thereto not previously found acceptable by SunAmerica
and its counsel shall be satisfactory in form and substance to SunAmerica and
such counsel, and SunAmerica and its counsel shall have received all such
counterpart originals or certified copies of such documents as SunAmerica may
reasonably request.
P. NO INJUNCTIONS, RESTRAINING ORDER OR ADVERSE LITIGATION. No
order, judgment or decree of any court, arbitrator or governmental authority
shall purport to enjoin or restrain SunAmerica from acquiring any Notes on the
Closing Date. As of the Closing Date, there shall not be pending or, to the
knowledge of SGC or Company, threatened, any action, suit, proceeding,
governmental investigation or arbitration against SGC, Company or any of their
respective Subsidiaries or any property of SGC, Company or any of their
respective Subsidiaries that has not been disclosed by SGC or Company in writing
pursuant to subsection 3.6 prior to the execution of this Agreement, and there
shall have occurred no development not so disclosed in any such action, suit,
proceeding, governmental investigation or arbitration so disclosed, that, in
either event, in the opinion of SunAmerica, could be expected to have a Material
Adverse Effect; and no injunction or other restraining order shall have been
issued and no hearing to cause an injunction or other restraining order to be
issued shall be pending or noticed with respect to any action, suit or
proceeding seeking to enjoin or otherwise prevent the consummation of, or to
recover any damages or obtain relief as a result of, the transactions
contemplated by this Agreement, the Basic Documents or the acquisition of the
Notes hereunder.
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Q. NO VIOLATION OF LAW. The acquisition of the Notes shall not
violate any law including, without limitation, Regulation G, Regulation T or
Regulation X of the Board of Governors of the Federal Reserve System.
R. EXISTING LEASE DOCUMENTS. On the Closing Date (i) SunAmerica
shall have received executed or conformed copies of the Existing Lease Documents
including any amendments thereto all in form and substance satisfactory to
SunAmerica, (ii) SunAmerica shall have received an Officers' Certificate from
SGC and Company stating that the applicable Existing Lease Documents to which
such Person is a party is in full force and effect and no material term or
condition thereof has been amended, modified or waived, that all agreements and
conditions contained in the Existing Lease Documents and any agreements or
documents referred to therein required to be performed or complied with by SGC
and Company and, to the knowledge of SGC and Company, the other parties thereto
on or before the Closing Date shall have been so performed or satisfied and that
neither SGC nor Company nor, to the knowledge of SGC or Company, any other party
to any Existing Lease Documents is in default in the performance of or
compliance with any of the terms or provisions thereof and (iii) SunAmerica
shall have received from the Tenant the Subordination, Non-Disturbance and
Attornment Agreement and any estoppel certificates or other documents or
certifications from the Tenant or the holder(s) of the Existing Lease Notes
requested by SunAmerica.
S. PAYMENT OF FEES AND EXPENSES. Without limiting the provisions of
subsection 9.2, SGC and Company shall have paid on or before the Closing by wire
transfer of immediately available funds, the reasonable fees, charges and
disbursements arising in connection with the preparation, execution and delivery
of the Basic Documents, including but not limited to the reasonable fees and
expenses of counsel to SunAmerica, O'Melveny & Myers to the extent an invoice
therefor is received by SGC not less than one Business Day prior to Closing; the
appraiser retained to deliver the Appraisal, environmental and other
consultants; closing costs; escrow fees; title issuance premiums; title search
and survey costs; and the reasonable out-of-pocket expenses of SunAmerica;
provided that the selection of the appraiser and any environmental or other
- -------- ----
consultant or experts shall not be made without Company's prior consent, which
shall not be unreasonably withheld.
T. PURCHASE OF PIONEER BONDS. On the Closing Date, SGC shall have
contributed not less than $10 million in cash to Pioneer Hotel, Inc. and Pioneer
Hotel, Inc. shall have executed a certificate to the effect that Pioneer Hotel,
Inc. will use all of such cash to purchase the Pioneer Bonds and cause the
Pioneer Bonds to be cancelled.
4.2 CONDITIONS TO NOTE ISSUANCES SUBSEQUENT TO THE CLOSING DATE.
-----------------------------------------------------------
The obligation of SunAmerica to purchase Notes on any Subsequent
Closing Date is subject to the following conditions precedent:
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A. NOTICE. SunAmerica shall have received a Note Issuance Notice in
------
substantially the form of Exhibit II annexed hereto not later than three
Business Days prior to the Subsequent Closing Date designated on such Note
Issuance Notice.
B. CONDITIONS TO OBLIGATIONS OF SUNAMERICA ON A SUBSEQUENT CLOSING
---------------------------------------------------------------
DATE. As of the Subsequent Closing Date, the following conditions shall be
- ----
satisfied and SGC and Company shall have delivered to SunAmerica an Officer's
Certificate, in form and substance satisfactory to SunAmerica, to the effect
that:
(i) The representations and warranties contained in the Agreement
and in the other Basic Documents shall be true, correct and complete in all
material respects as of the Subsequent Closing Date as to the same extent as
though made on and as of that date;
(ii) No event shall have occurred and be continuing as of the
Subsequent Closing Date, or would result from the consummation of the
purchase of the Notes or other transactions contemplated by the Basic
Documents, that would constitute an Event of Default or a Potential Event of
Default;
(iii) SGC and Company shall have performed all agreements and
satisfied all conditions which this Agreement and the other Basic Documents
provides shall be performed or satisfied by each of SGC and Company on or
before the Subsequent Closing Date;
(iv) No order, judgment or decree of any court, arbitrator or
governmental authority shall purport to enjoin or restrain SunAmerica from
acquiring the Note to be acquired by it on that Subsequent Closing Date;
(v) The issuance of the Notes requested on such Subsequent Closing
Date shall not violate any law including, without limitation, Regulation G,
Regulation T, Regulation U or Regulation X of the Board of Governors of the
Federal Reserve System;
(vi) Neither SGC nor Company has given notice to Collateral Agent
or any Holder under Nevada Revised Statute Section 106 or otherwise that any
indebtedness evidenced by any Note issued after the Closing Date will not be
secured by the Lien created by the Deed of Trust or any other Basic
Document; and
(vii) the Note issued on such Subsequent Closing Date will be
secured by the Deed of Trust and other Basic Documents.
C. DELIVERY OF NOTE. SunAmerica shall have received the Note to be
issued to SunAmerica on the Subsequent Closing Date duly executed and drawn to
the order of SunAmerica and with appropriate insertions.
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D. DELIVERY OF SFHI NOTES AND RELATED MATTERS. Collateral Agent
shall have received evidence satisfactory to it that the proceeds of the Notes
will be transferred to the Collateral Account and applied on or prior to
February 15, 1996 to purchase SFHI Notes that will be held in the Collateral
Account or otherwise delivered to Collateral Agent.
SECTION 5. AFFIRMATIVE COVENANTS OF SGC AND COMPANY
SGC and Company each hereby covenants and agrees that, until payment in
full of the Obligations, unless Requisite Holders shall otherwise give written
consent, SGC and Company shall perform, and shall cause each of its respective
Subsidiaries to perform, all covenants in this Section 5.
5.1 FINANCIAL STATEMENTS AND RELATED INFORMATION. SGC and Company will
--------------------------------------------
maintain a system of accounting established in accordance with sound business
practices to permit preparation of financial statements in conformity with GAAP.
SGC and Company will deliver to each Holder:
A. QUARTERLY, ANNUAL AND OTHER REPORTS: as soon as available all
annual and quarterly reports and such other information, documents and reports
that SGC is required to file with the Securities and Exchange Commission
pursuant to Sections 13 and 15(d) of the Exchange Act.
B. OFFICERS' CERTIFICATES: together with each delivery of quarterly
and annual financial statements of SGC and its Subsidiaries pursuant to
subsection 5.1A above, an Officers' Certificate of SGC stating that the signers
have reviewed the terms of this Agreement and have made, or caused to be made
under their supervision, a review in reasonable detail of the transactions and
condition of SGC, Company and their respective Subsidiaries during the
accounting period covered by such financial statements and that such review has
not disclosed the existence during or at the end of such accounting period, and
that the signers do not have knowledge of the existence as at the date of such
Officers' Certificate, of any condition or event that constitutes an Event of
Default or Potential Event of Default, or, if any such condition or event
existed or exists, specifying the nature and period of existence thereof and
what action SGC and Company have taken, are taking and propose to take with
respect thereto;
C. RECONCILIATION STATEMENTS: if, as a result of any change in
accounting principles and policies from those used in the preparation of the
audited financial statements referred to in subsection 3.3, the consolidated
financial statements of SGC and its Subsidiaries delivered pursuant to
subsection 5.1A will differ in any material respect from the consolidated
financial statements that would have been delivered pursuant to such subsections
had no such change in accounting principles and policies been made, then
together with the first delivery of financial statements pursuant to subsection
5.1A following such change, a written statement of the chief accounting officer
or chief
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financial officer of SGC setting forth the differences which would have resulted
if such financial statements had been prepared without giving effect to such
change;
D. SEC FILINGS AND PRESS RELEASES: promptly upon their becoming
available, copies of (a) all financial statements, reports, notices and proxy
statements sent or made available generally by SGC to its security holders, (b)
all regular and periodic reports and all registration statements (other than on
Form S-8 or a similar form) and prospectuses, if any, filed by SGC or any of
their respective Subsidiaries with any securities exchange or with the
Securities and Exchange Commission or any governmental or private regulatory
authority, and (c) all press releases and other statements made available
generally by SGC or any of their respective Subsidiaries to the public
concerning material developments in the business of SGC or any of their
respective Subsidiaries;
E. EVENTS OF DEFAULT, ETC.: promptly upon any officer of SGC or
Company obtaining knowledge (i) of any condition or event that constitutes an
Event of Default or Potential Event of Default, or becoming aware that any
Holder has given any notice or taken any other action with respect to a claimed
Event of Default or Potential Event of Default, (ii) that any Person has given
any notice to SGC, Company or any of their respective Subsidiaries or taken any
other action with respect to a claimed default or event or condition of the type
referred to in subsection 7.2, or (iii) of the occurrence of any event or change
that has caused or evidences, either in any case or in the aggregate, a Material
Adverse Effect, an Officers' Certificate specifying the nature and period of
existence of such condition, event or change, or specifying the notice given or
action taken by any such Person and the nature of such claimed Event of Default,
Potential Event of Default, default, event or condition, and what action SGC or
Company has taken, is taking and proposes to take with respect thereto;
F. LITIGATION OR OTHER PROCEEDINGS: promptly upon any officer of SGC
or Company obtaining knowledge of (X) the institution of, or non-frivolous
threat of, any action, suit, proceeding (whether administrative, judicial or
otherwise), governmental investigation or arbitration against SGC, Company or
any of its Subsidiaries or any property of SGC, Company or any of its
Subsidiaries (collectively, "PROCEEDINGS") not previously disclosed in writing
by SGC or Company to Holders or (Y) any material development in any Proceeding
that, in any case:
(1) if adversely determined, has a reasonable possibility of
giving rise to a Material Adverse Effect; or
(2) seeks to enjoin or otherwise prevent the consummation of, or
to recover any damages or obtain relief as a result of, the
transactions contemplated hereby;
written notice thereof together with such other information as may be reasonably
available to SGC or Company to enable Holders and their counsel to evaluate such
matters;
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G. EXISTING LEASE DOCUMENTS. With reasonable promptness, copies of
any Existing Lease Document or any amendment, supplement or modification
thereof;
H. ERISA EVENTS: promptly upon becoming aware of the occurrence of
or forthcoming occurrence of any ERISA Event, a written notice specifying the
nature thereof, what action SGC, Company or any of their respective ERISA
Affiliates has taken, is taking or proposes to take with respect thereto and,
when known, any action taken or threatened by the Internal Revenue Service, the
Department of Labor or the PBGC with respect thereto; and upon the request of a
Holder copies of each Schedule B (Actuarial Information) to the annual report
(Form 5500 Series) filed by SGC, Company or any of their respective ERISA
Affiliates with the Internal Revenue Service with respect to each Pension Plan
and such other documents or governmental reports or filings relating to any
Employee Benefit Plan as any Holder shall reasonably request;
I. ENVIRONMENTAL AUDITS AND REPORTS: promptly upon receipt thereof
copies of all environmental audits and reports, whether or not prepared by or on
behalf of SGC or Company or by independent consultants, with respect to any
environmental matters relating to the Facility; and
J. OTHER INFORMATION: with reasonable promptness, such other
information and data with respect to SGC, Company or any of their respective
Subsidiaries as from time to time may be reasonably requested by Collateral
Agent or any Holder.
5.2 INSPECTION. No more than once a fiscal quarter unless an Event of
----------
Default or Potential Event of Default has occurred and is continuing, SGC and
Company will permit any authorized representative designated by Collateral Agent
or any Holder of at least a majority in principal amount of the Notes at such
Person's own expense (unless a Potential Event of Default or an Event of Default
has occurred and is continuing in which case at SGC's and Company's expense), to
visit and inspect any of SGC's or Company's properties or the properties of any
of their respective Subsidiaries, including their financial and accounting
records, and to make copies and take extracts therefrom, and to discuss their
affairs, finances and accounts with the chief financial officer and any other
persons approved by the chief financial officer, under the chief financial
officer's direction, and, unless an Event of Default shall have occurred and be
continuing, all upon at least three Business Days' notice and at reasonable
times during normal business hours.
5.3 CORPORATE EXISTENCE, ETC. Except as permitted under subsection 6.3 or
-------------------------
6.5, SGC and Company will preserve and keep in full force and effect its
corporate existence and all rights and franchises material to its business;
provided, however, that SGC and Company shall not be required to preserve any
- -------- -------
such right, license or franchise, or corporate or other existence of any
Subsidiary (other than Company), if the Board of Directors of SGC and Company,
as the case may be, shall determine in good faith in accordance with their
respective charters that the preservation thereof is no longer desirable in the
conduct of the business of SGC, Company and their respective
40
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Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any
material respect to the Holders and will not have a Material Adverse Effect.
5.4 PAYMENT OF TAXES AND CLAIMS; TAX CONSOLIDATION. SGC and Company will,
----------------------------------------------
and will cause each of their respective Subsidiaries to, pay all taxes,
assessments and other governmental charges imposed upon it or any of its
properties or assets or in respect of any of its income, businesses or
franchises before any penalty accrues thereon, and all claims (including,
without limitation, claims for labor, services, materials and supplies) for sums
that have become due and payable and that by law have or may become a Lien upon
any of its properties or assets, prior to the time when any penalty or fine
shall be incurred with respect thereto; provided that no such charge or claim
--------
need be paid if being contested in good faith by appropriate proceedings timely
instituted and diligently conducted and if such reserve or other appropriate
provision, if any, as shall be required in conformity with GAAP shall have been
made therefor. SGC and Company will not, nor will they permit any of their
respective Subsidiaries to, file or consent to the filing of any consolidated
income tax return with any Person (other than SGC, Company or any of their
respective Subsidiaries). To the extent that the terms and provisions of the
Deed of Trust regarding payment of taxes and assessments on the Premises and
Improvements conflicts with the terms and provisions of this Agreement, the
terms and provisions of the Deed of Trust shall govern.
5.5 MAINTENANCE OF PROPERTIES; INSURANCE. SGC and Company will, and will
------------------------------------
cause each of their respective Subsidiaries to, maintain or cause to be
maintained in good repair, working order and condition, ordinary wear and tear
excepted, all material properties used or useful in the business of SGC and
Company and their respective Subsidiaries (including, without limitation,
intellectual property) and from time to time will make or cause to be made all
appropriate repairs, renewals and replacements thereof. SGC and Company will
maintain or cause to be maintained, with financially sound and reputable
insurers, insurance with respect to their respective properties and businesses
and the properties and businesses of their respective Subsidiaries against loss
or damage of the kinds customarily carried or maintained under similar
circumstances by corporations of established reputation engaged in similar
businesses. To the extent that the terms and provisions regarding the payment
of insurance contained in the Deed of Trust or Security Agreement conflict with
the terms and provisions of this subsection 5.5, the terms and provisions of the
Deed of Trust and Security Agreement shall govern.
5.6 COMPLIANCE WITH LAWS, ETC. SGC and Company shall, and shall cause each
-------------------------
of their respective Subsidiaries to, comply in all material respects with the
requirements of all applicable laws, rules, regulations and orders of any
governmental authority, including but not limited to all applicable
Environmental Laws and Gaming Laws, noncompliance with which could reasonably be
expected to cause a Material Adverse Effect.
41
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5.7 ENVIRONMENTAL DISCLOSURE AND INSPECTION.
---------------------------------------
A. Company shall exercise due diligence in order to comply and use
its best efforts to cause (i) all tenants under any leases or occupancy
agreements affecting any portion of the Facility and (ii) all other Persons on
or occupying such property, to comply with all Environmental Laws.
B. After the occurrence and during the continuance of an Event of
Default or otherwise at any time upon Collateral Agent's reasonable request,
Company agrees that Collateral Agent may, from time to time and in its sole and
absolute discretion, retain, at Company's expense, an independent professional
consultant to review any report relating to Hazardous Material prepared by or
for Company and, whether or not any such report exists, upon reasonable notice
to Company, to conduct its own investigation of the Facility, and SGC and
Company each agree to use its best efforts to obtain permission for Collateral
Agent's professional consultant to conduct its own investigation of the
Facility, Company hereby grants to Collateral Agent and its agents, employees,
consultants and contractors the right to enter into or on to the Facility to
perform such tests on such property as are reasonably necessary to conduct such
a review and/or investigation. Any such investigation of the Facility shall be
conducted, unless otherwise agreed to by Company and Collateral Agent, during
normal business hours and, to the extent reasonably practicable, shall be
conducted with prior notice. Company and Collateral Agent hereby acknowledge
and agree that any report of any investigation conducted at the request of
Collateral Agent pursuant to this subsection 5.7B will be obtained and shall be
used by Collateral Agent for the purposes of Holders' internal credit analysis,
to monitor the Notes and to protect Holders' security interests created by the
Basic Documents.
C. Company shall promptly advise Collateral Agent in writing and in
reasonable detail of (i) any Release of any Hazardous Material on or relating to
the Facility required to be reported to any federal, state or local governmental
or regulatory agency under any applicable Environmental Laws, (ii) any and all
written communications with respect to any Environmental Claims or with respect
to any Release of Hazardous Material required to be reported to any federal,
state or local governmental or regulatory agency, (iii) any remedial action
taken by Company or, to Company's or SGC's knowledge, any other Person in
response to (x) any Hazardous Material on, under or about the Facility, or (y)
any Environmental Claim that reasonably could have a Material Adverse Effect,
(iv) Company's discovery of any occurrence or condition on any real property
adjoining or in the vicinity of the Facility that reasonably could cause the
Facility or any part thereof to be subject to (x) any restrictions on the
ownership or transferability thereof or (y) any material restriction on the
occupancy or use thereof under any Environmental Laws, and (v) any request for
information from any governmental agency that indicates such agency is
investigating whether Company may be potentially responsible for a Release of
Hazardous Material.
D. Company shall promptly notify Collateral Agent of (i) any proposed
acquisition of stock, assets, or property by Company that could reasonably be
expected to
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expose Company to, or result in, Environmental Claims that could have a Material
Adverse Effect or that could reasonably be expected to have a material adverse
effect on any Governmental Authorization then held by Company and (ii) any
action that Company proposes to take to commence operations that reasonably
could be expected to subject Company to laws, rules or regulations (including,
without limitation, laws, rules and regulations requiring additional
environmental permits or licenses) not theretofore applicable to the Facility or
operations of Company.
E. Company shall, at its own expense, provide copies of such
documents or information as Collateral Agent may reasonably request in relation
to any matters disclosed pursuant to this subsection 5.7.
5.8 REMEDIAL ACTION REGARDING HAZARDOUS MATERIAL. Company shall promptly
--------------------------------------------
take any and all necessary remedial action in connection with the presence,
storage, use, disposal, transportation or Release of any Hazardous Material on,
under or about the Facility in order to comply with all applicable Environmental
Laws and Governmental Authorizations. In the event Company undertakes any
remedial action with respect to any Hazardous Material on, under or about the
Facility, Company shall conduct and complete such remedial action in compliance
with all applicable Environmental Laws and other applicable legal requirements
(including lawful policies, orders and directives of federal, state and local
governmental authorities).
SECTION 6. NEGATIVE COVENANTS OF SGC AND COMPANY
SGC and Company each hereby covenant and agree that, until payment in
full of all of the Obligations, unless Requisite Holders shall otherwise give
prior written consent, SGC and Company shall perform and shall cause each of
their respective Subsidiaries to perform, all covenants in this Section 6.
6.1 RESTRICTED JUNIOR PAYMENTS. SGC and Company will not, and will not
--------------------------
permit any of their Subsidiaries to, directly or indirectly, declare, make or
pay any Restricted Junior Payment; provided that so long as no Event of Default
-------------
or Potential Event of Default has occurred and is continuing, (i) SGC may pay
dividends accruing after September 30, 1996 in respect of outstanding SGC
Preferred Stock in cash to the extent required under the terms of the SGC
Preferred Stock, may exchange SGC Preferred Stock for Junior Subordinated Notes
and may pay interest accrued in respect of such Junior Subordinated Notes;
provided that in no event shall any principal payment in respect of such Junior
- --------
Subordinated Notes be due prior to December 15, 2000. (ii) Company may dividend
or otherwise distribute up to $2,500,000 of cash is the aggregate to SGC for
contribution to Pioneer Hotel, Inc. as contemplated by subsection 3.2F and may
dividend or otherwise distribute SFHI Notes to SGC to the extent expressly
permitted under subsections 2.5B, 2.5C or 2.5F; and (iii) from time to time
after SGC has delivered its financial statements for its fiscal quarter ending
December 31, 1996 and so long as Company has not been required to take action
under subsection 2.5C(v) because SFHI Cash Flow (determined for a four quarter
period as provided under subsection
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2.5C(v)) was less than $13,500,000, SGC may repurchase, redeem or otherwise
acquire Capital Stock of SGC in an amount not to exceed $3,000,000 in the
aggregate.
6.2 LIENS AND RELATED MATTERS.
-------------------------
A. PROHIBITION ON LIENS. Company shall not directly or indirectly,
create, incur, assume or permit to exist any Lien on or with respect to any
property or asset of any kind (including any document or instrument in respect
of goods or accounts receivable) of Company, whether now owned or hereafter
acquired, or any income or profits therefrom, or file or permit the filing of,
or permit to remain in effect, any financing statement or other similar notice
of any Lien with respect to any such property, asset, income or profits under
the Uniform Commercial Code of any State or under any similar recording or
notice statute, except:
(i) Permitted Encumbrances;
(ii) Liens on property of the Tenant described in the Existing Lease
Security Agreement; and
(iii) Liens described in Schedule 6.2 annexed hereto.
------------
B. EQUITABLE LIEN IN FAVOR OF LENDERS. If Company shall create or
assume any Lien upon any of its properties or assets, whether now owned or
hereafter acquired, other than Liens excepted by the provisions of subsection
6.2A, it shall make or cause to be made effective provision whereby the
Obligations will be secured by such Lien equally and ratably with any and all
other Indebtedness secured thereby as long as any such Indebtedness shall be so
secured; provided that, notwithstanding the foregoing, this covenant shall not
--------
be construed as a consent by Requisite Holders to the creation or assumption of
any such Lien not permitted by the provisions of subsection 6.2A.
C. NO FURTHER NEGATIVE PLEDGES. Except with respect to specific
property encumbered to secure payment of particular Indebtedness, Company shall
not enter into any agreement prohibiting the creation or assumption of any Lien
upon any of its properties or assets, whether now owned or hereafter acquired.
6.3 WHEN SGC MAY MERGE, ETC. SGC shall not consolidate with or merge with
------------------------
or into or sell, assign, transfer or lease all or substantially all of its
properties and assets as an entirety to any Person, or permit any Person to
merge with or into SGC unless:
(i) SGC shall be the continuing Person, or the Person (if other than
SGC) formed by such consolidation or into which SGC is merged or to which
the properties and assets of SGC, substantially as an entirety are
transferred (the "surviving entity") shall be a corporation organized and
existing under the laws of the United States or any State thereof or the
District of Columbia and shall expressly assume, by an agreement
supplemental hereto, executed and delivered to Collateral Agent, in form
satisfactory to Collateral Agent, all the obligations of
44
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SGC, under this Agreement, the Guaranty and the other Basic Documents and
this Agreement, the Guaranty and the other Basic Documents shall remain in
full force and effect; and
(ii) immediately before and immediately after giving effect to such
transaction, no Event of Default and no Potential Event of Default shall
have occurred and be continuing.
In connection with any consolidation, merger, transfer or lease
contemplated by this subsection 6.3, SGC shall deliver, or cause to be
delivered, to Collateral Agent, in form and substance reasonably satisfactory to
Collateral Agent, an Officers' Certificate and an Opinion of Counsel, each
stating that such consolidation, merger, transfer or lease and the supplemental
agreement in respect thereto comply with this subsection 6.3 and that all
conditions precedent herein provided for relating to such transaction have been
complied with. Upon any consolidation or merger or any transfer of all or
substantially all of the assets of SGC in accordance with this subsection 6.3,
the successor corporation formed by such consolidation or into which SGC is
merged or to which such transfer is made, shall succeed to, and be substituted
for, and may exercise every right and power of, SGC under this Agreement with
the same effect as if such successor corporation had been named as SGC herein.
6.4 INDEBTEDNESS OF COMPANY. Company will not, directly or indirectly,
-----------------------
create, incur, assume, guarantee or otherwise become or remain directly or
indirectly liable with respect to any Indebtedness except:
(i) Indebtedness in respect of the Notes;
(ii) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
drawn against insufficient funds in the ordinary course of business,
provided that such Indebtedness is extinguished within five business days of
its incurrence; and
(iii) the obligations of Company under the Existing Lease Guaranty
Agreement.
6.5 FUNDAMENTAL CHANGES. Company will not (i) form, acquire or otherwise
-------------------
permit to exist any Subsidiary or Joint Venture or any investment in the Capital
Stock or other ownership interest in any Person, (ii) liquidate or dissolve,
(iii) merge into or consolidate with any Person or (iv) sell or otherwise
transfer any Collateral except sales of obsolete equipment in the ordinary
course of business and except to the extent permitted under subsections 6.1,
2.5B, 2.5C and 2.5F; provided, however that nothing in this Section 6.4 shall
prohibit the grant or creation of any Lien permitted under Section 6.2.
6.6 TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES. SGC and Company shall
---------------------------------------------
not, and shall not permit any of their respective Subsidiaries to, directly or
indirectly,
45
<PAGE>
enter into or permit to exist any transaction (including, without limitation,
the purchase, sale, lease or exchange of any property or the rendering of any
service) with any holder of 5% or more of any class of equity securities of SGC
or with any Affiliate of SGC or of any such holder, on terms that are less
favorable to SGC, Company or that Subsidiary, as the case may be, than those
that might be obtained at the time from Persons who are not such a holder or
Affiliate; provided that the foregoing restriction shall not apply to (i) any
--------
transaction between SGC and any of its wholly-owned Subsidiaries (other than
Company) or between any of its wholly-owned Subsidiaries (other than Company) or
(ii) reasonable and customary fees paid to members of the Boards of Directors of
SGC and its Subsidiaries.
6.7 AMENDMENTS TO EXISTING LEASE DOCUMENTS. Company shall not amend,
--------------------------------------
modify, supplement or otherwise change the terms of any Existing Lease Document,
except with the consent of Requisite Holders, which consent shall not be
unreasonably withheld.
6.8 STAY, EXTENSION AND USURY LAWS. Neither SGC nor Company shall, nor
------------------------------
shall they permit any of their respective Subsidiaries to (to the extent each
may lawfully do so), at any time insist upon, plead or in any manner whatsoever
claim or take the benefit or advantage of, any stay or extension law or any
usury law or other law that would prohibit or forgive SGC or Company from paying
all or a portion of the principal of or premium, if any, or interest on the
Notes as contemplated herein, wherever enacted, now or at any time hereinafter
in force, or that may materially affect the covenants or the performance by SGC
or Company of their respective obligations hereunder in a manner inconsistent
with the provisions hereof. SGC and Company each expressly waive all benefit or
advantage of any such law. If a court of competent jurisdiction prescribes that
SGC or Company may not waive its rights to take the benefit or advantage of any
stay or extension law or any usury law or other law in accordance with the prior
sentence, then the obligation to pay interest on the Notes shall be reduced to
the maximum legal limit under applicable law governing the interest payable in
connection with the Notes and any amount of interest or premium, if any, paid by
SGC or Company that is deemed illegal shall be deemed to have been a prepayment
of principal (without penalty) on the Notes.
6.9 GOVERNMENT REGULATION. SGC and Company shall not, and shall not permit
any of their respective Subsidiaries to, be or become subject to, regulation
under the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act or the Investment Company Act of 1940 or under any other
federal or state statute or regulation which may limit its ability to incur
Indebtedness or which may otherwise render all or any portion of the Obligations
unenforceable.
SECTION 7. EVENTS OF DEFAULT
If any one or more of the following conditions or events ("Events of
Default") shall occur:
46
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7.1 FAILURE TO MAKE PAYMENTS WHEN DUE. Failure by Company to pay any
---------------------------------
installment of principal of any Note when due, whether at stated maturity, by
acceleration, by notice of voluntary prepayment, by mandatory prepayment,
redemption or otherwise; or failure by Company to pay any interest on any Note
or any other amount due under this Agreement within 15 days after the date due;
or
7.2 DEFAULT IN OTHER AGREEMENTS. (i) Failure of SGC, Company or any of
---------------------------
their respective Subsidiaries to pay when due any principal of or interest on
any Indebtedness (other than Indebtedness referred to in subsection 7.1) in an
aggregate principal amount of $5,000,000 or more, in each case beyond the end of
any grace period provided therefor; or (ii) breach or default by SGC, Company or
any of their respective Subsidiaries with respect to any other material term of
any items of Indebtedness with an aggregate principal amount of $5,000,000 or
more or any loan agreement, mortgage, indenture or other agreement relating to
such Indebtedness, including but not limited to the SFHI Indenture or the
Pioneer Indenture, if the effect of such breach or default is to cause, that
Indebtedness to become or be declared due and payable prior to its stated
maturity or the stated maturity of any underlying obligation, as the case may
be; or (iii) breach or default by Company under any Existing Lease Document if
such breach or default is not cured within any applicable grace period;
7.3 BREACH OF CERTAIN COVENANTS. Failure of SGC or Company to perform or
---------------------------
comply with any term or condition contained in subsection 2.5, 5.3 or Section 6
of this Agreement; or
7.4 BREACH OF WARRANTY. Any representation, warranty, certification or
------------------
other statement made by SGC, Company or any of their respective Subsidiaries in
any Basic Document shall be false in any material respect on the date as of
which made; or
7.5 OTHER DEFAULTS UNDER BASIC DOCUMENTS. SGC or Company shall default in
------------------------------------
the performance of or compliance with any term contained in this Agreement or
any of the other Basic Documents, other than any such term referred to in any
other subsection of this Section 7, and such default shall not have been
remedied or waived within 30 days after the earlier of (i) an officer of SGC or
Company becoming aware of such default or (ii) receipt by SGC or Company of
notice from any Holder of such default; or
7.6 INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. (i) A court
-----------------------------------------------------
having jurisdiction in the premises shall enter a decree or order for relief in
respect of SGC, Company or any of their respective material Subsidiaries in an
involuntary case under the Bankruptcy Code or under any other applicable
bankruptcy, insolvency or similar law now or hereafter in effect, which decree
or order is not stayed; or any other similar relief shall be granted under any
applicable federal or state law; or (ii) an involuntary case shall be commenced
against SGC, Company or any of their respective material Subsidiaries under the
Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar
law now or hereafter in effect; or a decree or order of a court having
jurisdiction in the premises for the appointment of a receiver, liquidator,
sequestrator, trustee, custodian or other officer having similar powers over
SGC, Company or any of their respective
47
<PAGE>
material Subsidiaries, or over all or a substantial part of its property, shall
have been entered; or there shall have occurred the involuntary appointment of
an interim receiver, trustee or other custodian of SGC, Company or any of their
respective material Subsidiaries for all or a substantial part of its property;
or a warrant of attachment, execution or similar process shall have been issued
against any substantial part of the property of SGC, Company or any of their
respective material Subsidiaries, and any such event described in this clause
(ii) shall continue for 60 days unless dismissed, bonded or discharged, it being
understood that "material Subsidiary" under subsections 7.6, 7.7 and 7.9 shall
include SFHI, Pioneer Finance, Pioneer Hotel Inc. and their respective
successors; or
7.7 VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. (i) SGC, Company
---------------------------------------------------
or any of their respective material Subsidiaries shall have an order for relief
entered with respect to it or commence a voluntary case under the Bankruptcy
Code or under any other applicable bankruptcy, insolvency or similar law now or
hereafter in effect, or shall consent to the entry of an order for relief in an
involuntary case, or to the conversion of an involuntary case to a voluntary
case, under any such law, or shall consent to the appointment of or taking
possession by a receiver, trustee or other custodian for all or a substantial
part of its property; or SGC, Company or any of their respective material
Subsidiaries shall make any assignment for the benefit of creditors; or (ii)
SGC, Company or any of their respective material Subsidiaries shall be unable,
or shall fail generally, or shall admit in writing its inability, to pay its
debts as such debts become due; or the Board of Directors of SGC, Company or any
of their respective material Subsidiaries (or any committee thereof) shall adopt
any resolution or otherwise authorize any action to approve any of the actions
referred to in clause (i) above or this clause (ii); or
7.8 JUDGMENTS AND ATTACHMENTS. Any money judgment, writ or warrant of
-------------------------
attachment or similar process involving in the aggregate at any time an amount
in excess of $5,000,000 (in either case not adequately covered by insurance as
to which a solvent and unaffiliated insurance company has acknowledged coverage)
shall be entered or filed against SGC, Company or any of their respective
Subsidiaries or any of their respective assets and shall remain undischarged,
unvacated, unbonded or unstayed for a period of 60 days (or in any event later
than five days prior to the date of any proposed sale thereunder); or
7.9 DISSOLUTION. Any order, judgment or decree shall be entered against
-----------
SGC, Company or any of their respective material Subsidiaries decreeing the
dissolution or split up of SGC, Company or that Subsidiary and such order shall
remain undischarged or unstayed for a period in excess of 30 days; or
7.10 EMPLOYEE BENEFIT PLANS. There shall occur one or more ERISA Events
----------------------
which individually or in the aggregate results in or might reasonably be
expected to result in liability of SGC, Company or any of its ERISA Affiliates
in excess of $500,000 during the term of this Agreement; or there shall exist an
amount of unfunded benefit liabilities (as defined in Section 4001(a)(18) of
ERISA), individually or in the aggregate for all
48
<PAGE>
Pension Plans (excluding for purposes of such computation any Pension Plans with
respect to which assets exceed benefit liabilities), which exceeds $500,000; or
7.11 MATERIAL ADVERSE EFFECT. Any event or change shall occur that has
-----------------------
caused or evidences, either in any case or in the aggregate, a Material Adverse
Effect; or
7.12 INVALIDITY OF ENVIRONMENTAL INDEMNITY OR GUARANTIES. Any Environmental
---------------------------------------------------
Indemnity or any guaranty of the Obligations, including, without limitation, the
Guaranty, for any reason, other than the satisfaction in full of all
Obligations, ceases to be in full force and effect or is declared to be null and
void, or any guarantor or indemnitor, including SGC denies that it has any
further liability under any indemnity or guaranty or under any make-well
agreement or under the Environmental Indemnity or gives notice to such effect,
in each case, to the extent it relates to the Obligations; or
7.13 IMPAIRMENT OF COLLATERAL.
------------------------
(A) A judgment creditor of SGC, Company or any of their respective
Subsidiaries shall obtain possession of any portion of the Collateral under the
Basic Documents by any means, including, without limitation, levy, distraint,
replevin or self-help, (B) any substantial portion of the Collateral shall be
taken by eminent domain or condemnation, (C) any of the Basic Documents shall
cease for any reason to be in full force and effect, or any party thereto shall
purport to disavow its obligations thereunder or shall declare that it does not
have any further obligations thereunder or shall contest the validity or
enforceability thereof or Holders shall cease to have a valid and perfected
first priority security interest in any Collateral therein except as permitted
under the terms of such Basic Document, or (D) Collateral Agent's security
interests or Liens, in each case on behalf of Holders, in Collateral under the
Basic Documents shall become otherwise impaired or unenforceable; or
7.14 OWNERSHIP OF COMPANY. SGC shall cease to own all of the Capital Stock
--------------------
of the Company; or
7.15 PURCHASE OF PIONEER BONDS. On or prior to February 15, 1996, Pioneer
-------------------------
Hotel Inc. shall not have used all of the cash contribution referred to in
subsection 4.1T to purchase and cause to be cancelled Pioneer Bonds;
THEN in addition to all other remedies of the Collateral Agent or the Holders
hereunder, under the other Basic Documents or at law or equity, (i) upon the
occurrence of any Event of Default described in subsection 7.6 or 7.7, each of
the unpaid principal amount of and accrued interest on the Notes, all other
Obligations shall automatically become immediately due and payable, without
presentment, demand, protest or other requirements of any kind, all of which are
hereby expressly waived by SGC and Company, and (ii) upon the occurrence and
during the continuation of any other Event of Default, Requisite Holders may, by
written notice to SGC and Company, declare all or any
49
<PAGE>
portion of the amounts described in clause (i) above to be, and the same shall
forthwith become, immediately due and payable.
Notwithstanding anything to the contrary contained in the preceding
paragraph, if at any time after an acceleration of the Obligations pursuant to
such paragraph SGC and Company shall pay all arrears of interest and all
payments on account of principal which shall have become due otherwise than as a
result of such acceleration (with interest on principal, premium (if any) and,
to the extent permitted by law, on overdue interest, at the rates specified in
this Agreement and late charges) and all Events of Default and Potential Events
of Default (other than non-payment of the principal of and accrued interest as
aforesaid on the Obligations, in each case which is due and payable solely by
virtue of acceleration) shall be remedied or waived pursuant to subsection 7.1,
then Holders representing 66-2/3% of the Notes, by written notice to SGC and
Company, may at their option rescind and annul such acceleration and its
consequences; but such action shall not affect any subsequent Event of Default
or Potential Event of Default or impair any right consequent thereon. The
provisions of this paragraph are intended merely to bind Holders to a decision
which may be made at the election of the percentage of Holders referenced above
and are not intended to benefit SGC or Company and do not grant SGC or Company
the right to require Holders to rescind or annul any acceleration hereunder,
even if the conditions set forth herein are met.
SGC and Company hereby waive to the extent not prohibited by applicable
law which cannot itself be waived (i) all presentments, demands for performance,
notices of nonperformance (except to the extent required by the provisions
hereof), (ii) any requirement of diligence or promptness on the part of any
holder of Notes in the enforcement of its rights under the provisions of this
Agreement, (iii) any and all notices of every kind and description which may be
required to be given by any statute or rule of law (except to the extent
required by the provisions of this Agreement), and (iv) to the extent permitted
by applicable law, any defense of any kind (other than payment) which it may now
or hereafter have with respect to its liability under the Notes.
No course of dealing between SGC, Company or any of their respective
Subsidiaries and any Holder shall operate as a waiver of any of the rights of
any Holder under any Basic Document. No delay or omission in exercising any
right under any Basic Document shall operate as a waiver of such right or any
other right. A waiver on any one occasion shall not be construed as a bar to or
waiver of any right or remedy on any other occasion. The remedies provided in
this Section 7 are in addition to all rights and remedies available to each
Holder under the Basic Documents or any other document or by law or equity.
SECTION 8. COLLATERAL AGENT AND RELATIONS AMONG HOLDERS, ETC.
8.1 APPOINTMENT OF THE COLLATERAL AGENT, POWERS AND IMMUNITIES. Each
----------------------------------------------------------
Holder of Notes hereby irrevocably appoints and authorizes Collateral Agent to
act as its agent
50
<PAGE>
under the Basic Documents with such powers as are expressly delegated to
Collateral Agent by the terms of this Agreement and the other Basic Documents,
together with such other powers as are reasonably incidental thereto.
Collateral Agent (which term as used in this sentence and in Sections 8.5 and
8.6 hereof shall include reference to its Affiliates and the officers,
directors, employees and agents of Collateral Agent and of its Affiliates): (a)
-
shall not have any duties or responsibilities except those expressly set forth
in this Agreement or in any other Basic Document, or be a trustee for any
Holder; (b) shall not be required to take any action which is contrary to this
-
Agreement or any other Basic Document or applicable law; (c) shall not be
-
required to initiate or conduct any litigation or collection proceedings
hereunder or under any other Basic Document; and (d) shall not be responsible
-
for any action taken or omitted to be taken by it hereunder or under any other
Basic Document or under any other document or instrument referred to or provided
for herein or therein or in connection herewith or therewith, except for its own
gross negligence or willful misconduct. Neither Collateral Agent nor any Holder
nor any of their respective Affiliates shall be responsible to any other Holder
for any recitals, statements, representations or warranties made by the SGC,
Company or any other Person contained in this Agreement or in any certificate or
other document referred to or provided for in, or received by any Holder under,
this Agreement or any other Basic Document, for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement, any
other Basic Document or any other document referred to or provided for herein or
therein, for the creation, perfection or priority of any Lien on or in any of
the Collateral or for any failure by SGC, Company or any other Person to perform
its obligations hereunder or thereunder. Collateral Agent may employ agents and
attorneys-in-fact and shall not be responsible for the negligence or misconduct
of any such agents of attorneys-in-fact selected by it with reasonable care.
Except as otherwise provided under this Agreement, Collateral Agent shall take
such action under the Basic Documents to which it is a party as shall be
directed by the Requisite Holders. As to any matters not expressly provided for
by any Basic Document, the Collateral Agent shall not be required to take any
action or exercise any discretion, but shall be required to act or to refrain
from acting upon instructions of the Requisite Holders and shall in all cases be
fully protected in acting, or in refraining from acting, hereunder or under any
other Basic Document in accordance with the instructions of the Requisite
Holders, and such instructions of the Requisite Holders and any action taken or
failure to act pursuant thereto shall be binding on all of the Holders.
8.2 RELIANCE BY COLLATERAL AGENT. Collateral Agent shall be entitled to
----------------------------
rely upon any certificate, notice or other document (including any cable,
telegram, telecopy or telex) believed by it to be genuine and correct and to
have been signed or sent by or on behalf of the proper Person or Persons, and
upon advice and statements of legal counsel, independent accountants and other
experts selected by Collateral Agent. Collateral Agent agrees to make such
demands and give such notices under the Basic Documents as the Requisite Holders
may request, to take such action to enforce the Basic Documents or any guaranty
or undertaking under the Basic Documents and to foreclose upon, collect and
dispose of the Collateral or any portion thereof, or enforce any such guaranty
or undertaking, and to release any part of the Collateral as may be directed by
the Requisite Holders; provided, however, that neither the consent nor the
-------- -------
direction of the Requisite
51
<PAGE>
Holders shall be required for the release of any part of the Collateral which is
otherwise permitted under this Agreement or the other Basic Documents.
Collateral Agent may at any time request directions from the Requisite Holders
with respect to this Agreement or the other Basic Documents as to any course of
action or other matter relating hereto or to such Collateral Documents or other
Basic Documents. Except as otherwise provided herein or in the Collateral
Documents or other Basic Documents, directions given by the Requisite Holders to
Collateral Agent hereunder shall be binding on all the Holders for all purposes.
Each Holder agrees not to take any action whatsoever to enforce any term or
provision of this Agreement, or any of the other Basic Documents or to enforce
any of its rights in respect of the Collateral or in connection with any
guaranties or undertakings given in any of the Basic Documents, except through
Collateral Agent in accordance with this Agreement.
8.3 DEFAULTS. Collateral Agent shall not be deemed to have knowledge or
--------
notice of the occurrence of a Potential Event of Default or Event of Default
unless Collateral Agent has received written notice from a Holder or Company
referring to this Agreement, describing such Potential Event of Default or Event
of Default and stating that such notice is a "Notice of Default". In the event
that Collateral Agent receives such a notice of the occurrence of a Potential
Event of Default or Event of Default, Collateral Agent shall give notice thereof
to the Holders. Collateral Agent shall (subject to the last sentence of Section
8.5 hereof) take such action with respect to such Potential Event of Default or
Event of Default as shall be reasonably directed by the Requisite Holders;
provided that, unless and until Collateral Agent shall have received such
- --------
directions, Collateral Agent may (but shall not be obligated to) take such
action, or refrain from taking such action, with respect to such Potential Event
of Default or Event of Default as it shall deem advisable in the best interest
of the Holders except to the extent that this Agreement expressly requires that
such action be taken, or not taken, only with the consent or upon the
authorization of the Requisite Holders or all of the Holders.
8.4 RIGHTS AS A HOLDER. With respect to the Notes held by Collateral
------------------
Agent, it shall have the same rights and powers hereunder as any Holder and may
exercise the same as though it was not acting as Collateral Agent and the terms
"Holder" or "Holders" shall, unless the context otherwise indicates, include the
Collateral Agent in its individual capacity. Collateral Agent may (without
having to account therefor to any Holder) accept deposits from, extend credit
(on a secured or unsecured basis) to and generally engage in any kind of
financing, insurance, trust or other business with the SGC, Company or any of
its Affiliates, as if it was not acting as Collateral Agent. Each Holder and
its Affiliates may (without having to account therefor to Collateral Agent, or
any other Holder) accept deposits from, extend credit (on a secured or unsecured
basis) to and generally engage in any kind of financing, insurance, trust or
other business with SGC, Company or any of its Affiliates, as if it was not
acting as a Holder.
8.5 INDEMNIFICATION. Each Holder agrees to indemnify Collateral Agent (to
---------------
the extent not reimbursed by SGC or Company), ratably in accordance with the
principal amount of Notes purchased by it, for any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature
52
<PAGE>
whatsoever which may at any time (including, without limitation, at any time
following the payment of principal of and/or interest on the Notes) be imposed
on, incurred by or asserted against Collateral Agent in any way relating to or
arising out of this Agreement, any other Basic Document or any documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby (including the costs and expenses which SGC or
Company is obligated to pay hereunder) or the enforcement of any of the terms
hereof or thereof or of any such other documents; provided that no Holder shall
--------
be liable for any of the foregoing to the extent they arise from the Collateral
Agent's gross negligence or wilful misconduct. Collateral Agent shall be fully
justified in refusing to take or to continue to take any action hereunder or
under the other Basic Documents unless it shall first be indemnified to its
satisfaction by the Holders against any and all liability and expense which may
be incurred by it by reason of taking or continuing to take any such action.
8.6 NON-RELIANCE ON COLLATERAL AGENT AND OTHER HOLDERS. Each Holder
--------------------------------------------------
represents that it has, independently and without reliance on Collateral Agent
or any other Holder, and based on such documents and information as it has
deemed appropriate, made its own appraisal of the financial condition and
affairs of SGC, Company and their Affiliates and made its own decision to
purchase the Notes and agrees that it will, independently and without reliance
upon Collateral Agent or any other Holder, continue to make its own appraisals
and decisions in taking or not taking action under this Agreement as it shall
deem appropriate at the time. Neither Collateral Agent nor any Holder shall be
required to keep informed as to the performance or observance by SGC, Company of
any of their Affiliates under this Agreement or any other document referred to
or provided for herein or to make inquiry of, or to inspect the properties or
books of, SGC, Company or any of their Affiliates. Neither the Collateral Agent
nor any Holder shall have any duty or responsibility to provide any Holder with
any credit or other information concerning SGC, Company or any of their
Affiliates, which may come into the possession of Collateral Agent or such
Holder or any of its or their Affiliates.
8.7 RESIGNATION OR REMOVAL OF COLLATERAL AGENT. Subject to the appointment
------------------------------------------
and acceptance of a successor Collateral Agent as provided below, Collateral
Agent may resign at any time by giving notice thereof to the Holders, SGC and
Company, and Collateral Agent may be removed at any time with or without cause
by the Requisite Holders. Upon any such resignation or removal, the Requisite
Holders shall have the right to appoint a successor Collateral Agent. If no
successor Collateral Agent shall have been so appointed by the Requisite Holders
and shall have accepted such appointment within 30 days after the retiring
Collateral Agent's giving of notice of resignation or the Requisite Holders'
removal of the retiring Collateral Agent, then the retiring Collateral Agent
may, on behalf of the Holders, appoint a successor Collateral Agent, which shall
be a financial institution with a combined capital and surplus of at least
$500,000,000. Upon the acceptance of any appointment as Collateral Agent
hereunder by a successor Collateral Agent, such successor Collateral Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Collateral Agent, and the retiring Collateral Agent
shall be discharged from its duties and obligations hereunder. Upon the
acceptance of any appointment as Collateral Agent, the retiring or
53
<PAGE>
removed Collateral Agent under this Agreement shall promptly (i) transfer to
-
such successor Collateral Agent all sums, securities and other items of
Collateral held under any Basic Document, together with all records and other
documents necessary or appropriate in connection with the performance of the
duties of the successor Collateral Agent under each Basic Document and this
Agreement, and (ii) execute and deliver to such successor Collateral Agent such
--
amendments to financing statements, and take such other actions, as may be
necessary or appropriate in connection with the assignment to such successor of
the security interests created under each of the Basic Documents. After any
retiring Collateral Agent's resignation or removal hereunder as Collateral
Agent, the provisions of this paragraph shall continue in effect for its benefit
in respect of any actions taken or omitted to be taken by it while it was acting
as the Collateral Agent.
8.8 AUTHORIZATION. Collateral Agent is hereby authorized by the Holders to
-------------
execute, deliver and perform in accordance with its terms each of the Basic
Documents to which the Collateral Agent is or is intended to be a party and each
Holder agrees to be bound by all of the agreements of Collateral Agent contained
in such Basic Documents.
SECTION 9. MISCELLANEOUS
9.1 AMENDMENTS AND WAIVERS.
----------------------
A. No amendment, modification, termination or waiver of any provision
of this Agreement, the Notes or the other Basic Documents, or consent to any
departure by SGC or Company therefrom, shall in any event be effective without
the written concurrence of Requisite Holders; provided that any such amendment,
--------
modification, termination, waiver or consent which: (i) reduces the requisite
percentage of Holders or the principal balance of the Notes that must consent to
an amendment or waiver of an Event of Default; (ii) reduces the rate of or
changes the time for payment of interest on any Notes; (iii) reduces the
principal amount of or extends the final maturity of any Note, or reduces the
redemption price of the Notes; (iv) changes the currency of payment for any
payment on the Notes; (v) changes the definition of or the requirements of SGC
or Company or any of their respective Subsidiaries upon the occurrence of a
Change in Control; (vi) changes in any manner the provisions contained in this
subsection 9.1A or (vii) reduces the requisite percentage of Holders or the
principal balance of the Notes necessary to amend or modify the provisions as
set forth in clauses (i) through (vii) shall be effective only with respect to
the applicable Holders consenting thereto if evidenced by a writing signed by or
on behalf of such Holders. Any waiver or consent shall be effective only in the
specific instance and for the specific purpose for which it was given. No
notice to or demand on SGC or Company in any case shall entitle SGC or Company
to any other or further notice or demand in similar or other circumstances. Any
amendment, modification, termination, waiver or consent effected in accordance
with this subsection 9.1 shall be binding upon each Holder at the time
outstanding, and each future Holder, if signed by SGC, on SGC and, if signed by
Company, on Company.
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B. Solely for the purpose of determining whether Holders of the
requisite percentage of the Notes then outstanding approved or consented to any
amendment, modification, termination or waiver to be given under this Agreement
or the Notes, or have directed the taking of any action provided herein or in
the Notes to be taken upon the direction of the Holders of a specified
percentage of the aggregate amount of Notes then outstanding, Notes directly or
indirectly owned by SGC, Company or any of their respective Subsidiaries shall
be deemed not to be outstanding.
9.2 EXPENSES. Whether or not the transactions contemplated hereby shall be
--------
consummated, SGC and Company jointly and severally agree to pay promptly (i) all
the actual reasonable costs and expenses of preparation of the Basic Documents
and of creating and perfecting Liens in favor of Collateral Agent, SunAmerica
and the other Holders or otherwise relating to the Collateral pursuant to any
Basic Document, including filing and recording fees and expenses, title
insurance, environmental studies and surveys; (ii) all the reasonable costs of
furnishing all opinions by counsel for SGC or Company (including without
limitation any opinions requested by Collateral Agent or SunAmerica as to any
legal matters arising hereunder) and of SGC or Company's performance of and
compliance with all agreements and conditions on its part to be performed or
complied with under this Agreement and the other Basic Documents including,
without limitation, with respect to confirming compliance with environmental and
insurance requirements; (iii) the reasonable fees, expenses and disbursements of
counsel to Collateral Agent and any Holder holding a majority in principal
amount of the Notes (including allocated costs of internal counsel) in
connection with the negotiation, preparation, execution and administration of
the Basic Documents and any consents, amendments, waivers or other modifications
hereto or thereto and any other documents or matters requested by SGC or
Company; (iv) all other actual reasonable costs and expenses incurred by
Collateral Agent or any Holder holding a majority of the principal amount of the
Notes in connection with the negotiation, preparation and execution of the Basic
Documents and the transactions contemplated hereby and thereby; and (v) after
the occurrence of an Event of Default, all costs and expenses, including
reasonable attorneys' fees (including allocated costs of internal counsel) and
costs of settlement, incurred by Collateral Agent and any Holder in enforcing
any Obligations of or in collecting any payments due from SGC or Company
hereunder or under the other Basic Documents by reason of such Event of Default
or in connection with any refinancing or restructuring of the credit
arrangements provided under this Agreement in the nature of a "work-out" or
pursuant to any insolvency or bankruptcy proceedings.
9.3 INDEMNITY. In addition to the payment of expenses pursuant to
---------
subsection 9.2, whether or not the transactions contemplated hereby shall be
consummated, SGC and Company jointly and severally agree to defend, indemnify,
pay and hold harmless Collateral Agent, each Holder, and the officers,
directors, employees, agents and affiliates of Collateral Agent and each Holder
(collectively called the "INDEMNITEES") from and against any and all other
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, expenses and disbursements of any kind or nature whatsoever
(including without limitation the reasonable fees and disbursements of counsel
for such Indemnitees) in connection with any investigative, administrative or
judicial
55
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proceeding commenced or threatened by any Person, whether or not any such
Indemnitee shall be designated as a party or a potential party thereto), whether
direct, indirect or consequential and whether based on any federal, state or
foreign laws, statutes, rules or regulations (including without limitation
securities and commercial laws, statutes, rules or regulations and Environmental
Laws), on common law or equitable cause or on contract or otherwise, that may be
imposed on, incurred by, or asserted against any such Indemnitee, in any manner
relating to or arising out of this Agreement or the other Basic Documents or the
transactions contemplated hereby or thereby (including without limitation
Holders' agreement to purchase the Notes or the use or intended use of the
proceeds of such purchase) or the statements contained in any commitment letter
delivered by any Holder to SGC or Company with respect thereto (collectively
called the "INDEMNIFIED LIABILITIES"); provided that SGC and Company shall not
--------
have any obligation to any Indemnitee hereunder with respect to any Indemnified
Liabilities to the extent such Indemnified Liabilities arise solely from the
gross negligence or willful misconduct of that Indemnitee as determined by a
final judgment of a court of competent jurisdiction. To the extent that the
undertaking to defend, indemnify, pay and hold harmless set forth in the
preceding sentence may be unenforceable because it is violative of any law or
public policy, SGC and Company shall contribute the maximum portion that it is
permitted to pay and satisfy under applicable law to the payment and
satisfaction of all Indemnified Liabilities incurred by the Indemnitees or any
of them.
9.4 RATABLE SHARING.
---------------
A. Holders hereby agree among themselves that if any of them shall,
whether by voluntary payment, by realization upon security, through the exercise
of any right of set-off, by counterclaim or cross action or by the enforcement
of any right under any Basic Document or otherwise, or as adequate protection of
a deposit treated as cash collateral under the Bankruptcy Code, receive payment
or reduction of a proportion of the aggregate amount of principal, interest,
fees and other amounts then due and owing to that Holder hereunder or under the
other Basic Document (collectively, the "AGGREGATE AMOUNTS DUE" to such Holder)
which is greater than the proportion received by any other Holder in respect of
the Aggregate Amounts Due to such other Holder, then the Holder receiving such
proportionately greater payment shall (i) notify each other Holder of the
receipt of such payment and (ii) apply a portion of such payment to purchase
participations (which it shall be deemed to have purchased from each seller of a
participation simultaneously upon the receipt by such seller of its portion of
such payment) in the Aggregate Amounts Due to the other Holders so that all such
recoveries of Aggregate Amounts Due shall be shared by all Holders in proportion
to the Aggregate Amounts Due to them; provided that if all or part of such
--------
proportionately greater payment received by such purchasing Holder is thereafter
recovered from such Holder upon the bankruptcy or reorganization of SGC or
Company or otherwise, those purchases shall be rescinded and the purchase prices
paid for such participations shall be returned to such purchasing Holder ratably
to the extent of such recovery, but without interest. SGC and Company expressly
consent to the foregoing arrangement and agrees that any holder of a
participation so purchased may exercise any and all rights of set-off or
counterclaim with respect to any and all monies owing by SGC and Company to that
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holder with respect thereto as fully as if that holder were owed the amount of
the participation held by that holder.
B. Subject to subsection 9.4A and in addition to any other rights
Collateral Agent or any Holder may have under law or in equity, if any amount
shall at any time be due and owing by SGC or Company under this Agreement or the
other Basic Documents, Collateral Agent or such Holder, as the case may be, is
authorized at any time or from time to time, without notice (any such notice
being hereby expressly waived), to set off and to appropriate and to apply any
and all deposits (general or special, including but not limited to indebtedness
evidenced by certificates of deposit, whether matured or unmatured) and any
other indebtedness of Collateral Agent or Holder, as the case may be, owing to
such SGC or Company and any other property of SGC or Company held by Collateral
Agent or Holder, as applicable to or for the credit or the account of SGC or
Company against and on account of the Obligations and liabilities of SGC or
Company to Collateral Agent or any Holder, as applicable.
9.5 INDEPENDENCE OF COVENANTS. All covenants hereunder shall be given
-------------------------
independent effect so that if a particular action or condition is not permitted
by any of such covenants, the fact that it would be permitted by an exception
to, or would otherwise be within the limitations of, another covenant shall not
avoid the occurrence of an Event of Default or Potential Event of Default if
such action is taken or condition exists.
9.6 NOTICES. Unless otherwise specifically provided herein, any notice or
-------
other communication herein required or permitted to be given shall be in writing
and may be personally served, telexed or sent by telefacsimile or United States
mail or courier service and shall be deemed to have been given when delivered in
person or by courier service, upon receipt of telefacsimile or telex if sent
prior to 5:00 p.m. on a Business Day (and otherwise such facsimile or telex
shall be deemed received on the next Business Day), or three Business Days after
depositing it in the United States mail with postage prepaid and properly
addressed. For the purposes hereof, the address of each party hereto shall be
as set forth under such party's name on the signature pages hereof or such other
address as shall be designated by such Person in a written notice delivered to
the other parties hereto.
9.7 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
------------------------------------------------------
A. All representations, warranties and agreements made in or pursuant
to the Basic Documents shall survive the execution and delivery of this
Agreement and the purchase of the Notes hereunder.
B. Notwithstanding anything in this Agreement or implied by law to
the contrary, the agreements of SGC and Company set forth in subsections 3.13,
9.2, 9.3 and 9.4 and the agreements of Holders set forth in subsection 9.4 shall
survive the payment of the Notes and the termination of this Agreement.
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9.8 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No failure or
-----------------------------------------------------
delay on the part of any Holder in the exercise of any power, right or privilege
hereunder or under any other Basic Document shall impair such power, right or
privilege or be construed to be a waiver of any default or acquiescence therein,
nor shall any single or partial exercise of any such power, right or privilege
preclude other or further exercise thereof or of any other power, right or
privilege. All rights and remedies existing under this Agreement and the other
Basic Documents are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
9.9 MARSHALLING; PAYMENTS SET ASIDE. No Holder shall be under any
-------------------------------
obligation to marshal any assets in favor of SGC, Company or any other party or
against or in payment of any or all of the Obligations. To the extent that SGC
or Company makes a payment or payments to any Holder, any Holder enforces any
security interests or exercises its rights of setoff, and such payment or
payments or the proceeds of such enforcement or setoff or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, any other state or federal law, common law or any equitable
cause, then, to the extent of such recovery, the obligation or part thereof
originally intended to be satisfied, and all Liens, rights and remedies therefor
or related thereto, shall be revived and continued in full force and effect as
if such payment or payments had not been made or such enforcement or setoff had
not occurred.
9.10 SEVERABILITY. In case any provision in or obligation under this
------------
Agreement or the Notes shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
9.11 OBLIGATIONS SEVERAL; INDEPENDENT NATURE OF HOLDERS' RIGHTS. The
----------------------------------------------------------
obligations of Holders hereunder are several and no Holder shall be responsible
for the obligations of any other Holder hereunder. Nothing contained herein or
in any other Basic Document, and no action taken by Holders pursuant hereto or
thereto, shall be deemed to constitute Holders as a partnership, an association,
a joint venture or any other kind of entity. The amounts payable at any time
hereunder to each Holder shall be a separate and independent debt, and each
Holder shall be entitled to protect and enforce its rights arising out of this
Agreement and it shall not be necessary for any other Holder to be joined as an
additional party in any proceeding for such purpose.
9.12 HEADINGS. Section and subsection headings in this Agreement are
--------
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose or be given any substantive effect.
9.13 APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE
--------------
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
NEVADA, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
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9.14 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
----------------------
parties hereto and their respective successors and assigns and shall inure to
the benefit of the parties hereto and the successors and assigns of Holders
subject to subsection 2.8. SunAmerica and any other Holder may assign the Notes
to its affiliates, one or more entities, and upon such assignment, any such
affiliate or entity shall become a Holder for all purposes of the Basic
Documents. The Holder shall have the right to sell participations in their
Notes; provided that Company shall have the right to consent (which consent
--------
shall not be unreasonably withheld or delayed) to the sale of any participation
in the Notes by SunAmerica that causes SunAmerica to hold less than 51% of the
legal or beneficial interests in all outstanding Notes. Neither SGC's or
Company's rights or obligations hereunder or under the other Basic Documents nor
any interest herein or therein may be assigned or delegated by SGC or Company
without the prior written consent of all Holders.
9.15 CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL JUDICIAL
----------------------------------------------
PROCEEDINGS BROUGHT AGAINST SGC OR COMPANY ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OTHER BASIC DOCUMENT OR ANY OBLIGATION MAY BE BROUGHT IN ANY
STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF NEVADA, AND BY
EXECUTION AND DELIVERY OF THIS AGREEMENT COMPANY ACCEPTS FOR ITSELF AND IN
CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON
CONVENIENS AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY
IN CONNECTION WITH THIS AGREEMENT, SUCH OTHER BASIC DOCUMENT OR SUCH OBLIGATION.
SGC and Company hereby agree that service of all process in any such proceeding
in any such court may be made by registered or certified mail, return receipt
requested, to SGC or Company, as applicable, at its address provided in
subsection 9.6, such service being hereby acknowledged by SGC and Company to be
sufficient for personal jurisdiction in any action against SGC or Company, as
applicable, in any such court and to be otherwise effective and binding service
in every respect. Nothing herein shall affect the right to serve process in any
other manner permitted by law or shall limit the right of any Holder to bring
proceedings against SGC or Company in the courts of any other jurisdiction.
9.16 WAIVER OF JURY TRIAL. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY
--------------------
AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE OTHER BASIC
DOCUMENTS OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS
TRANSACTION OR THE RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of this
waiver is intended to be all-encompassing of any and all disputes that may be
filed in any court and that relate to the subject matter of this transaction,
including without limitation contract claims, tort claims, breach of duty claims
and all other common law and statutory claims. Each party hereto acknowledges
that this waiver is a material inducement to enter into a business relationship,
that each has already relied on this waiver in entering into this Agreement, and
that each will continue to rely on this waiver in their related
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future dealings. Each party hereto further warrants and represents that it has
reviewed this waiver with its legal counsel and that it knowingly and
voluntarily waives its jury trial rights following consultation with legal
counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR ANY OF THE OTHER
BASIC DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE
SECURITIES MADE HEREUNDER. In the event of litigation, this Agreement may be
filed as a written consent to a trial by the court.
9.17 COUNTERPARTS; EFFECTIVENESS. This Agreement and any amendments,
---------------------------
waivers, consents or supplements hereto or in connection herewith may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed an original, but all such counterparts together shall constitute but one
and the same instrument; signature pages may be detached from multiple separate
counterparts and attached to a single counterpart so that all signature pages
are physically attached to the same document. This Agreement shall become
effective upon the execution of a counterpart hereof by each of the parties
hereto.
9.18 PROPOSED SUBSTITUTION OF THE COLLATERAL GRANTED UNDER THE DEED OF
-----------------------------------------------------------------
TRUST.
A. SunAmerica understands that SGC and Company may propose that
SunAmerica amend the Basic Documents to provide for the substitution of a parcel
of real property owned or to be owned by Company (the "Substitute Property") for
the Premises and Improvements and, in connection with such substitution,
Collateral Agent would release its lien on the Premises and Improvements and
obtain a first priority perfected security interest in the Substitute Property.
B. SunAmerica agrees to evaluate and consider any such proposed
Substitute Property, it being understood that any approval by SunAmerica of any
proposed Substitute Property would be evidenced in writing by amendments to the
Basic Documents or another agreement entered into after the Closing by
SunAmerica in form and substance satisfactory to SunAmerica in its sole
discretion and that SunAmerica reserves all of its rights to evaluate, consider
and either approve or decline to approve a proposed Substitute Property or any
term or condition thereof, in each case in its sole discretion. In furtherance
but not in limitation of the foregoing and in addition to any other terms or
conditions that SunAmerica determines in its sole discretion to be relevant in
connection with its evaluation of any proposed Substitute Property, SunAmerica
anticipates that its approval of any Substitute Property would include but not
be limited to requirements that an MAI Appraisal dated no more than 90 days
prior to the proposed date of substitution be delivered to and approved by
SunAmerica indicating that the minimum market value of the Substitute Property
is not less than $27 million, a title insurance report, survey, environmental
and other reports requested by SunAmerica and all documents relating to the
Substitute Property be delivered to and approved by
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SunAmerica, and SunAmerica approve all amendments to the Basic Documents
necessary to effect such substitution.
9.19 CONFLICTS WITH OTHER BASIC DOCUMENTS. To the fullest extent possible,
------------------------------------
the terms and provisions of the other Basic Documents shall be read in
conjunction with the terms and provisions of this Agreement and shall supplement
the terms and provisions hereof. To the extent that any terms and provisions
hereunder conflict with the terms provisions of any of the other Basic
Documents, the stricter provisions shall govern.
61
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
SAHARA GAMING CORPORATION,
a Nevada corporation
By: /s/ Thomas K. Land
Its: Senior Vice President and Chief Financial Officer
Notice Address:
SAHARA GAMING CORPORATION,
2535 Las Vegas Blvd. South
Las Vegas, Nevada 89109
Attention: Thomas Land
SAHARA LAS VEGAS CORP.,
a Nevada corporation
By: /s/ Thomas K. Land
Its: Senior Vice President and Chief Financial Officer
Notice Address:
Sahara Las Vegas Corp.
2535 Las Vegas Blvd. South
Las Vegas, Nevada 89109
Attention: Thomas Land
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SUNAMERICA LIFE INSURANCE COMPANY,
By: /s/ Steven P. Hanover
------------------------------
Its: ____________________________
Notice Address:
SunAmerica Life Insurance Company
1 SunAmerica Center
Century City
Los Angeles, CA 90067-6022
Attention: Peter McMillan
and Steven Hanover
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EXHIBIT 10.120
Recording requested by and
when recorded mail to:
O'MELVENY & MYERS
1999 Avenue of the Stars, Suite 700
Los Angeles, California 90067
Attention: Dean Pappas, Esq.
File No.: 843,112-044
______________________________________________________________________________
(Space above line is for Recorder's use)
DEED OF TRUST, FIXTURE FILING AND FINANCING STATEMENT
AND SECURITY AGREEMENT WITH ASSIGNMENT OF RENTS
NOTICE: THIS INSTRUMENT SECURES FUTURE ADVANCES.
THIS DEED OF TRUST, FIXTURE FILING AND FINANCING STATEMENT AND SECURITY
AGREEMENT WITH ASSIGNMENT OF RENTS (this "DEED OF TRUST"), made as of the 16th
day of January, 1996, by and among SAHARA LAS VEGAS CORP., a Nevada corporation,
as debtor and trustor ("TRUSTOR"), STEWART TITLE OF NEVADA, a Nevada
corporation, as trustee ("TRUSTEE"), and SUNAMERICA LIFE INSURANCE COMPANY, an
Arizona corporation, as Collateral Agent on behalf of itself and each of the
Holders, as secured party and beneficiary ("BENEFICIARY").
W I T N E S S E T H:
THAT TRUSTOR HEREBY:
GRANTS, bargains, sells, transfers, conveys and assigns the following
described real property and related collateral to Trustee, IN TRUST, WITH POWER
OF SALE, to have and to hold the same unto Trustee and its successors in
interest, for the benefit of and on behalf of Beneficiary, upon the trusts,
covenants and agreements herein expressed:
DESCRIPTION OF REAL PROPERTY COLLATERAL
All that certain real property, and the interests of Trustor therein,
situate in the County of Clark, State of Nevada, that is more particularly
described on that certain exhibit marked "Exhibit A", affixed hereto and by this
reference incorporated herein and made a part hereof (the "LAND");
Together with all right, title and interest of Trustor, now owned or
hereafter acquired, in and to any land lying within the right-of-way of any
street, open or proposed, adjoining any of the Land and any and all sidewalks,
alleys and strips and gores of land adjacent to or used in connection with any
of the Land, with appurtenances ("ADJACENT INTERESTS");
Together with all right, title and interest of Trustor in and to all
buildings, structures and all other improvements and fixtures that are or may
hereafter be erected or placed on or in the Land and all rights and interests of
Trustor in and to all buildings, structures and other improvements and fixtures
1
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that are or may hereafter be erected or placed on or in Adjacent Interests
(collectively, the "IMPROVEMENTS");
Together with all right, title and interest of Trustor in and to all and
singular the tenements, hereditaments and appurtenances belonging or in any wise
appertaining to any of the Land, Adjacent Interests or Improvements
(collectively, the "APPURTENANCES");
Together with all rents, issues, products, earnings, revenues, payments,
profits, royalties and other proceeds and income of or from any of the foregoing
or of or from any of the Leases, as hereinafter defined (collectively, the
"RENTS"), subject, however, in the case of Rents, to the absolute assignment
given to Beneficiary in Section 12 hereof, to which Section 12 this grant to the
Trustee is subject and subordinate;
Together with all leasehold estate, right, title and interest of Trustor in
and to all leases, subleases, licenses, concessions, franchises and other use or
occupancy agreements, as the same may be from time to time amended, modified,
extended or renewed (collectively, "LEASES"), including, without limitation,
that certain Ground Lease dated as of January 1, 1987, by and between Howard
Hughes Properties, Limited Partnership, a Delaware limited partnership, and Wet
'N Wild, Inc., a Florida corporation, as amended (the "WET 'N WILD LEASE"), and
any amendments, modifications, extensions or renewals thereof, covering any of
the Land, Adjacent Interests, Improvements or Appurtenances, now or hereafter
existing or entered into, and all right, title and interest of Trustor
thereunder, including, without limitation, the right to all security deposits,
advance rentals, other deposits, and all payments of similar nature, relating
thereto;
Together with all right, title and interest of Trustor in and to all water
rights and rights to the use of water now or hereafter appurtenant to or used in
connection with any of the Land, Adjacent Interests, Improvements or
Appurtenances ("WATER RIGHTS");
Together with any and all other estate, right, title, interest, property,
possession, claim or demand, in law or in equity, which Trustor now has or may
hereafter acquire in or to any of the Land, Adjacent Interests, Improvements,
Appurtenances, Rents, Leases and Water Rights, or pertaining or appurtenant
thereto, and all reversions and remainders thereof, and all tenements,
hereditaments and appurtenances thereunto belonging or in any wise appertaining
thereto ("OTHER INTERESTS") (said Land, Adjacent Interests, Improvements,
Appurtenances, Rents, Leases, Water Rights and Other Interests may be referred
to herein as the "REAL PROPERTY"); AND
THAT TRUSTOR HEREBY:
GRANTS a security interest, pursuant to the Nevada Uniform Commercial Code
- -- Secured Transactions, to Beneficiary on the terms and provisions (by this
reference incorporated herein with respect to the security interest herein
granted and the rights and obligations of the parties with respect to the
Personal Property, as hereinafter defined, but for no other purpose) set forth
in that certain Security Agreement dated as of even date herewith by and between
Trustor, as Grantor, and Beneficiary, as Secured Party (the "SECURITY
AGREEMENT"), in all of Trustor's right, title and interest in and to the
following described personal property, whether now owned or hereafter acquired
(collectively, the "PERSONAL PROPERTY"):
DESCRIPTION OF PERSONAL PROPERTY COLLATERAL
2
<PAGE>
All Trustor's right, title and interest in and to that certain personal
property, described hereinbelow as follows, and the interests of Trustor
therein, whether now owned or hereafter acquired (collectively the "PERSONAL
PROPERTY"):
(a) All present and future chattels, furniture, furnishings, goods,
equipment, fixtures and all other tangible personal property, of whatever kind
and nature, now or hereafter used in connection with or placed or located in or
on any part of the Real Property (including, without limitation, any building or
structure that is now or that may hereafter be erected on the Real Property),
including, but not limited to, machinery, materials, goods and equipment now or
hereafter used in any construction or operation relating thereto (including,
without limitation, air conditioning, heating, electrical, lighting, fire
fighting and fire prevention, food and beverage service, laundry, plumbing,
refrigeration, security, sound, signaling, telephone, television, window washing
and other equipment and fixtures, of whatever kind or nature, including
generators, transformers, switching gear, boilers, burners, furnaces, piping,
sprinklers, sinks, tubs, valves, compressors, motors, carts, dumb waiters,
elevators and other lifts, floor coverings, hardware, keys, locks, organs,
pianos, planters, railings, scales, shelving, signs, tools, machinery, molds,
dies, drills, presses, planers, saws, furniture, business fixtures, trade
fixtures, electric, gas and other motor vehicles, uniforms, vacuum cleaners,
hotel furniture, furnishings and equipment, bathroom furniture and furnishings
(including towels, bathmats, hamperettes, shower curtains and other bath linen),
beds and bedding (including mattresses, springs, pillows, bed pads, sheets,
blankets, comforters, spreads and other bed linens and furnishings), bric-a-
brac, chairs, chests, vanities, secretaries, bureaus, chiffonniers, love seats,
benches, costumers, smoking stands, sand jars, desks, dressers, hangings,
paintings, pictures, frames, sculptures, lamps, light bulbs, mirrors, night
stands, ornaments, radios, stereo equipment, sofas, statuary, tables,
telephones, televisions, vases, window coverings, foodstuffs, beverages
(including beer, wine, liquor and other alcoholic beverages), and other
consumables (including soap, shampoo, cleaning supplies and paper goods),
cutlery, cooking, baking and other kitchen utensils and apparatus (including
crockery, fryers, grills, kettles, mixers, pots, pans, pails, racks, steamers
and toasters), china and other dishes, flatware, glassware, hollowware, serving
pieces, trays, table linens, washers, dryers, irons, ironing boards and other
ironing equipment, cables, outlets, plugs, wiring and related apparatus and
fixtures, card readers, cash registers, adding machines, calculators, computers,
keyboards, monitors, printers, printing equipment, envelopes, stationary,
posting machines, blank forms, typewriters, typewriter stands, other office and
accounting equipment and supplies, time stamps, time recorders, bookkeeping
machines, checking machines, payroll machines, computer reservations systems,
and all other goods, equipment, furnishings, apparatus and fixtures which are
now or may hereafter be located at or used at or in connection with the Real
Property) and all other tangible personal property used or to be used at or in
connection with, or placed or to be placed in, rooms, halls, lounges, offices,
lobbies, lavatories, basements, cellars, vaults or other portions of the Real
Property or any facilities on the Real Property or of any other building or
buildings hereafter constructed or erected thereon, whether herein enumerated or
not, and whether or not contained in any such building, and which are used or to
be used or useful in the operation and maintenance thereof, or in any business
conducted thereon, together with all replacements and substitutions for any and
all personal property in which Trustor has an interest, including without
limitation such goods and equipment as shall from time to time be located,
placed, installed or used in or upon, or procured for use, or to be used or
useful in connection with the operation of the whole, or any part of, the Real
Property or any facilities on the Real Property and all parts thereof and all
accessions thereto;
(b) All present and future inventory and merchandise in all of its forms
(including, but not limited to, (i) all goods held by Trustor for sale or lease
or to be furnished under contracts of service or so leased or furnished, (ii)
all raw materials, work in process, (iii) all goods in which Trustor has an
interest in mass or a joint or other interest or right of any kind, (iv) all
goods that are returned to or repossessed by Trustor, and (v) all accessions
thereto and products thereof;
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(c) All present and future accounts, accounts receivable, rentals,
revenues, receipts, payments, and income of any nature whatsoever derived from
or received with respect to any facilities on the Real Property, agreements,
contracts, leases, contract rights, rights to payment, instruments, documents,
chattel paper, security agreements, guaranties, undertakings, surety bonds,
insurance policies, condemnation deposits and awards, notes and drafts,
securities, certificates of deposit and the right to receive all payments
thereon or in respect thereof (whether principal, interest, fees or otherwise),
contract rights (other than rights under contracts or governmental permits that
may not be transferred by law), including, without limitation, rights to all
deposits from tenants and other users of the Real Property or any facilities on
the Real Property, rights under all contracts relating to the construction,
renovation or restoration of any of the improvements now or hereafter located on
the Real Property or the financing thereof and all rights under payment or
performance bonds, warranties, and guaranties, and all rights to payment from
any credit/charge card organization or entity such as or similar to, and
including, without limitation, the organizations or entities that sponsor and
administer, respectively, the American Express Card, the Carte Blanche Card, the
Diners Club Card, the Discover Card, the MasterCard and the Visa Card, books of
account, and principal, interest and payments due on account of goods sold,
services rendered, loans made or credit extended, on or in connection with the
Real Property or any facilities on the Real Property and all forms of
obligations owing to and rights of Trustor or in which Trustor may have any
interest, however created or arising;
(d) All present and future right, title and interest of Trustor in and to
all leases, subleases, licenses, concessions, franchises and other use or
occupancy agreements, and any amendments, modifications, extensions or renewals
thereof, whether or not specifically herein described, which now or may
hereafter pertain to or affect the Real Property or any portion thereof, and all
amendments to the same, including, but not limited to, the following: (i) all
payments due and to become due under such Leases, whether as rent, damages,
insurance payments, condemnation awards, or otherwise; (ii) all claims, rights,
powers, privileges and remedies under such Leases; and (iii) all rights of the
Trustor under such Leases to exercise any election or option, or to give or
receive any notice, consent, waiver or approval, or to accept any surrender of
the premises or any part thereof, together with full power and authority in the
name of the Trustor, or otherwise, to demand and receive, enforce, collect, and
receipt for any or all of the foregoing, to endorse or execute any checks or any
instruments or orders, to file any claims, and to take any other action that
Beneficiary may deem necessary or advisable in connection therewith;
(e) All present and future deposit accounts of Trustor, any demand, time,
savings, passbook or like account maintained by Trustor with any bank, savings
and loan association, credit union or like organization, and all money, cash and
cash equivalents of Trustor, whether or not deposited in any such deposit
account;
(f) All present and future general intangibles (including but not limited
to all governmental permits relating to construction or other activities on the
Real Property), all tax refunds of every kind and nature to which Trustor now or
hereafter may become entitled, however arising, all other refunds, and all
deposits, goodwill, chooses in action, rights to payment or performance,
judgments taken on any rights or claims included in the Property (as hereinafter
defined), trade secrets, computer programs, software, customer lists, business
names, trademarks, trade names and service marks, patents, patent applications,
licenses, copyrights, technology, processes, proprietary information and
insurance proceeds;
(g) All present and future books and records, including, without
limitation, books of account and ledgers of every kind and nature, ledger cards,
computer programs, tapes, disks and other information storage devices, all
related data processing software, and all electronically recorded data
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relating to Trustor or its business or the Real Property, all receptacles and
containers for such records, and all files and correspondence;
(h) All present and future maps, plans, specifications, surveys, studies,
reports, data and drawings (including, without limitation, architectural,
structural, mechanical and engineering plans and specifications, studies, data
and drawings) prepared for or relating to the Real Property or the construction,
renovation or restoration of any improvements on the Real Property or the
extraction of minerals, sand, gravel or other valuable substances from the Real
Property, together with all amendments and modifications thereto;
(i) All present and future licenses, permits, variances, special permits,
franchises, certificates, rulings, certifications, validations, exemptions,
filings, registrations, authorizations, consents, approvals, waivers, orders,
rights and agreements (including options, option rights and contract rights),
other than those (including non-transferable gaming permits) that may not be
transferred by law, now or hereafter obtained by Trustor from any governmental
authority having or claiming jurisdiction over the Real Property or any other
element of the Property or providing access thereto, or the operation of any
business on, at, or from the Real Property;
(j) All present and future stocks, bonds, debentures, securities,
subscription rights, options, warrants, puts, calls, certificates, partnership
interests, joint venture interests, investments, brokerage accounts and all
rights, preferences, privileges, dividends, distributions, redemption payments
and liquidation payments received or receivable with respect thereto;
(k) All present and future accessions, appurtenances, components, repairs,
repair parts, spare parts, replacements, substitutions, additions, issue and
improvements to or of or with respect to any of the foregoing;
(l) All other fixtures and storage and office facilities, and all
accessions thereto and products thereof and all water stock relating to the Real
Property;
(m) All other tangible and intangible personal property of Trustor;
(n) All rights, remedies, powers and privileges of Trustor with respect to
any of the foregoing; and
(o) Any and all proceeds, products, rents, income and profits of any of the
foregoing, including, without limitation, all money, accounts, general
intangibles, deposit accounts, documents, instruments, chattel paper, goods,
insurance proceeds (whether or not the Trustee or Beneficiary is the loss
payee), and any other tangible or intangible property received upon the sale or
disposition of any of the foregoing (it being agreed, for purposes hereof, that
the term "PROCEEDS" includes whatever is receivable or received when any of the
Personal Property is sold, collected, exchanged or otherwise disposed of,
whether such disposition is voluntary or involuntary). Notwithstanding anything
to the contrary contained herein, Beneficiary acknowledges that it has no
security interest in (x) any cash of Trustor described in clauses (d), (e), (f)
and (j) above, to the extent such a security interest is prohibited by any
Gaming Laws, or (y) any deposit account described in clause (e) above, to the
extent such a security interest is not permitted by applicable law;
(The Real Property, the Personal Property and all of the other collateral
described above may hereinafter be collectively referred to as the "PROPERTY";
provided that, Beneficiary hereby acknowledges that certain improvements located
on the Property have been constructed and are currently
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owned by the tenant under the Wet 'N Wild Lease and that Trustor is hereby
granting only its right, title and interest (if any) in and to such
improvements);
FOR THE PURPOSE OF SECURING:
----------------------------
FIRST: Payment when due, whether at stated maturity, by required
prepayment, declaration, acceleration, demand or otherwise (including payment of
amounts that would become due but for the operation of the automatic stay under
Section 362(a) of the Bankruptcy Code, 11 U.S.C. (S)362(a)), of all obligations
and liabilities of every nature of Trustor now or hereafter existing under or
arising out of or in connection with that certain Note Purchase Agreement of
even date herewith, by and among Trustor, Beneficiary, as agent for the Holders,
and Sahara Gaming Corporation, a Nevada corporation ("SGC") (the "NOTE PURCHASE
AGREEMENT") (it being acknowledged that all initially capitalized terms used
herein without definition shall have the meanings given such terms in the Note
Purchase Agreement), or the promissory notes issued to the Beneficiary and the
other Holders to evidence such obligations and liabilities, together with any
and all renewals, extensions, amendments, modifications, rearrangements,
replacements, restatements, substitutions and addendums thereof or thereto
(herein referred to as the "NOTES"), whether for principal in the maximum
principal amount of Twenty Million Dollars ($20,000,000) in the aggregate or
such principal amount as may be advanced and remain unpaid or for interest
(including, without limitation, interest that, but for the filing of a petition
in bankruptcy with respect to Trustor, would accrue on such obligations), fees,
expenses, indemnities or otherwise, whether voluntary or involuntary, direct or
indirect, absolute or contingent, liquidated or unliquidated, whether or not
jointly owed with others, and whether or not from time to time decreased or
extinguished and later increased, created or incurred, and all or any portion of
such obligations or liabilities that are paid, to the extent all or any part of
such payment is avoided or recovered directly or indirectly from Beneficiary as
a preference, fraudulent transfer or otherwise.
SECOND: Payment and performance of every obligation, covenant, promise and
agreement of Trustor herein contained, or incorporated herein by reference,
including any sums paid or advanced by Beneficiary or Trustee pursuant to the
terms hereof.
THIRD: Payment of the expenses and costs incurred or paid by Beneficiary
in the preservation and enforcement of the rights and remedies of Beneficiary
and the duties and liabilities of Trustor hereunder, including, but not by way
of limitation, attorneys' fees, court costs, witness fees, expert witness fees,
collection costs, Trustee's fees and costs of a Trustee's Sale Guarantee, and
costs and expenses paid by Beneficiary in performing for Trustor's account any
obligation of Trustor.
FOURTH: Payment of additional sums and interest thereon which may
hereafter be loaned to Trustor by Beneficiary when evidenced by a promissory
note or notes or other writing that recites that this Deed of Trust is security
therefor.
FIFTH: Performance of every obligation, warranty, representation,
covenant, agreement and promise of Trustor contained in the Note Purchase
Agreement, Security Agreement and all other Basic Documents, except the
Environmental Indemnity.
The foregoing are described herein as the "SECURED OBLIGATIONS". All
persons who may have or acquire an interest in all or any part of the Property
will be considered to have notice of, and will be bound by, the terms of the
Secured Obligations and each other agreement or instrument made or entered into
in connection with each of the Secured Obligations. Such terms include any
provisions in the Notes or the Note Purchase Agreement which permit borrowing,
repayment and reborrowing, or which provide that the interest rate on one or
more of the Secured Obligations may vary from time to time.
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It is the intention of Trustor, Beneficiary and the Holders that this Deed
of Trust is an "instrument" (as defined in NRS 106.330, as amended or recodified
from time to time) which secures "future advances" (as defined in NRS 106.320,
as amended or recodified from time to time) and which is governed pursuant to
NRS 106.300 through 106.400, as amended and recodified from time to time ("NRS"
means Nevada Revised Statutes). It is the intention of the parties that the
Secured Obligations include the obligation of the Trustor to repay "future
advances" of "principal" (as defined in NRS 106.345, as amended or recodified
from time to time) in an amount up to $20,000,000, and that the lien of this
Deed of Trust secures the obligation of Trustor to repay all such "future
advances" with the priority set forth in NRS 106.370(1), as amended or
recodified from time to time.
THIS DEED OF TRUST FURTHER WITNESSETH THAT, IN CONNECTION WITH AND IN
FURTHERANCE OF THE FOREGOING GRANTS, AND THE ENCUMBRANCES, LIENS AND SECURITY
INTERESTS CREATED THEREBY, TRUSTOR COVENANTS AND AGREES AS FOLLOWS:
1. CERTAIN REPRESENTATIONS AND WARRANTIES. Trustor represents, warrants
and covenants that, except as set forth in the Note Purchase Agreement or as
disclosed to Beneficiary, prior to the date hereof, in a writing making
reference to this Section 1 of this Deed of Trust:
(a) Trustor lawfully possesses and holds fee simple title to all
of the Land and Improvements subject to the permitted exceptions set forth
on Exhibit B attached hereto and incorporated herein by this reference (the
---------
"PERMITTED EXCEPTIONS");
(b) Trustor has or will have good title to all Property other
than the Land and Improvements;
(c) Trustor has the full and unlimited power, right and authority
to encumber the Property and assign the Rents;
(d) This Deed of Trust creates a first priority lien on the
Property, subject to the Permitted Exceptions;
(e) Subject to the Permitted Exceptions (to the extent
applicable), Trustor owns (or, with respect to any Personal Property
acquired by Trustor after the date hereof, will own) the Personal Property
free and clear of any security agreements, reservations of title or
conditional sales contracts, and there is no financing statement affecting
the Personal Property on file in any public office other than the one to
perfect the security interest herein granted;
(f) Trustor's place of business, or its chief executive office if
it has more than one place of business, is located at the address specified
in the Note Purchase Agreement;
(g) No part of the Property is in the hands of a receiver, no
application for a receiver is pending with respect to any portion of the
Property, and no part of the Property is subject to any foreclosure or
similar proceeding;
(h) There is no pending or, to the best of Trustor's knowledge,
threatened, litigation, action, proceeding or investigation, including,
without limitation, any condemnation proceeding, against Trustor or the
Property before any court, governmental or quasi-governmental, arbitrator
or other authority;
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(i) Access to and egress from the Property are available and
provided by public streets, and Trustor has no knowledge of any federal,
state, county, municipal or other governmental plans to change the highway
or road system in the vicinity of the Property or to restrict or change
access from any such highway or road to the Property;
(j) Adequate utilities services exist for the current ownership,
use, occupancy, operation and maintenance of the Property, and Trustor is
not in default of any obligation to any utility service provider;
(k) The Property is located in a zoning district designated H-1
of the unincorporated City of Las Vegas, the County of Clark, State of
Nevada. Such designation permits the development, use and operation of the
Property as it is currently operated as a matter of right and not as a non-
conforming use. The Property complies in all respects with all
requirements, conditions and restrictions, including but not limited to
deed restrictions and restrictive covenants, applicable to the Property;
(l) Except for those that are Permitted Exceptions, there are no
special or other assessments for public improvements or otherwise now
affecting the Property, nor does Trustor know of any pending or threatened
special assessments affecting the Property or any contemplated improvements
affecting the Property that may result in special assessments. Except for
those that are Permitted Exceptions, there are no tax abatements or
exceptions affecting the Property;
(m) Trustor has not received any notice from any governmental
body having jurisdiction over the Property as to any violation of any
applicable law, or any notice from any insurance company or inspection or
rating bureau setting forth any requirements as a condition to the
continuation of any insurance coverage on or with respect to the Property
or the continuation thereof at premium rates existing at present which have
not been remedied or satisfied;
(n) Except as set forth in the lease certificate from Trustor to
Beneficiary dated as of the date hereof (the "LEASE CERTIFICATE"), there
are no occupancy rights (written or oral), Leases or tenancies presently
affecting any part of the Property. The Lease Certificate contains a true
and correct description of all leases, licenses and other occupancy
agreements presently affecting the Property. No written or oral agreements
or understandings exist between Trustor and the tenants under the Leases
described in the Lease Certificate that grant such tenants any rights
greater than those described in the Lease Certificate or that are in any
way inconsistent with the rights described in the Lease Certificate.
Except as set forth in the Lease Certificate, to Trustor's knowledge, there
has been no default or event which, with the giving of notice or the
passage of time, or both, would constitute a default by any party under the
Leases (including, without limitation, the Wet 'N Wild Lease);
(o) Except as specifically set forth in the Wet 'N Wild Lease,
there are no options, purchase contracts or other similar agreements of any
type (written or oral) presently affecting any part of the Property;
(p) Except as otherwise disclosed to Beneficiary in writing prior
to the date hereof, (i) there are no contracts (other than the Wet 'N Wild
Lease) presently affecting the Property ("CONTRACTS") having a term in
excess of one hundred eighty (180) days or not terminable by Trustor
(without penalty) on thirty (30) days' notice; (ii) Trustor has heretofore
delivered to Beneficiary true and correct copies of each of the Contracts
together with all amendments thereto; (iii) Trustor is not in default of
any obligations under any of the Contracts;
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and (iv) the Contracts represent the complete agreement between Trustor and
such other parties as to the services to be performed or materials to be
provided thereunder and the compensation to be paid for such services or
materials, as applicable, and except as otherwise disclosed herein, such
other parties possess no unsatisfied claims against Trustor. Trustor is
not in default under any of the Contracts and no event has occurred which,
with the passing of time or the giving of notice, or both, would constitute
a default under any of the Contracts;
(q) Trustor or its tenant currently has all permits ("PERMITS")
necessary or desirable for the use, ownership, development, occupancy and
maintenance of the Property as used as of the date hereof. None of the
Permits has been suspended or revoked, and all of the Permits are in full
force and effect, are fully paid for, and Trustor or its tenant has made or
will make application for renewals of any of the Permits prior to the
expiration thereof; and
(r) All insurance policies held by Trustor relating to or
affecting the Property are in full force and effect and shall remain in
full force and effect (unless replaced with new policies that meet the
requirements set forth in Section 6 hereof) through the date of payment in
---------
full of the Obligations. Trustor has not received any notice of default or
notice terminating or threatening to terminate any such insurance policy
and Trustor has made or will make application for renewals of any of such
insurance policies prior to the expiration thereof.
2. PAYMENT OF OBLIGATIONS. Trustor shall pay when due the principal
of and interest on the indebtedness evidenced by the Notes; all charges, fees
and other sums as provided in the Basic Documents; and the principal of and
interest on any other indebtedness secured by this Deed of Trust.
3. COMPLIANCE WITH LAWS. Trustor shall not commit, suffer or permit
any act to be done, or condition to exist, on, or with respect to, the Property
which violates or is prohibited by any law, statute, code, act, ordinance,
order, judgment, decree, injunction, rule, regulation, permit, license,
authorization or direction of any government or subdivision thereof, whether it
be federal, state, county or municipal (collectively, "LEGAL REQUIREMENTS"),
which is applicable to the Property, or any part thereof, now or at any time
hereafter.
4. MAINTENANCE OF PROPERTY. Trustor agrees: (a) properly to care
for and keep said Property in good condition and repair; (b) not to remove,
demolish or substantially alter any building on the Real Property except (i) in
compliance with the terms of this Deed of Trust relating to the occurrence of a
casualty or condemnation, (ii) upon the prior written consent of Beneficiary or
(iii) as required under the Wet 'N Wild Lease; (c) to complete promptly and in a
good and workmanlike manner any building or other improvement which may be
constructed thereon, to restore promptly in like manner any portion of the
Improvements (and any other improvements located on the Real Property, whether
or not such improvements are owned by Trustor) which may be damaged or destroyed
from any cause whatsoever, and to pay when due all claims for labor performed
and materials furnished therefor; (d) to comply with all laws, ordinances,
regulations, covenants, conditions and restrictions now or hereafter affecting
the Property or any part thereof, including any which require alteration or
improvement thereof, and with all requirements of insurance companies insuring
the Property or any portion thereof and of any bureau or agency which
establishes standards of insurability; (e) not to commit or permit any waste or
deterioration of the Property; (f) to keep and maintain abutting grounds,
sidewalks, roads, parking and landscaped areas in good and neat order and
repair; (g) not to apply for, willingly suffer or permit any change in zoning,
subdivision, or land use regulations affecting the Property without the prior
written consent of Beneficiary; (h) not to drill or extract or enter into any
lease for the drilling for or extraction of oil, gas or other hydrocarbon
substances or any mineral of any kind or character on or from the Property or
any part thereof without the prior written consent of
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Beneficiary; and (i) to do all other acts, in a timely and proper manner, which,
from the character or use of the Property, may be reasonably necessary to
maintain and preserve its value, the specific enumerations herein not excluding
the general.
5. ENVIRONMENTAL OBLIGATIONS.
(a) Trustor shall comply with, and shall use its best efforts to cause
each occupant of the Property to comply with, any and all Environmental Laws (as
hereinafter defined) regarding the presence or removal of Hazardous Material (as
hereinafter defined) on or in the Property, shall pay immediately, when due, the
costs of removal from the Property and disposal of any Hazardous Material which
is required to be removed pursuant to any Environmental Laws and shall keep the
Property free of any lien which may arise pursuant to any such Environmental
Laws. Trustor shall not, and shall not permit any person or entity (including
any tenant or other occupant of the Property), to release, discharge, or dispose
of any Hazardous Material on the Real Property except in compliance with all
Environmental Laws and, if the same shall exist, Trustor shall immediately
remove or cause to be removed from the Real Property such Hazardous Material to
the extent required to be removed pursuant to any Environmental Laws.
(b) As used herein, the term "HAZARDOUS MATERIAL" means: (i) any
chemical, material or substance at any time defined as or included in the
definition of "hazardous substances", "hazardous materials", hazardous wastes",
"extremely hazardous waste", "restricted hazardous waste", "infectious waste",
"toxic substances" or any other formulations intended to define, list or
classify substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, toxicity, reproductive toxicity, "TCLP
toxicity" or "EP toxicity" or words of similar import under any applicable
Environmental Law or publication promulgated pursuant thereto; (ii) any oil,
petroleum, petroleum fraction or petroleum derived substance; (iii) any drilling
fluid, produced water or other waste associated with the exploration,
development or production of crude oil, natural gas or geothermal resources;
(iv) any flammable substance or explosive; (v) any radioactive material; (vi)
asbestos in any form; (vii) urea formaldehyde foam insulation; (viii) electrical
equipment which contains any oil or dielectric fluid containing poly-chlorinated
biphenyls; (ix) any pesticide; (x) all hazardous substances defined in NRS
40.504, and (xi) any other chemical, material or substance exposure to which is
prohibited, limited or regulated by any Federal, state, local or other
governmental authority or which may or could pose a hazard to human health or
safety or the environment if released into the workplace or the environment; the
term "ENVIRONMENTAL LAW" means any statute, ordinance, order, rule, regulation,
plan, policy, decree, permit, guidance document, or other requirement of any
Federal, state, local or other governmental authority relating to: (aa)
environmental matters, including, without limitation, those relating to fines,
injunctions, penalties, damages, contribution, cost recovery compensation,
losses or injuries resulting from the Release (as hereinafter defined) or
threatened Release of Hazardous Material, (bb) the presence, generation, use,
storage, transportation or disposal of Hazardous Material, or (cc) occupational
safety and health, industrial hygiene, land use or the protection of human,
plant or animal health or welfare, in any manner applicable to any of the
Property, including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C. (S) 9601 et seq.), the
Hazardous Materials Transportation Act (49 U.S.C. (S) 1801 et seq.), the
Resource Conservation and Recovery Act (42 U.S.C. (S) 6901 et seq.), the Federal
Water Pollution Control Act (33 U.S.C. (S) 1251 et seq.), the Clean Air Act (42
U.S.C. (S) 7401 et seq.), the Federal Insecticide, Fungicide, and Rodenticide
Act (7 U.S.C. (S) 136 et seq.), the Occupational Safety and Health Act (29
U.S.C. (S)651 et seq.) and the Emergency Planning and Community Right-to-Know
Act (42 U.S.C. (S) 11001 et seq.), each as amended and supplemented, and any
analogous future or present local, state and federal statutes, ordinances and
other laws, and rules and regulations promulgated pursuant thereto, each as in
effect as of the date of determination; and the term "RELEASE" means any
release, spill, emission, leaking, pumping, pouring, injection, escaping,
deposit, disposal, dispersal,
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dumping, leaching or migration of Hazardous Material into the indoor or outdoor
environment (including, without limitation, the abandonment or disposal of any
barrels, containers or other closed receptacles containing any Hazardous
Material), or into or out of any of the Property, including the movement of any
Hazardous Material through the air, soil, surface, water, groundwater or
property.
(c) Trustor hereby agrees to indemnify, hold harmless and defend (by
counsel of Beneficiary's or the Holders' choice) Beneficiary, the Holders, their
directors, officers, employees, agents, successors and assigns from and against
any and all claims, losses, damages, demands, liabilities, fines, penalties,
assessments, charges, administrative and judicial proceedings and orders,
judgments, remedial action requirements, enforcement actions of any kind, and
all costs and expenses incurred in connection therewith (including but not
limited to attorneys' and consultants' fees and expenses), arising directly or
indirectly, in whole or in part, out of (i) the presence on or under the
Property (including, but not limited to, the surrounding streets and sidewalks)
of any Hazardous Material, or any Release of any Hazardous Material on, under or
from the Property, or (b) any activity carried on or undertaken on or off the
Property until the Secured Obligations have been fully and finally satisfied,
and whether by Trustor or any employees, agents, contractors or subcontractors
of Trustor or any third persons occupying or present on the Property, in
connection with the use, holding, handling, treatment, removal, storage,
decontamination, cleanup, transport, Release, generation, processing or
abatement of any Hazardous Material located or present in, on or under the
Property (including, but not limited to, the surrounding streets and sidewalks).
The foregoing indemnity shall further apply to any residual contamination in, on
or under the Property (including, but not limited to, the surrounding streets
and sidewalks), or affecting any natural resources, and to any contamination of
any property or natural resources arising in connection with the generation,
use, holding, handling, treatment, removal, decontamination, cleanup, storage,
transport, disposal, Release, processing or abatement of any such Hazardous
Material, and irrespective of whether any of such activities are undertaken in
accordance with applicable Environmental Laws. Trustor hereby acknowledges and
agrees that, notwithstanding any other provision of this Deed of Trust to the
contrary, the obligations of Trustor under this Section 5(c) shall be unlimited
personal obligations of Trustor, shall not be secured by this Deed of Trust and
shall survive any foreclosure under this Deed of Trust, any transfer in lieu
thereof, and any satisfaction of the Secured Obligations.
6. INSURANCE.
(a) TYPES AND AMOUNTS REQUIRED. During the continuance of this Deed
of Trust, Trustor shall at all times provide, maintain and keep in force, at no
expense to Trustee or Beneficiary, for the benefit of Trustor and Beneficiary,
as their respective interests may appear, the following policies of insurance:
(i) During the course of any construction or repair of
Improvements on the Property, (x) builder's completed value risk insurance
against "all risks of physical loss" (including fire and extended coverage,
and endorsements extending coverage for vandalism and malicious mischief,
collapse and property in transit, offsite storage, delay of opening
(business interruption), demolition and debris removal, flood, and, if
available, earthquake), in non-reporting form, covering 100% of the
anticipated cost of construction or repair, including "soft costs", with a
deductible from the loss payable for any casualty that is acceptable to
Beneficiary in its sole discretion (and Trustor shall obtain Beneficiary's
approval of the deductible prior to commencing any such new construction or
major repair); said policy to contain a "permission to occupy upon
completion of work or occupancy" endorsement and waiver of subrogation
endorsement acceptable to Beneficiary, and with replacement cost coverage
in an agreed amount, and (y) an "owner/contractor protective liability"
policy, providing separate liability coverage for Trustor and Beneficiary,
with a limit of not less than $10,000,000; provided that, such insurance
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policies may be provided by Trustor's tenant so long as Beneficiary is
named as an additional insured under such tenant's policies;
(ii) Insurance against loss or damage to the Improvements and
Personal Property owned by Trustor by fire and any of the other risks
covered by insurance of the type now known as "all risks of physical loss"
(including, if requested by Beneficiary, theft and earthquake coverage) in
an amount not less than 100% of the then full replacement cost of the
Improvements and Personal Property (exclusive of the cost of excavations,
pilings, foundations, footings and other underground improvements) without
deduction for physical depreciation; with a stipulated value or agreed
amount clause for not less than ninety percent (90%) of the then full
replacement cost of the Improvements; with a replacement cost endorsement,
a waiver of subrogation endorsement, coverage for the cost of removing
damaged property, and, if Beneficiary shall so require, coverage for
demolition and increased cost of construction occasioned by operation of
any law or ordinance regulating the construction, use or repair of the
Improvements; and with not more than $15,000 deductible from the loss
payable for any casualty (or, if Beneficiary requires earthquake coverage,
then, with respect to such coverage, such deductibles as are reasonably
approved by Beneficiary); and Beneficiary shall be named as an additional
insured under all casualty/"all risk" insurance procured and maintained by
any tenant of the Property with respect to any improvements or personal
property located on the Property (including, without limitation, the "all
risk" insurance procured and maintained by the tenant under the Wet 'N Wild
Lease);
(iii) If reasonably necessary and required by Beneficiary,
mechanical breakdown insurance (also known as "boiler and machinery"
insurance) covering pressure vessels, air tanks, boilers, machinery,
pressure piping, heating, air conditioning and elevator equipment and
escalator equipment, if the Improvements contain equipment of such nature,
and insurance against loss of occupancy or use arising from any such
breakdown, written on a comprehensive form with such limits and deductibles
as Beneficiary may reasonably require; the policy shall include an Agreed
Amount endorsement (waiving co-insurance), a Replacement Cost Valuation
endorsement, and coverage for increased cost of construction occasioned by
operation of any law or ordinance regulating the construction, use or
repair of the Improvements; and Beneficiary shall be named as an additional
insured under all mechanical breakdown insurance procured and maintained by
any tenant of the Property (including, without limitation, the tenant under
the Wet 'N Wild Lease);
(iv) Comprehensive general liability insurance (1973 Form),
written on an "occurrence basis," against claims for death, bodily injury,
personal injury and property damage occurring in, on or about the Real
Property or the adjoining streets, sidewalks and passageways, or arising
from or connected with the use, conduct or operation of Trustor's and its
tenants' business or interest (including, without limitation, products
liability coverage; blanket contractual liability coverage, including both
oral and written contracts; broad form property damage coverage; coverage
against liability for injury or property damage arising out of the use, by
or on behalf of the Trustor or any other person or organization, of any
owned, non-owned, leased or hired automotive equipment in the conduct of
any and all operations of Trustor; coverage for those hazards commonly
known in the insurance industry as explosion, collapse and underground
property damage; owners' and contractors' protective coverage; coverage for
elevators, escalators and garage/parking operations, if any, on the Real
Property; and completed operations coverage for two years after
construction of any Improvement has been completed), such insurance to
afford combined single limit protection of not less than $1,000,000 per
occurrence, and if such policy contains a self-insured retention, (A) such
self-insured retention shall be no greater than $10,000 per occurrence,
with an aggregate of $10,000 for all losses (including
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expenses) within the self-insured retention, and (B) Trustor shall be
solely responsible for the payment of all amounts due within said self-
insured retention, and the indemnification provisions contained in this
Deed of Trust shall include all liability associated with said self-insured
retention; and Beneficiary shall be named as an additional insured under
all comprehensive/commercial general liability insurance policies procured
or maintained by any tenant of the Property (including, without limitation,
the tenant under the Wet 'N Wild Lease);
(v) In the event Trustor ever operates any vehicles on the
Property, comprehensive business automobile liability insurance, written
under Coverage Symbol "1", covering all owned, non-owned and hired or
borrowed vehicles of Trustor used in connection with any of the
construction, maintenance and operation of the Improvements, naming Trustor
as the named insured and covering Beneficiary as additional insured,
insuring against liability for bodily injury and death and/or for property
damage in an amount not less than $1,000,000 combined single limit per
accident (if the policy contains a self-insured retention, (A) such self-
insured retention shall be no greater than $5,000 per occurrence, with an
aggregate limit of $10,000 for all losses (including expenses) within the
self-insured retention, and (B) Trustor shall be solely responsible for the
payment of all amounts due within said self-insured retention, and the
indemnification provisions contained in this Deed of Trust shall include
all liability associated with said self-insured retention); and Beneficiary
shall be named as an additional insured under all comprehensive business
automobile liability insurance policies procured or maintained by any
tenant of the Property (including, without limitation, the tenant under the
Wet 'N Wild Lease); and
(vi) Worker's compensation and employer's liability insurance
(and, if requested by Beneficiary, employer's liability insurance), in such
amounts and with such deductibles as are established by law or, if and to
the extent not so established, as are satisfactory to Beneficiary; and
Beneficiary shall be named as an additional insured under all worker's
compensation and employer's liability insurance procured and maintained by
any tenant of the Property (including, without limitation, the tenant under
the Wet 'N Wild Lease);
(vii) An umbrella liability policy with a limit of no less than
$15,000,000 providing excess coverage over all limits and coverages set
forth in paragraphs (iv), (v) and (vi) above, which limits can be obtained
by a combination of primary and excess umbrella policies, provided that all
layers follow form with the underlying policies set forth in paragraphs
(iv), (v) and (vi) and are written on an "occurrence form";
(viii) Business interruption/rental loss insurance/extra expense
and loss of "rental value" insurance, including coverage for off-premises
power losses and an extended period of indemnity endorsement for at least
360 days, in an amount representing not less than 100% of the annual net
profit (or net rental) plus continuing expenses (including debt service)
for the Property, as such net profit and continuing expenses are reasonably
projected by Trustor and consented to by Beneficiary (or, in the absence of
such a projection, as reasonably projected by Beneficiary) with a
deductible of no greater than seventy-two (72) hours, or $25,000 if a
separate deductible applies;
(ix) If the Property is located in an area identified by the
Secretary of Housing and Urban Development as a flood hazard area and in
which flood insurance has been made available under the National Flood
Insurance Act of 1968, flood insurance covering the Improvements, in an
amount, available under the Act, satisfactory to Beneficiary; and
Beneficiary shall be named as an additional insured under all flood
insurance procured and
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maintained by any tenant of the Property (including, without limitation,
the tenant under the Wet 'N Wild Lease); and
(x) Such other insurance and in such amounts, and such additional
amounts of the foregoing insurance, as may reasonably be required by
Beneficiary, in its sole discretion, from time to time, due consideration
being given to standard practices in the industry and to the risks involved
in Trustor's business, operations or interest.
(b) UNIFORM POLICY REQUIREMENTS. All policies of insurance required
by the terms of this Deed of Trust:
(i) shall be issued by insurance companies licensed and admitted
to do business in the State of Nevada, and rated no lower than A VII in the
most recent edition of A.M. Best's and AA in the most recent edition of
Standard & Poor's, and in such form and amounts as are satisfactory to
Beneficiary from time to time;
(ii) shall contain an endorsement or agreement by the insurer
that any loss shall be payable in accordance with the terms of such policy
notwithstanding any act, failure to act, negligence or breach of
representation or warranty of Trustor or any tenant of the Property, or of
any other party holding under Trustor, which might otherwise result in
forfeiture of said insurance;
(iii) shall contain a waiver by the insurer of all rights of
setoff, counterclaim and deduction against Trustor or any tenant of the
Property (as applicable);
(iv) shall contain a waiver of subrogation by the insurer in
favor of Beneficiary (and Beneficiary's officers, directors, employees,
agents and representatives) and a clause providing that the policy is
primary and that any other insurance of Beneficiary with respect to the
matters covered by such policy shall be excess and non-contributing;
(v) shall, in the case of policies affording liability insurance
coverage, name Beneficiary (and Beneficiary's officers, directors,
employees, agents and representatives) as additional insureds by an
endorsement satisfactory to Beneficiary and contain cross-liability and
severability of interest clauses satisfactory to Beneficiary, and, in the
case of other policies, shall name Beneficiary as a loss payee and have
attached thereto a lender's loss payable endorsement, for the benefit of
Beneficiary, in form satisfactory to Beneficiary (Form 438 BFU, unless
otherwise specified by Beneficiary); and
(vi) shall contain a provision that, notwithstanding any contrary
agreement between Trustor (or any tenant of the Property, as applicable)
and insurance company, such policies will not be canceled, failed to be
renewed or materially amended (which term shall include any reduction in
the type, scope or limits of coverage) without at least thirty (30) days
prior written notice to Beneficiary.
(c) BLANKET POLICIES. If Beneficiary consents, Trustor may provide
any of the required insurance through blanket policies carried by Trustor and
covering more than one location, or by policies procured by a tenant or other
party holding under Trustor; provided, however, that the amount of the total
insurance allocated to the Real Property and available with respect to the
occurrences required to be insured against shall be such as to furnish
protection the equivalent of separate policies in the amounts herein required,
and provided further, that, in all other respects, any such policy or policies
shall comply with all of the other provisions of this Deed of Trust.
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(d) EVIDENCE OF INSURANCE. At Beneficiary's option, Trustor shall
furnish Beneficiary with a certified copy of all policies of insurance required
under this Section or with a certificate of insurance for each required policy
setting forth the coverage, the limits of liability, the deductibles, if any,
the name of the carrier, the policy number, and the period of coverage, which
certificates shall be executed by authorized officials of the companies issuing
such insurance, or by agents or attorneys-in-fact authorized to issue said
certificates (in which event each such certificate shall be accompanied by a
notarized affidavit, agency agreement or power of attorney evidencing the
authority of the signatory to issue such certificate on behalf of the insurer
named therein). Trustor shall furnish to Beneficiary annually, within ten days
after the date hereof, or more often if Beneficiary shall so request, a
certificate of Trustor specifying all insurance policies with respect to the
Property and all other policies required hereby then outstanding and in force,
and stating whether or not such insurance complies with the requirements of this
Section and, if it does not, the manner in which it does not comply. At least
thirty (30) days prior to the expiration of each required policy, Trustor shall
deliver to Beneficiary evidence satisfactory to Beneficiary of the payment of
premium and the renewal or replacement of such policy continuing insurance in
force as required by this Deed of Trust.
(e) PROCUREMENT BY BENEFICIARY. If Trustor fails to provide,
maintain, keep in force or deliver to Beneficiary the policies of insurance
required by this Deed of Trust, Beneficiary may (but shall have no obligation
to) procure such insurance, or single interest insurance for such risks covering
Beneficiary's interests, and Trustor will pay all premiums therefor promptly
upon demand by Beneficiary; and until such payment is made by Trustor, the
amount of all such premiums, together with interest thereon at an annual rate
equal to the rate specified in Section 2.4C of the Note Purchase Agreement (or
if such provision is hereafter replaced or renumbered, the equivalent section)
(the "AGREED RATE"), shall be secured by this Deed of Trust.
(f) RESERVE FUND. Upon request by Beneficiary following an Event of
Default (as defined in Section 23 hereof), Trustor shall pay to Beneficiary an
initial cash reserve in an amount adequate to pay all insurance premiums due
within the next succeeding twelve calendar months on all policies of insurance
required by this Deed of Trust (or such lesser amount as may then be specified
by Beneficiary), and shall thereafter deposit with Beneficiary each month,
commencing with the first month after such request by Beneficiary and continuing
until all sums secured hereby are paid in full or Beneficiary notifies Trustor
to cease making such deposits, an amount equal to one-twelfth of the aggregate
annual insurance premiums on all policies of insurance required by this Deed of
Trust, as reasonably estimated by Beneficiary. In such event Trustor further
agrees to cause all bills, statements or other documents relating to the
foregoing insurance premiums to be sent or mailed directly to Beneficiary. Upon
receipt of such bills, statements or other documents evidencing that a premium
for a required policy is then payable, and providing Trustor has deposited
sufficient funds with Beneficiary pursuant to this Section, Beneficiary shall
pay such amounts as may be due thereunder out of the funds so deposited with
Beneficiary. If at any time and for any reason the funds deposited with
Beneficiary are or will be insufficient to pay such amounts as may be then or
subsequently due, Beneficiary may notify Trustor and Trustor shall immediately
deposit an amount equal to such deficiency with Beneficiary. Beneficiary may
impound or reserve for future payment of premiums such portion of such payments
as Beneficiary may in its absolute discretion deem proper, applying the balance
upon any indebtedness or obligation secured hereby in such order as Beneficiary
may determine, notwithstanding that said indebtedness or the performance of said
obligation may not yet be due according to the terms thereof. Notwithstanding
the foregoing, nothing contained herein shall cause Beneficiary to be deemed a
trustee of said funds or to be obligated to pay any amounts in excess of the
amount of funds deposited with Beneficiary pursuant to this Section, nor shall
anything contained herein modify the obligation of Trustor to maintain and keep
in force at all times such insurance as is required by this Deed of Trust.
Beneficiary may commingle said reserve with its own funds and Trustor shall be
entitled to no interest thereon.
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(g) REPLACEMENT COST. Whenever Beneficiary requires insurance with
full replacement cost protection, such full replacement cost shall be determined
annually (except in the event of substantial changes, alterations or additions
to the Improvements or in the event of new construction undertaken by the
Trustor, in which event such full replacement cost shall be determined from time
to time as required to assure full replacement cost coverage). Such
determination of full replacement cost shall be made by written agreement of the
insurance carrier and Trustor, subject to the approval of Beneficiary. If they
cannot agree or the value shall not be approved by Beneficiary within thirty
(30) days after such request, such full replacement cost shall be determined by
an appraiser, architect or contractor who shall be acceptable to Beneficiary.
No omission on the part of Beneficiary to request any such determination shall
relieve Trustor of its obligations hereunder, and any such determination to the
contrary notwithstanding, Beneficiary may require Trustor to obtain additional
insurance as provided in this Section.
(h) SEPARATE INSURANCE. Trustor shall not take out separate insurance
concurrent in form or contributing in the event of loss with that required by
this Section to be furnished by Trustor unless Beneficiary is a named insured
therein, with loss payable as provided herein. Trustor shall immediately notify
Beneficiary of the taking out of any such separate insurance and shall cause the
original policies in respect thereof or certificates therefor to be delivered to
Beneficiary.
(i) COMPLIANCE WITH INSURANCE REQUIREMENTS. Trustor shall observe and
comply with the requirements of all policies of insurance required to be
maintained in accordance with this Deed of Trust and shall cause the
requirements of the companies writing such policies to be so performed and
satisfied that at all times companies of good standing satisfactory to
Beneficiary shall be willing to write and to continue such insurance.
Notwithstanding any approval, disapproval, acceptance or acquiescence by
Beneficiary with respect to such insurance, or Beneficiary's obtaining or
failure to obtain any insurance, Beneficiary shall incur no liability as to the
form or legal sufficiency of insurance contracts, the solvency of any insurer or
the payment of any loss, and Trustor hereby expressly assumes full
responsibility therefor.
(j) ASSIGNMENT OF POLICIES UPON FORECLOSURE. In the event of
foreclosure of this Deed of Trust or other transfer of title or assignment of
any of the Property in extinguishment, in whole or in part, of the debt secured
hereby, all right, title and interest of Trustor in and to all policies of
insurance required by this Section with respect to such Property and any
unearned premiums paid thereon shall, without further act, be assigned to and
shall inure to the benefit of and pass to the successor in interest to Trustor
or the purchaser or grantee of the Property, and Trustor hereby appoints
Beneficiary its lawful attorney-in-fact to execute an assignment thereof and any
other document necessary to effect such transfer.
(k) WAIVER OF SUBROGATION. Trustor waives any and all right to claim
or recover against Beneficiary, its directors, officers, employees, agents and
representatives, for loss of or damage to Trustor, the Property, any other
property of Trustor, or any property of others under Trustor's control, from any
cause insured against or required to be insured against by the provisions of
this Deed of Trust; provided, however, that this waiver of subrogation shall not
be effective with respect to any policy of insurance permitted or required by
this Deed of Trust if (i) such policy prohibits, or if coverage thereunder would
be reduced as a result of, such waiver of subrogation and (ii) Trustor is unable
to obtain from a carrier issuing such insurance a policy that, by special
endorsement or otherwise, permits such a waiver of subrogation.
(l) REQUIREMENTS SUPPLEMENTAL. The requirements of this Deed of Trust
with respect to insurance and maintenance of the Property shall be supplemental
to and not exclusive of the requirements of the Note Purchase Agreement and the
Security Agreement relating thereto.
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7. CASUALTIES; INSURANCE PROCEEDS.
(a) NOTICE OF CASUALTIES. Trustor shall give prompt written notice
thereof to Beneficiary after the happening of any material casualty to or in
connection with the Property or any part thereof, whether or not such casualty
is covered by insurance.
(b) PAYMENT OF PROCEEDS. All proceeds payable to Trustor in
connection with any casualty affecting all or any portion of the Property shall
be payable to Beneficiary. Trustor hereby authorizes and directs any affected
insurance company to make payment of such proceeds directly to Beneficiary. If
Trustor receives any proceeds of insurance resulting from a casualty which,
pursuant to this Deed of Trust, are to be paid to Beneficiary, Trustor shall
promptly pay over such proceeds to Beneficiary. Trustor shall not settle,
adjust or compromise any claims for loss, damage or destruction of the Property
or any part thereof under any policy or policies of insurance carried by Trustor
in connection with a loss without the prior written consent of Beneficiary to
such settlement, adjustment or compromise; and, after an Event of Default
hereunder, Beneficiary shall have the sole and exclusive right, and Trustor
hereby authorizes and empowers Beneficiary, to settle, adjust or compromise any
such claims.
(c) USE IN RESTORATION. In the event of any damage to or destruction
of the Property or any improvements not owned by Trustor but located on the Real
Property, and provided that (i) at the time of such damage or destruction or
thereafter, an Event of Default does not exist, (ii) the damage or destruction
does not occur within six (6) months prior to the maturity of the Notes or other
Secured Obligations, and (iii) application of insurance proceeds to restoration
of the Property (or such other improvements) will not impair Beneficiary's
security for the obligations secured hereby, insurance proceeds payable to
Trustor in connection with such damage or destruction shall be applied, first,
toward reimbursement of all of Beneficiary's reasonable costs and expenses of
recovering the proceeds, including reasonable attorneys' fees; then, to payment
of all sums advanced by Beneficiary to protect the Property or such other
improvements or the security of the Notes or other Secured Obligations; then, to
payment of installments of principal and interest then due and payable under the
Notes; then, to restoration of the Property (or such other improvements, as
applicable), upon such conditions as Beneficiary shall determine (it being
expressly understood and agreed that Beneficiary may condition disbursement of
such proceeds for restoration upon proof that an amount equal to the sum which
Beneficiary is requested to disburse has theretofore been paid by Trustor, or is
then due and payable, for materials theretofore installed or work theretofore
performed upon the Property and properly includable in the cost of repair,
reconstruction or restoration thereof; delivery to Beneficiary by Trustor of
detailed plans and specifications providing for restoration in accordance with
all applicable Legal Requirements of all governmental authorities having
jurisdiction over the Property, together with a detailed estimate of the cost of
the work and a schedule therefor and a construction contract satisfactory to
Beneficiary, with a contractor satisfactory to Beneficiary, for performance of
the work within the budgeted amount, and within the scheduled time for
completion; proof that the insurance required hereby is in force; proof that,
after repair or reconstruction, the Property (or such other improvements) will
be at least as valuable as it was (or they were) immediately before the damage
or destruction occurred; and proof that the insurance proceeds available for
repair or restoration are sufficient, in Beneficiary' s determination, to pay
for the total cost of repair or reconstruction, including all associated
development costs and interest projected to be payable on the Secured
Obligations until the repair or reconstruction is complete, or Trustor must
provide its own funds in an amount equal to the difference between the proceeds
available for repair or restoration and a reasonable estimate, made by Trustor
and found acceptable by Beneficiary, of the total cost of repair or
reconstruction); and, upon completion of the work of restoration and payment of
the cost thereof, any balance of such proceeds shall be applied to the
indebtedness secured hereby, in such order as Beneficiary, in its sole
discretion, shall determine, notwithstanding that said indebtedness or the
performance of said obligation may not be due according to the terms thereof;
and, if any then remains,
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it shall be paid over to Trustor. Notwithstanding anything to the contrary
stated above, any insurance proceeds received in connection with any insurance
policy providing coverage for tenant's improvements located on the Property
(including, without limitation, any insurance policy procured and maintained by
the tenant under the Wet 'N Wild Lease) shall be applied in accordance with the
requirements of such tenant's lease.
(d) APPLICATION BY BENEFICIARY. Except as otherwise provided in the
last sentence of subsection (c) immediately above, if (i) at the time of such
damage or destruction or thereafter, an Event of Default exists hereunder, or
(ii) the damage or destruction occurs within six (6) months prior to the
maturity of the Notes or other Secured Obligations, or (iii) application of
insurance proceeds to restoration will impair Beneficiary's security for the
obligations secured hereby, then Beneficiary shall have the option, in its sole
and absolute discretion, (1) to apply all or any portion of such proceeds that
are payable to Trustor to any indebtedness or other obligation secured hereby
and in such order as Beneficiary may determine, notwithstanding that said
indebtedness or the performance of said obligation may not be due according to
the terms thereof, or (2) to apply all or any portion of such proceeds to the
restoration of the Property, subject to such conditions as Beneficiary shall
determine, or (3) to deliver all or any portion such proceeds to Trustor or any
tenant of the Property, subject to such conditions as Beneficiary may determine.
(e) DUTY TO RESTORE. Except as otherwise provided hereinbelow, in the
event of any damage or destruction of the Property or any improvements located
on the Property but not owned by Trustor, Trustor shall restore and repair (or
cause to be restored and repaired) the Property and such other improvements
located on the Real Property (even though such improvements are not owned by
Trustor), and nothing in this Deed of Trust shall be deemed to excuse Trustor
from restoring, repairing and maintaining the Property and any such other
improvements located on the Real Property, as herein provided, regardless of
whether or not insurance proceeds are available for restoration, whether or not
any such proceeds are sufficient in amount, or whether or not the Property (or
such other improvements) can be restored to the same condition and character as
existed prior to such damage or destruction. Notwithstanding anything to the
contrary stated above, Trustor shall not be obligated to restore the
improvements currently located on the Property and owned by the tenant under the
Wet 'N Wild Lease (unless otherwise required by the Wet 'N Wild Lease); provided
--------
that, Trustor shall be obligated to demolish and remove all such partially
- ----
damaged or destroyed improvements from the Property and to leave the Property in
a buildable condition if such improvements are not restored.
8. TAXES AND IMPOSITIONS.
(a) PAYMENT BY TRUSTOR. Subject to subsection (d) below, Trustor
--------------
shall pay, or cause to be paid, at least ten (10) days prior to delinquency, all
real property taxes and assessments, general and special, and all other taxes
and assessments of any kind or nature whatsoever, including, without limitation,
non-governmental levies or assessments such as maintenance charges, owner
association dues or charges or fees, levies or charges resulting from covenants,
conditions or restrictions affecting the Property, which are assessed or imposed
upon the Property, or become due and payable, and which create, may create or
appear to create a lien upon the Property, or any part thereof, or upon any of
the Personal Property (all of which taxes, assessments and charges, together
with any and all other taxes, and charges of a similar kind or nature are
collectively referred to hereinafter as "IMPOSITIONS"); provided, however, that
if, by law, any such Imposition is payable, or may at the option of the taxpayer
be paid, in installments, Trustor may pay the same or cause it to be paid,
together with any accrued interest on the unpaid balance of such Imposition, in
installments as the same become due and before any fine, penalty, interest or
cost may be added thereto for the nonpayment of any such installment and
interest.
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(b) NEW IMPOSITIONS. If at any time after the date hereof there shall
be assessed or imposed (i) a tax or assessment on the Property in lieu of or in
addition to the Impositions payable by Trustor pursuant to Subsection (a) of
this Section, or (ii) a license fee, tax or assessment imposed on Beneficiary
and measured by or based in whole or in part upon the amount of the Notes or
other obligations secured hereby, then all such taxes, assessments or fees shall
be deemed to be included within the term "IMPOSITIONS" as defined in Subsection
(a) of this Section, and Trustor shall pay and discharge the same as herein
provided with respect to the payment of Impositions, if Trustor is permitted by
law to pay the same. If Trustor is prohibited by law from paying such
Impositions, then, at the option of Beneficiary, all obligations secured hereby,
together with all accrued interest thereon, shall immediately become due and
payable. Anything to the contrary herein notwithstanding, Trustor shall have no
obligation to pay any franchise, estate, inheritance, income, excess profits or
similar tax levied on Beneficiary or on the obligations secured hereby, nor
shall such taxes be deemed to be Impositions.
(c) PROOF OF PAYMENT. Subject to the provisions of Subsection (d) of
this Section, Trustor shall deliver to Beneficiary, within seven (7) days after
the date upon which any Imposition is due and payable by Trustor in accordance
with this Deed of Trust, official receipts of the appropriate taxing authority,
or other proof satisfactory to Beneficiary, evidencing the payment thereof.
(d) CONTEST OF ASSESSMENTS. Trustor shall have the right before any
delinquency occurs to contest or object to the amount or validity of any such
Imposition by appropriate legal proceedings, but this shall not be deemed or
construed in any way as relieving, modifying or extending Trustor's covenant to
pay any such Imposition at the time and in the manner provided in this Section
unless Trustor has given prior written notice to Beneficiary of Trustor's intent
so to contest or object to an Imposition, and unless (i) Trustor shall
demonstrate to Beneficiary's satisfaction that the legal proceedings shall
conclusively operate to prevent the sale of the Property, or any part thereof,
to satisfy such Imposition prior to final determination of such proceedings; or
(ii) Trustor shall furnish a good and sufficient bond or surety as requested by
and satisfactory to Beneficiary; or (iii) Trustor shall demonstrate to
Beneficiary's satisfaction that Trustor has provided a good and sufficient
undertaking as required or permitted by law to accomplish a stay of any such
sale.
(e) RESERVE FUND. Upon request by Beneficiary following an Event of
Default, Trustor shall pay to Beneficiary an initial cash reserve in an amount
adequate to pay all Impositions for the ensuing tax fiscal year (or such lesser
amount as may then be specified by Beneficiary), and shall thereafter deposit
with Beneficiary each month, commencing with the first month after such request
by Beneficiary and continuing until all sums secured hereby are paid in full or
Beneficiary gives notice to Trustor to cease making such deposits, an amount
equal to one-twelfth of the sum of the annual Impositions, as reasonably
estimated by Beneficiary. In such event, Trustor further agrees to cause all
bills, statements or other documents relating to Impositions to be sent or
mailed directly to Beneficiary. Upon receipt of such bills, statements or other
documents evidencing that Impositions are then payable, and providing Trustor
has deposited sufficient funds with Beneficiary pursuant to this Section,
Beneficiary shall pay such amounts as may be due thereunder out of the funds so
deposited with Beneficiary. If at any time and for any reason the funds
deposited with Beneficiary are or will be insufficient to pay such amounts as
may then or subsequently be due, Beneficiary may notify Trustor and upon such
notice Trustor shall immediately deposit an amount equal to such deficiency with
Beneficiary. Notwithstanding the foregoing, nothing contained herein shall
cause Beneficiary to be deemed a trustee of said funds or to be obligated to pay
any amounts in excess of the amount of funds deposited with Beneficiary pursuant
to this Section, nor shall anything contained herein modify the obligation of
Trustor to pay, or cause to be paid, all Impositions. Beneficiary may commingle
said reserve with its own funds and Trustor shall be entitled to no interest
thereon. Beneficiary may impound or reserve for future payment of Impositions
such portion of such payments as Beneficiary may deem proper, applying the
balance upon any indebtedness or obligation secured hereby in such order as
Beneficiary may determine,
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notwithstanding that said indebtedness or the performance of said obligation may
not yet be due according to the terms thereof. Should Trustor fail to deposit
with Beneficiary (exclusive of that portion of said payments which has been
applied by Beneficiary upon any indebtedness or obligation secured hereby) sums
sufficient to fully pay such Impositions at least thirty (30) days before
delinquency thereof, Beneficiary may, at Beneficiary's election, but without any
obligation so to do, advance any amounts required to make up the deficiency,
which advances, if any, together with interest thereon at an annual rate equal
to the Agreed Rate, shall be secured hereby and shall be repayable to
Beneficiary upon demand; or, at the option of Beneficiary, Beneficiary may,
without making any advance whatever, apply any sums held by it upon any
indebtedness or obligation secured hereby, in such order as Beneficiary may
determine, notwithstanding that said indebtedness or the performance of said
obligation may not yet be due according to the terms thereof.
(f) JOINT ASSESSMENT. Trustor shall not initiate, and, to the maximum
extent permitted by law, shall not suffer or permit the joint assessment of any
real and personal property which may constitute all or a portion of the Property
or any other procedure whereby the lien of real property taxes and the lien of
personal property taxes shall be assessed, levied or charged to the Property as
a single lien.
(g) TAX SERVICE. Trustor shall cause to be furnished to Beneficiary a
tax reporting service, covering the Property, of the type and duration, and with
a company, satisfactory to Beneficiary.
9. LIENS. Trustor shall pay and promptly discharge, at Trustor's
cost and expense, all liens, encumbrances and charges upon the Property, or any
part thereof or interest therein, other than Permitted Exceptions; provided that
Trustor shall have the right to contest in good faith the validity of any such
lien, encumbrance or charge in accordance with the provisions of the Note
Purchase Agreement. If Trustor shall fail to remove and discharge any such
lien, encumbrance or charge, then, in addition to any other right or remedy of
Beneficiary, Beneficiary may, but shall not be obligated to, discharge the same,
either by paying the amount claimed to be due, or by procuring the discharge of
such lien, encumbrance or charge by depositing in a court a bond or the amount
claimed or otherwise giving security for such claim, or by procuring such
discharge in such manner as is or may be prescribed by law. Trustor shall,
immediately upon demand therefor by Beneficiary, pay to Beneficiary an amount
equal to all costs and expenses incurred by Beneficiary in connection with the
exercise by Beneficiary of the foregoing right to discharge any such lien,
encumbrance or charge, together with interest thereon from the date of such
expenditure at an annual rate equal to the Agreed Rate.
10. EASEMENTS AND LEASEHOLDS. If a leasehold estate or an easement
or other incorporeal right constitutes a portion of the Real Property or if all
or any portion of the Real Property or Improvements is leased or licensed by
Trustor to another person, Trustor agrees not to amend, change, terminate or
modify such lease (including, without limitation, the Wet 'N Wild Lease),
license, leasehold estate, easement or other right or interest, or any right
thereto or interest therein, without the prior written consent of Beneficiary,
which consent shall not be unreasonably withheld or delayed. Consent to one
amendment, change, agreement or modification shall not be deemed to be a waiver
of the right to require consent to other, future or successive amendments,
changes, agreements or modifications. Trustor agrees to perform all obligations
and agreements with respect to said lease (including, without limitation, the
Wet 'N Wild Lease), license, leasehold, easement or other right or interest and
shall not take any action or omit to take any action which would effect or
permit the termination thereof. Trustor agrees to promptly notify Beneficiary
in writing with respect to any default or alleged default by any party thereto
and to deliver to Beneficiary copies of all notices, demands, complaints or
other communications received or given by Trustor with respect to any such
default or alleged default. Beneficiary shall have the option to cure any such
default and to perform any or all of
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Trustor's obligations thereunder or with respect thereto. All sums expended by
Beneficiary in curing any such default shall be secured hereby and shall be
immediately due and payable without demand or notice and shall bear interest
from the date of expenditure at an annual rate equal to the Agreed Rate.
11. FURTHER ACTS. Trustor shall do and perform all acts necessary to
keep valid and effective the charges and lien hereof, to carry into effect its
object and purposes, to protect the lawful owner(s) of the Notes and other
obligations secured hereby; shall execute and deliver to Beneficiary at any
time, upon request of Beneficiary, all other and further instruments in writing
necessary to vest in and secure to Trustee each and every part of the Real
Property and to Beneficiary the Rents therefrom and rights and interest of
Beneficiary therein or with respect thereto; and, upon request by the
Beneficiary, shall supply evidence of fulfillment of each of the covenants
herein contained concerning which a request for such evidence has been made.
12. ASSIGNMENT OF RENTS.
(a) Notwithstanding any language contained herein, or in any other
document, to the contrary, Trustor hereby irrevocably and absolutely assigns and
transfers to Beneficiary, without having to first take possession of the
Property, all Rents, including all present and future Leases (including, without
limitation, the Wet 'N Wild Lease) and other rental agreements, reserving unto
Trustor a license to collect such Rents prior to the occurrence of any Event of
Default. Subsequent to the occurrence of an Event of Default, such license
reserved to Trustor shall be immediately revoked without further demand or
notice, and any Rents, including those past due, unpaid or undetermined, may be
collected by Beneficiary or its agent, and any amount so collected shall be
applied, less costs and expenses of operation and collection, including
attorneys' fees, to any indebtedness and/or obligations secured hereby, in such
order as Beneficiary shall determine. The collection of such Rents, and the
application thereof as aforesaid, shall not cure or constitute a waiver of any
default or notice of default hereunder or invalidate any act done pursuant to
such notice. Trustor and Beneficiary intend that this assignment shall be a
present, absolute and unconditional assignment, not an assignment for additional
security only, and shall, immediately upon the execution hereof, subject to the
license granted above, give Beneficiary, and its agent, the right to collect the
Rents and to apply them as aforesaid. Nothing contained herein, nor any
collection of Rents by Beneficiary, or its agent or a receiver, shall be
construed to make Beneficiary (i) a "Mortgagee-in-Possession" of the Property so
long as Beneficiary has not itself entered into actual possession of the
Property; (ii) responsible for performing any of the obligations of the lessor
under any Lease; (iii) responsible for any waste committed by lessees or any
other parties, any dangerous or defective condition of the Property, or any
negligence in the management, upkeep, repair or control of the Property; or (iv)
liable in any manner for the Property or the use, occupancy, enjoyment or
operation of all or any part of it.
(b) Trustor hereby represents to Beneficiary that, except for
Permitted Exceptions, there is no assignment or pledge of any Leases (including,
without limitation, the Wet 'N Wild Lease) of, or Rents from, the Property now
in effect, and covenants that, until the Notes are fully paid and the other
Secured Obligations are fully satisfied, Trustor will not make any such
assignment or pledge to anyone other than Beneficiary nor will it accept any
periodic payments which are to be made pursuant to such Leases or Rents more
than thirty (30) days in advance of the date on which such payments are due.
13. ACTIONS AFFECTING PROPERTY. Trustor shall give Beneficiary and
Trustee prompt written notice of the assertion of any claim with respect to, or
the filing of any action or proceeding affecting or purporting to affect, the
Property, or title thereto or any right of possession thereof, or this Deed of
Trust or the security hereof or the rights or powers of Beneficiary or Trustee
hereunder. Trustor shall appear in and contest any such action or proceeding at
Trustor's sole expense; and shall
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pay all costs and expenses, including cost of evidence of title and attorneys'
fees, in any such action or proceeding in which Beneficiary or Trustee may
appear.
14. EMINENT DOMAIN. If any proceeding or action be commenced for the
taking of the Property, or any part thereof or interest therein, for public or
quasi-public use under the power of eminent domain, condemnation or otherwise,
or if the same be taken or damaged by reason of any public improvement or
condemnation proceeding, or in any other manner, or should Trustor receive any
notice or other information regarding such proceeding, action, taking or damage
(including, without limitation, a proposal to purchase the Property or some
portion thereof in lieu of condemnation), Trustor shall give prompt written
notice thereof to Beneficiary. Beneficiary shall be entitled, at its option,
without regard to the adequacy of its security, to investigate and negotiate
with the Trustor and the condemnor concerning the proposed taking, to commence,
appear in and prosecute in its own name, with Trustor, any such action or
proceeding, and, to join Trustor in making any compromise or settlement in
connection with such taking or damage. Trustor shall not compromise or settle
any such action or proceeding or agree to any sale in lieu of condemnation
without the prior written consent of Beneficiary. All compensation, awards,
damages, rights of action and proceeds awarded to Trustor by reason of any such
taking, transfer or damage (the "AWARD") are hereby assigned to Beneficiary and
Trustor agrees to execute such further assignments of the Award as Beneficiary
or Trustee may require. After deducting therefrom all costs and expenses
(regardless of the particular nature thereof and whether incurred with or
without suit), including attorneys' fees, incurred by it in connection with any
such negotiations, action or proceeding (whether or not prosecuted to judgment),
Beneficiary shall, if (i) an Event of Default does not then exist hereunder,
(ii) the taking, transfer or damage does not occur within six (6) months prior
to the maturity of the Notes or other Secured Obligations, and (iii) application
of the Award to restoration of the Property will not impair Beneficiary's
security for the obligations secured hereby, apply the Award to the restoration
of the Property, subject to such conditions as Beneficiary shall determine (it
being expressly understood and agreed that Beneficiary may condition
disbursement of such proceeds for restoration upon proof that an amount equal to
the sum which Beneficiary is requested to disburse has theretofore been paid by
Trustor without reimbursement therefor, or is then due and payable, for
materials theretofore installed or work theretofore performed upon the Property
and properly includable in the cost of repair, reconstruction or restoration
thereof). If, at the time of receipt by Beneficiary of such proceeds, (i) an
Event of Default then exists hereunder, (ii) the taking, transfer or damage
occurs within six (6) months prior to the maturity of the Notes or other Secured
Obligations, or (iii) application of the Award to restoration will impair
Beneficiary's security for the obligations secured hereby, Beneficiary shall
have the option, in its sole and absolute discretion, (1) to apply all or any
portion of the Award upon any indebtedness or other obligation secured hereby
and in such order as Beneficiary may determine, notwithstanding that said
indebtedness or the performance of said obligation may not be due according to
the terms thereof, or (2) to apply all or any portion of the Award to the
restoration of the Property, subject to such conditions as Beneficiary may
determine, or (3) to deliver all or any portion of the Award, after such
deductions, to Trustor, subject to such conditions as Beneficiary may determine
(and, if the Award is not sufficient to satisfy the Secured Obligations in full,
Trustor shall immediately pay any remaining balance, together with all accrued
interest thereon). Nothing herein contained shall be deemed to excuse Trustor
from restoring, repairing and maintaining the Property, as herein provided,
regardless of whether or not the Award is available for restoration, whether or
not any such Award is sufficient in amount, or whether or not the Property can
be restored to the same condition and character as existed prior to such damage
or partial taking. Trustor hereby specifically, unconditionally and irrevocably
waives all rights of a property owner under all laws, including NRS 37.115, as
amended or recodified from time to time, which provide for allocation of
condemnation proceeds between a property owner and a lienholder to the fullest
extent permitted by law.
15. DUE ON SALE. Except as otherwise permitted in the Note Purchase
Agreement, or this Deed of Trust, if the Trustor shall sell or convey, or create
or permit to exist any mortgage,
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pledge, security interest or other encumbrance on, or in any other manner
alienate or otherwise "transfer" the Real Property hereby encumbered or any part
thereof or any interest therein, or shall enter into any agreement for the same,
or shall be divested of its title in any manner or way, whether voluntary or
involuntary or by merger, without the written consent of Beneficiary being first
had and obtained, any indebtedness or obligation secured hereby, irrespective of
the maturity dates expressed in the Notes or any other notes evidencing the
same, at the option of Beneficiary, and without demand or notice, shall
immediately become due and payable. Consent to one such transaction shall not
be deemed to be a waiver of the right to require consent to future or successive
transactions. Beneficiary may grant or deny such consent in its sole discretion
and, if consent should be given, any such transfer shall be subject to this Deed
of Trust, and any such transferee shall assume all obligations hereunder and
agree to be bound by all provisions contained herein. Such assumption shall
not, however, release Trustor or any maker or guarantor of any Secured
Obligation from any liability with respect thereto without the prior written
consent of Beneficiary. As used herein, "TRANSFER" includes the direct or
indirect sale, agreement to sell, transfer, conveyance, pledge, collateral
assignment or hypothecation of the Real Property, or any portion thereof or
interest therein, whether voluntary, involuntary, by operation of law or
otherwise, the execution of any installment land sale contract or similar
instrument affecting all or a portion of the Real Property, or the lease of all
or substantially all of the Property. The term "TRANSFER" shall also include
the direct or indirect transfer, assignment, hypothecation or conveyance of
legal or beneficial ownership of Trustor or any corporate shares of Trustor.
16. PARTIAL OR LATE PAYMENTS. By accepting payment of any
indebtedness secured hereby after its due date, Beneficiary does not waive its
right either to require prompt payment, when due, of all other indebtedness so
secured or to declare default, as herein provided, for failure to so pay.
17. RECONVEYANCE BY TRUSTEE. Upon receipt of written request from
Beneficiary reciting that all sums secured hereby have been paid and upon
surrender of this Deed of Trust and the Notes secured hereby to Trustee for
cancellation and retention, or such other disposition as Trustee, in its sole
discretion, may choose, and upon payment of its fees, the Trustee shall
reconvey, without warranty or recourse, the Property then held hereunder.
Beneficiary will give such written request and will surrender the Deed of Trust
and Notes within a reasonable time after it and all of the Holders receive
payment in full of all sums secured hereby. The recitals in such reconveyance
of any matters of fact shall be conclusive proof of the truth thereof. The
grantee in such reconveyance may be described in general terms as "the person or
persons legally entitled thereto".
18. RIGHT OF BENEFICIARY AND TRUSTEE TO APPEAR. If, during the
existence of the trust created hereby, there be commenced or pending any suit or
action materially and adversely affecting the Property, or any part thereof, or
the title thereto, or if any adverse claim for or against the Property, or any
part thereof, be made or asserted, the Trustee or Beneficiary may appear or
intervene in the suit or action and retain counsel therein and, unless such suit
or action is being diligently contested in good faith by Trustor and Trustor
shall have established and maintained adequate reserves with Beneficiary for the
full payment and satisfaction of such suit or action if determined adversely to
Trustor, may defend same, or otherwise take such action therein as the Trustee
or Beneficiary may be advised and may, after providing Trustor with written
notice, pay and expend such sums of money as the Trustee or Beneficiary may deem
to be necessary and Trustor shall pay all reasonable costs and expenses of
Trustee and Beneficiary incurred in connection therewith.
19. PERFORMANCE BY TRUSTEE OR BENEFICIARY. If Trustor fails to make
any payment or perform any act as and in the manner provided in any of the Basic
Documents and such failure becomes an "Event of Default" thereunder, then the
Trustee or Beneficiary, at the election of either of them and without any
obligation to do so, after the giving of reasonable notice to the Trustor, or
any successor in interest of the Trustor, or any of them and without releasing
Trustor from any obligation
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hereunder, may make such payment or perform such act and incur any liability, or
expend whatever amounts, in its absolute discretion, it may deem necessary
therefor. In connection therewith (without limiting their general and other
powers, whether conferred herein, in another Basic Document or by law),
Beneficiary and Trustee, and each of them, shall have and are hereby given the
right, but not the obligation, (i) to enter upon and take possession of the
Property; (ii) to make additions, alterations, repairs and improvements to the
Property which they or either of them may consider necessary or proper to keep
the Property in good condition and repair; (iii) to appear and participate in
any action or proceeding affecting or which may affect the security hereof or
the rights or powers of Beneficiary or Trustee; (iv) to pay, purchase, contest
or compromise any encumbrance, claim, charge, lien or debt which in the judgment
of either may affect or appears to affect the security of this Deed of Trust or
to be prior or superior hereto; and (v) in exercising such powers, to pay
necessary expenses, including employment of counsel and other necessary or
desirable consultants. All sums incurred or expended by the Trustee or
Beneficiary, under the terms hereof (including, without limiting the generality
of the foregoing, costs of evidence of title, court costs, appraisals, surveys,
and receiver's, Trustee's and attorneys' fees, costs and expenses (including,
without limitation, the fees and expenses of attorneys for Trustee), whether or
not an action is actually commenced in connection therewith), shall become due
and payable by the Trustor to the Trustee on the next interest or payment date
under the Notes secured hereby and shall bear interest until paid at an annual
percentage rate equal to the Agreed Rate. In no event shall the payment or
performance of any obligation by Trustee or Beneficiary be construed as a waiver
of the default occasioned by Trustor's failure to make such payment or payments
or to perform such obligation or obligations.
20. INSPECTIONS. Upon reasonable advance written notice,
Beneficiary, or its agents, representatives or workers, are authorized to enter
at any reasonable time upon or in any part of the Property for the purpose of
inspecting the same and for the purpose of performing any of the acts it is
authorized to perform hereunder or under the terms of any of the Basic
Documents; provided that, Beneficiary, its agents, representatives and workers
-------- ----
shall not unreasonably interfere with the Trustor's or its tenants' operations
on the Property.
21. INVALIDITY OF LIEN. If the lien of this Deed of Trust is invalid
or unenforceable as to any part of the Indebtedness (as defined in the Note
Purchase Agreement), or if the lien is invalid or unenforceable as to any part
of the Property, the unsecured or partially secured portion of the Indebtedness
shall be completely paid prior to the payment of the remaining and secured or
partially secured portion of the Indebtedness, and all payments made on the
Indebtedness, whether voluntary or under foreclosure or other enforcement action
or procedure, shall be considered to have been first paid on and applied to the
full payment of that portion of the Indebtedness which is not secured or is not
fully secured by the lien of this Deed of Trust.
22. SUBROGATION. To the extent that proceeds of the Notes or other
sums advanced by Beneficiary are used to pay any outstanding lien, charge or
prior encumbrance against the Property, such proceeds shall be deemed to have
been advanced by Beneficiary at Trustor's request and Beneficiary shall be
subrogated to any and all rights and liens held by any owner or holder of such
outstanding liens, charges and prior encumbrances, regardless of whether said
liens, charges or encumbrances are released.
23. EVENTS OF DEFAULT. Trustor will be in default under this Deed of
Trust upon the occurrence of any one or more of the following events (some or
all collectively, "EVENTS OF DEFAULT"; any one singly, an "EVENT OF DEFAULT"):
(a) FAILURE TO PAY. Any installment of principal of any Note is
not paid when due, whether at stated maturity, by acceleration, by notice
of voluntary prepayment, by
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mandatory prepayment or otherwise; or any installment of interest or any
other amounts due and owing under the Note Purchase Agreement, this Deed of
Trust or any other Basic Document, or any other amount the payment of which
is secured hereby, is not paid within fifteen (15) days after the date when
due; or
(b) OTHER BREACHES HEREOF. A breach by Trustor of any
representation, warranty or covenant in this Deed of Trust which is not
cured within thirty (30) days after the earlier of (i) an officer of
Company or SGC (its parent) becoming aware of such default, and (ii)
receipt by Company of notice from Trustee, Beneficiary or any Holder of
such default;
(c) DEFAULTS UNDER OTHER BASIC DOCUMENTS. The occurrence under
the Note Purchase Agreement or any of the other Basic Documents of an
"Event of Default" (as defined therein); or
(d) Trustor, or any other "borrower" (as that term is defined in
NRS 106.310, as amended or recodified from time to time) who may send a
notice pursuant to NRS 106.380(1), as amended or recodified from time to
time, with respect to this Deed of Trust: (i) delivers, sends by mail or
otherwise gives, or purports to deliver, send by mail or otherwise give, to
Beneficiary or any Holder (A) any notice of an election to terminate the
operation of this Deed of Trust as security for any Secured Obligation
(including, without limitation, any obligation to repay any "future
advance" (as defined in NRS 106.320, as amended or recodified from time to
time) of "principal" (as defined in NRS 106.345, as amended or recodified
from time to time)), or (B) any other notice pursuant to NRS 106.380(1), as
amended or recodified from time to time; (ii) records a statement pursuant
to NRS 106.380(3), as amended or recodified from time to time; or (iii)
causes this Deed of Trust, any Secured Obligation, Beneficiary or any
Holder to be subject to NRS 106.380(2), 106(3) or 106.400, as amended or
recodified from time to time.
24. REMEDIES. At any time after an Event of Default, Beneficiary and
Trustee will be entitled to invoke any and all of the following rights and
remedies, all of which will be cumulative, and the exercise of any one or more
of which shall not constitute an election of remedies:
(a) ACCELERATION. Beneficiary may declare any or all of the
Secured Obligations to be due and payable immediately, without presentment,
demand, protest or notice of any kind.
(b) RECEIVER. Subject to applicable Gaming Laws, Beneficiary may
apply to any court of competent jurisdiction for, and obtain appointment
of, a receiver for the Property or any part thereof, without notice to
Trustor or anyone claiming under Trustor, and without regard to the then
value of the Property or the adequacy of any security for the Secured
Obligations, and Trustor hereby irrevocably consents to such appointment
and waives notice of any application therefor to the fullest extent
permitted by law. Any such receiver or receivers shall have all the usual
powers and duties of receivers in like or similar cases and all the powers
and duties of Beneficiary in case of entry as provided herein and in the
Note Purchase Agreement and shall continue as such and exercise all such
powers until the later of (i) the date of confirmation of sale of all of
the Property; (ii) the disbursement of all proceeds of the Property
collected by such receiver and the payment of all expenses incurred in
connection therewith; or (iii) the termination of such receivership with
the consent of Beneficiary or pursuant to an order of a court of competent
jurisdiction.
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(c) ENTRY. Beneficiary, in person, by agent or by court-
appointed receiver, may enter, take possession of, manage and operate all
or any part of the Property, subject to applicable Gaming Laws, and may
also do any and all other things in connection with those actions that
Beneficiary may, in its sole discretion, consider necessary and appropriate
to protect the security of this Deed of Trust. Such other things may
include, among other things, any of the following: taking and possessing
all of Trustor's or the then owner's books and records; entering into,
enforcing, modifying, or canceling Leases (including the Wet 'N Wild Lease)
on such terms and conditions as Beneficiary may consider proper; obtaining
and evicting tenants; fixing or modifying Rents; collecting and receiving
any payment of money owing to Trustor; completing any construction; and
contracting for and making repairs and alterations. If Beneficiary so
requests, Trustor shall assemble all of the Property that has been removed
from the Real Property and make all of it available to Beneficiary at the
site of the Real Property. Trustor hereby irrevocably constitutes and
appoints Beneficiary as Trustor's attorney-in-fact to perform such acts and
execute such documents as Beneficiary in its sole discretion may consider
to be appropriate in connection with taking these measures, including
endorsement of Trustor's name on any instruments. Regardless of any
provision of this Deed of Trust or the Note Purchase Agreement, Beneficiary
shall not be considered to have accepted any property other than cash or
immediately available funds in satisfaction of any obligation of Trustor to
Beneficiary, unless Beneficiary has given express written notice of
Beneficiary's election of that remedy in accordance with the Nevada Uniform
Commercial Code, as it may be amended or recodified from time to time.
(d) CURE; PROTECTION OF SECURITY. Either Beneficiary or Trustee
may cure any breach or default of Trustor, and if it chooses to do so in
connection with any such cure, subject to applicable Gaming Laws,
Beneficiary or Trustee may also enter the Property and, whether or not
Beneficiary or Trustee enter the Property, do any and all other things
which it, in its sole discretion, may consider necessary and appropriate to
protect the security of this Deed of Trust, including, without limitation,
the right to complete any Improvements under construction thereon. Such
other things may include: appearing in and/or defending any action or
proceeding which purports to affect the security of, or the rights or
powers of Beneficiary or Trustee under, this Deed of Trust; paying,
purchasing, contesting or compromising any encumbrance, charge, lien or
claim of lien which in Beneficiary's or Trustee's sole judgment is or may
be senior in priority to this Deed of Trust, such judgment of Beneficiary
or Trustee to be conclusive as among the parties to this Deed of Trust;
obtaining insurance and/or paying any premiums or charges for insurance
required to be carried under this Deed of Trust; otherwise caring for and
protecting any and all of the Property; and employing counsel, accountants,
contractors and other appropriate persons to assist Beneficiary or Trustee.
Beneficiary and Trustee may take any of the actions permitted under this
Subsection either with or without giving notice to any person.
(e) UNIFORM COMMERCIAL CODE REMEDIES. With respect to Personal
Property, Beneficiary may exercise any or all of the remedies granted to a
secured party under NRS Article 104.9101 et seq. (the Nevada enactment of
the Uniform Commercial Code), together with any and all other rights and
remedies provided in the Security Agreement.
(f) JUDICIAL ACTION. Beneficiary may bring an action in any
court of competent jurisdiction to foreclose this Deed of Trust or to
obtain specific enforcement of any of the covenants or agreements of this
Deed of Trust or for any other remedy provided herein, in the Note Purchase
Agreement, in any Basic Document or otherwise provided by law or in equity.
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<PAGE>
(g) POWER OF SALE. Under the power of sale herein granted,
Beneficiary shall have the discretionary right to cause some or all of the
Property, including any Property which constitutes Personal Property, to be
sold or otherwise disposed of in any combination and in any manner
permitted by applicable law.
(i) SALES OF PERSONAL PROPERTY.
(A) For purposes of the power of sale herein granted,
Beneficiary may elect to treat as Personal Property any Property which
is intangible or which can be severed from the Land or Improvements
without causing structural damage. If Beneficiary chooses to do so,
Beneficiary may dispose of any Personal Property separately from the
sale of real property, in any manner permitted by or under the NRS,
including any public or private sale, or in any manner permitted by
any other applicable law or the Security Agreement.
(B) The following provision shall apply in the absence of
any specific statutory requirement which permits or requires a
different notice period: In connection with any sale or other
disposition of such Property, Trustor agrees that the following
procedures constitute a commercially reasonable sale: Beneficiary
shall mail written notice of the sale to Trustor not later than ten
(10) days prior to such sale. Upon receipt of any written request,
Beneficiary will, to the extent reasonably practicable, make the
Property available to any bona fide prospective purchaser for
inspection during reasonable business hours prior to the sale.
Notwithstanding any provision to the contrary, Beneficiary shall be
under no obligation to consummate a sale if, in its judgment, none of
the offers received by it equals the fair value of the Property
offered for sale. The foregoing procedures do not constitute the only
procedures that may be commercially reasonable.
(ii) TRUSTEE'S SALES OF REAL PROPERTY OR MIXED COLLATERAL.
(A) Beneficiary may choose to dispose of some or all of the
Property which consists solely of real property in any manner then
permitted by applicable law. In its discretion, Beneficiary may also
or alternatively choose to dispose of some or all of the Property, in
any combination consisting of both real and personal property,
together in one sale to be held in accordance with the law and
procedures applicable to real property. Trustor agrees that any sale
of personal property together with real property constitutes a
commercially reasonable sale of the personal property. For purposes
of this power of sale, either a sale of real property alone, or a sale
of both real and personal property together in accordance with law,
will sometimes be referred to as a "TRUSTEE'S SALE."
(B) Before any Trustee's Sale, Beneficiary or Trustee shall
give and record such notice of default and election to sell as may
then be required by law. When all time periods then legally mandated
have expired, and after such notice of sale as may then be legally
required has been given, Trustee shall sell the property being sold at
a public auction to be held at the time and place specified in the
notice of sale. Neither Trustee nor Beneficiary shall have any
obligation to make demand on Trustor before any Trustee's Sale. From
time to time, in accordance with then applicable law, Trustee may, and
in any event at Beneficiary's request shall, postpone any Trustee's
sale by
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<PAGE>
public announcement at the time and place noticed for that sale, or
may, in its discretion, give a new notice of sale.
(C) At any Trustee's Sale, Trustee shall sell to the highest
bidder at public auction for cash in lawful money of the United
States. Trustee shall execute and deliver to the purchaser(s) a deed
or deeds conveying the property being sold without any covenant or
warranty whatsoever, express or implied. The recitals in any such
deed of any matters or facts, including any facts bearing upon the
regularity or validity of any Trustee's Sale, shall be conclusive
proof of their truthfulness. Any such deed shall be conclusive
against all persons as to the facts recited in it.
(h) SINGLE OR MULTIPLE FORECLOSURE SALES. If the Property at the
time of sale or other disposition consists of more than one lot, parcel or
item of property, Beneficiary may:
(i) Designate the order in which the lots, parcels or items
shall be sold or disposed of or offered for sale or disposition; and
(ii) Elect to dispose of the lots, parcels or items through
a single consolidated sale or disposition to be held or made under the
power of sale herein granted, or in connection with judicial
proceedings, or by virtue of a judgment and decree of foreclosure and
sale; or through two or more such sales or dispositions; or in any
other manner that Beneficiary may deem to be in its best interests
(any such sale or disposition, a "FORECLOSURE SALE;" any two or more,
"FORECLOSURE SALES").
If Beneficiary chooses to have more than one Foreclosure Sale, Beneficiary
at its option may cause the Foreclosure Sales to be held simultaneously or
successively, on the same day, or on such different days and at such
different times and in such order as Beneficiary may deem to be in its best
interests. No Foreclosure Sale shall terminate or affect the liens of this
Deed of Trust on any part of the Property which has not been sold, until
all of the Secured Obligations have been paid in full.
25. COSTS OF ENFORCEMENT. If an installment of principal or interest
on the Notes is not paid when due or if any other Event of Default occurs,
Beneficiary and Trustee, and each of them, may employ an attorney or attorneys
to protect their rights hereunder. Trustor promises to pay to Beneficiary, on
demand, the fees and expenses of such attorneys and all other costs of enforcing
the obligations secured hereby, including but not limited to, recording fees,
the expense of a Trustee's Sale Guarantee, Trustee's fees and expenses,
receivers' fees and expenses, and all other expenses, of whatever kind or
nature, incurred by Beneficiary and Trustee, and each of them, in connection
with the enforcement of the obligations secured hereby, whether or not such
enforcement includes the filing of a lawsuit. Until paid, such sums shall be
secured hereby and shall bear interest, from date of expenditure, at an annual
rate equal to the Agreed Rate.
26. REMEDIES CUMULATIVE AND NOT EXCLUSIVE. Trustee and Beneficiary,
and each of them, shall be entitled to enforce payment and performance of any
indebtedness or obligations secured hereby and to exercise all rights and powers
under this Deed of Trust or under any Basic Document or other agreement or any
laws now or hereafter in force, notwithstanding some or all of the said
indebtedness and obligations secured hereby may now or hereafter be otherwise
secured, whether by mortgage, deed of trust, pledge, lien, assignment or
otherwise. Neither the acceptance of this Deed of Trust nor its enforcement
whether by court action or pursuant to the power of sale or other powers herein
contained, shall prejudice or in any manner affect Trustee's or Beneficiary's
right to realize upon
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or enforce any other security now or hereafter held by Trustee or Beneficiary,
it being agreed that Trustee and Beneficiary, and each of them, shall be
entitled to enforce this Deed of Trust and any other security now or hereafter
held by Beneficiary or Trustee in such order and manner as they or either of
them may in their absolute discretion determine. No remedy herein conferred
upon or reserved to Trustee or Beneficiary is intended to be exclusive of any
other remedy herein or by law provided or permitted, but each shall be
cumulative and shall be in addition to every other remedy given hereunder or now
or hereafter existing at law or in equity or by statute. Every power or remedy
given by any of the Basic Documents to Trustee or Beneficiary or to which either
of them may be otherwise entitled, may be exercised, concurrently or
independently, from time to time and as often as may be deemed expedient by
Trustee or Beneficiary and either of them may pursue inconsistent remedies.
27. CREDIT BIDS. At any Foreclosure Sale, any person, including
Trustor, Trustee or Beneficiary, may bid for and acquire the Property or any
part thereof to the extent permitted by then applicable law. Instead of paying
cash for such property, Beneficiary may settle therefor by crediting such
portion of the following obligations against the sales price of the property as
is necessary to equal such price:
(a) First, the portion of the Secured Obligations attributable to
the expenses of sale, costs of any action and any other sums for which
Trustor is obligated to pay or reimburse Beneficiary or Trustee hereunder
or under any other Basic Document; and
(b) Second, any of the other Secured Obligations, in any order
and proportion as Beneficiary, in its sole discretion, may elect.
28. APPLICATION OF FORECLOSURE SALE PROCEEDS. Beneficiary and
Trustee shall apply the proceeds of any Foreclosure Sale in the following
manner:
(a) First, to pay the portion of the Secured Obligations
attributable to the expenses of sale, costs of any action and any other
sums for which Trustor is obligated to reimburse Beneficiary or Trustee
hereunder or under any other Basic Document;
(b) Second, to pay the portion of the Secured Obligations
attributable to any sums expended or advanced by Beneficiary or Trustee
under the terms of this Deed of Trust which then remain unpaid;
(c) Third, to pay any and all other Secured Obligations, in any
order and proportion as Beneficiary, in its sole discretion, may elect; and
(d) Fourth, the remainder, if any, shall be remitted to the
person or persons entitled to it.
29. APPLICATION OF RENTS AND OTHER SUMS. Beneficiary shall apply any
and all Rents collected by it, and any and all sums, other than proceeds of a
Foreclosure Sale, which Beneficiary may receive or collect, in the following
manner:
(a) First, to pay the portion of the Secured Obligations
attributable to the costs and expenses of operation and collection that may
be incurred by Trustee, Beneficiary or any receiver;
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(b) Second, to pay any and all other Secured Obligations in any
order and proportion as Beneficiary, in its sole discretion, may elect; and
(c) Third, the remainder, if any, shall be remitted to the person
or persons entitled to it.
Beneficiary shall have no liability for any funds which it does not actually
receive.
30. INCORPORATION OF CERTAIN NEVADA COVENANTS. The following
covenants, Nos. 1, 3, 4 (at the Agreed Rate), 6, 7 (reasonable), 8 and 9 of NRS
107.030, where not in conflict with the provisions of the Basic Documents, are
hereby adopted and made a part of this Deed of Trust. Upon any Event of Default
by Trustor hereunder, Beneficiary may (a) declare all sums secured immediately
due and payable without demand or notice or (b) have a receiver appointed as a
matter of right without regard to the sufficiency of said property or any other
security or guaranty and without any showing as required by NRS (S)107.100. All
remedies provided in this Deed of Trust are distinct and cumulative to any other
right or remedy under this Deed of Trust or afforded by law or equity and may be
exercised concurrently, independently or successively. The sale of said
property conducted pursuant to Covenants Nos. 6, 7 and 8 of NRS (S)107.030 may
be conducted either as to the whole of said property or in separate parcels and
in such order as Trustee may determine.
31. SUBSTITUTION OF TRUSTEE. Beneficiary or its assigns may, from
time to time, by a written instrument executed and acknowledged by Beneficiary,
recorded in the county in which the Real Property is located and otherwise
complying with applicable law, and delivered to Trustor, appoint a successor
trustee or trustees to any Trustee named herein or acting hereunder, to execute
the trust created by the Deed of Trust or other conveyance in trust. Upon the
recording of such instrument, the new trustee or trustees shall, without
conveyance from the predecessor trustee, be vested with all the title, estate,
interest, rights, powers, duties and trusts in the premises vested in or
conferred upon the predecessor trustee. If there be more than one trustee,
either may act alone and execute the trusts upon the request of the Beneficiary,
and all his acts thereunder shall be deemed to be the acts of all trustees, and
the recital in any conveyance executed by such sole trustee of such request
shall be conclusive evidence thereof, and of the authority of such sole trustee
to act.
32. BINDING NATURE. This Deed of Trust applies to, inures to the
benefit of and binds Trustor and the heirs, legatees, devisees, administrators,
personal representatives, executors and the successors and assigns thereof,
Trustee and Beneficiary. Trustee and Beneficiary will provide to Trustor
written notice of any assignment of Beneficiary's or Trustee's interest
hereunder. As used herein, the term "Beneficiary" shall mean the owners and
holders of the Notes and other Secured Obligations from time to time, whether or
not named as Beneficiary herein (it being expressly agreed, however, that
Beneficiary may act through an agent; that only the signature of such agent is
required on any amendment hereof or any consent, approval or other action
hereunder; and that SunAmerica Life Insurance Company is the initial agent
hereunder); the term "Trustee" shall mean the trustee appointed hereunder from
time to time, whether or not notice of such appointment is given; and the term
"Trustor" shall mean the Trustor named herein and the permitted successors-in-
interest, if any, of said named Trustor, in and to the Property or any part
thereof. If there be more than one Trustor hereunder, their obligations
hereunder shall be joint and several. It is expressly agreed that the trust
created hereby is irrevocable by Trustor.
33. ACCEPTANCE OF TRUST; RESIGNATION BY TRUSTEE. Trustee accepts
this trust when this Deed of Trust, duly executed and acknowledged, is made a
public record as provided by law, reserving, however, unto the Trustee, the
right to resign from the duties and obligations imposed herein
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whenever Trustee, in its sole discretion, deems such resignation to be in the
best interest of the Trustee. Written notice of such resignation shall be given
to Trustor and Beneficiary.
34. FULL PERFORMANCE REQUIRED; SURVIVAL OF WARRANTIES. All
representations, warranties and covenants of Trustor contained in any loan
application or made to Beneficiary in connection with the Note and other Secured
Obligations secured hereby or contained in any of the Basic Documents or
incorporated by reference therein, shall survive the execution and delivery of
this Deed of Trust and shall remain continuing obligations, warranties and
representations of Trustor so long as any portion of the obligations secured by
this Deed of Trust remains outstanding.
35. WAIVER OF CERTAIN RIGHTS BY TRUSTOR. Trustor waives, to the
extent permitted by law, (i) the benefit of all laws now existing or that may
hereafter be enacted providing for any appraisement before sale of any portion
of the Property, (ii) all rights of redemption, valuation, appraisement, stay of
execution, notice of election to mature or declare due the whole of the secured
indebtedness and marshalling in the event of foreclosure of the liens hereby
created, and (iii) all rights and remedies which Trustor may have or be able to
assert by reason of the laws of the State of Nevada pertaining to the rights and
remedies of sureties. Without limiting the generality of the foregoing, Trustor
waives, to the extent permitted by law, all rights (including any rights
provided by NRS 100.040 and 100.050) to direct the order in which any of the
Property shall be sold in the event of any sale or sales pursuant hereto and to
have any of the Property or any other property now or hereafter constituting
security for the indebtedness secured hereby marshalled upon any foreclosure of
this Deed of Trust or of any other security for any of such indebtedness.
36. CONSTRUCTION. The language in all parts of this Deed of Trust
shall be in all cases construed simply according to its fair meaning and not
strictly for or against any of the parties hereto. Headings at the beginning
of Sections, Subsections, paragraphs and subparagraphs of this Deed of Trust are
solely for the convenience of the parties, are not a part hereof and shall not
be used in construing this Deed of Trust. The preamble, any recitals and all
exhibits and schedules to this Deed of Trust are part of this Deed of Trust and
are incorporated herein by this reference. When required by the context:
whenever the singular number is used in this Deed of Trust, the same shall
include the plural, and the plural shall include the singular; and the masculine
gender shall include the feminine and neuter genders and vice versa. Unless
otherwise required by the context (or otherwise provided herein): the words
"HEREIN", "HEREOF" and "HEREUNDER" and similar words shall refer to this Deed of
Trust generally and not merely to the provision in which such term is used; the
word "PERSON" shall include individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust, unincorporated
association, joint venture, governmental authority and other entity of whatever
nature; the words "INCLUDING", "INCLUDE" or "INCLUDES" shall be interpreted in
a non-exclusive manner as though the words "but not limited to" or "but without
limiting the generality of the foregoing" or "without limitation" immediately
followed the same; the word "MONTH" shall mean calendar month; and the term
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or legal holiday
under the laws of the State of California or Nevada. If the day on which
performance of any act or the occurrence of any event hereunder is due is not a
business day, the time when such performance or occurrence shall be due shall be
the first business day occurring after the day on which performance or
occurrence would otherwise be due hereunder. All times provided in this Deed of
Trust for the performance of any act will be strictly construed, time being of
the essence hereof.
37. PRIORITY. This Deed of Trust is intended to have, and retain,
priority over all other liens and encumbrances upon the Real Property, excepting
only: (i) such Impositions as, at the date hereof, have, or, by law, gain,
priority over the lien created hereby; (ii) covenants, conditions, restrictions,
easements, rights of way and Leases which are of record and which, on the date
hereof, affect the Real Property and are superior in right or have priority over
this Deed of Trust; (iii) Leases,
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liens, encumbrances and other matters as to which Beneficiary hereafter
expressly subordinates the lien of this Deed of Trust by written instrument in
recordable form; and (iv) to the extent not included within clauses (i) through
-----------
(iii) above, the Permitted Exceptions. Under no circumstances shall Beneficiary
- -----
be obligated or required to subordinate the lien hereof to any lien,
encumbrance, covenant or other matter affecting the Real Property or any portion
thereof. Beneficiary may, however, at Beneficiary's option, exercisable in its
sole and absolute discretion, subordinate the lien of this Deed of Trust, in
whole or in part, to any or all Leases, liens, encumbrances or other matters
affecting all or any portion of the Real Property, by executing and recording,
in the Office of the County Recorder of the county or counties in which the Real
Property is located, a unilateral declaration of such subordination specifying
the Lease, lien, encumbrance or other matter or matters to which this Deed of
Trust shall thereafter be subordinate.
38. AMENDMENTS. This Deed of Trust cannot be waived, changed,
discharged or terminated orally, but only by an instrument in writing signed by
the party against whom enforcement of any waiver, change, discharge or
termination is sought.
39. FIXTURE FILING AND FINANCING STATEMENT. Portions of the Personal
Property (and portions of the Real Property) are goods which are or are to
become fixtures on or relating to the Real Property. This Deed of Trust
constitutes a financing statement filed as a fixture filing in the Official
Records of the County Recorder of the County in which the Property is located
with respect to any and all fixtures included within the term "Property" as used
herein and with respect to any goods or other Personal Property that may now be
or hereafter become such fixtures. The address of Beneficiary, from which
information concerning the security interest granted hereunder may be obtained,
is:
SunAmerica Life Insurance Company
1 SunAmerica Center
Century City
Los Angeles, California 90067-6022
Attention: Director-Mortgage Lending and
Real Estate
40. ATTORNEY-IN-FACT. Trustor hereby appoints Beneficiary the
attorney-in-fact of Trustor to prepare, sign, file and record one or more
financing statements; any documents of title or registration, or like papers,
and to take any other action deemed necessary, useful or desirable by
Beneficiary to perfect and preserve Beneficiary's security interest against the
rights or interests of third persons.
41. RELEASES, EXTENSIONS, MODIFICATIONS AND ADDITIONAL SECURITY.
(a) From time to time, Beneficiary may perform any of the following
acts without incurring any liability or giving notice to any person, and without
affecting the personal liability of any person for the payment of the Secured
Obligations (except as provided below), and without affecting the security
hereof for the full amount of the Secured Obligations on all Property remaining
subject hereto, and without the necessity that any sum representing the value of
any portion of the Property affected by the Beneficiary's action be credited on
the Secured Obligations:
(i) Release any person liable for payment of any Secured
Obligation;
(ii) Extend the time for payment, or otherwise alter the terms of
payment, of any Secured Obligation;
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(iii) Accept additional real or personal property of any kind as
security for any Secured Obligation, whether evidenced by deeds of trust,
mortgages, security agreements or any other instruments of security; or
(iv) Alter, substitute or release any property securing the
Secured Obligations.
(b) From time to time when requested to do so by Beneficiary in
writing, Trustee may perform any of the following acts without incurring any
liability or giving notice to any person:
(i) Consent in writing to the making of any plat or map of the
Property or any part of it;
(ii) Join in granting any easement or creating any restriction
affecting the Property;
(iii) Join in any subordination or other agreement affecting
this Deed of Trust or the lien of it or other agreement or instrument
relating hereto or to the Property or any portion thereof; or
(iv) Reconvey the Property or any part of it without any
warranty.
42. EXCULPATION AND INDEMNIFICATION.
(a) Beneficiary shall not be directly or indirectly liable to Trustor
or any other person as a consequence of any of the following:
(i) Beneficiary's exercise of or failure to exercise any rights,
remedies or powers granted to Beneficiary in this Deed of Trust;
(ii) Beneficiary's failure or refusal to perform or discharge any
obligation or liability of Trustor under any agreement related to the
Property or under this Deed of Trust; or
(iii) Any loss sustained by Trustor or any third party resulting
from Beneficiary's failure to lease the Property, or from any other act or
omission of Beneficiary in managing the Property, after an Event of
Default, unless the loss is caused by the willful misconduct or bad faith
of Beneficiary.
To the extent permitted by applicable law, Trustor hereby expressly waives and
releases all liability of the types described above, and agrees that no such
liability shall be asserted against or imposed upon Beneficiary.
(b) Except for losses caused by the willful misconduct or bad faith of
Trustee or Beneficiary, Trustor agrees to indemnify Trustee and Beneficiary
against and hold them harmless from all losses, damages, liabilities, claims,
causes of action, judgments, court costs, attorneys' fees and other reasonable
legal expenses, cost of evidence of title, cost of evidence of value, and other
reasonable costs and expenses which either may suffer or incur:
(i) In performing any act required or permitted by this Deed of
Trust or any of the other Basic Documents or by law;
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(ii) Because of any failure of Trustor to perform any of
Trustor's obligations; or
(iii) Because of any alleged obligation of or undertaking by
Beneficiary to perform or discharge any of the representations, warranties,
conditions, covenants or other obligations in any document relating to the
Property other than the Basic Documents.
This agreement by Trustor to indemnify Trustee and Beneficiary shall survive the
release and cancellation of any or all of the Secured Obligations and the full
or partial release and/or reconveyance of this Deed of Trust.
(c) Trustor shall pay all obligations to pay money arising under this
Deed of Trust immediately upon demand by Trustee or Beneficiary.
43. RELATIONSHIP TO NOTE PURCHASE AGREEMENT. This Deed of Trust has
been executed pursuant to and is subject to the terms of the Note Purchase
Agreement executed concurrently herewith and Trustor agrees to observe and
perform all provisions contained therein. If and to the extent of any conflict
between the provisions of the Note Purchase Agreement and the provisions of this
Deed of Trust, the stricter provisions shall control.
44. RELATIONSHIP TO SECURITY AGREEMENT. Concurrently herewith,
Trustor is entering into the Security Agreement with Beneficiary with respect to
the Personal Property. As provided above, the terms of said Security Agreement
shall, with respect to the Personal Property and the security interest granted
hereby, supplement the terms of this Deed of Trust and, if and to the extent of
any conflict with the terms hereof applicable to said security interest and
Personal Property, shall, to the extent enforceable, control. Nothing in this
Section 44 shall be deemed or construed, however, to impair the rights of
Beneficiary to conduct one or more Trustee's Sales at which real and personal
property are sold together pursuant to the laws applicable to the sale of real
property.
45. RELATIONSHIP TO ENVIRONMENTAL INDEMNITY AGREEMENT. Concurrently
herewith, Trustor has executed an agreement entitled "Environmental Indemnity
Agreement" for the benefit of the Beneficiary and certain other "Indemnitees"
(as defined therein). Trustor hereby acknowledges and agrees that,
notwithstanding any other provision of this Deed of Trust to the contrary, the
obligations of Trustor under such "Environmental Indemnity Agreement" shall be
unlimited personal obligations of Trustor, the obligations of Trustor under such
instrument shall not be secured by this Deed of Trust and shall survive
foreclosure under this Deed of Trust, any transfer in lieu thereof, and any
satisfaction of the Secured Obligations.
46. SEVERABILITY. If any provision in or obligation under this Deed
of Trust shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
47. LOAN STATEMENT FEES. Trustor shall pay the amount demanded by
Beneficiary or its authorized loan servicing agent for any statement regarding
the obligations secured hereby; provided, however, that such amount may not
exceed the maximum amount allowed by law at the time request for the statement
is made.
48. NOTICES.
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(a) METHODS; ADDRESSEES. All notices, requests and demands to be made
hereunder to the parties hereto shall be in writing and shall be given by any of
the following means: (i) personal service; (ii) electronic communication,
whether by telex, telegram or telecopying (if confirmed in writing sent by
registered or certified, first class mail, return receipt requested); or (iii)
registered or certified, first class mail, return receipt requested. Such
addresses may be changed by notice to the other parties given in the same manner
as provided above. Any notice, demand or request sent pursuant to clause (i) of
this Section shall be deemed received upon such personal service, and if sent
pursuant to clause (ii) of this Section shall be deemed received upon receipt if
sent prior to 5:00 p.m. on a Business Day, and otherwise shall be deemed
received on the next succeeding Business day, and, if sent pursuant to clause
(iii) of this Section shall be deemed received three (3) days following deposit
in the mail.
TO BENEFICIARY: SunAmerica Life Insurance Company
1 SunAmerica Center
Century City
Los Angeles, California 90067-6022
Attention: Director-Mortgage Lending and
Real Estate
Facsimile No.: (310) 772-6573
WITH A COPY TO: O'Melveny & Myers
1999 Avenue of the Stars
Suite 700
Los Angeles, California 90067
Attention: Peter C. Kelley, Esq.
Facsimile No.: (310) 246-6779
TO TRUSTOR: Sahara Las Vegas Corp.
2535 Las Vegas Blvd. South
Las Vegas, Nevada 89109
Attention: Mr. Thomas Land
Facsimile No.: (702) 658-4303
TO TRUSTEE: Stewart Title of Nevada
3800 Howard Hughes Parkway
Suite 500
Las Vegas, Nevada 89109
Attention: Ms. Linda J. Jones
Facsimile No.: (702) 733-6401
(b) RELIANCE OF FAXES. Each party hereto (a "RECIPIENT") who receives
from another party hereto (a "SENDER") by electronic facsimile transmission
(telecopier or fax) any writing which appears to be signed by an authorized
signatory of that Sender is authorized to rely and act upon that writing in the
same manner as if the original signed writing was in the possession of the
Recipient upon oral confirmation of that Sender to the Recipient that the
writing was signed by an authorized signatory of that Sender and is intended by
that Sender to be relied upon by the Recipient. Each party transmitting any
writing to any other party by electronic facsimile transmission agrees to
forward immediately to that Recipient, by expedited means (for next day
delivery, if possible), or by first class mail if the Recipient so agrees, the
signed hard copy of that writing, unless the Recipient expressly agrees to some
other disposition of the original by the Sender.
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49. GOVERNING LAW. THIS DEED OF TRUST SHALL BE GOVERNED BY, AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF NEVADA, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
50. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL JUDICIAL
PROCEEDINGS BROUGHT AGAINST TRUSTOR ARISING OUT OF OR RELATING TO THIS DEED OF
TRUST MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN
THE STATE OF NEVADA, AND BY EXECUTION AND DELIVERY OF THIS DEED OF TRUST TRUSTOR
ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND
UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND
WAIVES ANY DEFENSE OF FORUM NON CONVENIENS AND IRREVOCABLY AGREES TO BE BOUND BY
ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS DEED OF TRUST. Trustor
hereby agrees that service of all process in any such proceeding in any such
court may be made by registered or certified mail, return receipt requested, to
Trustor at its address provided in Section 48 above, such service being hereby
acknowledged by Trustor to be sufficient for personal jurisdiction in any action
against Trustor in any such court and to be otherwise effective and binding
service in every respect. Nothing herein shall affect the right to serve
process in any other manner permitted by law or shall limit the right of
Beneficiary to bring proceedings against Trustor in the courts of any other
jurisdiction.
51. WAIVER OF JURY TRIAL. TRUSTOR HEREBY AGREES TO WAIVE ITS RIGHTS
TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF
THIS DEED OF TRUST. The scope of this waiver is intended to be all-encompassing
of any and all disputes that may be filed in any court and that relate to the
subject matter of this transaction, including without limitation contract
claims, tort claims, breach of duty claims, and all other common law and
statutory claims. Trustor acknowledges that this waiver is a material
inducement for Beneficiary to enter into a business relationship, that
Beneficiary has already relied on this waiver in entering into this Deed of
Trust and that Beneficiary will continue to rely on this waiver in the parties'
related future dealings. Trustor further warrants and represents that Trustor
has reviewed this waiver with its legal counsel, and that it knowingly and
voluntarily waives its jury trial rights following consultation with legal
counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS DEED OF TRUST. In the event of
litigation, this Deed of Trust may be filed as a written consent to a trial by
the court.
52. NONFOREIGN ENTITY. Section 1445 of the Internal Revenue Code of
1986, as amended (the "CODE") provides that a transferee of a U.S. real property
interest must withhold tax if the transferor is a foreign person. To inform
Beneficiary that the withholding of tax will not be required in the event of the
disposition of the Property pursuant to the terms of this Deed of Trust, Trustor
hereby certifies, under penalty of perjury, that:
(a) Trustor is not a foreign corporation, foreign partnership, foreign
trust or foreign estate, as those terms are defined in the Code and the
regulations promulgated thereunder; and
(b) Trustor's U.S. employer identification number is 88-0181943; and
(c) Trustor's principal place of business is 2535 Las Vegas Boulevard
South, Las Vegas, Nevada 89109.
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It is understood that Beneficiary may disclose the contents of this
certification to the Internal Revenue Service and that any false statement
contained herein could be punished by fine, imprisonment or both. Trustor
covenants and agrees to execute such further certificates, which shall be signed
under penalty of perjury, as Beneficiary shall reasonably require. The covenant
set forth herein shall survive the foreclosure of the lien of this Deed of Trust
or acceptance of a deed in lieu thereof.
SIGNATURE ON NEXT PAGE
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IN WITNESS WHEREOF, Trustor has executed this instrument as of the day
and year first above written.
TRUSTOR:
SAHARA LAS VEGAS CORP.,
a Nevada corporation
By: /s/ Thomas K. Land
Its: Senior Vice President and
Chief Financial Officer
S-1
<PAGE>
STATE OF NEVADA )
) SS
COUNTY OF CLARK )
On January 17, 1996 before me, the undersigned, a Notary Public in and
for said State, personally appeared Thomas K. Land personally known to me or
proved to me on the basis of satisfactory evidence to be the person(s) whose
name(s) is/are subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their authorized capacity(ies), and
that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature /s/ Joe Rayner
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION
The Real property located in the County of Clark, State of Nevada and described
as follows:
Being a portion of the Northeast Quarter (NE 1/4) of Section 9 and a portion of
the Northwest Quarter (NW 1/4) of the Northwest Quarter (NW 1/4) of Section 10,
Township 21 South, Range 61 East, M.D.B.&M., Clark County, Nevada, described as
follows:
COMMENCING at the Northeast Corner (NE Cor) of the Northeast Quarter (NE 1/4) of
said Section 9; thence South 04 Degrees 43 Minutes 06 Seconds East along the
East Line of said Section 9, a distance of 896.80 feet to a point, said point
being the Northeast Corner (NE Cor) of that certain parcel of land conveyed by
HOTEL SECURITIES C. to EL RANCHO VEGAS by Corporation Deed recorded March 20,
1945 shown as Document No. 194417, Clark County, Nevada Official Records, said
point also being the POINT OF BEGINNING; thence South 87 Degrees 12 Minutes 23
Seconds East parallel to the North Line of said Section 9 a distance of 342.86
feet to the West Line of Paradise Road; thence South 00 Degrees 14 Minutes 47
Seconds West along said West Line of Paradise Road, a distance of 868.44 feet;
thence North 87 Degrees 12 Minutes 23 Seconds West parallel to the North Line of
said Section 9, a distance of 1572.55 feet to the East Line of Las Vegas
Boulevard South; thence North 28 Degrees 00 Minutes 00 Seconds East along said
East Line of Las Vegas Boulevard South, a distance of 958.89 feet; thence South
87 Degrees 12 Minutes 23 Seconds East parallel to the North Line of said Section
9, a distance of 782.72 feet to the POINT OF BEGINNING.
ASSESSOR'S PARCEL NUMBERS: 162-09-602-001
162-09-602-005
A-1
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EXHIBIT 10.121
SECURITY AGREEMENT
This SECURITY AGREEMENT (this "AGREEMENT") is dated as of January 16,
1996 and entered into by and between SAHARA LAS VEGAS CORP., a Nevada
corporation ("GRANTOR"), and SUNAMERICA LIFE INSURANCE COMPANY, as collateral
agent for and representative of (in such capacity herein called "SECURED PARTY")
the holders of the Notes from to time to time (the "HOLDERS").
PRELIMINARY STATEMENTS
A. Grantor, Secured Party and Sahara Gaming Corporation, a Nevada
corporation ("SGC"), have entered into a Note Purchase Agreement dated as of
even date herewith (said Note Purchase Agreement, as it may hereafter be
amended, supplemented or otherwise modified from time to time, being the "NOTE
PURCHASE AGREEMENT", the terms defined therein and not otherwise defined herein
being used herein as therein defined), pursuant to which, among other things,
Grantor has issued its Note to Secured Party.
B. It is a condition precedent to the acquisition of the Note by
Secured Party under the Note Purchase Agreement that Grantor shall have granted
the security interests and undertaken the obligations contemplated by this
Agreement.
NOW, THEREFORE, in consideration of the premises and in order to induce
Secured Party to acquire the Note under the Note Purchase Agreement and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, Grantor hereby agrees with Secured Party as follows:
SECTION 1. GRANT OF SECURITY. Grantor hereby assigns to Secured
-----------------
Party, and hereby grants to Secured Party a security interest in, all of
Grantor's right, title and interest in and to the following, in each case
whether now or hereafter existing or in which Grantor now has or hereafter
acquires an interest and wherever the same may be located (the "COLLATERAL"):
(a) all present and future chattels, furniture, furnishings, goods,
equipment, fixtures and all other tangible personal property, of whatever kind
and nature, now or hereafter used in connection with or placed or located in or
on any part of the Premises (including, without limitation, any building or
structure that is now or that may hereafter be erected on the Premises),
including, but not limited to, machinery, materials, goods and equipment now or
hereafter used in any construction or operation relating thereto (including,
without limitation, air conditioning, heating, electrical, lighting, fire
fighting and fire prevention, food and beverage service, laundry, plumbing,
refrigeration, security, sound, signaling, telephone, television, window washing
and other equipment and fixtures, of whatever kind or nature, including
generators, transformers, switching
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gear, boilers, burners, furnaces, piping, sprinklers, sinks, tubs, valves,
compressors, motors, carts, dumb waiters, elevators and other lifts, floor
coverings, hardware, keys, locks, organs, pianos, planters, railings, scales,
shelving, signs, tools, machinery, molds, dies, drills, presses, planers, saws,
furniture, business fixtures, trade fixtures, electric, gas and other motor
vehicles, uniforms, vacuum cleaners, hotel furniture, furnishings and equipment,
bathroom furniture and furnishings (including towels, bathmats, hamperettes,
shower curtains and other bath linens), beds and bedding (including mattresses,
springs, pillows, bed pads, sheets, blankets, comforters, spreads and other bed
linens and furnishings), bric-a-brac, chairs, chests, vanities, secretaries,
bureaus, chiffonniers, love seats, benches, costumers, smoking stands, sand
jars, desks, dressers, hangings, paintings, pictures, frames, sculptures, lamps,
light bulbs, mirrors, night stands, ornaments, radios, stereo equipment, sofas,
statuary, tables, telephones, televisions, vases, window coverings, foodstuffs,
beverages (including beer, wine, liquor and other alcoholic beverages), and
other consumables (including soap, shampoo, cleaning supplies and paper goods),
cutlery, cooking, baking and other kitchen utensils and apparatus (including
crockery, fryers, grills, kettles, mixers, pots, pans, pails, racks, steamers
and toasters), china and other dishes, flatware, glassware, hollowware, serving
pieces, trays, table linens, washers, dryers, irons, ironing boards and other
ironing equipment, cables, outlets, plugs, wiring and related apparatus and
fixtures, card readers, cash registers, adding machines, calculators, computers,
keyboards, monitors, printers, printing equipment, envelopes, stationary,
posting machines, blank forms, typewriters, typewriter stands, other office and
accounting equipment and supplies, time stamps, time recorders, bookkeeping
machines, checking machines, payroll machines, computer reservations systems,
and all other goods, equipment, furnishings, apparatus and fixtures that are now
or may hereafter be located at or used at or in connection with the Premises)
and all other tangible personal property used or to be used at or in connection
with, or placed or to be placed in, rooms, halls, lounges, offices, lobbies,
lavatories, basements, cellars, vaults or other portions of the Premises or any
facilities on the Premises or of any other building or buildings hereafter
constructed or erected thereon, whether herein enumerated or not, and whether or
not contained in any such building, and which are used or to be used or useful
in the operation and maintenance thereof, or in any business conducted thereon,
together with all replacements and substitutions for any and all personal
property in which Grantor has an interest, including without limitation such
goods and equipment as shall from time to time be located, placed, installed or
used in or upon, or procured for use, or to be used or useful in connection with
the operation of the whole, or any part of, the Premises or any facilities on
the Premises and all parts thereof and all accessions thereto (any and all such
equipment, replacements, substitutions, parts and accessions being the
"EQUIPMENT");
(b) all present and future inventory and merchandise in all of its
forms (including, but not limited to, (i) all goods held by Grantor for sale or
lease or to be furnished under contracts of service or so leased or furnished,
(ii) all raw materials, work in process, (iii) all goods in which Grantor has an
interest in mass or a joint or other interest or right of any kind, (iv) all
goods that are returned to or repossessed by Grantor, and (v) all accessions
thereto and products thereof (all such inventory, accessions and products being
the "INVENTORY");
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(c) all present and future accounts, accounts receivable, rentals,
revenues, receipts, payments, and income of any nature whatsoever derived from
or received with respect to any facilities on the Premises, agreements,
contracts, leases, contract rights, rights to payment, instruments, documents,
chattel paper, security agreements, guaranties, undertakings, surety bonds,
insurance policies, condemnation deposits and awards, notes and drafts,
securities, certificates of deposit and the right to receive all payments
thereon or in respect thereof (whether principal, interest, fees or otherwise),
contract rights (other than rights under contracts or governmental permits that
may not be transferred by law), including, without limitation, rights to all
deposits from tenants and other users of the Premises or any facilities on the
Premises, rights under all contracts relating to the construction, renovation or
restoration of any of the improvements now or hereafter located on the Premises
or the financing thereof and all rights under payment or performance bonds,
warranties, and guaranties, and all rights to payment from any credit/charge
card organization or entity such as or similar to, and including, without
limitation, the organizations or entities that sponsor and administer,
respectively, the American Express Card, the Carte Blanche Card, the Diners Club
Card, the Discover Card, the MasterCard and the Visa Card, books of account, and
principal, interest and payments due on account of goods sold, services
rendered, loans made or credit extended, on or in connection with the Premises
or any facilities on the Premises and all forms of obligations owing to and
rights of Grantor or in which Grantor may have any interest, however created or
arising (any and all such accounts, contract rights, chattel paper, documents,
instruments, general intangibles and other obligations being the "ACCOUNTS", and
any and all such security agreements, leases and other contracts being the
"RELATED CONTRACTS");
(d) all present and future right, title and interest of Grantor in and
to all leases, subleases, licenses, concessions, franchises and other use or
occupancy agreements, and any amendments, modifications, extensions or renewals
thereof (collectively, "LEASES"), whether or not specifically herein described,
that now or may hereafter pertain to or affect the Premises or any portion
thereof, and all amendments to the same, including, but not limited to, the
following: (i) all payments due and to become due under such Leases, whether as
rent, damages, insurance payments, condemnation awards, or otherwise; (ii) all
claims, rights, powers, privileges and remedies under such Leases; and (iii) all
rights of the Grantor under such Leases to exercise any election or option, or
to give or receive any notice, consent, waiver or approval, or to accept any
surrender of the premises or any part thereof, together with full power and
authority in the name of the Grantor, or otherwise, to demand and receive,
enforce, collect, and receipt for any or all of the foregoing, to endorse or
execute any checks or any instruments or orders, to file any claims, and to take
any other action that Secured Party may deem necessary or advisable in
connection therewith;
(e) all present and future deposit accounts of Grantor, any demand,
time, savings, passbook or like account maintained by Grantor with any bank,
savings and loan association, credit union or like organization, and all money,
cash and cash equivalents of Grantor, whether or not deposited in any such
deposit account;
3
<PAGE>
(f) all present and future general intangibles (including but not
limited to all governmental permits relating to construction or other activities
on the premises), all tax refunds of every kind and nature to which Grantor now
or hereafter may become entitled, however arising, all other refunds, and all
deposits, goodwill, chooses in action, rights to payment or performance,
judgments taken on any rights or claims included in the Collateral, trade
secrets, computer programs, software, customer lists, business names,
trademarks, trade names and service marks, patents, patent applications,
licenses, copyrights, technology, processes, proprietary information and
insurance proceeds;
(g) all present and future books and records, including, without
limitation, books of account and ledgers of every kind and nature, ledger cards,
computer programs, tapes, disks and other information storage devices, all
related data processing software, and all electronically recorded data relating
to Grantor or its business or the Project, all receptacles and containers for
such records, and all files and correspondence;
(h) all present and future maps, plans, specifications, surveys,
studies, reports, data and drawings (including, without limitation,
architectural, structural, mechanical and engineering plans and specifications,
studies, data and drawings) prepared for or relating to the Premises or the
construction, renovation or restoration of any improvements on the Premises or
the extraction of minerals, sand, gravel or other valuable substances from the
Premises, together with all amendments and modifications thereto;
(i) all present and future licenses, permits, variances, special
permits, franchises, certificates, rulings, certifications, validations,
exemptions, filings, registrations, authorizations, consents, approvals,
waivers, orders, rights and agreements (including options, option rights and
contract rights), other than those that may not be transferred by law, now or
hereafter obtained by Grantor from any governmental authority having or claiming
jurisdiction over the Premises or any other element of the Collateral or
providing access thereto, or the operation of any business on, at, or from the
Premises;
(j) all present and future stocks, bonds, debentures, securities,
subscription rights, options, warrants, puts, calls, certificates, partnership
interests, joint venture interests, investments, brokerage accounts and all
rights, preferences, privileges, dividends, distributions, redemption payments
and liquidation payments received or receivable with respect thereto;
(k) all present and future accessions, appurtenances, components,
repairs, repair parts, spare parts, replacements, substitutions, additions,
issue and improvements to or of or with respect to any of the foregoing;
(l) all other fixtures and storage and office facilities, and all
accessions thereto and products thereof and all water stock relating to the
Premises;
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(m) the 11% First Mortgage Notes or any other indebtedness (any such
notes or indebtedness, the "SFHI Notes") issued by Santa Fe Hotel, Inc., a
Nevada corporation ("SFHI"), pursuant to that certain Indenture dated as of
December 29, 1993 among SFHI, Sahara Gaming Corporation and IBJ Schroder Bank &
Trust Company, as trustee, as amended, modified, supplemented, restated or
restructured from time to time (the "SFHI INDENTURE"), all rights of every
nature relating to the SFHI Notes including but not limited to all real property
and other security securing the SFHI Notes, and the instruments evidencing the
SFHI Notes, and all interest, cash investments and other property or proceeds
from time to time receivables or otherwise distributed in respect of or in
exchange for any or all of the SFHI Notes (collectively, the "PLEDGED SFHI
COLLATERAL");
(n) all other tangible and intangible personal property of Grantor;
(o) all rights, remedies, powers and privileges of Grantor with respect
to any of the foregoing;
(p) any and all proceeds, products, rents, income and profits of any of
the foregoing, including, without limitation, all money, accounts, general
intangibles, deposit accounts, documents, instruments, chattel paper, goods,
insurance proceeds (whether or not the Secured Party is the loss payee), and any
other tangible or intangible property received upon the sale or disposition of
any of the foregoing (it being agreed, for purposes hereof, that the term
"PROCEEDS" includes whatever is receivable or received when any of the
Collateral is sold, collected, exchanged or otherwise disposed of, whether such
disposition is voluntary or involuntary).
SECTION 2. SECURITY FOR OBLIGATIONS. This Agreement secures, and the
------------------------
Collateral is collateral security for, the prompt payment or performance in full
when due, whether at stated maturity, by required prepayment, declaration,
acceleration, demand or otherwise (including the payment of amounts that would
become due but for the operation of the automatic stay under Section 362(a) of
the Bankruptcy Code, 11 U.S.C. (S)362(a)), of all obligations and liabilities of
every nature of Grantor now or hereafter existing under or arising out of or in
connection with the Note Purchase Agreement and the other Basic Documents and
all extensions or renewals thereof, whether for principal, interest (including
without limitation interest that, but for the filing of a petition in bankruptcy
with respect to Grantor, would accrue on such obligations), fees, expenses,
indemnities or otherwise, whether voluntary or involuntary, direct or indirect,
absolute or contingent, liquidated or unliquidated, whether or not jointly owed
with others, and whether or not from time to time decreased or extinguished and
later increased, created or incurred, and all or any portion of such obligations
or liabilities that are paid, to the extent all or any part of such payment is
avoided or recovered directly or indirectly from Secured Party or any Holder as
a preference, fraudulent transfer or otherwise (all such obligations and
liabilities being the "UNDERLYING DEBT"), and all obligations of every nature of
Grantor now or hereafter existing under this Agreement (all such obligations of
Grantor, together with the Underlying Debt, being the "SECURED OBLIGATIONS").
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SECTION 3. GRANTOR REMAINS LIABLE. Anything contained herein to the
----------------------
contrary notwithstanding, (a) Grantor shall remain liable under any contracts
and agreements included in the Collateral, to the extent set forth therein, to
perform all of its duties and obligations thereunder to the same extent as if
this Agreement had not been executed, (b) the exercise by Secured Party of any
of its rights hereunder shall not release Grantor from any of its duties or
obligations under the contracts and agreements included in the Collateral, and
(c) Secured Party shall not have any obligation or liability under any contracts
and agreements included in the Collateral by reason of this Agreement or
otherwise, nor shall Secured Party be obligated to perform any of the
obligations or duties of Grantor thereunder or to take any action to collect or
enforce any claim for payment assigned hereunder.
SECTION 4. REPRESENTATIONS AND WARRANTIES. Grantor represents and
------------------------------
warrants as follows:
(a) Ownership of Collateral. Except for the security interest created
-----------------------
by this Agreement and any Liens permitted pursuant to the Note Purchase
Agreement, Grantor owns the Collateral free and clear of any Lien. Except such
as may have been filed in favor of Secured Party relating to this Agreement or
to perfect Liens permitted pursuant to the Note Purchase Agreement, no effective
financing statement or other instrument similar in effect covering all or any
part of the Collateral is on file in any filing or recording office.
(b) Location of Equipment and Inventory. All of the Equipment and
-----------------------------------
Inventory is, as of the date hereof, located at the Premises.
(c) Office Locations; Other Names. The chief place of business, the
-----------------------------
chief executive office and the office where Grantor keeps its records regarding
the Accounts and all originals of all chattel paper that evidence Accounts is,
and has been for the four month period preceding the date hereof, located at
4949 North Rancho Drive, Las Vegas, Nevada 89130. Grantor has not in the past
done, and does not now do, business under any other name (including any trade-
name or fictitious business name) except Sahara Las Vegas Corp.
(d) Governmental Authorizations. No authorization, approval or other
---------------------------
action by, and no notice to or filing with, any governmental authority or
regulatory body is required for either (i) the grant by Grantor of the security
interest granted hereby, (ii) the execution, delivery or performance of this
Agreement by Grantor, or (iii) the perfection of or the exercise by Secured
Party of its rights and remedies hereunder (except (i) the filing of Uniform
Commercial Code financing statements with the office of the Secretary of State
of the State of Nevada and (ii) as has been previously taken by or at the
direction of Grantor).
(e) Perfection. This Agreement, together with the filing of a UCC-1
----------
financing statement describing the Collateral with the Secretary of State of
Nevada and the Deed of Trust with the Clark County Recorder creates a valid,
perfected, enforceable
6
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and first priority security interest in the Collateral, securing the payment of
the Secured Obligations, and all filings and other actions necessary or
desirable to perfect and protect such security interest have been duly made or
taken.
(f) Other Information. All information heretofore, herein or hereafter
-----------------
supplied to Secured Party by or on behalf of Grantor with respect to the
Collateral is accurate and complete in all material respects.
SECTION 5. FURTHER ASSURANCES.
------------------
(a) Grantor agrees that from time to time, at the expense of Grantor,
Grantor will promptly execute and deliver all further instruments and documents,
and take all further action, that may be necessary or desirable, or that Secured
Party reasonably may request, in order to perfect and protect any security
interest granted or purported to be granted hereby or to enable Secured Party to
exercise and enforce its rights and remedies hereunder with respect to any
Collateral. Without limiting the generality of the foregoing, Grantor will:
(i) deliver to Secured Party all instruments or certificates evidencing or
representing the Pledged SFHI Collateral in suitable form for transfer by
delivery and shall be accompanied by Grantor's endorsement or duly executed
instruments of transfer or assignments in blank, all in form and substance
satisfactory to Secured Party, (ii) at the request of Secured Party mark
conspicuously each item of chattel paper included in the Accounts, each Related
Contract and, at the request of Secured Party, each of its records pertaining to
the Collateral, with a legend, in form and substance satisfactory to Secured
Party, indicating that such Collateral is subject to the security interest
granted hereby, (iii) at the request of Secured Party, deliver and pledge to
Secured Party hereunder all promissory notes and other instruments (including
checks) and all original counterparts of chattel paper constituting Collateral,
duly endorsed and accompanied by duly executed instruments of transfer or
assignment, all in form and substance satisfactory to Secured Party, (iv)
execute and file such financing or continuation statements, or amendments
thereto, and such other instruments or notices, as may be necessary or
desirable, or as Secured Party may reasonably request, in order to perfect and
preserve the security interests granted or purported to be granted hereby, (v)
at any reasonable time, upon request by Secured Party, exhibit the Collateral to
and allow inspection of the Collateral by Secured Party, or persons designated
by Secured Party, and (v) at Secured Party's reasonable request, appear in and
defend any action or proceeding that may affect Grantor's title to or Secured
Party's security interest in all or any significant part of the Collateral.
(b) Grantor shall pledge hereunder, immediately upon Grantor's
acquisition, any and all instruments or other evidences of the Pledged SFHI
Collateral. Grantor further agrees that it will, upon obtaining any additional
instruments or other evidences of Pledged SFHI Collateral, promptly (and in any
event within two Business Days) deliver to Secured Party a Pledge Amendment,
duly executed by Grantor, in substantially the form of Schedule I annexed hereto
----------
(a "PLEDGE AMENDMENT"), in respect of the additional SFHI Notes or other SFHI
Pledged Collateral to be pledged pursuant to this Agreement. Grantor hereby
authorizes Secured Party to attach each Pledge
7
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Amendment to this Agreement and agrees that all SFHI Notes or other SFHI Pledged
Collateral listed on any Pledge Amendment delivered to Secured Party shall for
all purposes hereunder be considered Collateral; provided that the failure of
--------
Grantor to execute a Pledge Amendment with respect to any additional SFHI Notes
or other SFHI Pledged Collateral pledged pursuant to this Agreement shall not
impair the security interest of Secured Party therein or otherwise adversely
affect the rights and remedies of Secured Party hereunder with respect thereto.
(c) Secured Party shall have the right, at any time in its discretion
and without notice to Grantor, to transfer to or to register in the name of
Secured Party or any of its nominees any or all of the Pledged SFHI Collateral.
In addition, Secured Party shall have the right at any time to exchange
certificates or instruments representing or evidencing Pledged SFHI Collateral
for certificates or instruments of smaller or larger denominations.
(d) Grantor hereby authorizes Secured Party to file one or more
financing or continuation statements, and amendments thereto, relative to all or
any part of the Collateral without the signature of Grantor. Grantor agrees
that a carbon, photographic or other reproduction of this Agreement or of a
financing statement signed by Grantor shall be sufficient as a financing
statement and may be filed as a financing statement in any and all
jurisdictions.
(e) Grantor will furnish to Secured Party from time to time statements
and schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as Secured Party may reasonably
request, all in reasonable detail.
(f) Secured Party agrees to release Pledged SFHI Collateral from the
lien created under this Agreement and the Collateral Account Agreement as
provided in subsection 2.5B and 2.5C of the Note Purchase Agreement.
SECTION 6. CERTAIN COVENANTS OF GRANTOR. Grantor shall:
----------------------------
(a) not use or permit any Collateral to be used unlawfully or in
violation of any provision of this Agreement or any applicable statute,
regulation or ordinance or any policy of insurance covering the Collateral;
(b) notify Secured Party of any change in Grantor's name or identity
within 15 days of such change;
(c) give Secured Party 30 days' prior written notice of any change in
Grantor's chief place of business, chief executive office or residence or the
office where Grantor keeps its records regarding the Accounts and all originals
of all chattel paper that evidence Accounts;
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(d) if Secured Party gives value to enable Grantor to acquire rights in
or the use of any Collateral, use such value for such purposes; and
(e) pay promptly when due all property and other taxes, assessments and
governmental charges or levies imposed upon, and all claims (including claims
for labor, materials and supplies) against, the Collateral, except to the extent
the validity thereof is being contested in good faith and for which adequate
reserves have been established; provided that Grantor shall in any event pay
--------
such taxes, assessments, charges, levies or claims not later than five days
prior to the date of any proposed sale under any judgement, writ or warrant of
attachment entered or filed against Grantor or any of the Collateral as a result
of the failure to make such payment.
SECTION 7. SPECIAL COVENANTS WITH RESPECT TO EQUIPMENT AND INVENTORY.
---------------------------------------------------------
Grantor shall:
(a) keep the Equipment and Inventory at the Premises or, upon 30 days'
prior written notice to Secured Party, at such other places in jurisdictions
where all action that may be necessary or desirable, or that Secured Party may
reasonably request, in order to perfect and protect any security interest
granted or purported to be granted hereby, or to enable Secured Party to
exercise and enforce its rights and remedies hereunder, with respect to such
Equipment and Inventory shall have been taken;
(b) cause the Equipment to be maintained and preserved in the same
condition, repair and working order as when new, ordinary wear and tear
excepted, and shall forthwith make or cause to be made all repairs, replacements
and other improvements in connection therewith that are necessary or desirable
to such end. Grantor shall promptly furnish to Secured Party a statement
respecting any material loss or damage to any of the Equipment (the requirements
under this subsection 7(b) being supplemental to and not exclusive of the
requirements under the Note Purchase Agreement and the Deed of Trust relating to
maintenance of property);
(c) notify Secured Party of the establishment after the date hereof of
any deposit accounts in which Secured Party may take a security interest
pursuant to applicable law and take such steps as may be requested by Secured
Party to perfect Secured Party's lien therein; and
(d) perform all acts that are necessary or desirable to cause all
licenses, permits, variances, special permits, franchises, certificates,
rulings, certifications, validations, exemptions, filings, registrations,
authorizations, consents, approvals, waivers, orders, rights, and agreements in
which a security interest has been conveyed to Secured Party pursuant to
subsection 1(h) to remain in full force and effect.
SECTION 8. INSURANCE. Grantor shall, at its own expense, maintain
---------
insurance with respect to the Equipment and Inventory in accordance with the
terms of the Note Purchase Agreement and the Deed of Trust.
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SECTION 9. SPECIAL COVENANTS WITH RESPECT TO ACCOUNTS AND RELATED
------------------------------------------------------
CONTRACTS.
- ---------
(a) Grantor shall keep its chief place of business and chief executive
office and the office where it keeps its records concerning the Accounts and
Related Contracts, and all originals of all chattel paper that evidence
Accounts, at the location therefor specified in Section 4 or, upon 30 days'
prior written notice to Secured Party, at such other location in a jurisdiction
where all action that may be necessary or desirable, or that Secured Party may
reasonably request, in order to perfect and protect any security interest
granted or purported to be granted hereby, or to enable Secured Party to
exercise and enforce its rights and remedies hereunder, with respect to such
Accounts and Related Contracts shall have been taken. Grantor will hold and
preserve such records and chattel paper and will permit representatives of
Secured Party at any time during normal business hours and upon reasonable
notice from the Secured Party to inspect and make abstracts from such records
and chattel paper, and Grantor agrees to render to Secured Party, at Grantor's
cost and expense, such clerical and other assistance as may be reasonably
requested with regard thereto. Promptly upon the request of Secured Party,
Grantor shall deliver to Secured Party complete and correct copies of each
Related Contract.
(b) Grantor shall, for not less than 3 years from the date on which
such Account arose, maintain (i) complete records of each Account, including
records of all payments received, credits granted and merchandise returned, and
(ii) all documentation relating thereto.
(c) Except as otherwise provided in this subsection (c), Grantor shall
continue to collect, at its own expense, all amounts due or to become due to
Grantor under the Accounts (but, other than with respect to security deposits,
in no event more than one month in advance) and Related Contracts. In
connection with such collections, Grantor may take (and, at Secured Party's
direction, shall take) such action as Grantor or Secured Party may deem
necessary or advisable to enforce collection of amounts due or to become due
under the Accounts; provided, however, that Secured Party shall have the right
-------- -------
at any time, upon the occurrence and during the continuation of an Event of
Default and upon written notice to Grantor of its intention to do so, to notify
the account debtors or obligors under any Accounts of the assignment of such
Accounts to Secured Party and to direct such account debtors or obligors to make
payment of all amounts due or to become due to Grantor thereunder directly to
Secured Party, to notify each Person maintaining a lockbox or similar
arrangement to which account debtors or obligors under any Accounts have been
directed to make payment to remit all amounts representing collections on checks
and other payment items from time to time sent to or deposited in such lockbox
or other arrangement directly to Secured Party and, upon such notification and
at the expense of Grantor, to enforce collection of any such Accounts and to
adjust, settle or compromise the amount or payment thereof, in the same manner
and to the same extent as Grantor might have done. After receipt by Grantor of
the notice from Secured Party referred to in the proviso to the preceding
-------
sentence, (i) all amounts and proceeds (including checks and other instruments)
received by Grantor in respect of the Accounts and the Related Contracts shall
be received in trust for the benefit of Secured Party
10
<PAGE>
hereunder, shall be segregated from other funds of Grantor and shall be
forthwith paid over or delivered to Secured Party in the same form as so
received (with any necessary endorsement) to be held as cash Collateral and
applied as provided by Section 17, and (ii) Grantor shall not adjust, settle or
compromise the amount or payment of any Account, or release wholly or partly any
account debtor or obligor thereof, or allow any credit or discount thereon
(other than settlements in the ordinary course of business and substantially
consistent with the practice at other gaming institutions in connection with
their gaming operations in the State of Nevada with payors of such Accounts
reached to facilitate collection from such payors of such Accounts).
SECTION 10. DEPOSIT ACCOUNTS. Upon the occurrence and during the
----------------
continuation of an Event of Default or Potential Event of Default, Secured Party
may exercise dominion and control over, and refuse to permit further withdrawals
(whether of money, securities, instruments or other property) from any deposit
accounts maintained with Secured Party constituting part of the Collateral.
SECTION 11. LICENSE OF PATENTS, TRADEMARKS, COPYRIGHTS, ETC. Grantor
-----------------------------------------------
hereby assigns, transfers and conveys to Secured Party, effective upon the
occurrence of any Event of Default, the nonexclusive right and license to use
all trademarks, tradenames, copyrights, customers lists, patents or technical
processes owned or used by Grantor that relate to the Collateral and any other
collateral granted by Grantor as security for the Secured Obligations, together
with any goodwill associated therewith, all to the extent necessary to enable
Secured Party to use, possess and realize on the Collateral and to enable any
successor or assign to enjoy the benefits of the Collateral. This right and
license shall inure to the benefit of all successors, assigns and transferees of
Secured Party and its successors, assigns and transferees, whether by voluntary
conveyance, operation of law, assignment, transfer, foreclosure, deed in lieu of
foreclosure or otherwise. Such right and license is granted free of charge,
without requirement that any monetary payment whatsoever be made to Grantor.
SECTION 12. TRANSFERS AND OTHER LIENS. Grantor shall not:
-------------------------
(a) sell, assign (by operation of law or otherwise) or otherwise
dispose of any of the Collateral, except as permitted by the Note Purchase
Agreement; or
(b) except for the security interest created by this Agreement or as
permitted by the Note Purchase Agreement, create or suffer to exist any Lien
upon or with respect to any of the Collateral to secure the indebtedness or
other obligations of any Person.
(c) Notwithstanding the foregoing, Grantor may request that Collateral
Agent release SFHI Notes pledged hereunder from the security interests created
pursuant hereto in accordance with subsection 2.5D of the Note Purchase
Agreement.
11
<PAGE>
SECTION 13. SFHI PLEDGED COLLATERAL.
-----------------------
(a) So long as no Event of Default shall have occurred and be
continuing, Grantor shall be entitled to exercise any and all voting and other
consensual rights pertaining to the Pledged SFHI Collateral or any part thereof
for any purpose not inconsistent with the terms of this Agreement or the other
Basic Documents; provided, however, that Grantor shall not exercise or refrain
-------- -------
from exercising any such right if Secured Party shall have notified Grantor
that, in Secured Party's judgment, such action would have an adverse effect on
the value of the Pledged SFHI Collateral or any part thereof; and provided,
--------
further, that Grantor shall give Secured Party at least five Business Days'
- -------
prior written notice of the manner in which it intends to exercise, or the
reasons for refraining from exercising, any such right.
(b) All principal, interest and other payments paid in cash or cash
equivalents in respect of the Pledged SFHI Collateral shall be paid to Secured
Party under and in accordance with the Cash Collateral Agreement. All
principal, interest and other payments paid or payable other than in cash or
cash equivalents in respect of, and instruments and other property received,
receivable or otherwise distributed in respect of, or in exchange for, any
Pledged SFHI Collateral shall be, and shall forthwith be delivered to Secured
Party to hold as Pledged SFHI Collateral. All principal, interest and other
payments paid in respect of the Pledged SFHI Collateral shall, if received by
Grantor, be received in trust for the benefit of Secured Party, be segregated
from the other property or funds of Grantor and be forthwith delivered to
Secured Party as Pledged SFHI Collateral in the same form as so received (with
all necessary indorsements).
(c) Upon the occurrence and during the continuation of an Event of
Default, upon written notice from Secured Party to Grantor, all rights of
Grantor to exercise the voting and other consensual rights which it would
otherwise be entitled to exercise pursuant to Section 13(a) shall cease, and all
such rights shall thereupon become vested in Secured Party who shall thereupon
have the sole right to exercise such voting and other consensual rights.
(d) In order to permit Secured Party to exercise the voting and other
consensual rights which it may be entitled to exercise pursuant to Section 7(c)
and to receive all payments and other distributions which it may be entitled to
receive under Section 7(b), (i) Grantor shall promptly execute and deliver (or
cause to be executed and delivered) to Secured Party all such proxies, orders
and other instruments as Secured Party may from time to time reasonably request
and (ii) without limiting the effect of the immediately preceding clause (i),
Grantor hereby grants to Secured Party an irrevocable proxy to vote the Pledged
SFHI Collateral and to exercise all other rights, powers, privileges and
remedies to which a holder of the Pledged SFHI Collateral would be entitled
(including, without limitation, giving or withholding written consents, calling
special meetings and voting at such meetings), which proxy shall be effective,
automatically and without the necessity of any action (including any transfer of
any Pledged SFHI Collateral on the record books of the issuer thereof) by any
other Person (including the issuer of the Pledged SFHI Collateral or any officer
or agent thereof), upon
12
<PAGE>
the occurrence of an Event of Default and which proxy shall only terminate upon
the payment in full of the Secured Obligations.
SECTION 14. SECURED PARTY APPOINTED ATTORNEY-IN-FACT. Grantor hereby
----------------------------------------
irrevocably appoints Secured Party as Grantor's attorney-in-fact, with full
authority in the place and stead of Grantor and in the name of Grantor, Secured
Party or otherwise, from time to time in Secured Party's discretion to take any
action and to execute any instrument that Secured Party may deem necessary or
advisable to accomplish the purposes of this Agreement, including without
limitation:
(a) to obtain and adjust insurance required to be maintained by Grantor
or paid to Secured Party pursuant to the Note Purchase Agreement and the Deed of
Trust;
(b) to ask for, demand, collect, sue for, recover, compound, receive
and give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral;
(c) to receive, endorse and collect any drafts or other instruments,
documents and chattel paper in connection with clauses (a) and (b) above;
(d) to file any claims or take any action or institute any proceedings
(including, without limitation, any proceeding before any Gaming Authority) that
Secured Party may deem necessary or desirable for the collection of any of the
Collateral or otherwise to enforce the rights of Secured Party with respect to
any of the Collateral;
(e) to pay or discharge taxes or Liens (other than Liens permitted
under this Agreement or the Note Purchase Agreement) levied or placed upon or
threatened against the Collateral, the legality or validity thereof and the
amounts necessary to discharge the same to be determined by Secured Party in its
sole discretion, any such payments made by Secured Party to become obligations
of Grantor to Secured Party, due and payable immediately without demand;
(f) to sign and endorse any invoices, freight or express bills, bills
of lading, storage or warehouse receipts, drafts against debtors, assignments,
verifications and notices in connection with Accounts and other documents
relating to the Collateral; and
(g) upon the occurrence and during the continuation of an Event of
Default, generally to sell, transfer, pledge, make any agreement with respect to
or otherwise deal with any of the Collateral as fully and completely as though
Secured Party were the absolute owner thereof for all purposes, and to do, at
Secured Party's option and Grantor's expense, at any time or from time to time,
all acts and things that Secured Party deems necessary to protect, preserve or
realize upon the Collateral and Secured Party's security interest therein in
order to effect the intent of this Agreement, all as fully and effectively as
Grantor might do.
13
<PAGE>
SECTION 15. SECURED PARTY MAY PERFORM. If Grantor fails to perform
-------------------------
any agreement contained herein, Secured Party may itself perform, or cause
performance of, such agreement, and the expenses of Secured Party incurred in
connection therewith shall be payable by Grantor under Section 18.
SECTION 16. STANDARD OF CARE. The powers conferred on Secured Party
----------------
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers. Except for the exercise of
reasonable care in the custody of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, Secured Party shall
have no duty as to any Collateral or as to the taking of any necessary steps to
preserve rights against prior parties or any other rights pertaining to any
Collateral, it being understood that Secured Party shall have no responsibility
for (a) ascertaining or taking action with respect to calls, conversions,
exchanges, maturities, tenders or other matters relating to any Collateral,
whether or not Secured Party has or is deemed to have knowledge of such matters,
(b) taking any necessary steps (other than steps taken in accordance with the
standard of care set forth above to maintain possession of the Collateral) to
preserve rights against any parties with respect to any Collateral, (c) taking
any necessary steps to collect or realize upon the Secured Obligations or any
guarantee therefor, or any part thereof, or any of the Collateral, or (d)
initiating any action to protect the Collateral against the possibility of a
decline in market value. Secured Party shall be deemed to have exercised
reasonable care in the custody and preservation of Collateral in its possession
if such Collateral is accorded treatment substantially equal to that which
Secured Party accords its own property.
SECTION 17. REMEDIES.
--------
(a) Notwithstanding any other provision hereof, if Secured Party
elects, upon any Event of Default, to sell real property and any of the
Collateral together under the Deed of Trust and applicable law, then the
terms of the Deed of Trust shall, with respect to such sale and Collateral,
control and supersede any terms in this Agreement with respect to such sale
and Collateral; provided that Secured Party's election to exercise remedies
--------
under the Deed of Trust shall have no effect on the terms contained in this
Agreement with respect to any Collateral as to which Secured Party has not
so elected.
(b) If any Event of Default shall have occurred and be continuing,
Secured Party may exercise in respect of the Collateral, in addition to all
other rights and remedies provided for herein or otherwise available to it,
all the rights and remedies of a secured party on default under the Uniform
Commercial Code as in effect in any relevant jurisdiction (the "CODE")
(whether or not the Code applies to the affected Collateral), and also may
(i) require Grantor to, and Grantor hereby agrees that it will at its
expense and upon request of Secured Party forthwith, assemble all or part of
the Collateral as directed by Secured Party and make it available to Secured
Party at a place to be designated by Secured Party that is reasonably
convenient to both parties, (ii) enter onto the property where any
14
<PAGE>
Collateral is located and take possession thereof with or without judicial
process, (iii) prior to the disposition of the Collateral, store, process,
repair or recondition the Collateral or otherwise prepare the Collateral for
disposition in any manner to the extent Secured Party deems appropriate,
(iv) take possession of Grantor's premises or place custodians in exclusive
control thereof, remain on such premises and use the same and any of
Grantor's equipment for the purpose of completing any work in process,
taking any actions described in the preceding clause, (iii) collect any
Secured Obligation, and (v) without notice except as specified below, sell
the Collateral or any part thereof in one or more parcels at public or
private sale, at any of Secured Party's offices or elsewhere, for cash, on
credit or for future delivery, at such time or times and at such price or
prices and upon such other terms as Secured Party may deem commercially
reasonable. Secured Party may be the purchaser of any or all of the
Collateral at any such sale and Secured Party shall be entitled, for the
purpose of bidding and making settlement or payment of the purchase price
for all or any portion of the Collateral sold at any such public sale, to
use and apply any of the Secured Obligations as a credit on account of the
purchase price for any Collateral payable by Secured Party at such sale.
Each purchaser at any such sale shall hold the property sold absolutely free
from any claim or right on the part of Grantor, and Grantor hereby waives
(to the extent permitted by applicable law) all rights of redemption, stay
and/or appraisal which it now has or may at any time in the future have
under any rule of law or statute now existing or hereafter enacted. Grantor
agrees that, to the extent notice of sale shall be required by law, at least
ten days' notice to Grantor of the time and place of any public sale or the
time after which any private sale is to be made shall constitute reasonable
notification. Secured Party shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given. Secured Party
may adjourn any public or private sale from time to time by announcement at
the time and place fixed therefor, and such sale may, without further
notice, be made at the time and place to which it was so adjourned. Grantor
hereby waives any claims against Secured Party arising by reason of the fact
that the price at which any Collateral may have been sold at such a private
sale was less than the price which might have been obtained at a public
sale, even if Secured Party accepts the first offer received and does not
offer such Collateral to more than one offeree. If the proceeds of any sale
or other disposition of the Collateral are insufficient to pay all the
Secured Obligations, Grantor shall be liable for the deficiency and the fees
of any attorneys employed by Secured Party to collect such deficiency.
(c) Grantor recognizes that, by reason of certain prohibitions
contained in the Securities Act of 1933, as from time to time amended (the
"SECURITIES ACT"), and applicable state securities laws, Secured Party may
be compelled, with respect to any sale of all or any part of the Collateral
conducted without prior registration or qualification of such Collateral
under the Securities Act and/or such state securities laws, to limit
purchasers to those who will agree, among other things, to acquire the
Collateral for their own account, for investment and not with a view to the
distribution or resale thereof. Grantor acknowledges that any such
15
<PAGE>
private sales may be at prices and on terms less favorable than those
obtainable through a public sale without such restrictions (including,
without limitation, a public offering made pursuant to a registration
statement under the Securities Act) and, notwithstanding such circumstances,
Grantor agrees that any such private sale shall be deemed to have been made
in a commercially reasonable manner and that Secured Party shall have no
obligation to engage in public sales and no obligation to delay the sale of
any Pledged Collateral for the period of time necessary to permit the issuer
thereof to register it for a form of public sale requiring registration
under the Securities Act or under applicable state securities laws, even if
such issuer would, or should, agree to so register it.
SECTION 18. APPLICATION OF PROCEEDS. Except as expressly provided
-----------------------
elsewhere in this Agreement, all proceeds received by Secured Party in respect
of any sale of, collection from, or other realization upon all or any part of
the Collateral may, in the discretion of Secured Party, be held by Secured Party
as Collateral for, and/or then, or at any other time thereafter, applied in full
or in part by Secured Party against, the Secured Obligations in the following
order of priority:
FIRST: To the payment of all costs and expenses of such sale,
collection or other realization, including costs and expenses of Secured
Party and its agents and counsel, and all other expenses, liabilities and
advances made or incurred by Secured Party in connection therewith, and all
amounts for which Secured Party is entitled to indemnification hereunder and
all advances made by Secured Party hereunder for the account of Grantor, and
to the payment of all costs and expenses paid or incurred by Secured Party
in connection with the exercise of any right or remedy hereunder, all in
accordance with Section 19;
SECOND: To the payment of all other Secured Obligations (for the
ratable benefit of the holders thereof) in such order as Secured Party shall
elect as provided in Section 2.5 of the Note Purchase Agreement; and
THIRD: To the payment to or upon the order of Grantor, or to
whomsoever may be lawfully entitled to receive the same or as a court of
competent jurisdiction may direct, of any surplus then remaining from such
proceeds.
SECTION 19. INDEMNITY AND EXPENSES.
----------------------
(a) Grantor agrees to indemnify Secured Party from and against any and
all claims, losses and liabilities in any way relating to, growing out of or
resulting from this Agreement and the transactions contemplated hereby
(including, without limitation, enforcement of this Agreement), except to the
extent such claims, losses or liabilities result solely from Secured Party's
gross negligence or willful misconduct as finally determined by a court of
competent jurisdiction.
16
<PAGE>
(b) Grantor shall pay to Secured Party upon demand the amount of any
and all costs and expenses, including the reasonable fees and expenses of its
counsel and of any experts and agents, that Secured Party may reasonably incur
in connection with (i) the administration of this Agreement, (ii) the custody,
preservation, use or operation of, or the sale of, collection from, or other
realization upon, any of the Collateral, (iii) the exercise or enforcement of
any of the rights of Secured Party hereunder, or (iv) the failure by Grantor to
perform or observe any of the provisions hereof.
SECTION 20. CONTINUING SECURITY INTEREST; TRANSFER OF NOTES. This
-----------------------------------------------
Agreement shall create a continuing security interest in the Collateral and
shall (a) remain in full force and effect until the indefeasible payment in full
of the Secured Obligations, (b) be binding upon Grantor, its successors and
assigns, and (c) inure, together with the rights and remedies of Secured Party
hereunder, to the benefit of Secured Party and its successors, transferees and
assigns. Without limiting the generality of the foregoing clause (c) any Holder
may assign or otherwise transfer any Notes held by it to any other Person in
accordance with the Note Purchase Agreement, and such other Person shall
thereupon become vested with all the benefits in respect thereof granted to
Secured Party herein or otherwise. Upon the indefeasible payment in full of all
Secured Obligations, the security interest granted hereby shall terminate and
all rights to the Collateral shall revert to Grantor. Upon any such termination
Secured Party will, at Grantor's expense, execute and deliver to Grantor such
documents as Grantor shall reasonably request to evidence such termination.
SECTION 21. SECURED PARTY AS COLLATERAL AGENT.
---------------------------------
(a) Secured Party has been appointed to act as Secured Party hereunder
by Holders. Secured Party shall be obligated, and shall have the right
hereunder, to make demands, to give notices, to exercise or refrain from
exercising any rights, and to take or refrain from taking any action (including,
without limitation, the release or substitution of Collateral), solely in
accordance with this Agreement and the Note Purchase Agreement.
(b) Secured Party shall at all times be the same Person that is
Collateral Agent under the Note Purchase Agreement. Written notice of
resignation by Collateral Agent pursuant to subsection 8.7 of the Note Purchase
Agreement shall also constitute notice of resignation as Secured Party under
this Agreement; removal of Collateral Agent pursuant to subsection 8.7 of the
Note Purchase Agreement shall also constitute removal as Secured Party under
this Agreement; and appointment of a successor Collateral Agent pursuant to
subsection 8.7 of the Note Purchase Agreement shall also constitute appointment
of a successor Secured Party under this Agreement. Upon the acceptance of any
appointment as Collateral Agent under subsection 8.7 of the Note Purchase
Agreement by a successor Collateral Agent, that successor Collateral Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring or removed Secured Party under this Agreement, and
the retiring or removed Secured Party under this Agreement shall promptly (i)
transfer to such successor Secured Party all sums, securities and other items of
Collateral held hereunder, together with all records and other documents
necessary or appropriate in connection with the
17
<PAGE>
performance of the duties of the successor Secured Party under this Agreement,
and (ii) execute and deliver to such successor Secured Party such amendments to
financing statements, and take such other actions, as may be necessary or
appropriate in connection with the assignment to such successor Secured Party of
the security interests created hereunder, whereupon such retiring or removed
Secured Party shall be discharged from its duties and obligations under this
Agreement. After any retiring or removed Collateral Agent's resignation or
removal hereunder as Secured Party, the provisions of this Agreement shall inure
to its benefit as to any actions taken or omitted to be taken by it under this
Agreement while it was Secured Party hereunder.
SECTION 22. AMENDMENTS; ETC. No amendment or waiver of any provision
---------------
of this Agreement, or consent to any departure by Grantor herefrom, shall in any
event be effective unless the same shall be in writing and signed by Secured
Party, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which it was given.
SECTION 23. NOTICES. Any notice or other communication herein
-------
required or permitted to be given shall be in writing and may be personally
served, telexed or sent by telefacsimile or United States mail or courier
service and shall be deemed to have been given when delivered in person or by
courier service, upon receipt of telefacsimile or telex prior to 5:00 p.m. on a
Business Day, or three Business Days after depositing it in the United States
mail with postage prepaid and properly addressed; provided that notices to
--------
Secured Party shall only be effective upon receipt. For the purposes hereof,
the address of each party hereto shall be as set forth under such party's name
on the signature pages hereof or, as to either party, such other address as
shall be designated by such party in a written notice delivered to the other
party hereto.
SECTION 24. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No
-----------------------------------------------------
failure or delay on the part of Secured Party in the exercise of any power,
right or privilege hereunder shall impair such power, right or privilege or be
construed to be a waiver of any default or acquiescence therein, nor shall any
single or partial exercise of any such power, right or privilege preclude any
other or further exercise thereof or of any other power, right or privilege.
All rights and remedies existing under this Agreement are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
SECTION 25. SEVERABILITY. In case any provision in or obligation
------------
under this Agreement shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
SECTION 26. HEADINGS. Section and subsection headings in this
--------
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose or be given any
substantive effect.
18
<PAGE>
SECTION 27. GOVERNING LAW; TERMS. THIS AGREEMENT SHALL BE GOVERNED
--------------------
BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF
THE STATE OF NEVADA, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES, EXCEPT TO
THE EXTENT THAT THE CODE PROVIDES THAT THE VALIDITY OR PERFECTION OF THE
SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR
COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF
NEVADA.
SECTION 28. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL
----------------------------------------------
JUDICIAL PROCEEDINGS BROUGHT AGAINST GRANTOR ARISING OUT OF OR RELATING TO THIS
AGREEMENT MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION
IN THE STATE OF CALIFORNIA OR NEVADA, AND BY EXECUTION AND DELIVERY OF THIS
AGREEMENT GRANTOR ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES,
GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID
COURTS AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN
CONNECTION WITH THIS AGREEMENT. Grantor hereby agrees that service of all
process in any such proceeding in any such court may be made by registered or
certified mail, return receipt requested, to Grantor at its address provided in
Section 23, such service being hereby acknowledged by Grantor to be sufficient
for personal jurisdiction in any action against Grantor in any such court and to
be otherwise effective and binding service in every respect. Nothing herein
shall affect the right to serve process in any other manner permitted by law.
SECTION 29. WAIVER OF JURY TRIAL. GRANTOR AND SECURED PARTY HEREBY
--------------------
AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT. The scope of this waiver is
intended to be all-encompassing of any and all disputes that may be filed in any
court and that relate to the subject matter of this transaction, including
without limitation contract claims, tort claims, breach of duty claims, and all
other common law and statutory claims. Grantor and Secured Party each
acknowledge that this waiver is a material inducement for Grantor and Secured
Party to enter into a business relationship, that Grantor and Secured Party have
already relied on this waiver in entering into this Agreement and that each will
continue to rely on this waiver in their related future dealings. Grantor and
Secured Party further warrant and represent that each has reviewed this waiver
with its legal counsel, and that each knowingly and voluntarily waives its jury
trial rights following consultation with legal counsel. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING,
AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS
OR MODIFICATIONS TO THIS AGREEMENT. In the event of litigation, this Agreement
may be filed as a written consent to a trial by the court.
19
<PAGE>
SECTION 30. COUNTERPARTS. This Agreement may be executed in one or
------------
more counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed an original, but all
such counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
[Remainder of page intentionally left blank]
20
<PAGE>
IN WITNESS WHEREOF, Grantor and Secured Party have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
SAHARA LAS VEGAS CORP.,
a Nevada corporation
By: /s/ Thomas K. Land
Its: Senior Vice President and
Chief Financial Officer
SUNAMERICA LIFE INSURANCE COMPANY
By: /s/ Steven P. Hanover
Its:______________________________
S-1
<PAGE>
SCHEDULE I
PLEDGE AMENDMENT
This Pledge Amendment, dated January 16, 1996, is delivered pursuant
to Section 5(b) of the Security Agreement referred to below. The undersigned
hereby agrees that this Pledge Amendment may be attached to the Security
Agreement dated January 16, 1996, between the undersigned and SunAmerica Life
Insurance Company, as Secured Party (the "SECURITY AGREEMENT," capitalized terms
defined therein being used herein as therein defined), and that the Pledged SFHI
Collateral listed on this Pledge Amendment shall be deemed to be part of the
Pledged SFHI Collateral and shall become part of the Collateral and shall secure
all Secured Obligations.
SAHARA LAS VEGAS CORPORATION
By: /s/ Thomas K. Land
Title: Senior Vice President and
Chief Financial Officer
Debt Issuer Amount of Indebtedness
- ----------- ----------------------
SFHI
I-1
<PAGE>
EXHIBIT 10.122
SGC GUARANTY
This GUARANTY is entered into as of January 16, 1996 by SAHARA GAMING
CORPORATION, a Nevada corporation ("GUARANTOR"), in favor of and for the benefit
of SUNAMERICA LIFE INSURANCE COMPANY, as collateral agent for and representative
of (in such capacity herein called "GUARANTIED PARTY") the holders of the Notes
from time to time ("HOLDERS"), and, subject to subsection 3.7, for the benefit
of the other Beneficiaries (as hereinafter defined).
RECITALS
A. Sahara Las Vegas Corp., a Nevada corporation ("COMPANY"), and Guarantor
have entered into that certain Note Purchase Agreement dated as of January 16,
1996 with Guarantied Party (said Note Purchase Agreement, as it may hereafter be
amended, supplemented or otherwise modified from time to time, being the "NOTE
PURCHASE AGREEMENT"; capitalized terms defined therein and not otherwise defined
herein being used herein as therein defined).
B. Guarantor owns all the capital stock of Company and will benefit from
the transactions contemplated by the Basic Documents.
C. It is a condition precedent to the acquisition of the Notes under the
Note Purchase Agreement that Company's obligations thereunder be guarantied by
Guarantor.
D. Guarantor is willing irrevocably and unconditionally to guaranty such
obligations of Company.
NOW, THEREFORE, based upon the foregoing and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
in order to induce Holders and Guarantied Party to enter into the Note Purchase
Agreement and to acquire the Notes thereunder, Guarantor hereby agrees as
follows:
SECTION 1. DEFINITIONS
1.1 CERTAIN DEFINED TERMS. As used in this Guaranty, the following terms
---------------------
shall have the following meanings unless the context otherwise requires:
"BENEFICIARIES" means Guarantied Party and Holders.
"GUARANTIED OBLIGATIONS" has the meaning assigned to that term in
subsection 2.1.
1
<PAGE>
"GUARANTY" means this Guaranty dated as of January 16, 1996, as it may
be amended, supplemented or otherwise modified from time to time.
"PAYMENT IN FULL", "PAID IN FULL" or any similar term means payment in
full of the Guarantied Obligations, including without limitation all
principal, interest, costs, fees and expenses (including, without
limitation, reasonable legal fees and expenses) of Beneficiaries as
required under the Basic Documents.
1.2 INTERPRETATION. References to "Sections" and "subsections" shall be
--------------
to Sections and subsections, respectively, of this Guaranty unless otherwise
specifically provided. In the event of any conflict or inconsistency between
the terms, conditions and provisions of this Guaranty and the terms, conditions
and provisions of the Note Purchase Agreement, the terms, conditions and
provisions of this Guaranty shall prevail.
SECTION 2. THE GUARANTY
2.1 GUARANTY OF THE GUARANTIED OBLIGATIONS. Guarantor hereby irrevocably
--------------------------------------
and unconditionally guaranties, as primary obligor and not merely as surety, the
due and punctual payment in full of all Guarantied Obligations when the same
shall become due, whether at stated maturity, by required prepayment,
declaration, acceleration, demand or otherwise (including amounts that would
become due but for the operation of the automatic stay under Section 362(a) of
the Bankruptcy Code, 11 U.S.C. (S) 362(a)). The term "GUARANTIED OBLIGATIONS"
is used herein in its most comprehensive sense and includes:
(a) any and all Obligations of Company now or hereafter made, incurred
or created, whether absolute or contingent, liquidated or unliquidated,
whether due or not due, and however arising under or in connection with the
Note Purchase Agreement and the other Basic Documents, including those
arising under successive borrowing transactions under the Note Purchase
Agreement which shall either continue the Obligations of Company or from
time to time renew them after they have been satisfied and including
interest which, but for the filing of a petition in bankruptcy with respect
to Company, would have accrued on any Guarantied Obligations, whether or
not a claim is allowed against Company for such interest in the related
bankruptcy proceeding; and
(b) those expenses set forth in subsection 2.8 hereof.
2.2 PAYMENT BY GUARANTOR; APPLICATION OF PAYMENTS. Guarantor hereby
---------------------------------------------
agrees, in furtherance of the foregoing and not in limitation of any other right
which any Beneficiary may have at law or in equity against Guarantor by virtue
hereof, that upon the failure of Company to pay any of the Guarantied
Obligations when and as the same shall become due, whether at stated maturity,
by required prepayment, declaration, acceleration, demand or otherwise
(including amounts that would become due but for the operation of the automatic
stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. (S) 362(a)),
Guarantor will upon demand pay, or cause to be paid, in cash, to Guarantied
Party for the ratable benefit of
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Beneficiaries, an amount equal to the sum of the unpaid principal amount of all
Guarantied Obligations then due as aforesaid, accrued and unpaid interest on
such Guarantied Obligations (including, without limitation, interest which, but
for the filing of a petition in bankruptcy with respect to Company, would have
accrued on such Guarantied Obligations, whether or not a claim is allowed
against Company for such interest in the related bankruptcy proceeding) and all
other Guarantied Obligations then owed to Beneficiaries as aforesaid. All such
payments shall be applied promptly from time to time by Guarantied Party:
First, to the payment of the costs and expenses of any collection or
-----
other realization under this Guaranty, including reasonable compensation to
Guarantied Party and its agents and counsel, and all expenses, liabilities
and advances made or incurred by Guarantied Party in connection therewith;
Second, to the payment of all other Guarantied Obligations in such
------
order as Guarantied Party shall elect pursuant to Section 2.5 of the Note
Purchase Agreement; and
Third, after payment in full of all Guarantied Obligations, to the
-----
payment to Guarantor, or its successors or assigns, or to whomsoever may be
lawfully entitled to receive the same or as a court of competent
jurisdiction may direct, of any surplus then remaining from such payments.
2.3 LIABILITY OF GUARANTOR ABSOLUTE. Guarantor agrees that its
-------------------------------
obligations hereunder are irrevocable, absolute, independent and unconditional
and shall not be affected by any circumstance which constitutes a legal or
equitable discharge of a guarantor or surety other than payment in full of the
Guarantied Obligations. In furtherance of the foregoing and without limiting
the generality thereof, Guarantor agrees as follows:
(a) This Guaranty is a guaranty of payment when due and not of
collectibility.
(b) Guarantied Party may enforce this Guaranty upon the occurrence of
an Event of Default under the Note Purchase Agreement.
(c) The obligations of Guarantor hereunder are independent of the
obligations of Company under the Basic Documents, and a separate action or
actions may be brought and prosecuted against Guarantor whether or not any
action is brought against Company or any other guarantors and whether or
not Company is joined in any such action or actions.
(d) Payment by Guarantor of a portion, but not all, of the Guarantied
Obligations shall in no way limit, affect, modify or abridge Guarantor's
liability for any portion of the Guarantied Obligations which has not been
paid. Without limiting the generality of the foregoing, if Guarantied
Party is awarded a judgment in any suit
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brought to enforce Guarantor's covenant to pay a portion of the Guarantied
Obligations, such judgment shall not be deemed to release Guarantor from
its covenant to pay the portion of the Guarantied Obligations that is not
the subject of such suit, and such judgment shall not, except to the extent
satisfied by Guarantor, limit, affect, modify or abridge Guarantor's
liability hereunder in respect of the Guarantied Obligations.
(e) Any Beneficiary, upon such terms as it deems appropriate, without
notice or demand and without affecting the validity or enforceability of
this Guaranty or giving rise to any reduction, limitation, impairment,
discharge or termination of Guarantor's liability hereunder, from time to
time may (i) renew, extend, accelerate, increase the rate of interest on,
or otherwise change the time, place, manner or terms of payment of the
Guarantied Obligations, (ii) settle, compromise, release or discharge, or
accept or refuse any offer of performance with respect to, or substitutions
for, the Guarantied Obligations or any agreement relating thereto and/or
subordinate the payment of the same to the payment of any other
obligations; (iii) request and accept other guaranties of the Guarantied
Obligations and take and hold security for the payment of this Guaranty or
the Guarantied Obligations; (iv) release, surrender, exchange, substitute,
compromise, settle, rescind, waive, alter, subordinate or modify, with or
without consideration, any security for payment of the Guarantied
Obligations, any other guaranties of the Guarantied Obligations, or any
other obligation of any Person (including any other guarantor) with respect
to the Guarantied Obligations; (v) enforce and apply any security now or
hereafter held by or for the benefit of such Beneficiary in respect of this
Guaranty or the Guarantied Obligations and direct the order or manner of
sale thereof, or exercise any other right or remedy that such Beneficiary
may have against any such security, in each case as such Beneficiary in its
discretion may determine consistent with the Note Purchase Agreement and
any applicable security agreement, including foreclosure on any such
security pursuant to one or more judicial or nonjudicial sales, whether or
not every aspect of any such sale is commercially reasonable, and even
though such action operates to impair or extinguish any right of
reimbursement or subrogation or other right or remedy of Guarantor against
Company or any security for the Guarantied Obligations; and (vi) exercise
any other rights available to it under the Basic Documents.
(f) This Guaranty and the obligations of Guarantor hereunder shall be
valid and enforceable and shall not be subject to any reduction,
limitation, impairment, discharge or termination for any reason (other than
payment in full of the Guarantied Obligations), including without
limitation the occurrence of any of the following, whether or not Guarantor
shall have had notice or knowledge of any of them: (i) any failure or
omission to assert or enforce or agreement or election not to assert or
enforce, or the stay or enjoining, by order of court, by operation of law
or otherwise, of the exercise or enforcement of, any claim or demand or any
right, power or remedy (whether arising under the Basic Documents, at law,
in equity or otherwise) with respect to the Guarantied Obligations or any
agreement relating thereto, or with
4
<PAGE>
respect to any other guaranty of or security for the payment of the
Guarantied Obligations; (ii) any rescission, waiver, amendment or
modification of, or any consent to departure from, any of the terms or
provisions (including without limitation provisions relating to events of
default) of the Note Purchase Agreement, any of the other Basic Documents
or any agreement or instrument executed pursuant thereto, or of any other
guaranty or security for the Guarantied Obligations or any agreement
relating to such other guaranty or security; (iii) the Guarantied
Obligations, or any agreement relating thereto, at any time being found to
be illegal, invalid or unenforceable in any respect; (iv) the application
of payments received from any source (other than payments received pursuant
to the other Basic Documents or from the proceeds of any security for the
Guarantied Obligations, except to the extent such security also serves as
collateral for indebtedness other than the Guarantied Obligations) to the
payment of indebtedness other than the Guarantied Obligations, even though
any Beneficiary might have elected to apply such payment to any part or all
of the Guarantied Obligations; (v) any Beneficiary's consent to the change,
reorganization or termination of the corporate structure or existence of
Company or any of its Subsidiaries and to any corresponding restructuring
of the Guarantied Obligations; (vi) any failure to perfect or continue
perfection of a security interest in any collateral which secures any of
the Guarantied Obligations; (vii) any defenses, set-offs or counterclaims
which Company may allege or assert against any Beneficiary in respect of
the Guarantied Obligations, including but not limited to failure of
consideration, breach of warranty, payment, statute of frauds, statute of
limitations, accord and satisfaction and usury; and (viii) any other act or
thing or omission, or delay to do any other act or thing, which may or
might in any manner or to any extent vary the risk of Guarantor as an
obligor in respect of the Guarantied Obligations.
2.4 WAIVERS BY GUARANTOR. Guarantor hereby waives, for the benefit of
--------------------
Beneficiaries:
(a) any right to require any Beneficiary, as a condition of payment or
performance by Guarantor, to (i) proceed against Company, any other
guarantor of the Guarantied Obligations or any other Person, (ii) proceed
against or exhaust any security held from Company, any such other guarantor
or any other Person, (iii) proceed against or have resort to any balance of
any deposit account or credit on the books of any Beneficiary in favor of
Company or any other Person, or (iv) pursue any other remedy in the power
of any Beneficiary whatsoever;
(b) any defense arising by reason of the incapacity, lack of authority
or any disability or other defense of Company including, without
limitation, any defense based on or arising out of the lack of validity or
the unenforceability of the Guarantied Obligations or any agreement or
instrument relating thereto or by reason of the cessation of the liability
of Company from any cause other than payment in full of the Guarantied
Obligations;
5
<PAGE>
(c) any defense based upon any statute or rule of law which provides
that the obligation of a surety must be neither larger in amount nor in
other respects more burdensome than that of the principal;
(d) any defense based upon any Beneficiary's errors or omissions in
the administration of the Guarantied Obligations, except behavior which
amounts to bad faith;
(e) (i) any principles or provisions of law, statutory or otherwise,
which are or might be in conflict with the terms of this Guaranty and any
legal or equitable discharge of Guarantor's obligations hereunder, (ii) the
benefit of any statute of limitations affecting Guarantor's liability
hereunder or the enforcement hereof, (iii) any rights to set-offs,
recoupments and counterclaims, and (iv) promptness, diligence and any
requirement that any Beneficiary protect, secure, perfect or insure any
security interest or lien or any property subject thereto;
(f) notices, demands, presentments, protests, notices of protest,
notices of dishonor and notices of any action or inaction, including
acceptance of this Guaranty, notices of default under the Note Purchase
Agreement or any agreement or instrument related thereto, notices of any
renewal, extension or modification of the Guarantied Obligations or any
agreement related thereto, notices of any extension of credit to Company
and notices of any of the matters referred to in subsection 2.3 and any
right to consent to any thereof; and
(g) any defenses or benefits that may be derived from or afforded by
law which limit the liability of or exonerate guarantors or sureties, or
which may conflict with the terms of this Guaranty, including without
limitation the provisions of Nevada Revised Statutes Sections 40.430-
40.459, 40.475 and 40.485 as permitted by Nevada Revised Statutes Section
40.495, and any successor provisions.
2.5 CERTAIN CALIFORNIA LAW WAIVERS. As used in this subsection 2.5, any
------------------------------
reference to "the principal" includes Company, and any reference to "the
creditor" includes each Beneficiary. In accordance with Section 2856 of the
California Civil Code:
(a) Guarantor agrees to withhold the exercise of any and all rights of
subrogation, reimbursement and contribution against Company, against any
other guarantor of any of the Guarantied Obligations and against any
collateral or security granted by any such other guarantor for any of the
Guarantied Obligations until the Guarantied Obligations shall have been
paid in full, all as more fully set forth in subsection 2.6;
(b) Guarantor waives any and all other rights and defenses available
to Guarantor as against any Beneficiary by reason of Sections 2787 to 2855,
inclusive, 2899 and 3433 of the California Civil Code except to the extent
expressly provided herein, including without limitation any and all rights
or defenses Guarantor may have
6
<PAGE>
by reason of protection afforded to the principal with respect to any of
the Guarantied Obligations, or to any other guarantor of any of the
Guarantied Obligations with respect to any of such guarantor's obligations
under its guaranty, in either case pursuant to the antideficiency or other
laws of the State of California limiting or discharging the principal's
indebtedness or such guarantor's obligations, including without limitation
Section 580a, 580b, 580d, or 726 of the California Code of Civil Procedure;
and
(c) Guarantor waives all rights and defenses arising out of an
election of remedies by the creditor, even though that election of
remedies, such as a nonjudicial foreclosure with respect to security for
any Guarantied Obligation, has destroyed Guarantor's rights of subrogation
and reimbursement against the principal by the operation of Section 580d of
the Code of Civil Procedure or otherwise; and even though that election of
remedies by the creditor, such as nonjudicial foreclosure with respect to
security for an obligation of any other guarantor of any of the Guarantied
Obligations, has destroyed Guarantor's rights of contribution against such
other guarantor.
No other provision of this Guaranty shall be construed as limiting the
generality of any of the covenants and waivers set forth in this subsection 2.5.
In accordance with subsection 3.6 below, this Guaranty shall be governed by, and
shall be construed and enforced in accordance with, the internal laws of the
State of Nevada, without regard to conflicts of laws principles. This
subsection 2.5 is included solely out of an abundance of caution, and shall not
be construed to mean that any of the above-referenced provisions of California
law are in any way applicable to this Guaranty or to any of the Guarantied
Obligations.
2.6 GUARANTOR'S RIGHTS OF SUBROGATION, CONTRIBUTION, ETC. Until the
----------------------------------------------------
Guarantied Obligations shall have been paid in full, Guarantor shall withhold
exercise of (a) any claim, right or remedy, direct or indirect, that Guarantor
now has or may hereafter have against Company or any of its assets in connection
with this Guaranty or the performance by Guarantor of its obligations hereunder,
in each case whether such claim, right or remedy arises in equity, under
contract, by statute, including without limitation under Nevada Revised Statutes
Section 40.475 or 40.485 as permitted by Nevada Revised Statutes Section 40.495
(1993), under common law or otherwise and including without limitation (i) any
right of subrogation, reimbursement or indemnification that Guarantor now has or
may hereafter have against Company, (ii) any right to enforce, or to participate
in, any claim, right or remedy that any Beneficiary now has or may hereafter
have against Company, and (iii) any benefit of, and any right to participate in,
any collateral or security now or hereafter held by any Beneficiary, and (b) any
right of contribution Guarantor may have against any other guarantor of any of
the Guarantied Obligations. Guarantor further agrees that, to the extent the
agreement to withhold the exercise of its rights of subrogation, reimbursement,
indemnification and contribution as set forth herein is found by a court of
competent jurisdiction to be void or voidable for any reason, any rights of
subrogation, reimbursement or indemnification Guarantor may have against Company
or against any collateral or security, and any rights of contribution Guarantor
may have against any such
7
<PAGE>
other guarantor, shall be junior and subordinate to any rights any Beneficiary
may have against Company, to all right, title and interest any Beneficiary may
have in any such collateral or security, and to any right any Beneficiary may
have against such other guarantor. Guarantied Party, on behalf of
Beneficiaries, may use, sell or dispose of any item of collateral or security as
it sees fit without regard to any subrogation rights Guarantor may have, and
upon any such disposition or sale any rights of subrogation such Guarantor may
have shall terminate. If any amount shall be paid to Guarantor on account of
any such subrogation, reimbursement or indemnification rights at any time when
all Guarantied Obligations shall not have been paid in full, such amount shall
be held in trust for Guarantied Party on behalf of Beneficiaries and shall
forthwith be paid over to Guarantied Party for the benefit of Beneficiaries to
be credited and applied against the Guarantied Obligations, whether matured or
unmatured, in accordance with the terms hereof.
2.7 EXPENSES. Guarantor agrees to pay, or cause to be paid, on demand,
--------
and to save Beneficiaries harmless against liability for, any and all costs and
expenses (including reasonable fees and disbursements of counsel and reasonable
allocated costs of internal counsel) incurred or expended by any Beneficiary in
connection with the enforcement of or preservation of any rights under this
Guaranty.
2.8 CONTINUING GUARANTY. This Guaranty is a continuing guaranty and
-------------------
shall remain in effect until all of the Guarantied Obligations shall have been
paid in full. Guarantor hereby irrevocably waives any right to revoke this
Guaranty as to future transactions giving rise to any Guarantied Obligations.
2.9 AUTHORITY OF GUARANTOR OR COMPANY. It is not necessary for any
---------------------------------
Beneficiary to inquire into the capacity or powers of Guarantor or Company or
the officers, directors or any agents acting or purporting to act on behalf of
any of them.
2.10 FINANCIAL CONDITION OF COMPANY. Any extensions of credit may be
------------------------------
granted to Company or continued from time to time without notice to or
authorization from Guarantor regardless of the financial or other condition of
Company at the time of any such grant or continuation. No Beneficiary shall
have any obligation to disclose or discuss with Guarantor its assessment, or
Guarantor's assessment, of the financial condition of Company. Guarantor has
adequate means to obtain information from Company on a continuing basis
concerning the financial condition of Company and its ability to perform its
obligations under the Basic Documents, and Guarantor assumes the responsibility
for being and keeping informed of the financial condition of Company and of all
circumstances bearing upon the risk of nonpayment of the Guarantied Obligations.
Guarantor hereby waives and relinquishes any duty on the part of any Beneficiary
to disclose any matter, fact or thing relating to the business, operations or
conditions of Company now known or hereafter known by any Beneficiary.
2.11 RIGHTS CUMULATIVE. The rights, powers and remedies given to
-----------------
Beneficiaries by this Guaranty are cumulative and shall be in addition to and
independent of all rights, powers and remedies given to Beneficiaries by virtue
of any statute or rule of law or in any
8
<PAGE>
of the other Basic Documents or any agreement between Guarantor and any
Beneficiary or Beneficiaries or between Company and any Beneficiary or
Beneficiaries. Any forbearance or failure to exercise, and any delay by any
Beneficiary in exercising, any right, power or remedy hereunder shall not impair
any such right, power or remedy or be construed to be a waiver thereof, nor
shall it preclude the further exercise of any such right, power or remedy.
2.12 BANKRUPTCY; POST-PETITION INTEREST; REINSTATEMENT OF GUARANTY. (a)
-------------------------------------------------------------
So long as any Guarantied Obligations remain outstanding, Guarantor shall not,
without the prior written consent of Guarantied Party in accordance with the
terms of the Note Purchase Agreement, commence or join with any other Person in
commencing any bankruptcy, reorganization or insolvency proceedings of or
against Company. The obligations of Guarantor under this Guaranty shall not be
reduced, limited, impaired, discharged, deferred, suspended or terminated by any
proceeding, voluntary or involuntary, involving the bankruptcy, insolvency,
receivership, reorganization, liquidation or arrangement of Company or by any
defense which Company may have by reason of the order, decree or decision of any
court or administrative body resulting from any such proceeding.
(b) Guarantor acknowledges and agrees that any interest on any portion
of the Guarantied Obligations which accrues after the commencement of any
proceeding referred to in clause (a) above (or, if interest on any portion of
the Guarantied Obligations ceases to accrue by operation of law by reason of the
commencement of said proceeding, such interest as would have accrued on such
portion of the Guarantied Obligations if said proceedings had not been
commenced) shall be included in the Guarantied Obligations because it is the
intention of Guarantor and Beneficiaries that the Guarantied Obligations which
are guarantied by Guarantor pursuant to this Guaranty should be determined
without regard to any rule of law or order which may relieve Company of any
portion of such Guarantied Obligations. Guarantor will permit any trustee in
bankruptcy, receiver, debtor in possession, assignee for the benefit of
creditors or similar person to pay Guarantied Party, or allow the claim of
Guarantied Party in respect of, any such interest accruing after the date on
which such proceeding is commenced.
(c) In the event that all or any portion of the Guarantied Obligations
are paid by Company, the obligations of Guarantor hereunder shall continue and
remain in full force and effect or be reinstated, as the case may be, in the
event that all or any part of such payment(s) are rescinded or recovered
directly or indirectly from any Beneficiary as a preference, fraudulent transfer
or otherwise, and any such payments which are so rescinded or recovered shall
constitute Guarantied Obligations for all purposes under this Guaranty.
2.13 NOTICE OF EVENTS. As soon as Guarantor obtains knowledge thereof,
----------------
Guarantor shall give Guarantied Party written notice of any condition or event
which has resulted in (a) a material adverse change in the financial condition
of Guarantor or Company or (b) a breach of or noncompliance with any term,
condition or covenant contained herein or in the Note Purchase Agreement, any
other Basic Document or any other document delivered pursuant hereto or thereto.
9
<PAGE>
2.14 SET OFF. In addition to any other rights any Beneficiary may have
-------
under law or in equity, if any amount shall at any time be due and owing by
Guarantor to any Beneficiary under this Guaranty, such Beneficiary is authorized
at any time or from time to time, without notice (any such notice being hereby
expressly waived), to set off and to appropriate and to apply any and all
deposits (general or special, including but not limited to indebtedness
evidenced by certificates of deposit, whether matured or unmatured) and any
other indebtedness of such Beneficiary owing to Guarantor and any other property
of Guarantor held by any Beneficiary to or for the credit or the account of
Guarantor against and on account of the Guarantied Obligations and liabilities
of Guarantor to any Beneficiary under this Guaranty.
SECTION 3. MISCELLANEOUS
3.1 SURVIVAL OF WARRANTIES. All agreements, representations and
----------------------
warranties made herein shall survive the execution and delivery of this Guaranty
and the other Basic Documents and any increase in the amount of the Notes or
other Obligations under the Note Purchase Agreement.
3.2 NOTICES. Any communications between Guarantied Party and Guarantor
-------
and any notices or requests provided herein to be given may be given by mailing
the same, postage prepaid, or by telex, facsimile transmission or cable to each
such party at its address set forth in the Note Purchase Agreement, on the
signature pages hereof or to such other addresses as each such party may in
writing hereafter indicate. Any notice, request or demand to or upon Guarantied
Party or Guarantor shall not be effective until received.
3.3 SEVERABILITY. In case any provision in or obligation under this
------------
Guaranty shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
3.4 AMENDMENTS AND WAIVERS. No amendment, modification, termination or
----------------------
waiver of any provision of this Guaranty, and no consent to any departure by
Guarantor therefrom, shall in any event be effective without the written
concurrence of Guarantied Party and, in the case of any such amendment or
modification, Guarantor against whom enforcement of such amendment or
modification is sought. Any such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which it was given.
3.5 HEADINGS. Section and subsection headings in this Guaranty are
--------
included herein for convenience of reference only and shall not constitute a
part of this Guaranty for any other purpose or be given any substantive effect.
3.6 APPLICABLE LAW. THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF
--------------
GUARANTOR AND BENEFICIARIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN
10
<PAGE>
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEVADA, WITHOUT REGARD TO
CONFLICTS OF LAWS PRINCIPLES.
3.7 SUCCESSORS AND ASSIGNS. This Guaranty is a continuing guaranty and
----------------------
shall be binding upon Guarantor and its respective successors and assigns. This
Guaranty shall inure to the benefit of Beneficiaries and their respective
successors and assigns. Guarantor shall not assign this Guaranty or any of the
rights or obligations of Guarantor hereunder without the prior written consent
of all Holders. Any Beneficiary may, without notice or consent, assign its
interest in this Guaranty in whole or in part, in accordance with Section 9.14
of the Note Purchase Agreement with respect to an assignment by any Holder and
in accordance with Section 8.7 of the Note Purchase Agreement with respect to an
assignment by the Collateral Agent. The terms and provisions of this Guaranty
shall inure to the benefit of any transferee or assignee of any Note, and in the
event of such transfer or assignment the rights and privileges herein conferred
upon such Beneficiary shall automatically extend to and be vested in such
transferee or assignee, all subject to the terms and conditions hereof.
3.8 CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL JUDICIAL
----------------------------------------------
PROCEEDINGS BROUGHT AGAINST GUARANTOR ARISING OUT OF OR RELATING TO THIS
GUARANTY, OR ANY OBLIGATIONS HEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL
COURT OF COMPETENT JURISDICTION IN THE STATE OF NEVADA. BY EXECUTING AND
DELIVERING THIS AGREEMENT, GUARANTOR, FOR ITSELF AND IN CONNECTION WITH ITS
PROPERTIES, IRREVOCABLY
(I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE
JURISDICTION AND VENUE OF SUCH COURTS;
(II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS;
(III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN
ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, TO GUARANTOR AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH
SUBSECTION 3.2;
(IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS
SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER GUARANTOR IN ANY SUCH
PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND
BINDING SERVICE IN EVERY RESPECT;
(V) AGREES THAT BENEFICIARIES RETAIN THE RIGHT TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST GUARANTOR IN
THE COURTS OF ANY OTHER JURISDICTION; AND
11
<PAGE>
(VI) AGREES THAT THE PROVISIONS OF THIS SUBSECTION 3.8 RELATING TO
JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST
EXTENT PERMISSIBLE.
3.9 WAIVER OF TRIAL BY JURY. GUARANTOR AND, BY ITS ACCEPTANCE OF THE
-----------------------
BENEFITS HEREOF, EACH BENEFICIARY EACH HEREBY AGREES TO WAIVE ITS RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS GUARANTY. The scope of this waiver is intended to be all encompassing
of any and all disputes that may be filed in any court and that relate to the
subject matter of this transaction, including without limitation contract
claims, tort claims, breach of duty claims and all other common law and
statutory claims. Guarantor and, by its acceptance of the benefits hereof, each
Beneficiary, each (i) acknowledges that this waiver is a material inducement for
Guarantor and Beneficiaries to enter into a business relationship, that
Guarantor and Beneficiaries have already relied on this waiver in entering into
this Guaranty or accepting the benefits thereof, as the case may be, and that
each will continue to rely on this waiver in their related future dealings and
(ii) further warrants and represents that each has reviewed this waiver with its
legal counsel, and that each knowingly and voluntarily waives its jury trial
rights following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE,
MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A
MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SUBSECTION 3.9 AND EXECUTED
BY GUARANTIED PARTY AND GUARANTOR), AND THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS GUARANTY.
In the event of litigation, this Guaranty may be filed as a written consent to a
trial by the court.
3.10 NO OTHER WRITING. This writing is intended by Guarantor and
----------------
Beneficiaries as the final expression of this Guaranty and is also intended as a
complete and exclusive statement of the terms of their agreement with respect to
the matters covered hereby. No course of dealing, course of performance or
trade usage, and no parol evidence of any nature, shall be used to supplement or
modify any terms of this Guaranty. There are no conditions to the full
effectiveness of this Guaranty.
3.11 FURTHER ASSURANCES. At any time or from time to time, upon the
------------------
request of Guarantied Party, Guarantor shall execute and deliver such further
documents and do such other acts and things as Guarantied Party may reasonably
request in order to effect fully the purposes of this Guaranty.
3.12 COUNTERPARTS; EFFECTIVENESS. This Guaranty may be executed in any
---------------------------
number of counterparts and by the different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original for all purposes; but all such counterparts together shall
constitute but one and the same instrument. This Guaranty shall become
effective as to Guarantor upon the execution of a counterpart hereof by
12
<PAGE>
Guarantor and receipt by Guarantied Party of written or telephonic notification
of such execution and authorization of delivery thereof.
3.13 GUARANTIED PARTY AS COLLATERAL AGENT.
------------------------------------
(a) Guarantied Party has been appointed to act as Guarantied Party
hereunder by Holders. Guarantied Party shall be obligated, and shall have the
right hereunder, to make demands, to give notices, to exercise or refrain from
exercising any rights, and to take or refrain from taking any action, solely in
accordance with this Guaranty and the Note Purchase Agreement.
(b) Guarantied Party shall at all times be the same Person that is
Collateral Agent under the Note Purchase Agreement. Written notice of
resignation by Collateral Agent pursuant to subsection 8.7 of the Note Purchase
Agreement shall also constitute notice of resignation as Guarantied Party under
this Guaranty; removal of Collateral Agent pursuant to subsection 8.7 of the
Note Purchase Agreement shall also constitute removal as Guarantied Party under
this Guaranty; and appointment of a successor Collateral Agent pursuant to
subsection 8.7 of the Note Purchase Agreement shall also constitute appointment
of a successor Guarantied Party under this Guaranty. Upon the acceptance of any
appointment as Collateral Agent under subsection 8.7 of the Note Purchase
Agreement by a successor Collateral Agent, that successor Collateral Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring or removed Guarantied Party under this Guaranty, and
the retiring or removed Guarantied Party under this Guaranty shall promptly (i)
transfer to such successor Guarantied Party all sums held hereunder, together
with all records and other documents necessary or appropriate in connection with
the performance of the duties of the successor Guarantied Party under this
Guaranty, and (ii) take such other actions as may be necessary or appropriate in
connection with the assignment to such successor Guarantied Party of the rights
created hereunder, whereupon such retiring or removed Guarantied Party shall be
discharged from its duties and obligations under this Guaranty. After any
retiring or removed Guarantied Party's resignation or removal hereunder as
Guarantied Party, the provisions of this Guaranty shall inure to its benefit as
to any actions taken or omitted to be taken by it under this Guaranty while it
was Guarantied Party hereunder.
13
<PAGE>
IN WITNESS WHEREOF, the undersigned Guarantor has caused this Guaranty
to be duly executed and delivered by its officer thereunto duly authorized as of
the date first written above.
SAHARA GAMING CORPORATION
By /s/ Thomas K. Land
Title Senior Vice President and
Chief Financial Officer
S-1
<PAGE>
EXHIBIT 23
Sahara Gaming Corporation
Las Vegas, Nevada
We have made a review, in accordance with Statements on Standards for Accounting
and Review Services issued by the American Institute of Certified Public
Accountants, of the unaudited interim financial information of Sahara Gaming
Corporation and subsidiaries for the periods ended December 31, 1995 and 1994,
as indicated in our report dated February 13, 1996 because we did not perform an
audit, we expressed no opinion on that information.
We are aware that our report referred to above, which is included in your
Quarterly Report on Form 10-Q for the quarter ended December 31, 1995 is
incorporated by reference In Registration Statement No. 33-44700 on Form S-8 and
in post-effective Amendment No. 1 to Registration Statement No. 33-7053 on Form
S-8.
We also are aware that the aforementioned report, pursuant to Rule 436(c) under
the Securities Act of 1933, is not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that act.
DELOITTE & TOUCHE LLP
Las Vegas, Nevada
February 13, 1996
<TABLE> <S> <C>
<PAGE>
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 35,161,475
<SECURITIES> 0
<RECEIVABLES> 3,957,247
<ALLOWANCES> 0
<INVENTORY> 1,406,606
<CURRENT-ASSETS> 46,365,728
<PP&E> 210,682,193
<DEPRECIATION> 47,749,162
<TOTAL-ASSETS> 265,547,316
<CURRENT-LIABILITIES> 22,884,701
<BONDS> 197,589,248
0
17,521,385
<COMMON> 61,944
<OTHER-SE> 51,513,504
<TOTAL-LIABILITY-AND-EQUITY> 265,547,316
<SALES> 0
<TOTAL-REVENUES> 68,819,729
<CGS> 0
<TOTAL-COSTS> 15,739,774
<OTHER-EXPENSES> 10,404,652
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<INTEREST-EXPENSE> 6,822,262
<INCOME-PRETAX> 35,853,041
<INCOME-TAX> 12,219,000
<INCOME-CONTINUING> 23,634,041
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<EXTRAORDINARY> 0
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<EPS-PRIMARY> 3.76
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