<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: JUNE 30, 1997
-------------------------------------------------
[ ] 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
---------------------------------------------------------
SANTA FE GAMING CORPORATION
-------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
NEVADA 88-0304348
------------------------------------------------------------ --------------------------------------
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)
</TABLE>
4949 NORTH 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 August 13, 1997
- ------------------------------------------ ---------------------------------
Amount Outstanding Date
<PAGE>
SANTA FE GAMING CORPORATION AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Condensed Financial Statements
Balance sheets at June 30, 1997
(unaudited) and September 30, 1996 2
Statements of Operations for the three and nine
months ended June 30, 1997 and 1996
(unaudited) 3
Statement of Changes in Stockholders' Equity
for the nine months ended June 30, 1997
(unaudited) 4
Statements of Cash Flows for the nine months
ended June 30, 1997 and 1996 (unaudited) 5
Notes to Consolidated Condensed Financial
Statements (unaudited) 6
Independent Accountants' Review Report 14
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 15
PART II. OTHER INFORMATION 26
</TABLE>
1
<PAGE>
Santa Fe Gaming Corporation and
Subsidiaries Consolidated
Condensed Balance Sheets
<TABLE>
<CAPTION>
June 30, September 30,
ASSETS 1997 1996
- ------------------------------------------------- ------------ ------------
<S> <C> <C>
(Unaudited)
Current assets:
Cash and short-term investments $ 10,205,138 $ 17,497,824
Accounts receivable, net 1,414,853 1,529,723
Accounts receivable, officer 674,485 636,113
Inventories 1,169,741 1,218,120
Prepaid expenses & other 4,934,592 3,778,514
Assets held for sale 0 2,424,821
------------ ------------
Total current assets 18,398,809 27,085,115
Land held for development 38,194,065 38,194,065
Property and equipment, net 105,744,418 110,217,659
Goodwill 44,999,511 46,073,869
Other assets 7,831,215 7,085,069
------------ ------------
Total assets $215,168,018 $228,655,777
============ ============
LIABILITIES and STOCKHOLDERS' EQUITY
- -------------------------------------------------
Current liabilities:
Current portion of long-term debt $ 12,417,139 $ 3,770,817
Accounts payable 4,829,186 5,757,161
Interest payable 1,858,238 7,142,225
Accrued and other liabilities 8,727,840 9,134,856
------------ ------------
Total current liabilities 27,832,403 25,805,059
Deferred income taxes 0 2,687,751
Long-term debt - less current portion 162,235,666 167,687,476
Commitments
Stockholders' equity:
Common stock, $.01 par value; authorized-100,000,000
shares; issued and outstanding-6,195,356 shares 61,954 61,954
Preferred stock, exchangeable, redeemable 8% cumulative,
stated at $2.14 liquidation value, authorized-10,000,000
shares; issued and outstanding-8,856,651 shares 20,090,427 18,953,233
Additional paid-in capital 51,513,504 51,513,504
Accumulated deficit (46,478,162) (37,965,426)
------------ ------------
Total 25,187,723 32,563,265
Less treasury stock - 4,875 shares, at cost (87,774) (87,774)
------------- ------------
Total stockholders' equity 25,099,949 32,475,491
------------- ------------
Total liabilities and stockholders' equity $215,168,018 $228,655,777
============ ============
</TABLE>
See the accompanying Notes to Consolidated Condensed Financial Statements.
2
<PAGE>
Santa Fe Gaming Corporation and Subsidiaries
Consolidated Condensed Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
June 30, 1997 June 30, 1996 June 30, 1997 June 30, 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Casino $22,283,530 $20,374,926 $63,609,645 $65,205,811
Hotel 1,051,280 1,063,904 3,061,682 3,028,663
Food and beverage 2,729,467 2,812,246 8,086,735 8,488,705
Other revenues 1,451,711 1,698,950 5,648,056 6,380,207
Gain on sale of assets 0 0 0 40,753,738
----------- ----------- ----------- -----------
Total revenues 27,515,988 25,950,026 80,406,118 123,857,124
----------- ----------- ----------- -----------
Operating expenses:
Casino 10,720,016 10,943,438 31,749,544 32,732,907
Hotel 457,155 474,049 1,319,149 1,365,017
Food and beverage 3,438,509 4,040,954 10,898,320 11,803,497
Other operating expenses 738,779 850,305 2,212,925 2,684,479
Selling, general & administrative 3,553,412 3,826,082 10,601,997 12,014,077
Utilities & property expenses 3,111,085 2,652,156 9,083,909 7,429,110
Depreciation & amortization 2,753,904 3,532,881 8,241,501 10,868,140
----------- ----------- ----------- -----------
Total operating expenses 24,772,860 26,319,865 74,107,345 78,897,227
----------- ------------ ----------- -----------
Operating income (loss) 2,743,128 (369,839) 6,298,773 44,959,897
Interest expense 5,585,080 5,766,250 16,948,978 18,716,389
----------- ----------- ----------- -----------
Income (loss) before income tax expense
(benefit) and extraordinary item (2,841,952) (6,136,089) (10,650,205) 26,243,508
Federal income tax expense (benefit) (491,055) (1,965,000) (2,902,340) 9,195,000
----------- ----------- ----------- -----------
Income (loss) before extraordinary item (2,350,897) (4,171,089) (7,747,865) 17,048,508
Extraordinary item-gain on early extinguishment
of debt, net of tax provision of $200,482
in 1997 and $4,229,000 in 1996 372,323 0 372,323 7,854,707
----------- ----------- ----------- -----------
Net income (loss) (1,978,574) (4,171,089) (7,375,542) 24,903,215
Dividends on preferred shares 379,065 364,432 1,137,194 1,065,848
----------- ----------- ----------- -----------
Net income (loss) applicable to common shares ($2,357,639) ($4,535,521) ($8,512,736) $23,837,367
=========== =========== =========== ===========
Average common shares outstanding 6,195,356 6,195,356 6,195,356 6,195,356
=========== =========== =========== ===========
Income (loss) per common share ($0.38) ($0.73) ($1.37) $3.85
=========== =========== =========== ===========
</TABLE>
See the accompanying Notes to Consolidated Condensed Financial Statements.
3
<PAGE>
Santa Fe Gaming Corporation and Subsidiaries
Consolidated Condensed Statements 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, 1996 $61,954 $18,953,233 $51,513,504 ($37,965,426) ($87,774) $32,475,491
Net loss (7,375,542) (7,375,542)
Preferred stock dividend accrued 1,137,194 (1,137,194) 0
------- ----------- ----------- ------------ -------- -----------
Balances, June 30, 1997 $61,954 $20,090,427 $51,513,504 ($46,478,162) ($87,774) $25,099,949
======= =========== =========== ============ ======== ===========
</TABLE>
See the accompanying Notes to Consolidated Condensed Financial Statements.
4
<PAGE>
Santa Fe Gaming Corporation and Subsidiaries
Consolidated Condensed Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
30-Jun-97 30-Jun-96
- -------------------------------------------- ------------ -------------
<S> <C> <C>
Cash flows from operating activities:
Cash and short-term investments
provided by operations $2,164,108 $37,098,150
Gain on sale of assets (40,753,738)
Gain on sale of land held for development (725,179)
Gain on early extinguishment of debt (372,323) (7,854,707)
Deferred gain on sale of equipment (962,552)
Decrease in accounts receivable, net 114,870 3,547,883
Increase in accounts receivable, officer (38,372) (78,424)
Decrease in inventories 48,379 231,874
Decrease (increase) in prepaid expenses & other (1,156,066) 575,309
Increase (decrease) in deferred income taxes (2,888,233) 9,195,000
Decrease (increase) in other assets (1,614,350) 2,409,023
Decrease in accounts payable (927,975) (827,790)
Decrease in interest payable (5,031,376) (7,361,822)
Decrease in accrued and other liabilities (300,202) (5,562,441)
------------ -------------
Net cash used in operating activities (10,726,719) (10,344,235)
------------ -------------
Cash flows from investing activities:
Proceeds from sale of assets 128,508,377
Proceeds from sale leaseback of equipment 3,570,000
Proceeds from sale of land held for development 3,150,000
Decrease in restricted cash 95,569
Capital expenditures (1,551,270) (4,369,535)
------------ -------------
Net cash provided by investing activities 1,598,730 127,804,411
------------ -------------
Cash flows from financing activities:
Cash proceeds of long-term debt 6,675,658 20,000,000
Cash paid on long-term debt (4,840,355) (163,565,349)
------------ -------------
Net cash provided by (used in) financing activities 1,835,303 (143,565,349)
------------ -------------
Decrease in cash and short-term investments (7,292,686) (26,105,173
Cash and short-term investments,
beginning of period 17,497,824 42,749,932
------------ -------------
Cash and short-term investments,
end of period $ 10,205,138 $ 16,644,759
============ =============
</TABLE>
See the accompanying Notes to Consolidated Condensed Financial Statements.
5
<PAGE>
SANTA FE GAMING CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION AND GENERAL INFORMATION
Santa Fe Gaming Corporation, formerly known as Sahara Gaming Corporation, (the
"Company" or "Santa Fe 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 are conducted through two wholly owned
subsidiary corporations, Santa Fe Hotel Inc. ("SFHI") and Pioneer Hotel Inc.
("PHI") (the "Operating Companies"). 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.
The Company owns real estate adjacent to the Santa Fe, on Las Vegas Bouelvard
South through an indirect wholly owned subsidiary of the Company, Sahara Las
Vegas Corp ("SLVC"), and in Henderson, Nevada through a wholly-owned subsidiary
of the Pioneer for possible development opportunities. The Company, through its
wholly-owned subsidiaries, Hacienda Hotel Inc. ("HHI") and Sahara Nevada Corp
("SNC") previously owned and operated the Hacienda Resort Hotel & Casino (the
"Hacienda") and the Sahara Hotel & Casino (the "Sahara"), but sold substantially
all of the assets related to those hotel/casinos in August 1995 and October
1995, respectively.
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, 1996.
The results of operations for the three and nine month periods ended June 30,
1997 and 1996 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
June 30, 1997, the results of its operations for the three and nine month
periods ended June 30, 1997 and 1996, the changes in stockholders' equity for
the nine month period ended June 30, 1997, and cash flows for the nine month
periods ended June 30, 1997 and 1996.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results may differ from estimates.
6
<PAGE>
Recently Issued Accounting Standards
The Financial Accounting Standard Board ("FASB") recently issued SFAS No. 128
"Earnings per Share". This statement establishes standards for computing and
presenting earnings per share and is effective for financial statements issued
for periods ending after December 15, 1997. Earlier application of this
statement is not permitted and upon adoption requires restatement (as
applicable) of all prior-period earnings per share data presented. Management
believes that the implementation of this standard will not have a significant
impact on earnings per share.
In addition, the FASB issued SFAS No. 129, Disclosure of Information about
Capital Structure in February 1997. This statement establishes standards for
disclosing information about an entity's capital structure. Management intends
to comply with the disclosure requirements of this statement which are effective
for periods ending after December 15, 1997.
On June 30, 1997, the FASB issued SFAS No. 130, Reporting Comprehensive Income.
This statement requires companies to classify items of other comprehensive
income by their nature in a financial statement and display the accumulated
balance of other comprehensive income separately from retained earnings and
additional paid-in capital in the equity section of a statement of financial
position, and is effective for financial statements issued for fiscal years
beginning after December 15, 1997. Management does not believe this new FASB
will have material impact on their financial statements.
On June 30, 1997, the FASB issued SFAS No. 131, Disclosure About Segments of an
Enterprise and Related Information. This statement establishes additional
standards for segments reporting in the financial statements and is effective
for fiscal years beginning after December 15, 1997. Management has not
determined the effect of this statement on its financial statement disclosure.
NOTE 2 - CASH AND SHORT-TERM INVESTMENTS
At June 30, 1997, approximately $6.1 million of the Company's consolidated cash
and short term investments was held by SFHI and was 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 million principal amount of 11% First Mortgage Notes due
2000 ("11% Notes") of SFHI was issued. As of June 30, 1997, SFHI did not meet
the conditions precedent to making a distribution to the Company.
At June 30, 1997, approximately $3.3 million of the Company's consolidated cash
and short-term investments was held by PHI and was subject to certain
restrictions, including restrictions on its availability for distribution to the
Company, by the terms of an indenture pursuant to which the 13 1/2% First
Mortgage Notes due 1998 ("13 1/2% Notes") of Pioneer
7
<PAGE>
Finance Corp. were issued. As of June 30, 1997, PHI did not meet the conditions
precedent to making a distribution to the Company.
NOTE 3 - ACCOUNT RECEIVABLE OFFICER
As of June 30, 1997 and September 30, 1996, Accounts Receivable, Officer
reflects an unsecured demand loan in the principal amount of $476,000, which,
together with accrued interest, totaled approximately $674,000 and $636,000,
respectively, from HHI to LICO, a company wholly-owned by Paul W. Lowden,
Chairman of the Board, Chief Executive Officer and 52% stockholder of the
Company. The loan from HHI to LICO bears interest at the rate equal to 2% over
the prime rate. In January 1997, the Company and Mr. Lowden agreed that the
Company may offset amounts due Mr. Lowden under certain compensation
arrangements against the outstanding balance of the loan beginning in 1998.
NOTE 4 - ASSETS HELD FOR SALE
In November 1996, the Company sold an option to acquire a 40 acre parcel located
approximately eight miles south of the former Hacienda on Las Vegas Boulevard
South for $2.8 million. Pursuant to the option agreement, the option holder
exercised the option in February, 1997 to purchase the property for $350,000 in
additional net proceeds to the Company. The Company reported a $730,000 gain on
the sale and has included this gain in other revenues in the quarter ended March
31, 1997.
NOTE 5 - LONG-TERM DEBT
In December 1996, the Company borrowed approximately $1.6 million pursuant to a
first mortgage note secured by the 22 acre parcel of real property adjacent to
the Santa Fe ("Land Note"). The Land Note requires interest only payments at a
12% per annum interest rate for a three-year term. The Company utilized
proceeds from the Land Note to satisfy an existing first mortgage note of
$850,000 and expenses of the transactions resulting in net proceeds of
approximately $650,000.
In April 1997, the Company acquired $3.5 million principal amount of 10 1/4%
Subordinated Sinking Fund Debentures ("Debentures"), due 1998. The Company
submitted $2.3 million in Debentures to the trustee for cancellation in
satisfaction of the sinking fund payment due in June 1997. In addition, the
Company submitted $1.2 million for cancellation in reduction of the balance due
at maturity in June 1998. The Company recorded a $700,000 extraordinary gain
before amortization of debt discount and original issue cost and federal income
tax on the purchase which is reported in the quarter ended June 30, 1997.
8
<PAGE>
In May 1997, the Company borrowed $5.0 million at a rate of 12 1/4% interest,
payable monthly for a twelve month term, pursuant to a first mortgage note
secured by the 39 acre parcel of land located in Henderson, Nevada (the "12 1/4%
Note").
In August 1997, the Company and the holders of the 12% First Mortgage Notes due
1999 ("12% Notes") secured by, among other things, the 27 acre real property
located on Las Vegas Boulevard South, amended the terms of the 12% Notes to,
among other things, (i) provide for the issuance of up to an additional $20
million of 12% Notes, (ii) provide for the deferral of a $500,000 principal
payment originally due on December 31, 1996 from June 30, 1997, until December
31, 1997, and (iii) revise a covenant requiring redemption of 12% Notes (or
alternatively the redemption of 11% Notes), in the event cash flow (before
maximum of $2.4 million lease payments) at the Santa Fe is less than $13.5
million for any four-quarter period commencing with the four-quarter period
ending December 31, 1997. (See Note 10 - Subsequent Events)
NOTE 6 - STOCKHOLDERS' EQUITY
Prior to fiscal 1997, the Company satisfied 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. Pursuant to the terms of the Certificate of Designation
with respect to the preferred stock, dividends that are not declared are
cumulative and accrue at a rate per annum equal to 8% of $2.14 for each share of
preferred stock. The Company is a party to 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 currently prohibit the payment of
cash dividends on the preferred stock.
In March 1997, the Company announced that it was not declaring the semi-annual
dividend with respect to its preferred stock. The accrued stock dividend has
been recorded as an increase to the preferred stock account.
Pursuant to the terms of the 12% Notes, as amended, while the 12% Notes are
outstanding the Company is prohibited from exercising an option to exchange the
Preferred Stock into Junior Subordinated Notes, beginning in September 1998.
NOTE 7 - LEASES
In December 1996, the Company executed an operating lease for 180 slot machines
at the Pioneer. The lease requires monthly payments of $37,000 for a 36 month
term.
The Company amended the terms of Santa Fe operating leases entered into during
fiscal 1996 to, among other things, extend the term of the leases from 24 to 36
months and to
9
<PAGE>
replace older gaming equipment with newer equipment. Santa Fe's lease payments
aggregating approximately $250,000 per month, expire at various times between
March 1, 1999 and May 15, 2001.
NOTE 8 - INCOME TAXES
For the nine months ended June 30, 1997, a tax benefit of $2.7 million was
recognized. All of the benefit was a deferred tax benefit. The tax benefit for
federal income taxes differs from the amounts computed by applying the federal
income tax rate of 35% to income before benefit for federal income taxes for the
following items (dollars in thousands):
<TABLE>
<CAPTION>
% of Pretax
Amount Income
------- --------
<S> <C> <C>
Expected benefit for federal
income taxes $3,527 35%
Amortization of goodwill (376) (4%)
Other, Net (449) (4%)
------- ----
Benefit for federal income taxes $2,702 27%
======= ====
</TABLE>
The Company, as of September 30, 1996, had federal net operating loss credit
carryforwards of approximately $24.5 million expiring at various dates though
2010.
NOTE 9 - SUPPLEMENTAL INFORMATION
Supplemental statement of cash flows information for the nine month periods
ended June 30, 1997 and 1996 is presented below:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Operating Activities:
Cash paid during the period
for interest $21,139,499 $25,400,475
=========== ===========
Cash paid during the period for income taxes: $ 100,000 $ 0
=========== ===========
Investing and Financing Activities:
Debt incurred in connection with the
acquisition of machinery and equipment $ 633,865 $ 76,734
=========== ===========
Supplemental Schedule of Non Cash
Investing and Financing Activities
Land acquired in exchange of assets $ 0 $21,504,400
=========== ===========
</TABLE>
NOTE 10 - SUBSEQUENT EVENTS
Amended 12% Notes - In 1997, the Company and the holders of the 12% Notes
- -----------------
amended the terms of the 12% Notes to provide for the issuance of up to an
additional $20 million of 12% Notes. The proceeds from an additional $15
million in 12% Notes were
10
<PAGE>
used as follows: (i) $2 million was deposited in a cash collateral account
for future principal and interest payments on the 12% Notes, (ii) $1 million
was distributed to the Company and is restricted to certain uses, including debt
service obligations of the Company and its subsidiaries, and (iii) $12 million
is available to be used for certain expenses, and to repurchase 11% Notes, which
are and will be held as collateral for the 12% notes. If all the 12 million is
not used the Company will be required to redeem a principal amount of 12% Notes
equal to the amount of such proceeds not so used. As of August 13, 1997,
$500,000 remains available for such purposes. Pursuant to the amended agreement
relating to the 12% Notes, the Company has the right to borrow an additional $5
million, the proceeds of which may be used, among other things, to refinance the
12 1/4% Notes.
In addition, the Company and the holders of the 12% Notes, amended the terms of
the 12% Notes to, among other things, (i) provide for the deferral of a $500,000
principal payment originally due on December 31, 1996 from June 30, 1997, until
December 31, 1997, and (ii) revise a covenant requiring redemption of 12% Notes
(or alternatively the redemption of 11% Notes) in the event cash flow (before
maximum of $2.4 million in lease payments) at the Santa Fe is less than $13.5
million for any four-quarter period commencing with the four-quarter period
ending December 31, 1997 from the four-quarter period ending June 30, 1997.
As of August 13, 1997, there are $35 million principal amount of 12% notes
outstanding. Interest is payable semi-annually on June 20 and December 20 and
principal payments of $1 million and $500,000 are due December 31, 1997 and
1998, respectively. The 12% Notes, as amended, are guaranteed by the Company and
secured by, among other things, a 27 acre parcel of real property on the Las
Vegas Strip, Nevada and $33.1 million principal amount of the 11% Notes held by
Sahara Las Vegas Corp. ("SLVC") and collateral accounts consisting of $2.5
million in cash.
Investments - In July 1997, the U.S. Bankruptcy Court of New Orleans entered an
- -----------
order denying confirmation of the Company's Plan of Reorganization for Treasure
Bay Gaming & Resorts, Inc. ("Treasure Bay"). The Court simultaneously entered
an order for confirmation of the Plan of Reorganization proposed by the current
debtor-in-possession of Treasure Bay.
Investments - In August 1997, Santa Fe Mining Company, L.L.C. ("Santa Fe
- -----------
Mining") converted a $100,000 working capital line of credit into a three-year
fully amortizing term loan. In addition, Santa Fe Mining entered into a
financing commitment for a three year fully amortizing Note at 11 1/2% per annum
for approximately $100,000 to finance the acquisition of slot equipment. The
Company owns a 50% equity interest in Santa Fe Mining, a restaurant/tavern
operation in Northwest Las Vegas. The Company and its partner have guaranteed
the above obligations.
11
<PAGE>
11. Supplemental Statement of Subsidiary Information -
For The Nine Months Ended June 30, 1997 and 1996
The Company's primary operations are in the hotel/casino industry and in
fiscal years 1997 and 1996 are conducted through PHI and SFHI. "Other" below
includes financial information for the Company's other operations before
eliminating entries. In addition to the financial information for the nine
months ended June 30, 1997 and 1996, as set forth in the table below (dollars in
thousands), see notes 2, 5 and 7 for additional discussion of subsidiary
operations.
<TABLE>
<CAPTION>
Year PHI SFHI Other Eliminations TOTAL
--------- --------- --------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Operating revenues 1997 $ 31,688 $47,334 $ 2,524 ($1,140) $ 80,406
======== ======= ======= ======= ========
1996 $ 34,543 $47,101 $45,632 ($3,419) $123,857
======== ======= ======= ======= ========
Operating income 1997 $ 1,302 $ 4,877 $ 834 ($ 714) $ 6,299
======== ======= ======= ======= ========
1996 $ 2,488 $ 3,323 $41,065 ($1,916) $ 44,960
======== ======= ======= ======= ========
Interest expense 1997 $ 6,046 $ 9,911 $ 1,706 ($ 714) $ 16,949
======== ======= ======= ======= ========
1996 $ 7,295 $10,231 $ 1,861 ($ 671) $ 18,716
======== ======= ======= ======= ========
Depreciation and amortization 1997 $ 4,186 $ 3,918 $ 138 $ 8,242
======== ======= ======= ======= ========
1996 $ 4,518 $ 6,254 $ 96 $ 10,868
======== ======= ======= ======= ========
Capital expenditures 1997 $ 726 $ 1,266 $ 193 $ 2,185
======== ======= ======= ======= ========
1996 $ 1,025 $ 3,079 $ 266 $ 4,370
======== ======= ======= ======= ========
Identifiable assets 1997 $111,012 $77,326 $ 28,075 ($1,245) $215,168
======== ======= ======== ======= ========
1996 $117,737 $84,320 $ 36,475 ($1,245) $237,287
======== ======= ======== ======= ========
</TABLE>
12
<PAGE>
12. Supplemental Statement of Subsidiary Information
For The Three Months Ended June 30, 1997 and 1996
The Company's primary operations are in the hotel/casino industry and in
fiscal years 1997 and 1996 are conducted through PHI and SFHI. "Other" below
includes financial information for the Company's other operations before
eliminating entries. In addition to the financial information for the three
months ended June 30, 1997 and 1996, as set forth in the table below (dollars in
thousands), see notes 2, 5 and 7 for additional discussion of subsidiary
operations.
<TABLE>
<CAPTION>
Year PHI SFHI Other Eliminations TOTAL
------ ------- ------- ------ ------------ -------
<S> <C> <C> <C> <C> <C> <C>
Operating revenues 1997 $10,582 $16,767 $663 ($496) $27,516
======= ======= ====== ============ =======
1996 $11,107 $15,597 $1,314 ($2,068) $25,950
======= ======= ====== ============ =======
Operating income 1997 $360 $2,701 $95 ($413) $2,743
======= ======= ====== ============ =======
1996 $365 $913 ($162) ($1,486) ($370)
======= ======= ====== ============ =======
Interest expense 1997 $2,039 $3,465 $494 ($413) $5,585
======= ======= ====== ============ =======
1996 $2,076 $3,322 $609 ($241) $5,766
======= ======= ====== ============ =======
Depreciation and amortization 1997 $1,394 $1,316 $44 $2,754
======= ======= ====== ============ =======
1996 $1,507 $1,994 $32 $3,533
======= ======= ====== ============ =======
Capital expenditures 1997 $271 $754 $66 $1,091
======= ======= ====== ============ =======
1996 $197 $750 $0 $947
======= ======= ====== ============ =======
</TABLE>
13
<PAGE>
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
Santa Fe Gaming Corporation:
We have reviewed the accompanying consolidated condensed balance sheet of Santa
Fe Gaming Corporation ( formerly Sahara Gaming Corporation) and subsidiaries
(the "Company") as of June 30, 1997, the related consolidated condensed
statements of operations for three-month and nine-month periods ended June 30,
1997 and 1996, stockholders' equity for the nine-month period ended June 30,
1997 and of cash flows for the nine-month periods ended June 30, 1997 and 1996,
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 Santa Fe Gaming Corporation and
subsidiaries as of September 30, 1996, and the related consolidated statements
of operations, stockholders' equity and of cash flows for the year then ended
(not presented herein); and in our report dated December 16, 1996 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, 1996 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
August 11, 1997
14
<PAGE>
SANTA FE GAMING CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - Nine Months Ended June 30, 1997 and 1996
- ----------------------------------------------------------------
CONSOLIDATED
Consolidated revenues for the nine month period ended June 30, 1997 were $80.4
million, a $2.7 million or 3.2% decrease from $83.1 million for the same period
in fiscal 1996, excluding a $40.8 million gain on the sale of assets in the
prior year period. Revenues decreased by $2.9 million at the Pioneer Hotel and
Gambling Hall (the "Pioneer") and increased by $1.4 million at the Santa Fe
Hotel and Casino (the "Santa Fe"), excluding a $1.2 million intercompany gain in
the sale of land included in the prior year period. Revenues associated with
operations sold, primarily a recreational vehicle park, during prior periods
accounted for a $1.3 million decrease in revenues.
Consolidated operating income for the nine month period ended June 30, 1997 was
$6.3 million, a $2.1 million or 49.8% increase from $4.2 million for the same
period in fiscal 1996, excluding the $40.8 million gain on sale of assets.
Operating income increased by $2.8 million at the Santa Fe, excluding the
intercompany gain included in the prior year period, and decreased by $1.2
million at the Pioneer.
Consolidated interest expense for the nine month period ended June 30, 1997 was
$16.9 million, a $1.8 million decrease compared to $18.7 million for the same
period in fiscal 1996. Interest expense decreased by $300,000 at the Santa Fe
and $1.2 million at the Pioneer in the 1997 period due to the retirement in
January 1996 of approximately $5.6 million principal amount of 11% First
Mortgage Notes due 2000 ("11% Notes") issued by Santa Fe Hotel Inc. ("SFHI") and
the retirement in January and March 1996 of approximately $22.8 million
principal amount of 13 1/2% First Mortgage Notes due 1998 issued by Pioneer
Finance Corp. ("13 1/2% Notes").
Consolidated loss before income taxes and extraordinary item for the nine month
period ended June 30, 1997 was $10.7 million, a $3.9 million decrease compared
to a loss of $14.5 million in the same period in the prior year, excluding the
$40.8 million gain on sale of assets. Loss before income taxes and
extraordinary item at the Santa Fe decreased by $3.1 million in the nine months
ended June 30, 1997 compared to the prior year period, excluding the
intercompany gain included in the prior year period, and was unchanged at the
Pioneer.
15
<PAGE>
SANTA FE
Revenues at the Santa Fe increased 3.2%, or $1.4 million, in the nine months
ended June 30, 1997 to $47.3 million as compared to $45.9 million in the same
period in the prior year, excluding a $1.2 million intercompany gain on the sale
of land included in the prior year period. Casino revenues increased 5.5%, or
$1.9 million, to $36.6 million from $34.7 million, comprised of an increase in
slot revenue of 8.4%, or $2.4 million, offset by decreases in table and other
gaming revenues of $500,000. Food and beverage revenues decreased 9.1%,or
$500,000, to $5.4 million from $5.9 million. The revenue increase for the nine
month period reflects the net effect of an increase in the current quarter of
$2.4 million offset by a decrease of approximately $800,000 during the first six
months of the current period. (See discussions of the most recent three month
period below). Since April 1996, revenues have been impacted due to construction
of an interchange north of the Santa Fe (at US 95 and Rancho). The Nevada
Department of Transportation has advised the Company that construction on the
interchange is expected to be completed before the end of fiscal 1997; however,
the Company has been advised that construction of an overpass at Lone Mountain
Road is scheduled to commence thereafter.
Operating expenses decreased by 3.0%, or $1.3 million. Casino expenses increased
by $1.0 million, or 6.0%, primarily due to increased promotional costs incurred
to directly market to members of the slot club to compete with other hotel-
casinos in the area. This was offset by a decrease of $1.0 million, or 14.4%, in
selling, general and administrative expenses as a result of more direct casino
marketing resulting in decreased general advertising and marketing costs. Food
and beverage expenses had volume and cost control related decreases of 10.7%, or
$800,000, over the prior year period. Utilities and property expenses increased
55.8%, or $2.1 million, attributable to an increase in rent expense due to
operating lease transactions completed in fiscal 1996 with respect to gaming
equipment. Decreases in depreciation and amortization of 37.4%, or $2.3 million,
were due to the sale of slot equipment in the prior fiscal year. Accordingly,
operating income increased $2.8 million, or 134.7%, to $4.9 million in 1997 from
$2.1 million in 1996, excluding the intercompany gain included in the prior year
period.
Interest expense decreased $300,000, or 3.1% to $9.9 million in 1997 compared to
$10.2 million in 1996, primarily due to the repurchase and retirement of $5.6
million principal amount of 11% Notes acquired in January 1996.
Santa Fe is negotiating with the Teamsters, Operating Engineers, Culinary and
Bartenders unions ("Unions") with respect to a collective bargaining agreement
covering certain employees at the Santa Fe. If negotiations result in an
agreement between SFHI and the Unions, operating expenses may increase. In the
event negotiations fail to result in an agreement; the Unions may call a strike,
which would result in operating revenues being adversely affected. In either
event, there could be a material adverse effect on the results of operations and
financial condition of Santa Fe and the Company.
16
<PAGE>
PIONEER
Revenues at the Pioneer decreased 8.3%, or $2.9 million, to $31.7 million as
compared to $34.5 million in the prior year. Casino revenues were $27.0 million
in 1997, representing a decrease of 10.6%, or $3.2 million, from $30.2 million
when compared to the 1996 period, comprised primarily of decreases of 10.6%, or
$2.8 million, in slot revenue, and $200,000 or 6.7%, in table games revenues.
Food and beverage revenues increased 7.6%, or $200,000, to $2.7 million from
$2.5 million. The decrease in the fiscal 1997 period is believed to be primarily
due to the continued competitive gaming market environment in and around
Laughlin, including Indian gaming facilities operating in Arizona and Southern
California.
Operating expenses decreased $1.7 million, or 5.2%, to $30.4 million. Casino
expenses experienced volume-related decreases of 9.3%, or $1.4 million.
Selling, general and administrative expenses increased 7.7%, or $300,000,
primarily as a result of increased advertising and promotional costs.
Utilities and property expenses decreased 7.7%, or $300,000, primarily due to a
decrease in payroll expenses. Decreases in depreciation and amortization
expenses of 7.3%, or $300,000, were related to the sale of certain equipment
during the prior year period. Accordingly, operating income decreased by 47.7%,
or $1.2 million, to $1.3 million in fiscal 1997 from $2.5 million in fiscal
1996.
Interest expense decreased $1.2 million, or 17.1%, to $6.0 million in 1997
compared to $7.3 million in 1996, primarily due to the repurchase and retirement
of $22.8 million principal amount of 13 1/2% Notes in January and March 1996.
Three Months Ended June 30, 1997 and 1996
- -----------------------------------------
CONSOLIDATED
Consolidated revenues for the three month period ended June 30, 1997 were $27.5
million, a $1.5 million, or 6.0%, increase from $26.0 million for the same
period in fiscal 1996. Revenues increased by $2.4 million at the Santa Fe,
excluding a $1.2 million intercompany gain on the sale of land included in the
prior year period, and decreased by $500,000 at the Pioneer.
Consolidated operating income for the three month period ended June 30, 1997 was
$2.7 million, a $3.1 million increase from a $400,000 loss for the same period
in fiscal 1996. Operating income increased by $3.0 million at the Santa Fe,
excluding the intercompany gain included in the prior year period, and was
unchanged at the Pioneer.
17
<PAGE>
Consolidated interest expense for the three month period ended June 30, 1997 was
$5.6 million, a $200,000, or 3.1%, decrease compared to $5.8 million for the
same period in fiscal 1996. Interest expense decreased by $100,000 at the
Santa Fe in the 1997 period.
Consolidated loss before income taxes and extraordinary item for the three month
period ended June 30, 1997 was $2.8 million, a $3.3 million decrease compared to
$6.1 million in the same period in the prior year. Net loss before income taxes
and extraordinary item at the Santa Fe decreased by $2.9 million in the quarter
ended June 30, 1997 compared to the prior year period, excluding the
intercompany gain included in the prior year period, and was unchanged at the
Pioneer.
SANTA FE
Revenues at the Santa Fe increased 16.8%, or $2.4 million, in the three months
ended June 30, 1997 to $16.8 million as compared to $14.4 million in the same
period in the prior year, excluding a $1.2 million intercompany gain on the sale
of land, included in the prior year period. Casino revenues increased 23.2%, or
$2.5 million, to $13.4 million from $10.8 million, comprised of increases in
slot revenue of 24.8%, or $2.3 million. Management believes that slot revenues
during the current period increased in part, from the installation of new games,
and a new advertising campaign. Since April 1996, revenues, have been impacted
due to the construction of an interchange north of the Santa Fe (at US 95 and
Rancho). The Nevada Department of Transportation has advised the Company that
construction on the interchange is expected to be completed before the end of
fiscal 1997; however, the Company has been advised that construction of an
overpass at Lone Mountain Road is scheduled to commence thereafter.
Operating expenses decreased by 4.2%, or $600,000. Casino expenses increased by
$400,000, or 7.2%, primarily due to increased promotional costs incurred by the
slot club to compete with other hotel-casinos in the area. This was partially
offset by a decrease of $200,000, or 11.7%, in selling, general and
administrative expenses as a result of more direct casino marketing resulting in
decreased general advertising and marketing costs. Food and beverage expenses
decreased 20.6%, or $600,000, over the prior year period, related to both
decrease in volume and improved control of cost-of-sales. Utilities and property
expenses increased 38.5%, or $500,000, attributable to an increase in rent
expense due to sale leaseback transactions completed in fiscal 1996 with respect
to gaming equipment. Decreases in depreciation and amortization of 34.0%, or
$700,000, were due to the sale of slot equipment in the prior fiscal year.
Accordingly, operating income increased $3.0 million to $2.7 million in 1997
from a loss of $300,000 in 1996, excluding the intercompany gain included in the
prior year period. Results for the third quarter are not necessarily indicative
of the results to be expected in the future.
18
<PAGE>
PIONEER
Revenues at the Pioneer decreased 4.7%, or $500,000, in the three month period
ended June 30, 1997 to $10.6 million as compared to $11.1 million in the same
period in the prior year. Casino revenues were $8.9 million in 1997,
representing a decrease of 6.3%, or $600,000, comprised primarily of a 7.9%, or
$600,000, decrease in slot revenue. The decrease is believed to be primarily
due to the continued competitive gaming market environment in and around
Laughlin, including Indian gaming facilities opened in Arizona and Southern
California.
Operating expenses decreased $500,000, or 4.8%, to $10.2 million. Casino
expenses experienced volume-related decreases of 9.3%, or $500,000. Selling,
general and administrative expenses increased 10.7%, or $100,000, primarily as a
result of increased advertising and promotional costs. A decrease in
depreciation and amortization expense of 7.5%, or $100,000, was related to the
sale of gaming equipment during the prior year period. Accordingly, operating
income of $400,000 was unchanged in fiscal 1997 from fiscal 1996.
LIQUIDITY AND CAPITAL RESOURCES; TRENDS AND FACTORS RELEVANT TO FUTURE
OPERATIONS
As of June 30, 1997, the Company held cash and short-term investments of $10.2
million compared to $17.5 million at September 30, 1996. The Company's cash used
for operations was $10.7 million for the nine months ended June 30, 1997 as
compared to $10.3 million for similar period in the prior year. Cash generated
from investing activities was $1.6 million and $127.8 million, during the nine
month periods ended June 1997 and 1996, respectively. The 1996 period included
cash of approximately $128.5 million from the sale of the Sahara Hotel. Cash
provided from financing activities was $1.8 million in the nine month period
compared to cash used in financing activities of $143.6 million during the same
period in 1997 compared to 1996. In 1996, the Company utilized proceeds from the
sale of the Sahara Hotel and from the issuance of the private placement of 12%
Notes due 1999 (the "12% Notes") to retire $163.6 million of indebtedness.
The Company's earnings before interest, taxes, depreciation, amortization and
rents ("EBITDAR") were $6.5 million and $17.5 million for the three and nine
months ended June 30, 1997, respectively. The Company's EBITDAR in 1996
excluding the $40.8 million gain on the sale of assets was $3.6 million and
$15.9 million for the comparable three and nine month periods. EBITDAR for the
1997 three and nine month periods represents .99 and .88 times rent and interest
expense, respectively, compared to approximately .58 and .81 times rent and
interest expense, respectively, in the prior year three and nine month periods.
In the fiscal 1997 nine month period, the Company reported approximately $2.9
million in rent expense compared to approximately $900,000 in the fiscal 1996
period. EBITDAR 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
19
<PAGE>
operating income (as determined in accordance with generally accepted accounting
principles) as an indicator of the Company's operating performance, or to cash
flows from operating activities (as determined in accordance with generally
accepted accounting principles) as a measure of liquidity. Management believes
EBITDAR gives a better representation of operating cash flow as a result of
operating leases included in the Company's capital structure.
Prior to fiscal 1996, the Company generally generated sufficient cash from
operations to finance operations, meet existing debt service obligations,
complete capital improvements, maintain existing facilities, and provide working
capital. However, beginning in fiscal year 1996, the Company expended the
balance of its restricted working capital and has, since then, sold assets and
entered into financing arrangements to generate working capital necessary to
satisfy its cash requirements. Debt agreements restrict the distribution of cash
from certain of the Company's subsidiaries to the Company. Cash flow from the
Santa Fe and Pioneer and Sahara Las Vegas Corp., ("SLVC") are not currently, and
are not expected in the foreseeable future to be, available for distribution to
the Company. In addition, debt agreements limit additional indebtedness of such
subsidiaries. Therefore, the Company and its subsidiaries other than SLVC,
Pioneer Hotel Inc. ("PHI") and SFHI, (collectively "Corporate") must rely on
existing cash and available resources including assets that may be sold, to
provide liquidity to fund Corporate cash requirements. See more detailed
discussion of Liquidity for SLVC, PHI, SFHI and Corporate, below.
Debt Obligations - The Company has approximately $12.4 million in current
- ----------------
maturities of long term debt due to third parties during the twelve-month period
ending June 30, 1998, comprised primarily of a $5.5 million principal amount of
10 1/4% Subordinated Debenture due June 1998 (the "10 1/4% Debentures"), $5.0
million pursuant to a first mortgage note secured by the 39 acre parcel of land
located in Henderson, Nevada maturing in May 1998 (the "12 1/4% Note"), and
principal amortization payments under notes payable and capital leases. Under
the amended agreement relating to the 12% Notes, the Company has the right to
borrow an additional $5 million, the proceeds of which may be used, among other
things, to refinance the 12 1/4% Notes. The scheduled maturities applicable to
third party debt at SFHI and PHI during the twelve month period ending June 30,
1998 are $700,000 and $100,000, respectively.
The Company had $162.2 million in long-term debt, net of current maturities and
debt discount, as of June 30, 1997. Approximately $64.8 million of long-term
debt (excluding capital leases) matures in December 1998, comprised primarily of
$60.0 million of principal amount of 13 1/2% Notes and a $4.8 million balloon
payment due on the note payable to Sierra Construction Corp. ("Sierra
Construction") due December 1998.
Although management has in the past and is currently exploring refinancing
alternatives, as well as possible dispositions or financing 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 or modify some or all of
its indebtedness or dispose of, or obtain financing with respect to any assets.
Any such refinancing or modification would be subject to the Company's future
operations and the prevailing market conditions at the time of such proposed
transaction and would likely require the approval of the Nevada Gaming
Authorities for such financings or asset sales.
20
<PAGE>
If the Company is ultimately unable to refinance or modify any such debt prior
to maturity, and/or obtain sufficient proceeds from asset dispositions or
financings to repay such 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 limitation, agreements relating to substantially
all of the outstanding long-term debt of the Company and its subsidiaries.
LIQUIDITY - CORPORATE - Approximately $4.0 million of the Company's current
- ---------------------
assets at June 30, 1997, including approximately $800,000 of cash and short-term
investments, was held by Corporate. In August 1997, Corporate received
an approximate $900,000 distribution from the proceeds of the issuance of an
additional $15 million of 12% Notes. (See Liquidity - SLVC below)
Corporate consists primarily of non-operating entities which do not generate
cash flow from operations. Corporate's principal uses of cash are for debt
service, administrative and professional expenses of the parent company, and
costs associated with the evaluation and development of proposed projects.
Corporate debt service includes payment obligations on $5.5 million principal
amount of the 10 1/4% Debentures, a $5.5 million note payable to Sierra
Construction due December 1998 and a $1.6 million loan on a 22 acre parcel of
land due December 1999. See "Debt Obligations" above.
Additional potential uses of cash by Corporate include the payment of a
guaranteed tenant loan if the Company terminates the lease to which the parcel
on Las Vegas Boulevard South is subject (which loan had an outstanding balance
of $5.5 million as of June 30, 1997) and the payment of $750,000 to the
recreational vehicle park operator to which the Company transferred its rights
and obligations relating to the Camperland recreational vehicle group contracts
if the operator chooses to relocate the Camperland membership to a mutually
acceptable new location. Furthermore, in the event that cash at SFHI or PHI is
insufficient to meet liquidity requirements, Corporate may make contributions
or, to the extent permitted by financing arrangements loans to either SFHI or
PHI to prevent an event of default under debt instruments to which SFHI or PHI
is a party.
Prior to fiscal 1997, the Company satisfied 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. The Company is a party to financing arrangements that
restrict the Company's ability to exchange the preferred stock to junior
subordinate notes in September 1998 and to declare and pay dividends or make
distributions with respect to the Company's capital stock, which currently
prohibit the payment of cash dividends on the preferred stock. In the event not
declared, dividends will accrue on the preferred stock. The Company accrued the
semi-annual preferred stock dividend due in March 1997. To the extent the
21
<PAGE>
Company accrues four consecutive semi-annual preferred stock dividends, the
preferred stockholders will have the right to appoint two members to the Board
of Directors at the next annual meeting of shareholders. In March 1999, the
dividend rate increases to 11.0% from 8.0% and increases by 50 basis points each
semi-annual period thereafter, up to a maximum of 16%.
Management believes that Corporate has sufficient working capital and available
resources to meet its operating requirements through the twelve month period
ending June 30, 1998, excluding the maturity of $5.5 million principle amount of
10 1/4% Subdebentures in June 1998. Management is exploring alternatives to
satisfy the outstanding indebtedness on the 10 1/4% Subdebentures.
See "Debt Obligations" above.
LIQUIDITY - SFHI - At June 30, 1997, approximately $9.2 million of the
- ----------------
Company's current assets, including approximately $6.1 million of cash and short
term investments, was held by SFHI.
Results from operations at the Santa Fe for the three and nine months ended June
30, 1997 generated EBITDAR of $4.8 million and $11.0 million, approximately 1.13
and .91 times rent and interest expense, respectively, during the same period
compared to $1.9 million and $8.6 million, excluding a $1.2 million intercompany
gain on sale of land, of EBITDAR in 1996, or approximately .54 and .82 times
rent and interest expense, respectively. In the fiscal 1997 nine month period,
the Santa Fe reported approximately $2.2 million in rent expense compared to
$300,000 in the fiscal 1996 period. Management believes that Santa Fe's EBITDAR
in future periods may continue to be adversely impacted as a result of increased
competition in its market area and restricted access to the property due to road
construction. The Nevada Department of Transportation has advised the Company
that construction on the interchange is expected to be completed before the end
of 1997; however, the Company has also been advised that construction of an
overpass at Lone Mountain Road is scheduled to commence thereafter.
SFHI's principal uses of cash from operations are for lease payments, interest
payments on indebtedness and capital expenditures to maintain the facility.
Santa Fe's operating expenses in fiscal 1997 include increased lease expenses
associated with lease transactions completed in fiscal 1996. Interest expense in
fiscal 1997 attributable to the 11% Notes decreased when compared to fiscal 1996
as a result of the repurchase and cancellation of $5.6 million principal amount
of 11% Notes in January 1996. Capital expenditures to maintain the facility in
fiscal 1997 are expected to be less than in fiscal 1996 and 1995 in which
expansion projects were completed.
Management believes that, based on operations for the nine month period ended
June 30, 1997, SFHI will have sufficient cash resources to meet its operating
expense requirements
22
<PAGE>
through the twelve month period ending June 30, 1998, although no assurance can
be given to that effect. Results for the third quarter ended June 30, 1997
improved compared to the same quarter in the prior year and to the first two
quarters in fiscal 1997. However, results for the 1997 third quarter are not
necessarily indicative of results for the entire fiscal year. If operating
results do not improve in the future compared to the nine months ended June 30,
1997, management believes SFHI may not have sufficient cash from operations to
meet its debt service requirements through June 30, 1998. SFHI is exploring
alternatives to improve liquidity, including, but not limited to, operating
lease amendments, possible reductions of indebtedness and possible refinancings
or modification of the 11% Notes. To the extent that SFHI is unable to generate
sufficient cash to meet its debt service requirements, Corporate may, to the
extent of available funds, make loans under the intercompany revolving loan
note (the "Revolving Note") with a maximum principal amount of $5 million, or
make capital contributions or make advances to SFHI. See "Liquidity-Corporate."
LIQUIDITY - PHI - At June 30, 1997, approximately $5.1 million of the Company's
- ---------------
current assets, including approximately $3.3 million of cash and short term
investments, was held by PHI At that date, PHI also held, through a wholly-
owned subsidiary, a 39 acre parcel of real property in Henderson, Nevada
("Pioneer Subsidiary"). As of June 30, 1997, the Pioneer subsidiary held
$600,000 of the cash and short-term investments held by the Pioneer.
Results from operations at the Pioneer for the three and nine months ended June
30, 1997, generated EBITDAR of $2.0 million and $6.2 million, approximately .88
and .92 times rent and interest expense respectively, during the same period,
compared with $2.0 million and $7.6 million of EBITDAR in fiscal 1996 or
approximately .91 and .96 times, rent and interest expense, respectively. In the
fiscal 1997 nine month period, the Pioneer reported approximately $700,000 in
rent expense compared to $600,000 in the fiscal 1996 period. Results for the
third quarter are not necessarily indicative of the results to be expected in
the future.
PHI's principal uses of cash are for lease payments, interest payments on
indebtedness and capital expenditures to maintain the facility. Interest
expense attributable to the 13 1/2% Notes decreased to $8.1 million in fiscal
1997 as a result of the retirement of $22.8 million principal amount of 13 1/2%
Notes in January and March 1996. (See Results of Operations - Pioneer).
Interest expense in the future periods will include debt service on the 12 1/4%
Notes in the principal amount of $5 million at the Pioneer subsidiary. Capital
expenditures to maintain the facility in fiscal 1997 are expected to be
approximately that expended during fiscal 1996.
Management believes that, based on operations for the three and nine month
periods ended June 30, 1997, PHI will have sufficient cash and available
resources to meet its operating requirements through the twelve months ending
June 30, 1998, although no assurance can be given to that effect. If operating
results do not improve in the future compared to the nine months and quarter
ended June 30, 1997, management believes PHI may not have sufficient cash from
operations to meet its debt service requirements.
23
<PAGE>
However, PHI, through the Pioneer subsidiary, owns a 39 acre property which
management believes may be sold to the extent necessary to generate liquidity to
meet debt service requirements. PHI is exploring alternatives to improve
liquidity, including, but not limited to, the possible sale of assets, a
possible reduction of indebtedness or retiring of the 13 1/2% Notes. To the
extent that PHI is unable to generate sufficient cash to meet its debt service
requirements, Corporate may, to the extent of available funds, make capital
contributions or, to the extent permitted by financing arrangements, advances to
PHI See "Liquidity-Corporate".
LIQUIDITY - SLVC - At June 30, 1997, approximately $70,000 of the Company's
- ----------------
current assets, including approximately $50,000 of cash and short-term
investments, was held by SLVC. In 1997, SLVC amended and restated the agreement
relating to the 12% Notes, pursuant to which SLVC borrowed an additional $15
million, and has the right to borrow an additional $5 million. The proceeds from
the additional $15 million of 12% Notes were used as follows: (i) $2 million was
deposited in a cash collateral account restricted in use for future principal
and interest payments on the 12% Notes, (ii) $1 million was distributed to the
Company and is restricted to certain uses, including debt service obligations of
the Company and its subsidiaries, and (iii) $12 million is available to be used
for certain expenses and to purchase 11% Notes, which are and will be held as
collateral for the 12% Notes. If all $12 million is not used SLVC will be
required to redeem a principal amount of 12% Notes equal to the amount of such
proceeds not so used. As of August 13, 1997, $500,000 remains available for such
purposes. The additional $5 million that may be borrowed may be used, among
other things, to refinance the 12 1/4% Notes.
SLVC owns a 27 acre parcel of real estate on Las Vegas Boulevard South which is
subject to a lease with a water theme park operator. SLVC generates minimal cash
from the lease agreement, after payment of property costs. SLVC receives
interest income on $33.1 million principal amount of 11% Notes which are held as
collateral for the 12% Notes. SLVC's principal uses of cash on hand, cash
generated under the lease agreement, and interest income on the 11% Notes is to
satisfy principal and interest obligations on the 12% Notes.
Additional potential uses of cash by SLVC include the redemption of $7.0 million
principal amount of 12% Notes or alternatively the redemption of $7.0 million
principal amount of 11% Notes, in the event cash flow, before a maximum $2.4
million in lease obligations at the Santa Fe, is less than $13.5 million for any
four quarter period commencing with the four quarter period ending December 31,
1997.
Management believes that SLVC has available resources, consisting primarily of
restricted working capital, to meet operating and debt service requirements
through the twelve months ending June 30, 1998, although no assurance can be
given to that effect.
Related Parties From 1991 through 1993 LICO, a company wholly-owned by Mr.
- ---------------
Lowden, Chairman of the Board, Chief Executive Officer and 52% stockholder of
the Company, borrowed an aggregate of $476,000 from a subsidiary of the Company,
pursuant to an
24
<PAGE>
unsecured demand loan which bears interest at 2% over the prime rate. The
outstanding balance of the loan including accrued interest was $674,000 as of
June 30, 1997. In January 1997, the Company and Mr. Lowden agreed that the
Company may offset amounts due Mr. Lowden, under certain compensation
arrangements, against the outstanding balance of the loan beginning in 1998.
In November 1993, Mr. Lowden and Bank of America ("the Bank") 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. At June 30, 1997, the principal
balance of the loan was approximately $927,000. 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 that the value of the pledged collateral is at least three
times the outstanding loan balance. Based on the recent trading price of the
Company's common stock, the market value of the Pledge Shares is less than 3
times the outstanding loan balance. The Bank has requested Mr. Lowden to either
reduce the outstanding loan balance or to provide additional collateral. 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 operations. Any such increases
in costs associated with casino operations and maintenance of properties may not
be completely recovered by the Company.
Private Securities Litigation Reform Act
- ----------------------------------------
Certain statements in this Quarterly Report on Form 10-Q which are not
historical facts are forward looking statements, such as statements relating to
future operating results, existing and expected competition, financing and
refinancing sources and availability, plans for future development or expansion
activities and capital expenditures. Such forward looking statements involve a
number of risks and uncertainties that may significantly affect the Company's
liquidity and results in the future and, accordingly, actual results may differ
materially from those expressed in any forward looking statements. Such risks
and uncertainties include, but are not limited to, those related to effects of
competition, leverage and debt service and ability, financing and refinancing
efforts, general economic conditions, changes in gaming laws or regulations
(including the legalization of gaming in various jurisdictions) and risks
related to development and construction activities.
25
<PAGE>
SANTA FE GAMING CORPORATION
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
HYLAND V. GRIFFIN INVESTIGATIONS ET AL.
Pursuant to an order of the United States District Court in New Jersey, the
lawsuit was dismissed as against Santa Fe Gaming Corporation and virtually all
other defendants.
TREASURE BAY - SECURITIES LITIGATION
The United States District Court in Nevada dismissed the Francis L. Miller
lawsuit as originally filed in Mississippi Circuit Court. The Court permitted
Mr. Miller to file the claims that he asserted in the dismissed action as
counterclaims to the lawsuit filed by the Company against Mr. Miller et al. on
December 12, 1994 in the United States District Court, District of Nevada. The
effect of this court initiated action was to combine the two lawsuits.
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
The Company, PHI, and SFHI, (Collectively, the "Santa Fe Group"), are subject to
extensive state and local regulations by the Nevada Gaming Commission, Nevada
Gaming Control Board and in the case of Pioneer Hotel, Inc., and Santa Fe Hotel,
Inc., the Clark County Liquor & Gaming Licensing Board and the City of Las
Vegas, respectively, (collectively the "Nevada Gaming Authorities"). Management
believes the Santa Fe Group is in compliance with regulations promulgated by the
Nevada Gaming Authorities.
26
<PAGE>
In June 1997, the Nevada legislature adopted Senate Bill 208 ("SB 208") which is
intended to impose stricter requirements with respect to developing resort
hotels within Clark County, Nevada, before gaming licenses can be granted.
Under SB 208, the stricter requirements will not be applicable to the Company's
proposed development of the Henderson, Nevada project provided (i) the project
has received all approvals for land use for the proposed project from the local
governing body on or before December 31, 1998, and such approvals remain
unexpired on that date, and (ii) the Nevada Gaming Commission approves a
nonrestricted gaming license for the project on or before December 31, 2002.
Item 6 - Exhibits and Reports on Form 8-K
A. Exhibits:
10.84 Sahara Las Vegas Corp Tranche A Note due December 15,
1999, dated July 31, 1997
10.85 Casino Properties Guaranty dated July 29, 1997
10.86 Sahara Resorts Guaranty dated July 29, 1997
10.87 Hacienda Hawaiian Guaranty dated July 29, 1997
10.88 First Amendment to Company Security Agreement dated
July 29, 1997
10.89 Sahara Resorts Pledge Agreement dated July 29, 1997
10.90 Company Pledge Agreement dated July 29, 1997
10.91 Casino Properties Pledge Agreement dated July 29, 1997
10.92 Hacienda Hawaiian Pledge Agreement dated July 29, 1997
23 Consent of Deloitte & Touche LLP
27 Financial Data Schedule
B. Reports on Form 8-K:
None
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.
SANTA FE GAMING CORPORATION, Registrant
By: /s/ Thomas K. Land
-------------------------------------------------
Thomas K. Land, Chief Financial Officer
Dated: August 14, 1997
27
<PAGE>
EXHIBIT 10.84
SAHARA LAS VEGAS CORP.
TRANCHE A NOTE DUE DECEMBER 15, 1999
July 31, 1997
$15,000,000 Los Angeles, California
FOR VALUE RECEIVED, the undersigned, SAHARA LAS VEGAS CORP. (herein
called the "Company"), a corporation organized and existing under the laws of
the State of Nevada, hereby promises to pay to OKGBD & Co., as nominee for
SUNAMERICA, INC. or registered assigns ("Holder"), the principal sum of FIFTEEN
MILLION DOLLARS ($15,000,000) on December 15, 1999 with interest (computed on
the basis of actual days elapsed and a 360-day year of twelve 30-day months) on
the unpaid balance thereof at 12% per annum from the date hereof, payable semi-
annually on June 20 and December 20, commencing on December 20, 1997, and the
stated maturity of this Note, and, to the extent permitted by law, upon the
occurrence of and continuation of an Event of Default (as defined in the Note
Purchase Agreement), interest, payable, on demand, at a rate per annum from time
to time equal to 2% per annum above the interest rate specified above. In
addition to interest as set forth herein, if any payment of principal and/or
interest or any other amount payable hereunder or under the other Basic
Documents (as defined in the Note Purchase Agreement) is not paid when due,
Company shall pay to each Holder, on demand, a 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.
Payments of principal of, interest on and late charges with respect to
this Note are to be made in lawful money of the United States of America as
provided in the Securities Purchase Agreement referred to below.
This Note is one of the Tranche A Notes (herein called the "Notes")
issued pursuant to the Amended and Restated Note Purchase Agreement, dated as of
July 29, 1997 (as from time to time amended, modified or otherwise supplemented,
the "Note Purchase Agreement"), among the Company, Santa Fe Gaming Corporation
(formerly named Sahara Gaming Corporation), SunAmerica Life Insurance Company,
as Collateral Agent, and the Holders party thereto and is entitled to the
benefits thereof. Each holder of this Note will be deemed, by its acceptance
hereof, to have made the representation set forth in Section 2.9 of the Note
Purchase Agreement.
This Note, together with the other notes issued pursuant to the Note
Purchase Agreement, are secured by the Company Deed of Trust, the Company
Security Agreement and certain other Basic Documents (as such terms are defined
in the Note Purchase Agreement) and is guaranteed by the SGC Guaranty, the
Sahara Resorts Guaranty and the other Guaranties (as such terms are defined in
the Note Purchase Agreement).
1
<PAGE>
This Note is a registered Note and, as provided in the Note Purchase
Agreement, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company will not be affected by any notice to
the contrary.
The Company will make required prepayments of principal on the dates
and in the amounts specified in the Note Purchase Agreement. This Note is also
subject to optional prepayment, in whole or from time to time in part, at the
times and on the terms specified in the Note Purchase Agreement.
If an Event of Default, as defined in the Note Purchase Agreement,
occurs and is continuing, the principal of this Note may be declared or
otherwise become due and payable in the manner, at the price and with the effect
provided in the Note Purchase Agreement.
2
<PAGE>
This Agreement shall be construed and enforced in accordance with, and
the rights of the parties shall be governed by, the law of the State of Nevada
excluding choice-of-law principles of the law of such State that would require
the application of the laws of a jurisdiction other than such State.
SAHARA LAS VEGAS CORP.
By /s/ Thomas K. Land
----------------------------------------
Thomas K. Land
Title: Treasurer and Assistant Secretary
By /s/ Paul W. Lowden
----------------------------------------
Paul W. Lowden
Title: President
S-1
<PAGE>
OPTION OF HOLDER TO ELECT REPURCHASE
If you want to elect to have this Note purchased by Company pursuant
to Section 2.5C(v) of the Note Purchase Agreement, check the box: [_]
---------------
If you want to elect to have only part of this Note purchased by
Company pursuant to Section 2.5C(v) of the Note Purchase Agreement, state the
---------------
amount (which must be $1,000 or an integral multiple of $1,000):
$____________________
Date: ___________________ Signature:_____________________________
(Sign exactly as your name
appears on the other side of
this Note)
Signature Guarantee:
<PAGE>
EXHIBIT 10.85
EXHIBIT III-D
CASINO PROPERTIES GUARANTY
This GUARANTY is entered into as of July 29, 1997 by CASINO
PROPERTIES, INC., 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 "REPRESENTATIVE") 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 Santa Fe Gaming Corporation (formerly named Sahara Gaming Corporation) have
entered into that certain Amended and Restated Note Purchase Agreement dated as
of July 29, 1997 with Representative (said Amended and Restated 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 a portion of the capital stock of Company and
will benefit from the transactions contemplated by the Basic Documents.
C. It is a condition precedent to the effectiveness of the Note
Purchase Agreement, including but not limited to the issuance of any additional
Notes thereunder, that Company's obligations thereunder be guarantied by
Guarantor. Guarantor has received copies of the Note Purchase Agreement and the
other Basic Documents.
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 Representative to enter into the Note Purchase
Agreement and to acquire the Additional 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 Representative and Holders.
1
<PAGE>
"GUARANTIED OBLIGATIONS" has the meaning assigned to that term in
subsection 2.1.
"GUARANTY" means this Guaranty dated as of July 25, 1997, 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. Subject to the provisions
--------------------------------------
of subsection 2.2, 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 LIMITED ON AMOUNT GUARANTIED. If any Fraudulent Transfer Law (as
----------------------------
hereinafter defined) is determined by a court of competent jurisdiction to be
applicable to the obligations of Guarantor under this Guaranty, such obligations
of Guarantor hereunder shall be limited to a maximum aggregate amount equal to
the largest amount that would not render
2
<PAGE>
its obligations hereunder subject to avoidance as a fraudulent transfer or
conveyance under Section 548 of Title 11 of the United States Code or any
applicable provisions of comparable state law (collectively, the "FRAUDULENT
TRANSFER LAWS"), in each case after giving effect to all other liabilities of
Guarantor, contingent or otherwise, that are relevant under the Fraudulent
Transfer Laws (specifically excluding, however, any liabilities of guarantor (x)
in respect of intercompany indebtedness to Company or other affiliates of
Company to the extent that such indebtedness would be discharged in an amount
equal to the amount paid by Guarantor hereunder and (y) under any guaranty of
subordinated indebtedness which guaranty contains a limitation as to maximum
amount similar to that set forth in this sentence of subsection 2.2, pursuant to
which the liability of Guarantor hereunder is included in the liabilities taken
into account in determining such maximum amount) and after giving effect as
assets to the value (as determined under the applicable provisions of the
Fraudulent Transfer Laws) of any rights to subrogation, reimbursement,
indemnification or contribution of Guarantor pursuant to applicable law or
pursuant to the terms of any agreement.
2.3 PAYMENT BY GUARANTOR; APPLICATION OF PAYMENTS. Subject to the
---------------------------------------------
provisions of subsection 2.2, 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 Representative for the ratable benefit of
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 Representative:
First, to the payment of the costs and expenses of any collection or
-----
other realization under this Guaranty, including reasonable compensation to
Representative and its agents and counsel, and all expenses, liabilities
and advances made or incurred by Representative in connection therewith;
Second, to the payment of all other Guarantied Obligations in such
------
order as Representative 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.
3
<PAGE>
2.4 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) Representative 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 Representative
is awarded a judgment in any suit 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
4
<PAGE>
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 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
5
<PAGE>
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.
2.5 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;
(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
6
<PAGE>
(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.
2.6 CERTAIN CALIFORNIA LAW WAIVERS. As used in this subsection 2.6,
------------------------------
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 2.7;
(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 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 2.6.
In accordance with subsection 4.6 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 2.6 is included solely out of an abundance of caution, and shall
7
<PAGE>
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.
2.7 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 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. Representative, 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 Representative on behalf of Beneficiaries and
shall forthwith be paid over to Representative for the benefit of Beneficiaries
to be credited and applied against the Guarantied Obligations, whether matured
or unmatured, in accordance with the terms hereof.
2.8 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.
2.9 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.
8
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2.10 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.
2.11 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.
2.12 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 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.
2.13 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 Representative 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
9
<PAGE>
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 Representative, or allow the claim of
Representative 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.
2.14 NOTICE OF EVENTS. As soon as Guarantor obtains knowledge
----------------
thereof, Guarantor shall give Representative 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.
2.15 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. REPRESENTATIONS, WARRANTIES AND COVENANTS
3.1 REPRESENTATIONS AND WARRANTIES.
------------------------------
In order to induce Beneficiaries to accept this Guaranty and to enter
into the Note Purchase Agreement and to issue the Notes thereunder, Guarantor
hereby represents and warrants to Beneficiaries that the following statements
are true and correct:
(a) CORPORATE EXISTENCE. Guarantor is duly organized, validly
-------------------
existing and in good standing under the laws of the state of its
incorporation, has the corporate power to own its assets and to transact
the business in which it is now engaged and is duly qualified as a foreign
corporation and in good standing under the laws of each jurisdiction where
its ownership or lease of property or the conduct of its business
10
<PAGE>
requires such qualification, except for failures to be so qualified,
authorized or licensed that would not in the aggregate have a material
adverse effect on the business, operations, assets or financial condition
of Guarantor.
(b) CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. Guarantor
-------------------------------------------------------
has the corporate power, authority and legal right to execute, deliver and
perform this Guaranty and the other Basic Documents to which Guarantor is a
party and all obligations required hereunder or thereunder and has taken
all necessary corporate action to authorize its Guaranty hereunder on the
terms and conditions hereof and its execution, delivery and performance of
this Guaranty and the other Basic Documents to which Guarantor is a party
and all obligations required hereunder or thereunder. No consent of any
other Person including, without limitation, stockholders and creditors of
Guarantor, and no license, permit, approval or authorization of, exemption
by, notice or report to, or registration, filing or declaration with, any
governmental authority is required by Guarantor in connection with this
Guaranty or any other Basic Document to which Guarantor is a party or the
execution, delivery, performance, validity or enforceability of this
Guaranty or any other Basic Document to which Guarantor is a party and all
obligations required hereunder or thereunder. This Guaranty and the other
Basic Documents to which Guarantor is a party have been, and each
instrument or document required hereunder or thereunder will be, executed
and delivered by a duly authorized officer of Guarantor, and this Guaranty
and the other Basic Documents to which Guarantor is a party constitute, and
each instrument or document required hereunder or thereunder when executed
and delivered by Guarantor hereunder or thereunder will constitute, the
legally valid and binding obligation of Guarantor, enforceable against
Guarantor in accordance with their terms, except as enforcement may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws or equitable principles relating to or limiting
creditors' rights generally.
(c) NO LEGAL BAR TO THIS GUARANTY. The execution, delivery and
-----------------------------
performance of this Guaranty and the other Basic Documents to which
Guarantor is a party and the documents or instruments required hereunder or
thereunder will not violate any provision of any existing law or regulation
binding on Guarantor, or any order, judgment, award or decree of any court,
arbitrator or governmental authority binding on Guarantor, or the
certificate of incorporation or bylaws of Guarantor or any securities
issued by Guarantor, or any mortgage, indenture, lease, contract or other
agreement, instrument or undertaking to which Guarantor is a party or by
which Guarantor or any of its assets may be bound, the violation of which
would have a material adverse effect on the business, operations, assets or
financial condition of Guarantor and will not result in, or require, the
creation or imposition of any Lien on any of its property, assets or
revenues pursuant to the provisions of any such mortgage, indenture, lease,
contract or other agreement, instrument or undertaking.
(d) REPRESENTATIONS AND WARRANTIES IN NOTE PURCHASE AGREEMENT. All
---------------------------------------------------------
representations and warranties made by SGC or Company in the Note Purchase
11
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Agreement regarding Guarantor individually are true, correct and complete
as of the date hereof.
3.2 COVENANTS. Guarantor covenants and agrees that it shall perform
---------
all covenants contained in Sections 5 and 6 of the Note Purchase Agreement that
relate to Guarantor.
SECTION 4. MISCELLANEOUS
4.1 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.
4.2 NOTICES. Any communications between Representative 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
Representative or Guarantor shall not be effective until received.
4.3 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.
4.4 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 Representative 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.
4.5 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.
4.6 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 ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
NEVADA, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
4.7 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
12
<PAGE>
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.
4.8 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 4.2;
(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
(VI) AGREES THAT THE PROVISIONS OF THIS SUBSECTION 4.8 RELATING TO
JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST
EXTENT PERMISSIBLE.
4.9 WAIVER OF TRIAL BY JURY. GUARANTOR AND, BY ITS ACCEPTANCE OF THE
-----------------------
BENEFITS HEREOF, EACH BENEFICIARY EACH HEREBY AGREES TO
13
<PAGE>
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 4.9 AND EXECUTED BY REPRESENTATIVE 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.
4.10 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.
4.11 FURTHER ASSURANCES. At any time or from time to time, upon the
------------------
request of Representative, Guarantor shall execute and deliver such further
documents and do such other acts and things as Representative may reasonably
request in order to effect fully the purposes of this Guaranty.
4.12 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
Guarantor and receipt by Representative of written or telephonic notification of
such execution and authorization of delivery thereof.
4.13 REPRESENTATIVE AS COLLATERAL AGENT.
----------------------------------
(a) Representative has been appointed to act as Representative
hereunder by Holders. Representative 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
14
<PAGE>
refrain from taking any action, solely in accordance with this Guaranty and the
Note Purchase Agreement.
(b) Representative 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 Representative under
this Guaranty; removal of Collateral Agent pursuant to subsection 8.7 of the
Note Purchase Agreement shall also constitute removal as Representative 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 Representative 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 Representative under this Guaranty, and
the retiring or removed Representative under this Guaranty shall promptly (i)
transfer to such successor Representative 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 Representative under this Guaranty,
and (ii) take such other actions as may be necessary or appropriate in
connection with the assignment to such successor Representative of the rights
created hereunder, whereupon such retiring or removed Representative shall be
discharged from its duties and obligations under this Guaranty. After any
retiring or removed Representative's resignation or removal hereunder as
Representative, 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
Representative hereunder.
15
<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.
CASINO PROPERTIES, INC.
By /s/ Thomas K. Land
--------------------------------------
Thomas K. Land
Title: Treasurer and Assistant Secretary
By /s/ Paul W. Lowden
--------------------------------------
Paul W. Lowden
Title: President
S-1
<PAGE>
EXHIBIT 10.86
EXHIBIT III-C
SAHARA RESORTS GUARANTY
This GUARANTY is entered into as of July 29, 1997 by SAHARA RESORTS, 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 "REPRESENTATIVE") 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 Santa Fe Gaming Corporation (formerly named Sahara Gaming Corporation) have
entered into that certain Amended and Restated Note Purchase Agreement dated as
of July 29, 1997 with Representative (said Amended and Restated 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 substantially 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 effectiveness of the Note
Purchase Agreement, including but not limited to the issuance of any additional
Notes thereunder, that Company's obligations thereunder be guarantied by
Guarantor. Guarantor has received copies of the Note Purchase Agreement and the
other Basic Documents.
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 Representative to enter into the Note Purchase
Agreement and to acquire the Additional 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 Representative and Holders.
1
<PAGE>
"GUARANTIED OBLIGATIONS" has the meaning assigned to that term in
subsection 2.1.
"GUARANTY" means this Guaranty dated as of July 25, 1997, 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. Subject to the
--------------------------------------
provisions of subsection 2.2, 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 LIMITED ON AMOUNT GUARANTIED. If any Fraudulent Transfer Law (as
----------------------------
hereinafter defined) is determined by a court of competent jurisdiction to be
applicable to the obligations of Guarantor under this Guaranty, such obligations
of Guarantor hereunder shall be limited to a maximum aggregate amount equal to
the largest amount that would not render
2
<PAGE>
its obligations hereunder subject to avoidance as a fraudulent transfer or
conveyance under Section 548 of Title 11 of the United States Code or any
applicable provisions of comparable state law (collectively, the "FRAUDULENT
TRANSFER LAWS"), in each case after giving effect to all other liabilities of
Guarantor, contingent or otherwise, that are relevant under the Fraudulent
Transfer Laws (specifically excluding, however, any liabilities of guarantor (x)
in respect of intercompany indebtedness to Company or other affiliates of
Company to the extent that such indebtedness would be discharged in an amount
equal to the amount paid by Guarantor hereunder and (y) under any guaranty of
subordinated indebtedness which guaranty contains a limitation as to maximum
amount similar to that set forth in this sentence of subsection 2.2, pursuant to
which the liability of Guarantor hereunder is included in the liabilities taken
into account in determining such maximum amount) and after giving effect as
assets to the value (as determined under the applicable provisions of the
Fraudulent Transfer Laws) of any rights to subrogation, reimbursement,
indemnification or contribution of Guarantor pursuant to applicable law or
pursuant to the terms of any agreement.
2.3 PAYMENT BY GUARANTOR; APPLICATION OF PAYMENTS. Subject to the
---------------------------------------------
provisions of subsection 2.2, 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 Representative for the ratable benefit of
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 Representative:
First, to the payment of the costs and expenses of any collection or
-----
other realization under this Guaranty, including reasonable compensation to
Representative and its agents and counsel, and all expenses, liabilities
and advances made or incurred by Representative in connection therewith;
Second, to the payment of all other Guarantied Obligations in such
------
order as Representative 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.
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<PAGE>
2.4 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) Representative 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 Representative
is awarded a judgment in any suit 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
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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 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
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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.
2.5 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 ;
(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
6
<PAGE>
(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.
2.6 CERTAIN CALIFORNIA LAW WAIVERS. As used in this subsection 2.6,
------------------------------
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 2.7;
(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 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 2.6.
In accordance with subsection 4.6 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 2.6 is included solely out of an abundance of caution, and shall
7
<PAGE>
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.
2.7 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 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. Representative, 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 Representative on behalf of Beneficiaries and
shall forthwith be paid over to Representative for the benefit of Beneficiaries
to be credited and applied against the Guarantied Obligations, whether matured
or unmatured, in accordance with the terms hereof.
2.8 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.
2.9 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.
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<PAGE>
2.10 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.
2.11 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.
2.12 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 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.
2.13 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 Representative 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
9
<PAGE>
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 Representative, or allow the claim of
Representative 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.
2.14 NOTICE OF EVENTS. As soon as Guarantor obtains knowledge
----------------
thereof, Guarantor shall give Representative 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.
2.15 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. REPRESENTATIONS, WARRANTIES AND COVENANTS
3.1 REPRESENTATIONS AND WARRANTIES.
------------------------------
In order to induce Beneficiaries to accept this Guaranty and to
enter into the Note Purchase Agreement and to issue the Notes thereunder,
Guarantor hereby represents and warrants to Beneficiaries that the following
statements are true and correct:
(a) CORPORATE EXISTENCE. Guarantor is duly organized, validly
-------------------
existing and in good standing under the laws of the state of its
incorporation, has the corporate power to own its assets and to transact
the business in which it is now engaged and is duly qualified as a foreign
corporation and in good standing under the laws of each jurisdiction where
its ownership or lease of property or the conduct of its business
10
<PAGE>
requires such qualification, except for failures to be so qualified,
authorized or licensed that would not in the aggregate have a material
adverse effect on the business, operations, assets or financial condition
of Guarantor.
(b) CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. Guarantor
-------------------------------------------------------
has the corporate power, authority and legal right to execute, deliver and
perform this Guaranty and the other Basic Documents to which Guarantor is a
party and all obligations required hereunder or thereunder and has taken
all necessary corporate action to authorize its Guaranty hereunder on the
terms and conditions hereof and its execution, delivery and performance of
this Guaranty and the other Basic Documents to which Guarantor is a party
and all obligations required hereunder or thereunder. No consent of any
other Person including, without limitation, stockholders and creditors of
Guarantor, and no license, permit, approval or authorization of, exemption
by, notice or report to, or registration, filing or declaration with, any
governmental authority is required by Guarantor in connection with this
Guaranty or any other Basic Document to which Guarantor is a party or the
execution, delivery, performance, validity or enforceability of this
Guaranty or any other Basic Document to which Guarantor is a party and all
obligations required hereunder or thereunder. This Guaranty and the other
Basic Documents to which Guarantor is a party have been, and each
instrument or document required hereunder or thereunder will be, executed
and delivered by a duly authorized officer of Guarantor, and this Guaranty
and the other Basic Documents to which Guarantor is a party constitute, and
each instrument or document required hereunder or thereunder when executed
and delivered by Guarantor hereunder or thereunder will constitute, the
legally valid and binding obligation of Guarantor, enforceable against
Guarantor in accordance with their terms, except as enforcement may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws or equitable principles relating to or limiting
creditors' rights generally.
(c) NO LEGAL BAR TO THIS GUARANTY. The execution, delivery and
-----------------------------
performance of this Guaranty and the other Basic Documents to which
Guarantor is a party and the documents or instruments required hereunder or
thereunder will not violate any provision of any existing law or regulation
binding on Guarantor, or any order, judgment, award or decree of any court,
arbitrator or governmental authority binding on Guarantor, or the
certificate of incorporation or bylaws of Guarantor or any securities
issued by Guarantor, or any mortgage, indenture, lease, contract or other
agreement, instrument or undertaking to which Guarantor is a party or by
which Guarantor or any of its assets may be bound, the violation of which
would have a material adverse effect on the business, operations, assets or
financial condition of Guarantor and will not result in, or require, the
creation or imposition of any Lien on any of its property, assets or
revenues pursuant to the provisions of any such mortgage, indenture, lease,
contract or other agreement, instrument or undertaking.
(d) REPRESENTATIONS AND WARRANTIES IN NOTE PURCHASE AGREEMENT. All
---------------------------------------------------------
representations and warranties made by SGC or Company in the Note Purchase
11
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Agreement regarding Guarantor individually are true, correct and complete
as of the date hereof.
3.2 COVENANTS. Guarantor covenants and agrees that it shall perform
---------
all covenants contained in Sections 5 and 6 of the Note Purchase Agreement that
relate to Guarantor.
SECTION 4. MISCELLANEOUS
4.1 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.
4.2 NOTICES. Any communications between Representative 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
Representative or Guarantor shall not be effective until received.
4.3 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.
4.4 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 Representative 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.
4.5 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.
4.6 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 ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
NEVADA, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
4.7 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
12
<PAGE>
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.
4.8 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 4.2;
(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
(VI) AGREES THAT THE PROVISIONS OF THIS SUBSECTION 4.8 RELATING TO
JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST
EXTENT PERMISSIBLE.
4.9 WAIVER OF TRIAL BY JURY. GUARANTOR AND, BY ITS ACCEPTANCE OF THE
-----------------------
BENEFITS HEREOF, EACH BENEFICIARY EACH HEREBY AGREES TO
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<PAGE>
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 4.9 AND EXECUTED BY REPRESENTATIVE 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.
4.10 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.
4.11 FURTHER ASSURANCES. At any time or from time to time, upon the
------------------
request of Representative, Guarantor shall execute and deliver such further
documents and do such other acts and things as Representative may reasonably
request in order to effect fully the purposes of this Guaranty.
4.12 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
Guarantor and receipt by Representative of written or telephonic notification of
such execution and authorization of delivery thereof.
4.13 REPRESENTATIVE AS COLLATERAL AGENT.
----------------------------------
(a) Representative has been appointed to act as Representative
hereunder by Holders. Representative 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
14
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refrain from taking any action, solely in accordance with this Guaranty and the
Note Purchase Agreement.
(b) Representative 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 Representative under
this Guaranty; removal of Collateral Agent pursuant to subsection 8.7 of the
Note Purchase Agreement shall also constitute removal as Representative 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 Representative 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 Representative under this Guaranty, and
the retiring or removed Representative under this Guaranty shall promptly (i)
transfer to such successor Representative 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 Representative under this Guaranty,
and (ii) take such other actions as may be necessary or appropriate in
connection with the assignment to such successor Representative of the rights
created hereunder, whereupon such retiring or removed Representative shall be
discharged from its duties and obligations under this Guaranty. After any
retiring or removed Representative's resignation or removal hereunder as
Representative, 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
Representative hereunder.
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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 RESORTS
By /s/ Thomas K. Land
--------------------------------------
Thomas K. Land
Title: Treasurer and Assistant Secretary
By /s/ Paul W. Lowden
---------------------------------------
Paul W. Lowden
Title: President
S-1
<PAGE>
EXHIBIT 10.87
EXHIBIT III-E
HACIENDA HAWAIIAN GUARANTY
This GUARANTY is entered into as of July 29, 1997 by HACIENDA HAWAIIAN
PROPERTIES, INC., 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 "REPRESENTATIVE") 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 Santa Fe Gaming Corporation (formerly named Sahara Gaming Corporation) have
entered into that certain Amended and Restated Note Purchase Agreement dated as
of July 29, 1997 with Representative (said Amended and Restated 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 a portion of the capital stock of Company and
will benefit from the transactions contemplated by the Basic Documents.
C. It is a condition precedent to the effectiveness of the Note
Purchase Agreement, including but not limited to the issuance of any additional
Notes thereunder, that Company's obligations thereunder be guarantied by
Guarantor. Guarantor has received copies of the Note Purchase Agreement and the
other Basic Documents.
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 Representative to enter into the Note Purchase
Agreement and to acquire the Additional 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 Representative and Holders.
1
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"GUARANTIED OBLIGATIONS" has the meaning assigned to that term in
subsection 2.1.
"GUARANTY" means this Guaranty dated as of July 25, 1997, 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. Subject to the
--------------------------------------
provisions of subsection 2.2, 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 LIMITED ON AMOUNT GUARANTIED. If any Fraudulent Transfer Law (as
----------------------------
hereinafter defined) is determined by a court of competent jurisdiction to be
applicable to the obligations of Guarantor under this Guaranty, such obligations
of Guarantor hereunder shall be limited to a maximum aggregate amount equal to
the largest amount that would not render
2
<PAGE>
its obligations hereunder subject to avoidance as a fraudulent transfer or
conveyance under Section 548 of Title 11 of the United States Code or any
applicable provisions of comparable state law (collectively, the "FRAUDULENT
TRANSFER LAWS"), in each case after giving effect to all other liabilities of
Guarantor, contingent or otherwise, that are relevant under the Fraudulent
Transfer Laws (specifically excluding, however, any liabilities of guarantor (x)
in respect of intercompany indebtedness to Company or other affiliates of
Company to the extent that such indebtedness would be discharged in an amount
equal to the amount paid by Guarantor hereunder and (y) under any guaranty of
subordinated indebtedness which guaranty contains a limitation as to maximum
amount similar to that set forth in this sentence of subsection 2.2, pursuant to
which the liability of Guarantor hereunder is included in the liabilities taken
into account in determining such maximum amount) and after giving effect as
assets to the value (as determined under the applicable provisions of the
Fraudulent Transfer Laws) of any rights to subrogation, reimbursement,
indemnification or contribution of Guarantor pursuant to applicable law or
pursuant to the terms of any agreement.
2.3 PAYMENT BY GUARANTOR; APPLICATION OF PAYMENTS. Subject to the
---------------------------------------------
provisions of subsection 2.2, 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 Representative for the ratable benefit of
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 Representative:
First, to the payment of the costs and expenses of any collection or
-----
other realization under this Guaranty, including reasonable compensation to
Representative and its agents and counsel, and all expenses, liabilities
and advances made or incurred by Representative in connection therewith;
Second, to the payment of all other Guarantied Obligations in such
------
order as Representative 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.
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<PAGE>
2.4 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) Representative 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
Representative is awarded a judgment in any suit 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
4
<PAGE>
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 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
5
<PAGE>
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.
2.5 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;
(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
6
<PAGE>
(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.
2.6 CERTAIN CALIFORNIA LAW WAIVERS. As used in this subsection 2.6,
------------------------------
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 2.7;
(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 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 2.6.
In accordance with subsection 4.6 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 2.6 is included solely out of an abundance of caution, and shall
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<PAGE>
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.
2.7 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 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. Representative, 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 Representative on behalf of Beneficiaries and
shall forthwith be paid over to Representative for the benefit of Beneficiaries
to be credited and applied against the Guarantied Obligations, whether matured
or unmatured, in accordance with the terms hereof.
2.8 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.
2.9 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.
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2.10 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.
2.11 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.
2.12 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 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.
2.13 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 Representative 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
9
<PAGE>
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 Representative, or allow the claim of
Representative 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.
2.14 NOTICE OF EVENTS. As soon as Guarantor obtains knowledge
----------------
thereof, Guarantor shall give Representative 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.
2.15 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. REPRESENTATIONS, WARRANTIES AND COVENANTS
3.1 REPRESENTATIONS AND WARRANTIES.
------------------------------
In order to induce Beneficiaries to accept this Guaranty and to enter
into the Note Purchase Agreement and to issue the Notes thereunder, Guarantor
hereby represents and warrants to Beneficiaries that the following statements
are true and correct:
(a) CORPORATE EXISTENCE. Guarantor is duly organized, validly
-------------------
existing and in good standing under the laws of the state of its
incorporation, has the corporate power to own its assets and to transact
the business in which it is now engaged and is duly qualified as a foreign
corporation and in good standing under the laws of each jurisdiction where
its ownership or lease of property or the conduct of its business
10
<PAGE>
requires such qualification, except for failures to be so qualified,
authorized or licensed that would not in the aggregate have a material
adverse effect on the business, operations, assets or financial condition
of Guarantor.
(b) CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. Guarantor
-------------------------------------------------------
has the corporate power, authority and legal right to execute, deliver and
perform this Guaranty and the other Basic Documents to which Guarantor is a
party and all obligations required hereunder or thereunder and has taken
all necessary corporate action to authorize its Guaranty hereunder on the
terms and conditions hereof and its execution, delivery and performance of
this Guaranty and the other Basic Documents to which Guarantor is a party
and all obligations required hereunder or thereunder. No consent of any
other Person including, without limitation, stockholders and creditors of
Guarantor, and no license, permit, approval or authorization of, exemption
by, notice or report to, or registration, filing or declaration with, any
governmental authority is required by Guarantor in connection with this
Guaranty or any other Basic Document to which Guarantor is a party or the
execution, delivery, performance, validity or enforceability of this
Guaranty or any other Basic Document to which Guarantor is a party and all
obligations required hereunder or thereunder. This Guaranty and the other
Basic Documents to which Guarantor is a party have been, and each
instrument or document required hereunder or thereunder will be, executed
and delivered by a duly authorized officer of Guarantor, and this Guaranty
and the other Basic Documents to which Guarantor is a party constitute, and
each instrument or document required hereunder or thereunder when executed
and delivered by Guarantor hereunder or thereunder will constitute, the
legally valid and binding obligation of Guarantor, enforceable against
Guarantor in accordance with their terms, except as enforcement may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws or equitable principles relating to or limiting
creditors' rights generally.
(c) NO LEGAL BAR TO THIS GUARANTY. The execution, delivery and
-----------------------------
performance of this Guaranty and the other Basic Documents to which
Guarantor is a party and the documents or instruments required hereunder or
thereunder will not violate any provision of any existing law or regulation
binding on Guarantor, or any order, judgment, award or decree of any court,
arbitrator or governmental authority binding on Guarantor, or the
certificate of incorporation or bylaws of Guarantor or any securities
issued by Guarantor, or any mortgage, indenture, lease, contract or other
agreement, instrument or undertaking to which Guarantor is a party or by
which Guarantor or any of its assets may be bound, the violation of which
would have a material adverse effect on the business, operations, assets or
financial condition of Guarantor and will not result in, or require, the
creation or imposition of any Lien on any of its property, assets or
revenues pursuant to the provisions of any such mortgage, indenture, lease,
contract or other agreement, instrument or undertaking.
(d) REPRESENTATIONS AND WARRANTIES IN NOTE PURCHASE AGREEMENT. All
---------------------------------------------------------
representations and warranties made by SGC or Company in the Note Purchase
11
<PAGE>
Agreement regarding Guarantor individually are true, correct and complete
as of the date hereof.
3.2 COVENANTS. Guarantor covenants and agrees that it shall perform
---------
all covenants contained in Sections 5 and 6 of the Note Purchase Agreement that
relate to Guarantor.
SECTION 4. MISCELLANEOUS
4.1 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.
4.2 NOTICES. Any communications between Representative 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
Representative or Guarantor shall not be effective until received.
4.3 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.
4.4 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 Representative 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.
4.5 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.
4.6 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 ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
NEVADA, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
4.7 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
12
<PAGE>
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.
4.8 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 4.2;
(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
(VI) AGREES THAT THE PROVISIONS OF THIS SUBSECTION 4.8 RELATING TO
JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST
EXTENT PERMISSIBLE.
4.9 WAIVER OF TRIAL BY JURY. GUARANTOR AND, BY ITS ACCEPTANCE OF THE
-----------------------
BENEFITS HEREOF, EACH BENEFICIARY EACH HEREBY AGREES TO
13
<PAGE>
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 4.9 AND EXECUTED BY REPRESENTATIVE 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.
4.10 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.
4.11 FURTHER ASSURANCES. At any time or from time to time, upon the
------------------
request of Representative, Guarantor shall execute and deliver such further
documents and do such other acts and things as Representative may reasonably
request in order to effect fully the purposes of this Guaranty.
4.12 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
Guarantor and receipt by Representative of written or telephonic notification of
such execution and authorization of delivery thereof.
4.13 REPRESENTATIVE AS COLLATERAL AGENT.
----------------------------------
(a) Representative has been appointed to act as Representative
hereunder by Holders. Representative 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
14
<PAGE>
refrain from taking any action, solely in accordance with this Guaranty and the
Note Purchase Agreement.
(b) Representative 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 Representative under
this Guaranty; removal of Collateral Agent pursuant to subsection 8.7 of the
Note Purchase Agreement shall also constitute removal as Representative 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 Representative 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 Representative under this Guaranty, and
the retiring or removed Representative under this Guaranty shall promptly (i)
transfer to such successor Representative 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 Representative under this Guaranty,
and (ii) take such other actions as may be necessary or appropriate in
connection with the assignment to such successor Representative of the rights
created hereunder, whereupon such retiring or removed Representative shall be
discharged from its duties and obligations under this Guaranty. After any
retiring or removed Representative's resignation or removal hereunder as
Representative, 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
Representative hereunder.
15
<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.
HACIENDA HAWAIIAN PROPERTIES, INC.
By /s/ Paul W. Lowden
--------------------------------
Title President
-----------------------------
By /s/ Thomas K. Land
--------------------------------
Title Treasurer and Asst. Secretary
-----------------------------
SUNAMERICA LIFE INSURANCE COMPANY,
as Secured Party
By /s/ Stephen P. Hanover
--------------------------------
Title Authorized Agent
-----------------------------
S-1
<PAGE>
EXHIBIT 10.88
FIRST AMENDMENT TO
COMPANY SECURITY AGREEMENT
THIS FIRST AMENDMENT TO COMPANY SECURITY AGREEMENT (this "AMENDMENT")
is made and entered into as of this 29th day of July, 1997, by and between
SAHARA LAS VEGAS CORP., a Nevada corporation ("GRANTOR"), and SUNAMERICA LIFE
INSURANCE COMPANY, an Arizona corporation ("SUNAMERICA"), as Collateral agent on
behalf of itself and each of the Holders ("SECURED PARTY").
R E C I T A L S
- - - - - - - -
A. Pursuant to that certain Note Purchase Agreement dated as of
January 16, 1996, by and among Santa Fe Gaming Corporation (formally Sahara
Gaming Corporation) ("SGC"), Grantor and SunAmerica (the "NOTE PURCHASE
AGREEMENT"), Company issued and sold to SunAmerica certain 12% Notes Due
December 15, 1999 in a principal amount up to $20,000,000 (the "ORIGINAL
NOTES"), which Original Notes were secured by, among other things, that certain
Security Agreement dated as of January 16, 1996 between Grantor and Collateral
Agent (the "Company Security Agreement").
B. Pursuant to that certain Amended and Restated Note Purchase
Agreement of even date herewith, by and among SGC, Company, Collateral Agent,
Anchor National Life Insurance Company, an Arizona corporation, and CalFarm Life
Insurance Company, a California corporation (the "AMENDED AND RESTATED NOTE
PURCHASE AGREEMENT"), (i) Company agreed to issue and sell to the Holders, in
addition to the Original Notes, certain Tranche A Notes in a principal amount up
to $15,000,000 (the "TRANCHE A NOTES") and certain Tranche B Notes in a
principal amount up to $5,000,000 (the "TRANCHE B NOTES"), and (ii) SGC and
Company agreed that the Tranche A Notes and Tranche B Notes would be secured by,
among other things, the Collateral pursuant to the Company Security Agreement.
C. The parties hereby desire to amend the Company Security
Agreement as necessary to account for the Tranche A Notes and Tranche B Notes
and to conform the Company Security Agreement to the Amended and Restated Note
Purchase Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the parties
hereby amend the Environmental Indemnity as follows:
1. All references in the Company Security Agreement to the term
"Note Purchase Agreement" shall be deemed to refer to the Amended and Restated
Note Purchase Agreement.
1
<PAGE>
2. All references in the Company Security Agreement to the term
"Notes" shall be deemed to refer to the Original Notes, the Tranche A Notes and
the Tranche B Notes, collectively.
3. Section 13 of the Company Security Agreement is hereby
amended and restated in its entirety as follows:
"(a) So long as (i) no Event of Default shall have occurred and
be continuing or (ii) Secured Party shall not have elected in its sole
discretion to exercise voting and other consensual rights pertaining to
Pledged SFHI Collateral pursuant to Section 13(c), 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
Holders under and in accordance with the Collateral Account Agreement, the
Additional Collateral Account Agreement and the Note Purchase 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 or upon the election of the Secured Party in its sole
discretion, 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
2
<PAGE>
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
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 the occurrence of an Event of Default and which proxy
shall only terminate upon the payment in full of the Secured Obligations.
(e) Upon the written request of Secured Party, Grantor shall
transfer any Pledged SHFI Collateral or other Collateral held pursuant to
the Collateral Account Agreement or the Additional Collateral Account
Agreement to Secured Party or a bank or other institution designated by
Secured Party."
4. Except as expressly amended and modified hereby, the Company
Security Agreement shall remain in full force and effect.
5. The provisions of this Amendment shall be binding upon, and
shall inure to the benefit of, the successors and assigns of the parties hereto.
6. This Amendment may be executed in any number of counterparts,
each of which shall be deemed an original, but all of which when taken together
shall constitute one and the same instrument. The signature and acknowledgment
pages of any counterpart may be detached therefrom without impairing the legal
effect of the signatures and acknowledgments thereto, provided such signature
and acknowledgment pages are attached to any other counterpart identical thereto
except having additional signature and acknowledgment pages executed by other
parties to this Amendment attached thereto.
7. This Amendment 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.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment as of the date first written above.
"GRANTOR"
SAHARA LAS VEGAS CORP.,
a Nevada corporation
By: /s/ Thomas K. Land
-------------------------------
Its: Treasurer and Asst. Secretary
------------------------------
By: /s/ Paul W. Lowden
-------------------------------
Its: President
------------------------------
"SECURED PARTY"
SUNAMERICA LIFE INSURANCE COMPANY,
an Arizona corporation
By: /s/ Steven P. Hanover
-------------------------------
Its: Authorized Agent
------------------------------
S-1
<PAGE>
EXHIBIT 10.89
EXHIBIT V-B
SAHARA RESORTS PLEDGE AGREEMENT
This SAHARA RESORTS PLEDGE AGREEMENT (this "AGREEMENT") is dated as of
July 29, 1997 and entered into by and between SAHARA RESORTS, a Nevada
corporation ("PLEDGOR"), and SUNAMERICA LIFE INSURANCE COMPANY, an Arizona
corporation, as agent for and representative of (in such capacity herein call
"SECURED PARTY") the holders of Notes from time to time ("HOLDERS") party to the
Note Purchase Agreement (as hereinafter defined) ("SECURED PARTY")
PRELIMINARY STATEMENTS
A. Pledgor is the legal and beneficial owner of the shares of stock
(the "PLEDGED SHARES") described in Part A of Schedule I annexed hereto and
----------
issued by the corporations named therein.
B. Secured Party, Holders, Sahara Las Vegas Corp., a Nevada
corporation ("COMPANY") and Santa Fe Gaming Corporation (formerly named Sahara
Gaming Corporation), a Nevada corporation, have entered into an Amended and
Restated Note Purchase Agreement dated as of July 29, 1997 (said Amended and
Restated Note Purchase Agreement, as amended to the date hereof and 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 a
certain Holder has made certain commitments, subject to the terms and conditions
set forth in the Note Purchase Agreement, to purchase Additional Notes from
Company.
C. Pledgor has executed and delivered as of the date hereof a Guaranty
dated as of July 29, 1997 (said Guaranty, as amended to the date hereof and as
it may hereafter be amended, supplemented or otherwise modified from time to
time, being the "GUARANTY") in favor of Secured Party for the benefit of
Holders, pursuant to which Pledgor has guarantied the prompt payment and
performance when due of all obligations of Company under the Note Purchase
Agreement.
D. It is a condition precedent to the amendment and restatement of the
Existing Note Purchase Agreement effected by the Note Purchase Agreement and the
consummation of the transactions contemplated thereby that Pledgor 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 a certain Holder to purchase any Additional Notes under the Note Purchase
1
<PAGE>
Agreement and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Pledgor hereby agrees with Secured
Party as follows:
SECTION 1. PLEDGE OF SECURITY. Pledgor hereby pledges to Secured
------------------
Party, and hereby grants to Secured Party a security interest in, all of
Pledgor's right, title and interest in and to the following (the "PLEDGED
COLLATERAL"):
(a) the Pledged Shares and the certificates representing the Pledged
Shares and any interest of Pledgor in the entries on the books of any financial
intermediary pertaining to the Pledged Shares, and all dividends, cash,
warrants, rights, instruments and other property or proceeds from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all of the Pledged Shares;
(b) all additional shares of, and all securities convertible into and
warrants, options and other rights to purchase or otherwise acquire, stock of
any issuer of the Pledged Shares from time to time acquired by Pledgor in any
manner (which shares shall be deemed to be part of the Pledged Shares), the
certificates or other instruments representing such additional shares,
securities, warrants, options or other rights and any interest of Pledgor in the
entries on the books of any financial intermediary pertaining to such additional
shares, and all dividends, cash, warrants, rights, instruments and other
property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such additional
shares, securities, warrants, options or other rights; and
(c) to the extent not covered by clauses (a) through (b) above, all
proceeds of any or all of the foregoing Pledged Collateral. For purposes of
this Agreement, the term "PROCEEDS" includes whatever is receivable or received
when Pledged Collateral or proceeds are sold, exchanged, collected or otherwise
disposed of, whether such disposition is voluntary or involuntary, and includes,
without limitation, proceeds of any indemnity or guaranty payable to Pledgor or
Secured Party from time to time with respect to any of the Pledged Collateral.
SECTION 2. SECURITY FOR OBLIGATIONS. This Agreement secures, and the
------------------------
Pledged 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 Pledgor now or hereafter existing under or
arising out of or in connection with the Note Purchase Agreement, the Guaranty
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 Pledgor, would accrue on such
obligations), fees, expenses, indemnities or otherwise,
2
<PAGE>
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 Pledgor now or
hereafter existing under this Agreement (all such obligations of Pledgor,
together with the Underlying Debt, being the "SECURED OBLIGATIONS").
SECTION 3. DELIVERY OF PLEDGED COLLATERAL. All certificates or
------------------------------
instruments representing or evidencing the Pledged Collateral shall be delivered
to and held by or on behalf of Secured Party pursuant hereto and shall be in
suitable form for transfer by delivery or, as applicable, shall be accompanied
by Pledgor's endorsement, where necessary, or duly executed instruments of
transfer or assignment in blank, all in form and substance satisfactory to
Secured Party. Secured Party shall have the right, at any time in its
discretion and without notice to Pledgor, to transfer to or to register in the
name of Secured Party or any of its nominees any or all of the Pledged
Collateral, subject only to the revocable rights specified in Section 7(a). In
addition, Secured Party shall have the right at any time to exchange
certificates or instruments representing or evidencing Pledged Collateral for
certificates or instruments of smaller or larger denominations.
SECTION 4. REPRESENTATIONS AND WARRANTIES. Pledgor represents and
-------------------------------
warrants as follows:
(a) Due Authorization, etc. of Pledged Collateral. All of the Pledged
---------------------------------------------
Shares have been duly authorized and validly issued and are fully paid and non-
assessable.
(b) Description of Pledged Collateral. The Pledged Shares constitute
---------------------------------
percentage interests of the issued and outstanding shares of stock of each of
the Persons set forth on Schedule I annexed hereto, and there are no outstanding
warrants, options or other rights to purchase, or other agreements outstanding
with respect to, or property that is now or hereafter convertible into, or that
requires the issuance or sale of, any Pledged Shares.
(c) Ownership of Pledged Collateral. Pledgor is the legal, record and
-------------------------------
beneficial owner of the Pledged Collateral free and clear of any Lien except for
the security interest created by this Agreement and Permitted Liens.
(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 pledge by Pledgor of the Pledged
Collateral pursuant to this Agreement and the grant by Pledgor of the security
3
<PAGE>
interest granted hereby, (ii) the execution, delivery or performance of this
Agreement by Pledgor, or (iii) the exercise by Secured Party of the voting or
other rights, or the remedies in respect of the Pledged Collateral, provided for
in this Agreement (except as may be required in connection with a disposition of
Pledged Collateral by laws affecting the offering and sale of securities
generally).
(e) Perfection. Assuming Secured Party's continued possession of the
----------
certificates representing the Pledged Shares, the pledge of the Pledged
Collateral pursuant to this Agreement creates a valid and perfected first
priority security interest in the Pledged Collateral, securing the payment of
the Secured Obligations.
(f) Margin Regulations. The pledge of the Pledged Collateral pursuant
------------------
to this Agreement does not violate Regulation G, T, U or X of the Board of
Governors of the Federal Reserve System.
SECTION 5. TRANSFERS AND OTHER LIENS; ADDITIONAL PLEDGED COLLATERAL;
---------------------------------------------------------
ETC. Pledgor shall:
- ----
(a) not, except as expressly permitted by the Note Purchase Agreement,
(i) sell, assign (by operation of law or otherwise) or otherwise dispose of, or
grant any option with respect to, any of the Pledged Collateral, (ii) create or
suffer to exist any Lien upon or with respect to any of the Pledged Collateral,
except for the security interest under this Agreement, or (iii) permit any
issuer of Pledged Shares to merge or consolidate unless all the outstanding
capital stock of the surviving or resulting corporation is, upon such merger or
consolidation, pledged hereunder and no cash, securities or other property is
distributed in respect of the outstanding shares of any other constituent
corporation;
(b) (i) cause each issuer of Pledged Shares that is a Subsidiary of
Pledgor not to issue any stock or other securities in addition to or in
substitution for the Pledged Shares issued by such issuer, except to Pledgor,
(ii) pledge hereunder, immediately upon its acquisition (directly or indirectly)
thereof, any and all additional shares of stock or other securities of each
issuer of Pledged Shares, and (iii) pledge hereunder, immediately upon its
acquisition (directly or indirectly) thereof, any and all shares of stock issued
to or otherwise acquired by Pledgor of any Person that, after the date of this
Agreement, becomes, as a result of any occurrence, a direct Subsidiary of
Pledgor;
(c) promptly deliver to Secured Party all written notices
received by it as holder of the Pledged Collateral; and
(d) pay promptly when due all taxes, assessments and governmental
charges or levies imposed upon, and all claims against, the Pledged Collateral,
except to the extent the validity thereof is being contested in good faith;
provided that Pledgor shall in any event pay such taxes, assessments, charges,
- --------
levies or claims not
4
<PAGE>
later than five days prior to the date of any proposed sale under any judgement,
writ or warrant of attachment entered or filed against Pledgor or any of the
Pledged Collateral as a result of the failure to make such payment.
SECTION 6. FURTHER ASSURANCES; PLEDGE AMENDMENTS.
-------------------------------------
(a) Pledgor agrees that from time to time, at the expense of Pledgor,
Pledgor 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 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 Pledged
Collateral. Without limiting the generality of the foregoing, Pledgor will:
(i) 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 and
(ii) at Secured Party's request, appear in and defend any action or proceeding
that may affect Pledgor's title to or Secured Party's security interest in all
or any part of the Pledged Collateral.
(b) Pledgor further agrees that it will, upon obtaining any additional
shares of stock or other securities required to be pledged hereunder as provided
in Section 5(b) or (c), promptly (and in any event within five Business Days)
deliver to Secured Party a Pledge Amendment, duly executed by Pledgor, in
substantially the form of Schedule II annexed hereto (a "PLEDGE AMENDMENT"), in
-----------
respect of the additional Pledged Shares to be pledged pursuant to this
Agreement. Pledgor hereby authorizes Secured Party to attach each Pledge
Amendment to this Agreement and agrees that all Pledged Shares listed on any
Pledge Amendment delivered to Secured Party shall for all purposes hereunder be
considered Pledged Collateral; provided that the failure of Pledgor to execute a
--------
Pledge Amendment with respect to any additional Pledged Shares 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.
SECTION 7. VOTING RIGHTS; DIVIDENDS; ETC.
------------------------------
(a) So long as no Event of Default shall have occurred and be
continuing:
(i) Pledgor shall be entitled to exercise any and all voting and other
consensual rights pertaining to the Pledged Collateral or any part thereof
for any purpose not inconsistent with the terms of this Agreement or the
Note Purchase Agreement; provided, however, that Pledgor shall not
-------- -------
exercise or refrain from exercising any such right if Secured Party shall
have notified Pledgor that, in Secured Party's judgment, such action would
have a material
5
<PAGE>
adverse effect on the value of the Pledged Collateral or any part thereof;
and provided, further, that Pledgor 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. It
is understood, however, that neither (A) the voting by Pledgor of any
Pledged Shares for or Pledgor's consent to the election of directors at a
regularly scheduled annual or other meeting of stockholders (or by written
consent) or with respect to incidental matters at any such meeting nor (B)
Pledgor's consent to or approval of any action otherwise permitted under
this Agreement and the Note Purchase Agreement shall be deemed inconsistent
with the terms of this Agreement or the Note Purchase Agreement within the
meaning of this Section 7(a)(i), and no notice of any such voting or consent
need be given to Secured Party;
(ii) Pledgor shall be entitled to receive and retain, and to
utilize free and clear of the lien of this Agreement (but subject to the
provisions of the Note Purchase Agreement), any and all dividends, principal
and interest paid in respect of the Pledged Collateral; provided, however,
-------- -------
that any and all
(A) dividends, principal and interest paid or payable other
than in cash in respect of, and instruments and other property
received, receivable or otherwise distributed in respect of, or in
exchange for, any Pledged Collateral,
(B) dividends and other distributions paid or payable in cash
in respect of any Pledged Collateral in connection with a partial or
total liquidation or dissolution or in connection with a reduction of
capital, capital surplus or paid-in-surplus, and
(C) cash paid, payable or otherwise distributed in redemption
of or in exchange for any Pledged Shares,
shall be, and shall forthwith be delivered to Secured Party to hold as,
Pledged Collateral and shall, if received by Pledgor, be received in trust
for the benefit of Secured Party, be segregated from the other property or
funds of Pledgor and be forthwith delivered to Secured Party as Pledged
Collateral in the same form as so received (with all necessary
indorsements); and
(iii) Secured Party shall promptly execute and deliver (or cause to be
executed and delivered) to Pledgor all such proxies, dividend payment
orders and other instruments as Pledgor may from time to time reasonably
request for the purpose of enabling Pledgor to exercise the voting and other
consensual rights which it is entitled to exercise pursuant to paragraph (i)
above and to receive the dividends, principal or interest payments which it
is authorized to receive and retain pursuant to paragraph (ii) above.
6
<PAGE>
(b) Upon the occurrence and during the continuation of an Event of
Default:
(i) upon written notice from Secured Party to Pledgor, all rights
of Pledgor to exercise the voting and other consensual rights which it would
otherwise be entitled to exercise pursuant to Section 7(a)(i) 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;
(ii) all rights of Pledgor to receive the dividends and interest
payments which it would otherwise be authorized to receive and retain
pursuant to Section 7(a)(ii) shall cease, and all such rights shall
thereupon become vested in Secured Party who shall thereupon have the sole
right to receive and hold as Pledged Collateral such dividends and interest
payments; and
(iii) all dividends, principal and interest payments which are
received by Pledgor contrary to the provisions of paragraph (ii) of this
Section 7(b) shall be received in trust for the benefit of Secured Party,
shall be segregated from other funds of Pledgor and shall forthwith be paid
over to Secured Party as Pledged Collateral in the same form as so received
(with any ne cessary indorsements).
(c) 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(b)(i) and to receive all dividends and other distributions which it may be
entitled to receive under Section 7(a)(ii) or Section 7(b)(ii), (i) Pledgor
shall promptly execute and deliver (or cause to be executed and delivered) to
Secured Party all such proxies, dividend payment 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), Pledgor hereby grants to
Secured Party an irrevocable proxy to vote the Pledged Shares and to exercise
all other rights, powers, privileges and remedies to which a holder of the
Pledged Shares would be entitled (including, without limitation, giving or
withholding written consents of shareholders, calling special meetings of
shareholders and voting at such meetings), which proxy shall be effective,
automatically and without the necessity of any action (including any transfer of
any Pledged Shares on the record books of the issuer thereof) by any other
Person (including the issuer of the Pledged Shares or any officer or agent
thereof), upon the occurrence of an Event of Default and which proxy shall only
terminate upon the payment in full of the Secured Obligations.
SECTION 8. SECURED PARTY APPOINTED ATTORNEY-IN-FACT. Pledgor hereby
----------------------------------------
irrevocably appoints Secured Party as Pledgor's attorney-in-fact, with full
authority in the place and stead of Pledgor and in the name of Pledgor, Secured
Party
7
<PAGE>
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 file one or more financing or continuation statements, or
amendments thereto, relative to all or any part of the Pledged Collateral
without the signature of Pledgor (to the extent permitted by applicable law);
(b) during the continuance of any Event of Default, to ask, 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 Pledged
Collateral;
(c) during the continuance of any Event of Default, to receive,
endorse and collect any instruments made payable to Pledgor representing any
divi dend, principal or interest payment or other distribution in respect of the
Pledged Collateral or any part thereof and to give full discharge for the same;
and
(d) during the continuance of any Event of Default, to file any claims
or take any action or institute any proceedings that Secured Party may deem
necessary or desirable for the collection of any of the Pledged Collateral or
otherwise to enforce the rights of Secured Party with respect to any of the
Pledged Collateral.
SECTION 9. SECURED PARTY MAY PERFORM. If Pledgor 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 Pledgor under Section 14(b).
SECTION 10. STANDARD OF CARE. The powers conferred on Secured Party
----------------
hereunder are solely to protect its interest in the Pledged 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 Pledged Collateral in its
possession and the accounting for moneys actually received by it hereunder,
Secured Party shall have no duty as to any Pledged 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 Pledged 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 Pledged Collateral) to preserve
rights against any parties with respect to any Pledged 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 Pledged Collateral, or
(d) initiating any action to protect the Pledged 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 Pledged Collateral
in its possession if such
8
<PAGE>
Pledged Collateral is accorded treatment substantially equal to that which
Secured Party accords its own property consisting of negotiable securities.
SECTION 11. REMEDIES.
--------
(a) If any Event of Default shall have occurred and be continuing,
Secured Party may exercise in respect of the Pledged 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 Pledged Collateral), and Secured Party
may also in its sole discretion, without notice except as specified below, sell
the Pledged Collateral or any part thereof in one or more parcels at public or
private sale, at any exchange or broker's board or 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, irrespective of the impact of any such sales
on the market price of the Pledged Collateral. Secured Party or any Holder may
be the purchaser of any or all of the Pledged Collateral at any such sale and
Secured Party, as agent for and representative of Holders (but not any Holder or
Holders in its or their respective individual capacities unless Requisite
Holders shall otherwise agree in writing), shall be entitled, for the purpose of
bidding and making settlement or payment of the purchase price for all or any
portion of the Pledged 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 Pledged 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 Pledgor, and Pledgor 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. Pledgor agrees that, to the extent notice of
sale shall be required by law, at least ten days' notice to Pledgor 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 Pledged 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. Pledgor hereby waives any claims against Secured Party arising by
reason of the fact that the price at which any Pledged 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 Pledged Collateral to more than one offeree.
If the proceeds of any sale or other disposition of the Pledged Collateral are
insufficient to pay all the Secured Obligations, Pledgor shall be liable for the
deficiency and the fees of any attorneys employed by Secured Party to collect
such deficiency.
9
<PAGE>
(b) Pledgor 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 Pledged Collateral
conducted without prior registration or qualification of such Pledged 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 Pledged Collateral
for their own account, for investment and not with a view to the distribution or
resale thereof. Pledgor acknowledges that any such 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 Pledgor
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.
(c) If Secured Party determines to exercise its right to sell any or
all of the Pledged Collateral, upon written request, Pledgor shall and shall
cause each issuer (which is a Subsidiary of Pledgor) of any Pledged Shares to be
sold hereunder from time to time to furnish to Secured Party all such
information as Secured Party may request in order to determine the number of
shares and other instruments included in the Pledged Collateral which may be
sold by Secured Party in exempt transactions under the Securities Act and the
rules and regulations of the Securities and Exchange Commission thereunder, as
the same are from time to time in effect.
SECTION 12. 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 Pledged Collateral may, in the discretion of Secured Party, be held by
Secured Party as Pledged Collateral for, and/or then, or at any 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 reasonable compensation to
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 Pledgor, 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 13;
10
<PAGE>
SECOND: To the payment of all other Secured Obligations in such
order as Secured Party shall elect; and
THIRD: To the payment to or upon the order of Pledgor, or to
whosoever 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 13. INDEMNITY AND EXPENSES.
----------------------
(a) Pledgor agrees to indemnify Secured Party and each Holder 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 or such Holder's gross negligence or willful
misconduct as finally determined by a court of competent jurisdiction.
(b) Pledgor 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 incur in
connection with (i) the administration of this Agreement, (ii) the custody or
preservation of, or the sale of, collection from, or other realization upon, any
of the Pledged Collateral, (iii) the exercise or enforcement of any of the
rights of Secured Party hereunder, or (iv) the failure by Pledgor to perform or
observe any of the provisions hereof.
SECTION 14. CONTINUING SECURITY INTEREST; TRANSFER OF NOTES. This
-----------------------------------------------
Agreement shall create a continuing security interest in the Pledged Collateral
and shall (a) remain in full force and effect until the payment in full of all
Secured Obligations, (b) be binding upon Pledgor, 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, and such
other Person shall thereupon become vested with all the benefits in respect
thereof granted to Holders herein or otherwise. Upon the payment in full of all
Secured Obligations, the security interest granted hereby shall terminate and
all rights to the Pledged Collateral shall revert to Pledgor. Upon any such
termination Secured Party will, at Pledgor's expense, execute and deliver to
Pledgor such documents as Pledgor shall reasonably request to evidence such
termination and Pledgor shall be entitled to the return, upon its request and at
its expense, against receipt and without recourse to Secured Party, of such of
the Pledged Collateral as shall not have been sold or otherwise applied pursuant
to the terms hereof.
11
<PAGE>
SECTION 15. 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 Pledged 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
Pledged Collateral held hereunder, together with all records and other documents
necessary or appropriate in connection with the 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 16. AMENDMENTS; ETC. No amendment, modification, termination
---------------
or waiver of any provision of this Agreement, and no consent to any departure by
Pledgor therefrom, shall in any event be effective unless the same shall be in
writing and signed by Secured Party and, in the case of any such amendment or
modification, by Pledgor. Any such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which it was given.
SECTION 17. 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
12
<PAGE>
deemed to have been given when delivered in person or by courier service, upon
receipt of telefacsimile or telex, or four 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, 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 18. 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 19. 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 20. 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.
SECTION 21. GOVERNING LAW; TERMS. THIS AGREEMENT AND THE RIGHTS AND
--------------------
OBLIGATIONS OF THE PARTIES HEREUNDER 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 PLEDGED
COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF
NEVADA. Unless otherwise defined herein or in the Note Purchase Agreement, terms
used in Articles 8 and 9 of the Uniform Commercial Code in the State of Nevada
are used herein as therein defined.
SECTION 22. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL
----------------------------------------------
JUDICIAL PROCEEDINGS BROUGHT AGAINST PLEDGOR ARISING OUT OF OR RELATING TO THIS
AGREEMENT 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
13
<PAGE>
PLEDGOR 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. Pledgor 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 Pledgor at
its address provided in Section 17, such service being hereby acknowledged by
Pledgor to be sufficient for personal jurisdiction in any action against Pledgor
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 Secured Party to bring
proceedings against Pledgor in the courts of any other jurisdiction.
SECTION 23. WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED BY
--------------------
APPLICABLE LAW, PLEDGOR 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. Pledgor and Secured Party each acknowledge that this waiver
is a material inducement for Pledgor and Secured Party to enter into a business
relationship, that Pledgor 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. Pledgor 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.
SECTION 24. 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]
14
<PAGE>
IN WITNESS WHEREOF, Pledgor 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 RESORTS
By: /s/ Paul W. Lowden
------------------------------------
Title: President
-----------------------------
By: /s/ Thomas K. Land
------------------------------------
Title: Treasurer and Asst. Secretary
-----------------------------
SUNAMERICA LIFE INSURANCE COMPANY,
as Secured Party
By: /s/ Steven P. Hanover
------------------------------------
Title: Authorized Agent
-----------------------------
S-1
<PAGE>
SCHEDULE I
Attached to and forming a part of the Sahara Resorts Pledge Agreement
dated as of July 29, 1997 between Sahara Resorts, as Pledgor, and SunAmerica
Life Insurance Company, as Secured Party.
Part A
<TABLE>
<CAPTION>
Class Stock Number
of Certificate Par of Percentage
Stock Issuer Stock Nos. Value Shares Interest
- ------------ ----- ----------- ------ ------ ----------
<S> <C> <C> <C> <C> <C>
Sahara Las Vegas Corp. Common 4 $10.00 50 87.72%
Casino Properties, Inc. Common 1 no par 500 100%
</TABLE>
I-1
<PAGE>
SCHEDULE II
PLEDGE AMENDMENT
This Pledge Amendment, dated ____________, 19__, is delivered pursuant
to Section 6(b) of the Pledge Agreement referred to below. The undersigned
hereby agrees that this Pledge Amendment may be attached to the Sahara Resorts
Pledge Agreement dated July 29, 1997, between the undersigned and SunAmerica
Life Insurance Company, as Secured Party (the "PLEDGE AGREEMENT," capitalized
terms defined therein being used herein as therein defined), and that the
Pledged Shares listed on this Pledge Amendment shall be deemed to be part of the
Pledged Shares and shall become part of the Pledged Collateral and shall secure
all Secured Obligations.
SAHARA RESORTS
By: ___________________________
Title:
<TABLE>
<CAPTION>
Class Stock Number
of Certificate of
Stock Issuer Stock Nos. Par Value Shares
- ------------ ----- ----------- --------- ------
<S> <C> <C> <C> <C>
</TABLE>
II-1
<PAGE>
EXHIBIT 10.90
EXHIBIT V-A
COMPANY PLEDGE AGREEMENT
This COMPANY PLEDGE AGREEMENT (this "AGREEMENT") is dated as of July
29, 1997 and entered into by and between SAHARA LAS VEGAS CORP., a Nevada
corporation ("PLEDGOR") and SUNAMERICA LIFE INSURANCE COMPANY, an Arizona
corporation, as agent for and representative of (in such capacity herein call
"SECURED PARTY") the holders of Notes from time to time ("HOLDERS") party to the
Note Purchase Agreement (as hereinafter defined) ("SECURED PARTY")
PRELIMINARY STATEMENTS
A. Pledgor is the legal and beneficial owner of (i) the shares of
stock (the "PLEDGED SHARES") described in Part A of Schedule I annexed hereto
----------
and issued by the corporations named therein and (ii) the indebtedness (if any)
(the "PLEDGED DEBT") described in Part B of said Schedule I and issued by the
----------
obligors named therein.
B. Secured Party, Holders, Pledgor and Santa Fe Gaming Corporation
(formerly named Sahara Gaming Corporation), a Nevada corporation, have entered
into an Amended and Restated Note Purchase Agreement dated as of July 29, 1997
(said Amended and Restated Note Purchase Agreement, as amended to the date
hereof and 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 a certain Holder has made certain commitments, subject to the
terms and conditions set forth in the Note Purchase Agreement, to purchase
Additional Notes from Pledgor.
C. It is a condition precedent to the amendment and restatement of
the Existing Note Purchase Agreement effected by the Note Purchase Agreement and
the consummation of the transactions contemplated thereby that Pledgor 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 a certain Holder to purchase any Additional Notes under the Note Purchase
Agreement and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Pledgor hereby agrees with Secured
Party as follows:
1
<PAGE>
SECTION 1. PLEDGE OF SECURITY. Pledgor hereby pledges to Secured
------------------
Party, and hereby grants to Secured Party a security interest in, all of
Pledgor's right, title and interest in and to the following (the "PLEDGED
COLLATERAL"):
(a) the Pledged Shares and the certificates representing the Pledged
Shares and any interest of Pledgor in the entries on the books of any financial
intermediary pertaining to the Pledged Shares, and all dividends, cash,
warrants, rights, instruments and other property or proceeds from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all of the Pledged Shares;
(b) the Pledged Debt and the instruments evidencing the Pledged Debt,
and all interest, cash, instruments and other property or proceeds from time to
time received, receivable or otherwise distributed in respect of or in exchange
for any or all of the Pledged Debt;
(c) all additional shares of, and all securities convertible into and
warrants, options and other rights to purchase or otherwise acquire, stock of
any issuer of the Pledged Shares from time to time acquired by Pledgor in any
manner (which shares shall be deemed to be part of the Pledged Shares), the
certificates or other instruments representing such additional shares,
securities, warrants, options or other rights and any interest of Pledgor in the
entries on the books of any financial intermediary pertaining to such additional
shares, and all dividends, cash, warrants, rights, instruments and other
property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such additional
shares, securities, warrants, options or other rights;
(d) all additional indebtedness from time to time owed to Pledgor by
any obligor on the Pledged Debt and the instruments evidencing such
indebtedness, and all interest, cash, instruments and other property or proceeds
from time to time received, receivable or otherwise distributed in respect of or
in exchange for any or all of such indebtedness;
(e) all shares of, and all securities convertible into and warrants,
options and other rights to purchase or otherwise acquire, stock of any Person
that, after the date of this Agreement, becomes, as a result of any occurrence,
a direct Subsidiary of Pledgor (which shares shall be deemed to be part of the
Pledged Shares), the certificates or other instruments representing such shares,
securities, warrants, options or other rights and any interest of Pledgor in the
entries on the books of any financial intermediary pertaining to such shares,
and all dividends, cash, warrants, rights, instruments and other property or
proceeds from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of such shares, securities, warrants,
options or other rights;
2
<PAGE>
(f) all indebtedness from time to time owed to Pledgor by any Person
that is or becomes, as a result of any occurrence, a direct or indirect
Subsidiary or Affiliate of Pledgor (including but not limited to Santa Fe Green
Valley), and all interest, cash, instruments and other property or proceeds from
time to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of such indebtedness; and
(g) to the extent not covered by clauses (a) through (f) above, all
proceeds of any or all of the foregoing Pledged Collateral. For purposes of
this Agreement, the term "PROCEEDS" includes whatever is receivable or received
when Pledged Collateral or proceeds are sold, exchanged, collected or otherwise
disposed of, whether such disposition is voluntary or involuntary, and includes,
without limitation, proceeds of any indemnity or guaranty payable to Pledgor or
Secured Party from time to time with respect to any of the Pledged Collateral.
SECTION 2. SECURITY FOR OBLIGATIONS. This Agreement secures, and the
------------------------
Pledged 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 Pledgor now or hereafter existing under or
arising out of or in connection with the Note Purchase Agreement, the Guaranty
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 Pledgor, 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 Pledgor now or hereafter existing under
this Agreement (all such obligations of Pledgor, together with the Underlying
Debt, being the "SECURED OBLIGATIONS").
SECTION 3. DELIVERY OF PLEDGED COLLATERAL. All certificates or
------------------------------
instruments representing or evidencing the Pledged Collateral shall be delivered
to and held by or on behalf of Secured Party pursuant hereto and shall be in
suitable form for transfer by delivery or, as applicable, shall be accompanied
by Pledgor's endorsement, where necessary, or duly executed instruments of
transfer or assignment in blank, all in form and substance satisfactory to
Secured Party. Secured Party shall have the right, at any time in its
discretion and without notice to Pledgor, to transfer to or to register in the
name of Secured Party or any of its nominees any or all of the Pledged
Collateral, subject only to the revocable rights specified in Section 7(a). In
3
<PAGE>
addition, Secured Party shall have the right at any time to exchange
certificates or instruments representing or evidencing Pledged Collateral for
certificates or instru ments of smaller or larger denominations.
SECTION 4. REPRESENTATIONS AND WARRANTIES. Pledgor represents and
------------------------------
warrants as follows:
(a) Due Authorization, etc. of Pledged Collateral. All of the Pledged
---------------------------------------------
Shares have been duly authorized and validly issued and are fully paid and non-
assessable. All of the Pledged Debt (if any) has been duly authorized,
authenticated or issued, and delivered and is the legal, valid and binding
obligation of the issuers thereof (subject to bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or limiting creditors'
rights generally and equitable principles relating to enforceability) and is not
in default.
(b) Description of Pledged Collateral. The Pledged Shares constitute
---------------------------------
100 percent of the issued and outstanding shares of stock of each of the direct
Subsidiaries of Pledgor, and there are no outstanding warrants, options or other
rights to purchase, or other agreements outstanding with respect to, or property
that is now or hereafter convertible into, or that requires the issuance or sale
of, any Pledged Shares. The Pledged Debt constitutes all of the issued and
outstanding intercompany indebtedness evidenced by a promissory note of the
respective issuers thereof owing to Pledgor.
(c) Ownership of Pledged Collateral. Pledgor is the legal, record and
-------------------------------
beneficial owner of the Pledged Collateral free and clear of any Lien except for
the security interest created by this Agreement and Permitted Liens.
(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 pledge by Pledgor of the Pledged
Collateral pursuant to this Agreement and the grant by Pledgor of the security
interest granted hereby, (ii) the execution, delivery or performance of this
Agreement by Pledgor, or (iii) the exercise by Secured Party of the voting or
other rights, or the remedies in respect of the Pledged Collateral, provided for
in this Agreement (except as may be required in connection with a disposition of
Pledged Collateral by laws affecting the offering and sale of securities
generally).
(e) Perfection. Assuming Secured Party's continued possession of the
----------
certificates representing the Pledged Shares, the pledge of the Pledged
Collateral pursuant to this Agreement creates a valid and perfected first
priority security interest in the Pledged Collateral, securing the payment of
the Secured Obligations.
4
<PAGE>
(f) Margin Regulations. The pledge of the Pledged Collateral pursuant
------------------
to this Agreement does not violate Regulation G, T, U or X of the Board of
Governors of the Federal Reserve System.
SECTION 5. TRANSFERS AND OTHER LIENS; ADDITIONAL PLEDGED COLLATERAL;
--------------------------------------------------------
ETC. Pledgor shall:
- ---
(a) not, except as expressly permitted by the Note Purchase Agreement,
(i) sell, assign (by operation of law or otherwise) or otherwise dispose of, or
grant any option with respect to, any of the Pledged Collateral, (ii) create or
suffer to exist any Lien upon or with respect to any of the Pledged Collateral,
except for the security interest under this Agreement, or (iii) permit any
issuer of Pledged Shares to merge or consolidate unless all the outstanding
capital stock of the surviving or resulting corporation is, upon such merger or
consolidation, pledged hereunder and no cash, securities or other property is
distributed in respect of the outstanding shares of any other constituent
corporation;
(b) (i) cause each issuer of Pledged Shares that is a Subsidiary of
Pledgor not to issue any stock or other securities in addition to or in
substitution for the Pledged Shares issued by such issuer, except to Pledgor,
(ii) pledge hereunder, immediately upon its acquisition (directly or indirectly)
thereof, any and all additional shares of stock or other securities of each
issuer of Pledged Shares, and (iii) pledge hereunder, immediately upon its
acquisition (directly or indirectly) thereof, any and all shares of stock issued
to or otherwise acquired by Pledgor of any Person that, after the date of this
Agreement, becomes, as a result of any occurrence, a direct Subsidiary of
Pledgor;
(c) (i) pledge hereunder, immediately upon their issuance, any and all
instruments or other evidences of additional indebtedness from time to time owed
to Pledgor by any obligor on the Pledged Debt, and (ii) pledge hereunder,
immediately upon their issuance, any and all instruments or other evidences of
indebtedness from time to time owed to Pledgor by any Person that after the date
of this Agreement becomes, as a result of any occurrence, a direct or indirect
Subsidiary of Pledgor;
(d) promptly deliver to Secured Party all written notices received by
it as holder of the Pledged Collateral; and
(e) pay promptly when due all taxes, assessments and governmental
charges or levies imposed upon, and all claims against, the Pledged Collateral,
except to the extent the validity thereof is being contested in good faith;
provided that Pledgor 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
Pledgor or any of the Pledged Collateral as a result of the failure to make such
payment.
5
<PAGE>
SECTION 6. FURTHER ASSURANCES; PLEDGE AMENDMENTS.
-------------------------------------
(a) Pledgor agrees that from time to time, at the expense of Pledgor,
Pledgor 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 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 Pledged
Collateral. Without limiting the generality of the foregoing, Pledgor will:
(i) 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 and
(ii) at Secured Party's request, appear in and defend any action or proceeding
that may affect Pledgor's title to or Secured Party's security interest in all
or any part of the Pledged Collateral.
(b) Pledgor further agrees that it will, upon obtaining any additional
shares of stock or other securities required to be pledged hereunder as provided
in Section 5(b) or (c), promptly (and in any event within five Business Days)
deliver to Secured Party a Pledge Amendment, duly executed by Pledgor, in
substantially the form of Schedule II annexed hereto (a "PLEDGE AMENDMENT"), in
-----------
respect of the additional Pledged Shares or Pledged Debt to be pledged pursuant
to this Agreement. Pledgor hereby authorizes Secured Party to attach each Pledge
Amendment to this Agreement and agrees that all Pledged Shares or Pledged Debt
listed on any Pledge Amendment delivered to Secured Party shall for all purposes
hereunder be considered Pledged Collateral; provided that the failure of Pledgor
--------
to execute a Pledge Amendment with respect to any additional Pledged Shares or
Pledged Debt 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.
SECTION 7. VOTING RIGHTS; DIVIDENDS; ETC.
-----------------------------
(a) So long as no Event of Default shall have occurred and be
continuing:
(i) Pledgor shall be entitled to exercise any and all voting and
other consensual rights pertaining to the Pledged Collateral or any part
thereof for any purpose not inconsistent with the terms of this Agreement or
the Note Purchase Agreement; provided, however, that Pledgor shall not
-------- -------
exercise or refrain from exercising any such right if Secured Party shall
have notified Pledgor that, in Secured Party's judgment, such action would
have a material adverse effect on the value of the Pledged Collateral or any
part thereof; and provided, further, that Pledgor shall give Secured Party
-------- -------
at least five Business Days' prior written notice of the manner in which it
intends to exercise, or the
6
<PAGE>
reasons for refraining from exercising, any such right. It is understood,
however, that neither (A) the voting by Pledgor of any Pledged Shares for or
Pledgor's consent to the election of directors at a regularly scheduled
annual or other meeting of stockholders (or by written consent) or with
respect to incidental matters at any such meeting nor (B) Pledgor's consent
to or approval of any action otherwise permitted under this Agreement and
the Note Purchase Agreement shall be deemed inconsistent with the terms of
this Agreement or the Note Purchase Agreement within the meaning of this
Section 7(a)(i), and no notice of any such voting or consent need be given
to Secured Party;
(ii) Pledgor shall be entitled to receive and retain, and to utilize
free and clear of the lien of this Agreement (but subject to the provisions
of the Note Purchase Agreement), any and all dividends, principal and
interest paid in respect of the Pledged Collateral; provided, however,
-----------------
that any and all
(A) dividends, principal and interest paid or payable other
than in cash in respect of, and instruments and other property
received, receivable or otherwise distributed in respect of, or in
exchange for, any Pledged Collateral,
(B) dividends and other distributions paid or payable in cash
in respect of any Pledged Collateral in connection with a partial or
total liquidation or dissolution or in connection with a reduction of
capital, capital surplus or paid-in-surplus, and
(C) cash paid, payable or otherwise distributed in redemption
of or in exchange for any Pledged Shares,
shall be, and shall forthwith be delivered to Secured Party to hold as,
Pledged Collateral and shall, if received by Pledgor, be received in trust
for the benefit of Secured Party, be segregated from the other property or
funds of Pledgor and be forthwith delivered to Secured Party as Pledged
Collateral in the same form as so received (with all necessary
indorsements); and
(iii) Secured Party shall promptly execute and deliver (or cause
to be executed and delivered) to Pledgor all such proxies, dividend payment
orders and other instruments as Pledgor may from time to time reasonably
request for the purpose of enabling Pledgor to exercise the voting and other
consensual rights which it is entitled to exercise pursuant to paragraph (i)
above and to receive the dividends, principal or interest payments which it
is authorized to receive and retain pursuant to paragraph (ii) above.
(b) Upon the occurrence and during the continuation of an
Event of Default:
7
<PAGE>
(i) upon written notice from Secured Party to Pledgor, all rights
of Pledgor to exercise the voting and other consensual rights which it would
otherwise be entitled to exercise pursuant to Section 7(a)(i) 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;
(ii) all rights of Pledgor to receive the dividends and interest
payments which it would otherwise be authorized to receive and retain
pursuant to Section 7(a)(ii) shall cease, and all such rights shall
thereupon become vested in Secured Party who shall thereupon have the sole
right to receive and hold as Pledged Collateral such dividends and interest
payments; and
(iii) all dividends, principal and interest payments which are
received by Pledgor contrary to the provisions of paragraph (ii) of this
Section 7(b) shall be received in trust for the benefit of Secured Party,
shall be segregated from other funds of Pledgor and shall forthwith be paid
over to Secured Party as Pledged Collateral in the same form as so received
(with any necessary indorsements).
(c) 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(b)(i) and to receive all dividends and other distributions which it may be
entitled to receive under Section 7(a)(ii) or Section 7(b)(ii), (i) Pledgor
shall promptly execute and deliver (or cause to be executed and delivered) to
Secured Party all such proxies, dividend payment 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), Pledgor hereby grants to
Secured Party an irrevocable proxy to vote the Pledged Shares and to exercise
all other rights, powers, privileges and remedies to which a holder of the
Pledged Shares would be entitled (including, without limitation, giving or
withholding written consents of shareholders, calling special meetings of
shareholders and voting at such meetings), which proxy shall be effective,
automatically and without the necessity of any action (including any transfer of
any Pledged Shares on the record books of the issuer thereof) by any other
Person (including the issuer of the Pledged Shares or any officer or agent
thereof), upon the occurrence of an Event of Default and which proxy shall only
terminate upon the payment in full of the Secured Obligations.
SECTION 8. SECURED PARTY APPOINTED ATTORNEY-IN-FACT. Pledgor hereby
----------------------------------------
irrevocably appoints Secured Party as Pledgor's attorney-in-fact, with full
authority in the place and stead of Pledgor and in the name of Pledgor, 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:
8
<PAGE>
(a) to file one or more financing or continuation statements, or
amendments thereto, relative to all or any part of the Pledged Collateral
without the signature of Pledgor (to the extent permitted by applicable law);
(b) during the continuance of any Event of Default, to ask, 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 Pledged
Collateral;
(c) during the continuance of any Event of Default, to receive,
endorse and collect any instruments made payable to Pledgor representing any
divi dend, principal or interest payment or other distribution in respect of the
Pledged Collateral or any part thereof and to give full discharge for the same;
and
(d) during the continuance of any Event of Default, to file any claims
or take any action or institute any proceedings that Secured Party may deem
necessary or desirable for the collection of any of the Pledged Collateral or
otherwise to enforce the rights of Secured Party with respect to any of the
Pledged Collateral.
SECTION 9. SECURED PARTY MAY PERFORM. If Pledgor 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 Pledgor under Section 14(b).
SECTION 10. STANDARD OF CARE. The powers conferred on Secured Party
----------------
hereunder are solely to protect its interest in the Pledged 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 Pledged Collateral in its
possession and the accounting for moneys actually received by it hereunder,
Secured Party shall have no duty as to any Pledged 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 Pledged 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 Pledged Collateral) to preserve
rights against any parties with respect to any Pledged 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 Pledged Collateral, or
(d) initiating any action to protect the Pledged 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 Pledged Collateral
in its possession if such Pledged Collateral is accorded treatment substantially
equal to that which Secured Party accords its own property consisting of
negotiable securities.
9
<PAGE>
SECTION 11. REMEDIES.
--------
(a) If any Event of Default shall have occurred and be continuing,
Secured Party may exercise in respect of the Pledged 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 Pledged Collateral), and Secured Party
may also in its sole discretion, without notice except as specified below, sell
the Pledged Collateral or any part thereof in one or more parcels at public or
private sale, at any exchange or broker's board or 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, irrespective of the impact of any such sales
on the market price of the Pledged Collateral. Secured Party or any Holder may
be the purchaser of any or all of the Pledged Collateral at any such sale and
Secured Party, as agent for and representative of Holders (but not any Holder or
Holders in its or their respective individual capacities unless Requisite
Holders shall otherwise agree in writing), shall be entitled, for the purpose of
bidding and making settlement or payment of the purchase price for all or any
portion of the Pledged 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 Pledged 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 Pledgor, and Pledgor 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. Pledgor agrees that, to the extent notice of
sale shall be required by law, at least ten days' notice to Pledgor 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 Pledged 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. Pledgor hereby waives any claims against Secured Party arising by
reason of the fact that the price at which any Pledged 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 Pledged Collateral to more than one offeree.
If the proceeds of any sale or other disposition of the Pledged Collateral are
insufficient to pay all the Secured Obligations, Pledgor shall be liable for the
deficiency and the fees of any attorneys employed by Secured Party to collect
such deficiency.
(b) Pledgor 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
10
<PAGE>
compelled, with respect to any sale of all or any part of the Pledged Collateral
conducted without prior registration or qualification of such Pledged 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 Pledged Collateral
for their own account, for investment and not with a view to the distribution or
resale thereof. Pledgor acknowledges that any such 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 Pledgor
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.
(c) If Secured Party determines to exercise its right to sell any or
all of the Pledged Collateral, upon written request, Pledgor shall and shall
cause each issuer (which is a Subsidiary of Pledgor) of any Pledged Shares to be
sold hereunder from time to time to furnish to Secured Party all such
information as Secured Party may request in order to determine the number of
shares and other instruments included in the Pledged Collateral which may be
sold by Secured Party in exempt transactions under the Securities Act and the
rules and regulations of the Securities and Exchange Commission thereunder, as
the same are from time to time in effect.
SECTION 12. 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 Pledged Collateral may, in the discretion of Secured Party, be held by
Secured Party as Pledged Collateral for, and/or then, or at any 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 reasonable compensation to
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 Pledgor, 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 13;
SECOND: To the payment of all other Secured Obligations in such
order as Secured Party shall elect; and
11
<PAGE>
THIRD: To the payment to or upon the order of Pledgor, or to
whosoever 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 13. INDEMNITY AND EXPENSES.
----------------------
(a) Pledgor agrees to indemnify Secured Party and each Holder 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 or such Holder's gross negligence or willful
misconduct as finally determined by a court of competent jurisdiction.
(b) Pledgor 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 incur in
connection with (i) the administration of this Agreement, (ii) the custody or
preservation of, or the sale of, collection from, or other realization upon, any
of the Pledged Collateral, (iii) the exercise or enforcement of any of the
rights of Secured Party hereunder, or (iv) the failure by Pledgor to perform or
observe any of the provisions hereof.
SECTION 14. CONTINUING SECURITY INTEREST; TRANSFER OF NOTES. This
-----------------------------------------------
Agreement shall create a continuing security interest in the Pledged Collateral
and shall (a) remain in full force and effect until the payment in full of all
Secured Obligations, (b) be binding upon Pledgor, 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 gener ality of the foregoing clause (c), any Holder may
assign or otherwise transfer any Notes held by it to any other Person, and such
other Person shall thereupon become vested with all the benefits in respect
thereof granted to Holders herein or otherwise. Upon the payment in full of all
Secured Obligations, the security interest granted hereby shall terminate and
all rights to the Pledged Collateral shall revert to Pledgor. Upon any such
termination Secured Party will, at Pledgor's expense, execute and deliver to
Pledgor such documents as Pledgor shall reasonably request to evidence such
termination and Pledgor shall be entitled to the return, upon its request and at
its expense, against receipt and without recourse to Secured Party, of such of
the Pledged Collateral as shall not have been sold or otherwise applied pursuant
to the terms hereof.
SECTION 15. 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
12
<PAGE>
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 Pledged 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
Pledged Collateral held hereunder, together with all records and other documents
necessary or appropriate in connection with the 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 16. AMENDMENTS; ETC. No amendment, modification, termination
---------------
or waiver of any provision of this Agreement, and no consent to any departure by
Pledgor therefrom, shall in any event be effective unless the same shall be in
writing and signed by Secured Party and, in the case of any such amendment or
modification, by Pledgor. Any such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which it was given.
SECTION 17. 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, or four 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 in the Note Purchase
13
<PAGE>
Agreement 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 18. 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 19. 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 20. 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.
SECTION 21. GOVERNING LAW; TERMS. THIS AGREEMENT AND THE RIGHTS AND
--------------------
OBLIGATIONS OF THE PARTIES HEREUNDER 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 PLEDGED
COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF
NEVADA. Unless otherwise defined herein or in the Note Purchase Agreement, terms
used in Articles 8 and 9 of the Uniform Commercial Code in the State of Nevada
are used herein as therein defined.
SECTION 22. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL
----------------------------------------------
JUDICIAL PROCEEDINGS BROUGHT AGAINST PLEDGOR ARISING OUT OF OR RELATING TO THIS
AGREEMENT 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 PLEDGOR
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
14
<PAGE>
ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT. Pledgor 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 Pledgor at
its address provided in Section 17, such service being hereby acknowledged by
Pledgor to be sufficient for personal jurisdiction in any action against Pledgor
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 Secured Party to bring
proceedings against Pledgor in the courts of any other jurisdiction.
SECTION 23. WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED BY
--------------------
APPLICABLE LAW, PLEDGOR 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. Pledgor and Secured Party each acknowledge that this waiver
is a material inducement for Pledgor and Secured Party to enter into a business
relationship, that Pledgor 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. Pledgor 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.
SECTION 24. 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]
15
<PAGE>
IN WITNESS WHEREOF, Pledgor 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.
By: /s/ Paul W. Lowden
-----------------------------------
Title: President
------------------------------
By: /s/ Thomas K. Land
-----------------------------------
Title: Treasurer and Asst. Secretary
------------------------------
SUNAMERICA LIFE INSURANCE COMPANY, as
Secured Party
By: /s/ Stephen P. Hanover
-----------------------------------
Title: Authorized Agent
------------------------------
S-1
<PAGE>
SCHEDULE I
Attached to and forming a part of the Company Pledge Agreement dated
as of July 29, 1997 between Sahara Las Vegas Corp., as Pledgor, and SunAmerica
Life Insurance Company, as Secured Party.
Part A
<TABLE>
<CAPTION>
Class of Stock Certi- Par Number of
Stock Issuer Stock ficate Nos. Value Shares
- --------------- -------- ------------ ------ ---------
<S> <C> <C> <C> <C>
SFV, Inc. Common 1 No Par 1,000
</TABLE>
Part B
Debt Issuer Amount of Indebtedness
- ----------- ----------------------
I-1
<PAGE>
SCHEDULE II
PLEDGE AMENDMENT
This Pledge Amendment, dated ____________, 19__, is delivered pursuant
to Section 6(b) of the Pledge Agreement referred to below. The undersigned
hereby agrees that this Pledge Amendment may be attached to the Company Pledge
Agreement dated July 29, 1997, between the undersigned and SunAmerica Life
Insurance Company, as Secured Party (the "PLEDGE AGREEMENT," capitalized terms
defined therein being used herein as therein defined), and that the [Pledged
Shares] [Pledged Debt] listed on this Pledge Amendment shall be deemed to be
part of the [Pledged Shares] [Pledged Debt] and shall become part of the Pledged
Collateral and shall secure all Secured Obligations.
SAHARA LAS VEGAS CORP.
By: ___________________________
Title:
Class of Stock Certi- Par Number of
Stock Issuer Stock ficate Nos. Value Shares
- ------------ -------- ------------ ----- ---------
Debt Issuer Amount of Indebtedness
- ----------- ----------------------
II-1
<PAGE>
EXHIBIT 10.91
EXHBIT V-C
CASINO PROPERTIES PLEDGE AGREEMENT
This CASINO PROPERTIES PLEDGE AGREEMENT (this "AGREEMENT") is dated as of
July 29, 1997 and entered into by and between CASINO PROPERTIES, INC., a Nevada
corporation ("PLEDGOR"), and SUNAMERICA LIFE INSURANCE COMPANY, an Arizona
corporation, as agent for and representative of (in such capacity herein call
"SECURED PARTY") the holders of Notes from time to time ("HOLDERS") party to the
Note Purchase Agreement (as hereinafter defined) ("SECURED PARTY").
PRELIMINARY STATEMENTS
A. Pledgor is the legal and beneficial owner of the shares of stock (the
"PLEDGED SHARES") described in Part A of Schedule I annexed hereto and issued by
----------
the corporations named therein.
B. Secured Party, Holders, Sahara Las Vegas Corp., a Nevada corporation
("COMPANY") and Santa Fe Gaming Corporation (formerly named Sahara Gaming
Corporation), a Nevada corporation, have entered into an Amended and Restated
Note Purchase Agreement dated as of July 29, 1997 (said Amended and Restated
Note Purchase Agreement, as amended to the date hereof and 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 a certain Holder
has made certain commitments, subject to the terms and conditions set forth in
the Note Purchase Agreement, to purchase Additional Notes from Company.
C. Pledgor has executed and delivered as of the date hereof a Guaranty
dated as of July 29, 1997 (said Guaranty, as amended to the date hereof and as
it may hereafter be amended, supplemented or otherwise modified from time to
time, being the "GUARANTY") in favor of Secured Party for the benefit of
Holders, pursuant to which Pledgor has guarantied the prompt payment and
performance when due of all obligations of Company under the Note Purchase
Agreement.
D. It is a condition precedent to the amendment and restatement of the
Existing Note Purchase Agreement effected by the Note Purchase Agreement and the
consummation of the transactions contemplated thereby that Pledgor 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 a
certain Holder to purchase any Additional Notes under the Note Purchase
1
<PAGE>
Agreement and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Pledgor hereby agrees with Secured
Party as follows:
SECTION 1. PLEDGE OF SECURITY. Pledgor hereby pledges to Secured Party,
------------------
and hereby grants to Secured Party a security interest in, all of Pledgor's
right, title and interest in and to the following (the "PLEDGED COLLATERAL"):
(a) the Pledged Shares and the certificates representing the Pledged Shares
and any interest of Pledgor in the entries on the books of any financial
intermediary pertaining to the Pledged Shares, and all dividends, cash,
warrants, rights, instruments and other property or proceeds from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all of the Pledged Shares;
(b) all additional shares of, and all securities convertible into and
warrants, options and other rights to purchase or otherwise acquire, stock of
any issuer of the Pledged Shares from time to time acquired by Pledgor in any
manner (which shares shall be deemed to be part of the Pledged Shares), the
certificates or other instruments representing such additional shares,
securities, warrants, options or other rights and any interest of Pledgor in the
entries on the books of any financial intermediary pertaining to such additional
shares, and all dividends, cash, warrants, rights, instruments and other
property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such additional
shares, securities, warrants, options or other rights; and
(c) to the extent not covered by clauses (a) through (b) above, all
proceeds of any or all of the foregoing Pledged Collateral. For purposes of this
Agreement, the term "PROCEEDS" includes whatever is receivable or received when
Pledged Collateral or proceeds are sold, exchanged, collected or otherwise
disposed of, whether such disposition is voluntary or involuntary, and includes,
without limitation, proceeds of any indemnity or guaranty payable to Pledgor or
Secured Party from time to time with respect to any of the Pledged Collateral.
SECTION 2. SECURITY FOR OBLIGATIONS. This Agreement secures, and the
------------------------
Pledged 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 Pledgor now or hereafter existing under or
arising out of or in connection with the Note Purchase Agreement, the Guaranty
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 Pledgor, would accrue on such
obligations), fees, expenses, indemnities or otherwise,
2
<PAGE>
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 Pledgor now or
hereafter existing under this Agreement (all such obligations of Pledgor,
together with the Underlying Debt, being the "SECURED OBLIGATIONS").
SECTION 3. DELIVERY OF PLEDGED COLLATERAL. All certificates or
------------------------------
instruments representing or evidencing the Pledged Collateral shall be delivered
to and held by or on behalf of Secured Party pursuant hereto and shall be in
suitable form for transfer by delivery or, as applicable, shall be accompanied
by Pledgor's endorsement, where necessary, or duly executed instruments of
transfer or assignment in blank, all in form and substance satisfactory to
Secured Party. Secured Party shall have the right, at any time in its
discretion and without notice to Pledgor, to transfer to or to register in the
name of Secured Party or any of its nominees any or all of the Pledged
Collateral, subject only to the revocable rights specified in Section 7(a). In
addition, Secured Party shall have the right at any time to exchange
certificates or instruments representing or evidencing Pledged Collateral for
certificates or instru ments of smaller or larger denominations.
SECTION 4. REPRESENTATIONS AND WARRANTIES. Pledgor represents and
warrants as follows:
(a) Due Authorization, etc. of Pledged Collateral. All of the Pledged
---------------------------------------------
Shares have been duly authorized and validly issued and are fully paid and non-
assessable.
(b) Description of Pledged Collateral. The Pledged Shares constitutes
---------------------------------
the percentage of the issued and outstanding shares of stock of the Persons set
forth on Schedule I annexed hereto, and there are no outstanding warrants,
options or other rights to purchase, or other agreements outstanding with
respect to, or property that is now or hereafter convertible into, or that
requires the issuance or sale of, any Pledged Shares.
(c) Ownership of Pledged Collateral. Pledgor is the legal, record and
-------------------------------
beneficial owner of the Pledged Collateral free and clear of any Lien except for
the security interest created by this Agreement and Permitted Liens.
(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 pledge by Pledgor of the Pledged
Collateral pursuant to this Agreement and the grant by Pledgor of the security
3
<PAGE>
interest granted hereby, (ii) the execution, delivery or performance of this
Agreement by Pledgor, or (iii) the exercise by Secured Party of the voting or
other rights, or the remedies in respect of the Pledged Collateral, provided for
in this Agreement (except as may be required in connection with a disposition of
Pledged Collateral by laws affecting the offering and sale of securities
generally).
(e) Perfection. Assuming Secured Party's continued possession of the
----------
certificates representing the Pledged Shares, the pledge of the Pledged
Collateral pursuant to this Agreement creates a valid and perfected first
priority security interest in the Pledged Collateral, securing the payment of
the Secured Obligations.
(f) Margin Regulations. The pledge of the Pledged Collateral pursuant
------------------
to this Agreement does not violate Regulation G, T, U or X of the Board of
Governors of the Federal Reserve System.
SECTION 5. TRANSFERS AND OTHER LIENS; ADDITIONAL PLEDGED COLLATERAL; ETC.
--------------------------------------------------------------
Pledgor shall:
(a) not, except as expressly permitted by the Note Purchase Agreement,
(i) sell, assign (by operation of law or otherwise) or otherwise dispose of, or
grant any option with respect to, any of the Pledged Collateral, (ii) create or
suffer to exist any Lien upon or with respect to any of the Pledged Collateral,
except for the security interest under this Agreement, or (iii) permit any
issuer of Pledged Shares to merge or consolidate unless all the outstanding
capital stock of the surviving or resulting corporation is, upon such merger or
consolidation, pledged hereunder and no cash, securities or other property is
distributed in respect of the outstanding shares of any other constituent
corporation;
(b) (i) cause each issuer of Pledged Shares that is a Subsidiary of
Pledgor not to issue any stock or other securities in addition to or in
substitution for the Pledged Shares issued by such issuer, except to Pledgor,
(ii) pledge hereunder, immediately upon its acquisition (directly or indirectly)
thereof, any and all additional shares of stock or other securities of each
issuer of Pledged Shares, and (iii) pledge hereunder, immediately upon its
acquisition (directly or indirectly) thereof, any and all shares of stock issued
to or otherwise acquired by Pledgor of any Person that, after the date of this
Agreement, becomes, as a result of any occurrence, a direct Subsidiary of
Pledgor;
(c) promptly deliver to Secured Party all written notices received by it as
holder of the Pledged Collateral; and
(d) pay promptly when due all taxes, assessments and governmental
charges or levies imposed upon, and all claims against, the Pledged Collateral,
except to the extent the validity thereof is being contested in good faith;
provided that Pledgor shall in any event pay such taxes, assessments, charges,
- --------
levies or claims not
4
<PAGE>
later than five days prior to the date of any proposed sale under any judgement,
writ or warrant of attachment entered or filed against Pledgor or any of the
Pledged Collateral as a result of the failure to make such payment.
SECTION 6. FURTHER ASSURANCES; PLEDGE AMENDMENTS.
-------------------------------------
(a) Pledgor agrees that from time to time, at the expense of Pledgor,
Pledgor 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 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 Pledged
Collateral. Without limiting the generality of the foregoing, Pledgor will:
(i) 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 and
(ii) at Secured Party's request, appear in and defend any action or proceeding
that may affect Pledgor's title to or Secured Party's security interest in all
or any part of the Pledged Collateral.
(b) Pledgor further agrees that it will, upon obtaining any additional
shares of stock or other securities required to be pledged hereunder as provided
in Section 5(b) or (c), promptly (and in any event within five Business Days)
deliver to Secured Party a Pledge Amendment, duly executed by Pledgor, in
substantially the form of Schedule II annexed hereto (a "PLEDGE AMENDMENT"), in
-----------
respect of the additional Pledged Shares to be pledged pursuant to this
Agreement. Pledgor hereby authorizes Secured Party to attach each Pledge
Amendment to this Agreement and agrees that all Pledged Shares listed on any
Pledge Amendment delivered to Secured Party shall for all purposes hereunder be
considered Pledged Collateral; provided that the failure of Pledgor to execute a
--------
Pledge Amendment with respect to any additional Pledged Shares 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.
SECTION 7. VOTING RIGHTS; DIVIDENDS; ETC.
------------------------------
(a) So long as no Event of Default shall have occurred and be continuing:
(i) Pledgor shall be entitled to exercise any and all voting and
other consensual rights pertaining to the Pledged Collateral or any part
thereof for any purpose not inconsistent with the terms of this Agreement or
the Note Purchase Agreement; provided, however, that Pledgor shall not
-------- -------
exercise or refrain from exercising any such right if Secured Party shall
have notified Pledgor that, in Secured Party's judgment, such action would
have a material
5
<PAGE>
adverse effect on the value of the Pledged Collateral or any part thereof;
and provided, further, that Pledgor 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. It
is understood, however, that neither (A) the voting by Pledgor of any
Pledged Shares for or Pledgor's consent to the election of directors at a
regularly scheduled annual or other meeting of stockholders (or by written
consent) or with respect to incidental matters at any such meeting nor (B)
Pledgor's consent to or approval of any action otherwise permitted under
this Agreement and the Note Purchase Agreement shall be deemed inconsistent
with the terms of this Agreement or the Note Purchase Agreement within the
meaning of this Section 7(a)(i), and no notice of any such voting or consent
need be given to Secured Party;
(ii) Pledgor shall be entitled to receive and retain, and to
utilize free and clear of the lien of this Agreement (but subject to the
provisions of the Note Purchase Agreement), any and all dividends, principal
and interest paid in respect of the Pledged Collateral; provided, however,
-------- -------
that any and all
(A) dividends, principal and interest paid or payable other
than in cash in respect of, and instruments and other property
received, receivable or otherwise distributed in respect of, or in
exchange for, any Pledged Collateral,
(B) dividends and other distributions paid or payable in cash
in respect of any Pledged Collateral in connection with a partial or
total liquidation or dissolution or in connection with a reduction of
capital, capital surplus or paid-in-surplus, and
(C) cash paid, payable or otherwise distributed in redemption
of or in exchange for any Pledged Shares,
shall be, and shall forthwith be delivered to Secured Party to hold as,
Pledged Collateral and shall, if received by Pledgor, be received in trust
for the benefit of Secured Party, be segregated from the other property or
funds of Pledgor and be forthwith delivered to Secured Party as Pledged
Collateral in the same form as so received (with all necessary
indorsements); and
(iii) Secured Party shall promptly execute and deliver (or cause to be
executed and delivered) to Pledgor all such proxies, dividend payment orders
and other instruments as Pledgor may from time to time reasonably request
for the purpose of enabling Pledgor to exercise the voting and other
consensual rights which it is entitled to exercise pursuant to paragraph (i)
above and to receive the dividends, principal or interest payments which it
is authorized to receive and retain pursuant to paragraph (ii) above.
6
<PAGE>
(b) Upon the occurrence and during the continuation of an Event of Default:
(i) upon written notice from Secured Party to Pledgor, all rights
of Pledgor to exercise the voting and other consensual rights which it would
otherwise be entitled to exercise pursuant to Section 7(a)(i) 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;
(ii) all rights of Pledgor to receive the dividends and interest
payments which it would otherwise be authorized to receive and retain
pursuant to Section 7(a)(ii) shall cease, and all such rights shall
thereupon become vested in Secured Party who shall thereupon have the sole
right to receive and hold as Pledged Collateral such dividends and interest
payments; and
(iii) all dividends, principal and interest payments which are
received by Pledgor contrary to the provisions of paragraph (ii) of this
Section 7(b) shall be received in trust for the benefit of Secured Party,
shall be segregated from other funds of Pledgor and shall forthwith be paid
over to Secured Party as Pledged Collateral in the same form as so received
(with any necessary indorsements).
(c) 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(b)(i) and to receive all dividends and other distributions which it may be
entitled to receive under Section 7(a)(ii) or Section 7(b)(ii), (i) Pledgor
shall promptly execute and deliver (or cause to be executed and delivered) to
Secured Party all such proxies, dividend payment 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), Pledgor hereby grants to
Secured Party an irrevocable proxy to vote the Pledged Shares and to exercise
all other rights, powers, privileges and remedies to which a holder of the
Pledged Shares would be entitled (including, without limitation, giving or
withholding written consents of shareholders, calling special meetings of
shareholders and voting at such meetings), which proxy shall be effective,
automatically and without the necessity of any action (including any transfer of
any Pledged Shares on the record books of the issuer thereof) by any other
Person (including the issuer of the Pledged Shares or any officer or agent
thereof), upon the occurrence of an Event of Default and which proxy shall only
terminate upon the payment in full of the Secured Obligations.
SECTION 8. SECURED PARTY APPOINTED ATTORNEY-IN-FACT. Pledgor hereby
----------------------------------------
irrevocably appoints Secured Party as Pledgor's attorney-in-fact, with full
authority in the place and stead of Pledgor and in the name of Pledgor, Secured
Party
7
<PAGE>
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 file one or more financing or continuation statements, or
amendments thereto, relative to all or any part of the Pledged Collateral
without the signature of Pledgor (to the extent permitted by applicable law);
(b) during the continuance of any Event of Default, to ask, 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 Pledged
Collateral;
(c) during the continuance of any Event of Default, to receive,
endorse and collect any instruments made payable to Pledgor representing any
divi dend, principal or interest payment or other distribution in respect of the
Pledged Collateral or any part thereof and to give full discharge for the same;
and
(d) during the continuance of any Event of Default, to file any claims
or take any action or institute any proceedings that Secured Party may deem
necessary or desirable for the collection of any of the Pledged Collateral or
otherwise to enforce the rights of Secured Party with respect to any of the
Pledged Collateral.
SECTION 9. SECURED PARTY MAY PERFORM. If Pledgor 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 Pledgor under Section 14(b).
SECTION 10. STANDARD OF CARE. The powers conferred on Secured Party
----------------
hereunder are solely to protect its interest in the Pledged 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 Pledged Collateral in its
possession and the accounting for moneys actually received by it hereunder,
Secured Party shall have no duty as to any Pledged 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 Pledged 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 Pledged Collateral) to preserve
rights against any parties with respect to any Pledged 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 Pledged Collateral, or
(d) initiating any action to protect the Pledged 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 Pledged Collateral
in its possession if such
8
<PAGE>
Pledged Collateral is accorded treatment substantially equal to that which
Secured Party accords its own property consisting of negotiable securities.
SECTION 11. REMEDIES.
--------
(a) If any Event of Default shall have occurred and be continuing, Secured
Party may exercise in respect of the Pledged 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 Pledged Collateral), and Secured Party
may also in its sole discretion, without notice except as specified below, sell
the Pledged Collateral or any part thereof in one or more parcels at public or
private sale, at any exchange or broker's board or 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, irrespective of the impact of any such sales
on the market price of the Pledged Collateral. Secured Party or any Holder may
be the purchaser of any or all of the Pledged Collateral at any such sale and
Secured Party, as agent for and representative of Holders (but not any Holder or
Holders in its or their respective individual capacities unless Requisite
Holders shall otherwise agree in writing), shall be entitled, for the purpose of
bidding and making settlement or payment of the purchase price for all or any
portion of the Pledged 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 Pledged 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 Pledgor, and Pledgor 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. Pledgor agrees that, to the extent notice of sale
shall be required by law, at least ten days' notice to Pledgor 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 Pledged 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.
Pledgor hereby waives any claims against Secured Party arising by reason of the
fact that the price at which any Pledged 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 Pledged Collateral to more than one offeree. If the proceeds of any sale or
other disposition of the Pledged Collateral are insufficient to pay all the
Secured Obligations, Pledgor shall be liable for the deficiency and the fees of
any attorneys employed by Secured Party to collect such deficiency.
9
<PAGE>
(b) Pledgor 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 Pledged Collateral conducted
without prior registration or qualification of such Pledged 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 Pledged Collateral for their
own account, for investment and not with a view to the distribution or resale
thereof. Pledgor acknowledges that any such 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 Pledgor 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.
(c) If Secured Party determines to exercise its right to sell any or
all of the Pledged Collateral, upon written request, Pledgor shall and shall
cause each issuer (which is a Subsidiary of Pledgor) of any Pledged Shares to be
sold hereunder from time to time to furnish to Secured Party all such
information as Secured Party may request in order to determine the number of
shares and other instruments included in the Pledged Collateral which may be
sold by Secured Party in exempt transactions under the Securities Act and the
rules and regulations of the Securities and Exchange Commission thereunder, as
the same are from time to time in effect.
SECTION 12. 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 Pledged Collateral may, in the discretion of Secured Party, be held by
Secured Party as Pledged Collateral for, and/or then, or at any 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 reasonable compensation to
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 Pledgor, 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 13;
10
<PAGE>
SECOND: To the payment of all other Secured Obligations in such
order as Secured Party shall elect; and
THIRD: To the payment to or upon the order of Pledgor, or to
whosoever 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 13. INDEMNITY AND EXPENSES.
----------------------
(a) Pledgor agrees to indemnify Secured Party and each Holder 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 or such Holder's gross negligence or willful
misconduct as finally determined by a court of competent jurisdiction.
(b) Pledgor 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 incur in
connection with (i) the administration of this Agreement, (ii) the custody or
preservation of, or the sale of, collection from, or other realization upon, any
of the Pledged Collateral, (iii) the exercise or enforcement of any of the
rights of Secured Party hereunder, or (iv) the failure by Pledgor to perform or
observe any of the provisions hereof.
SECTION 14. CONTINUING SECURITY INTEREST; TRANSFER OF NOTES. This
-----------------------------------------------
Agreement shall create a continuing security interest in the Pledged Collateral
and shall (a) remain in full force and effect until the payment in full of all
Secured Obligations, (b) be binding upon Pledgor, 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 gener ality of the foregoing clause (c), any Holder may
assign or otherwise transfer any Notes held by it to any other Person, and such
other Person shall thereupon become vested with all the benefits in respect
thereof granted to Holders herein or otherwise. Upon the payment in full of all
Secured Obligations, the security interest granted hereby shall terminate and
all rights to the Pledged Collateral shall revert to Pledgor. Upon any such
termination Secured Party will, at Pledgor's expense, execute and deliver to
Pledgor such documents as Pledgor shall reasonably request to evidence such
termination and Pledgor shall be entitled to the return, upon its request and at
its expense, against receipt and without recourse to Secured Party, of such of
the Pledged Collateral as shall not have been sold or otherwise applied pursuant
to the terms hereof.
11
<PAGE>
SECTION 15. 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 Pledged 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 Pledged
Collateral held hereunder, together with all records and other documents
necessary or appropriate in connection with the 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 16. AMENDMENTS; ETC. No amendment, modification, termination
---------------
or waiver of any provision of this Agreement, and no consent to any departure by
Pledgor therefrom, shall in any event be effective unless the same shall be in
writing and signed by Secured Party and, in the case of any such amendment or
modification, by Pledgor. Any such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which it was given.
SECTION 17. 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
12
<PAGE>
deemed to have been given when delivered in person or by courier service, upon
receipt of telefacsimile or telex, or four 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, 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 18. 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 19. 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 20. 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.
SECTION 21. GOVERNING LAW; TERMS. THIS AGREEMENT AND THE RIGHTS AND
--------------------
OBLIGATIONS OF THE PARTIES HEREUNDER 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 PLEDGED
COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF
NEVADA. Unless otherwise defined herein or in the Note Purchase Agreement, terms
used in Articles 8 and 9 of the Uniform Commercial Code in the State of Nevada
are used herein as therein defined.
SECTION 22. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL
----------------------------------------------
JUDICIAL PROCEEDINGS BROUGHT AGAINST PLEDGOR ARISING OUT OF OR RELATING TO THIS
AGREEMENT 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
13
<PAGE>
PLEDGOR 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. Pledgor 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 Pledgor at
its address provided in Section 17, such service being hereby acknowledged by
Pledgor to be sufficient for personal jurisdiction in any action against Pledgor
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 Secured Party to bring
proceedings against Pledgor in the courts of any other jurisdiction.
SECTION 23. WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED BY
--------------------
APPLICABLE LAW, PLEDGOR 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. Pledgor and Secured Party each acknowledge that this waiver
is a material inducement for Pledgor and Secured Party to enter into a business
relationship, that Pledgor 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. Pledgor 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.
SECTION 24. 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]
14
<PAGE>
IN WITNESS WHEREOF, Pledgor 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.
CASINO PROPERTIES, INC.
By: /s/ Paul W. Lowden
------------------------------------
Title: President
-----------------------------
By: /s/ Thomas K. Land
-------------------------------------
Title: Treasurer and Asst. Secretary
-----------------------------
SUNAMERICA LIFE INSURANCE COMPANY,
as Secured Party
By: Stephen P. Hanover
------------------------------------
Title: Authorized Agent
------------------------------
S-1
<PAGE>
SCHEDULE I
Attached to and forming a part of the Casino Properties Pledge Agreement
dated as of July 29, 1997 between Casino Properties, Inc., as Pledgor, and
SunAmerica Life Insurance Company, as Secured Party.
Part A
<TABLE>
<CAPTION>
Class Stock Number
of Certificate Par of Percentage
Stock Issuer Stock Nos. Value Shares Interest
- ------------ ----- ----------- ----- ------ ---------
<S> <C> <C> <C> <C> <C>
Sahara Las Vegas Corp. Common 5 $10.00 5 8.77%
Hacienda Hawaiian
Properties, Inc. Common 021 no par 10 100%
</TABLE>
I-1
<PAGE>
SCHEDULE II
PLEDGE AMENDMENT
This Pledge Amendment, dated ____________, 19__, is delivered pursuant
to Section 6(b) of the Pledge Agreement referred to below. The undersigned
hereby agrees that this Pledge Amendment may be attached to the Casino
Properties Pledge Agreement dated July 29, 1997, between the undersigned and
SunAmerica Life Insurance Company, as Secured Party (the "PLEDGE AGREEMENT,"
capitalized terms defined therein being used herein as therein defined), and
that the Pledged Shares listed on this Pledge Amendment shall be deemed to be
part of the Pledged Shares and shall become part of the Pledged Collateral and
shall secure all Secured Obligations.
CASINO PROPERTIES, INC.
By:
___________________________
Title:
________________________
<TABLE>
<CAPTION>
Stock Issuer Class Stock Number
of Certificate Par of Percentage
Stock Issuer Stock Nos. Value Shares Interest
- ------------ ----- ----------- ----- ------ ----------
<S> <C> <C> <C> <C> <C>
</TABLE>
II-1
<PAGE>
EXHIBIT 10.92
EXHIBIT V-D
HACIENDA HAWAIIAN PLEDGE AGREEMENT
This HACIENDA HAWAIIAN PLEDGE AGREEMENT (this "AGREEMENT") is dated as
of July 29, 1997 and entered into by and between HACIENDA HAWAIIAN PROPERTIES,
INC., a Nevada corporation ("PLEDGOR"), and SUNAMERICA LIFE INSURANCE COMPANY,
an Arizona corporation, as agent for and representative of (in such capacity
herein call "SECURED PARTY") the holders of Notes from time to time ("HOLDERS")
party to the Note Purchase Agreement (as hereinafter defined) ("SECURED PARTY")
PRELIMINARY STATEMENTS
A. Pledgor is the legal and beneficial owner of the shares of stock
(the "PLEDGED SHARES") described in Part A of Schedule I annexed hereto and
----------
issued by the corporations named therein.
B. Secured Party, Holders, Sahara Las Vegas Corp., a Nevada
corporation ("COMPANY") and Santa Fe Gaming Corporation (formerly named Sahara
Gaming Corporation), a Nevada corporation, have entered into an Amended and
Restated Note Purchase Agreement dated as of July 29, 1997 (said Amended and
Restated Note Purchase Agreement, as amended to the date hereof and 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 a
certain Holder has made certain commitments, subject to the terms and conditions
set forth in the Note Purchase Agreement, to purchase Additional Notes from
Company.
C. Pledgor has executed and delivered as of the date hereof a
Guaranty dated as of July 29, 1997 (said Guaranty, as amended to the date hereof
and as it may hereafter be amended, supplemented or otherwise modified from time
to time, being the "GUARANTY") in favor of Secured Party for the benefit of
Holders, pursuant to which Pledgor has guarantied the prompt payment and
performance when due of all obligations of Company under the Note Purchase
Agreement.
D. It is a condition precedent to the amendment and restatement of
the Existing Note Purchase Agreement effected by the Note Purchase Agreement and
the consummation of the transactions contemplated thereby that Pledgor 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 a certain Holder to purchase any Additional Notes under the Note Purchase
1
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Agreement and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Pledgor hereby agrees with Secured
Party as follows:
SECTION 1. PLEDGE OF SECURITY. Pledgor hereby pledges to Secured
------------------
Party, and hereby grants to Secured Party a security interest in, all of
Pledgor's right, title and interest in and to the following (the "PLEDGED
COLLATERAL"):
(a) the Pledged Shares and the certificates representing the Pledged
Shares and any interest of Pledgor in the entries on the books of any financial
intermediary pertaining to the Pledged Shares, and all dividends, cash,
warrants, rights, instruments and other property or proceeds from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all of the Pledged Shares;
(b) all additional shares of, and all securities convertible into and
warrants, options and other rights to purchase or otherwise acquire, stock of
any issuer of the Pledged Shares from time to time acquired by Pledgor in any
manner (which shares shall be deemed to be part of the Pledged Shares), the
certificates or other instruments representing such additional shares,
securities, warrants, options or other rights and any interest of Pledgor in the
entries on the books of any financial intermediary pertaining to such additional
shares, and all dividends, cash, warrants, rights, instruments and other
property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such additional
shares, securities, warrants, options or other rights; and
(c) to the extent not covered by clauses (a) through (c) above, all
proceeds of any or all of the foregoing Pledged Collateral. For purposes of
this Agreement, the term "PROCEEDS" includes whatever is receivable or received
when Pledged Collateral or proceeds are sold, exchanged, collected or otherwise
disposed of, whether such disposition is voluntary or involuntary, and includes,
without limitation, proceeds of any indemnity or guaranty payable to Pledgor or
Secured Party from time to time with respect to any of the Pledged Collateral.
SECTION 2. SECURITY FOR OBLIGATIONS. This Agreement secures, and the
------------------------
Pledged 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 Pledgor now or hereafter existing under or
arising out of or in connection with the Note Purchase Agreement, the Guaranty
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 Pledgor, would accrue on such
obligations), fees, expenses, indemnities or otherwise, whether voluntary or
involuntary, direct or indirect, absolute or contingent, liquidated
2
<PAGE>
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 Pledgor now or
hereafter existing under this Agreement (all such obligations of Pledgor,
together with the Underlying Debt, being the "SECURED OBLIGATIONS").
SECTION 3. DELIVERY OF PLEDGED COLLATERAL. All certificates or
------------------------------
instruments representing or evidencing the Pledged Collateral shall be delivered
to and held by or on behalf of Secured Party pursuant hereto and shall be in
suitable form for transfer by delivery or, as applicable, shall be accompanied
by Pledgor's endorsement, where necessary, or duly executed instruments of
transfer or assignment in blank, all in form and substance satisfactory to
Secured Party. Secured Party shall have the right, at any time in its
discretion and without notice to Pledgor, to transfer to or to register in the
name of Secured Party or any of its nominees any or all of the Pledged
Collateral, subject only to the revocable rights specified in Section 7(a). In
addition, Secured Party shall have the right at any time to exchange
certificates or instruments representing or evidencing Pledged Collateral for
certificates or instru ments of smaller or larger denominations.
SECTION 4. REPRESENTATIONS AND WARRANTIES. Pledgor represents and
------------------------------
warrants as follows:
(a) Due Authorization, etc. of Pledged Collateral. All of the Pledged
---------------------------------------------
Shares have been duly authorized and validly issued and are fully paid and non-
assessable.
(b) Description of Pledged Collateral. The Pledged Shares constitutes
---------------------------------
the percentage of the issued and outstanding shares of stock of Company set
forth on Schedule I annexed hereto, and there are no outstanding warrants,
options or other rights to purchase, or other agreements outstanding with
respect to, or property that is now or hereafter convertible into, or that
requires the issuance or sale of, any Pledged Shares.
(c) Ownership of Pledged Collateral. Pledgor is the legal, record and
-------------------------------
beneficial owner of the Pledged Collateral free and clear of any Lien except for
the security interest created by this Agreement and Permitted Liens.
(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 pledge by Pledgor of the Pledged
Collateral pursuant to this Agreement and the grant by Pledgor of the security
interest granted hereby, (ii) the execution, delivery or performance of this
Agreement by Pledgor, or (iii) the exercise by Secured Party of the voting or
other rights, or the
3
<PAGE>
remedies in respect of the Pledged Collateral, provided for in this Agreement
(except as may be required in connection with a disposition of Pledged
Collateral by laws affecting the offering and sale of securities generally).
(e) Perfection. Assuming Secured Party's continued possession of the
----------
certificates representing the Pledged Shares, the pledge of the Pledged
Collateral pursuant to this Agreement creates a valid and perfected first
priority security interest in the Pledged Collateral, securing the payment of
the Secured Obligations.
(f) Margin Regulations. The pledge of the Pledged Collateral pursuant
------------------
to this Agreement does not violate Regulation G, T, U or X of the Board of
Governors of the Federal Reserve System.
SECTION 5. TRANSFERS AND OTHER LIENS; ADDITIONAL PLEDGED COLLATERAL;
---------------------------------------------------------
ETC. Pledgor shall:
- ----
(a) not, except as expressly permitted by the Note Purchase Agreement,
(i) sell, assign (by operation of law or otherwise) or otherwise dispose of, or
grant any option with respect to, any of the Pledged Collateral, (ii) create or
suffer to exist any Lien upon or with respect to any of the Pledged Collateral,
except for the security interest under this Agreement, or (iii) permit any
issuer of Pledged Shares to merge or consolidate unless all the outstanding
capital stock of the surviving or resulting corporation is, upon such merger or
consolidation, pledged hereunder and no cash, securities or other property is
distributed in respect of the outstanding shares of any other constituent
corporation;
(b) (i) cause each issuer of Pledged Shares that is a Subsidiary of
Pledgor not to issue any stock or other securities in addition to or in
substitution for the Pledged Shares issued by such issuer, except to Pledgor,
(ii) pledge hereunder, immediately upon its acquisition (directly or indirectly)
thereof, any and all additional shares of stock or other securities of each
issuer of Pledged Shares, and (iii) pledge hereunder, immediately upon its
acquisition (directly or indirectly) thereof, any and all shares of stock issued
to or otherwise acquired by Pledgor of any Person that, after the date of this
Agreement, becomes, as a result of any occurrence, a direct Subsidiary of
Pledgor;
(c) promptly deliver to Secured Party all written notices received by
it as holder of the Pledged Collateral; and
(d) pay promptly when due all taxes, assessments and governmental
charges or levies imposed upon, and all claims against, the Pledged Collateral,
except to the extent the validity thereof is being contested in good faith;
provided that Pledgor 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
Pledgor or any of the Pledged Collateral as a result of the failure to make such
payment.
4
<PAGE>
SECTION 6. FURTHER ASSURANCES; PLEDGE AMENDMENTS.
-------------------------------------
(a) Pledgor agrees that from time to time, at the expense of Pledgor,
Pledgor 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 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 Pledged
Collateral. Without limiting the generality of the foregoing, Pledgor will:
(i) 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 and
(ii) at Secured Party's request, appear in and defend any action or proceeding
that may affect Pledgor's title to or Secured Party's security interest in all
or any part of the Pledged Collateral.
(b) Pledgor further agrees that it will, upon obtaining any additional
shares of stock or other securities required to be pledged hereunder as provided
in Section 5(b) or (c), promptly (and in any event within five Business Days)
deliver to Secured Party a Pledge Amendment, duly executed by Pledgor, in
substantially the form of Schedule II annexed hereto (a "PLEDGE AMENDMENT"), in
-----------
respect of the additional Pledged Shares to be pledged pursuant to this
Agreement. Pledgor hereby authorizes Secured Party to attach each Pledge
Amendment to this Agreement and agrees that all Pledged Shares listed on any
Pledge Amendment delivered to Secured Party shall for all purposes hereunder be
considered Pledged Collateral; provided that the failure of Pledgor to execute a
--------
Pledge Amendment with respect to any additional Pledged Shares 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.
SECTION 7. VOTING RIGHTS; DIVIDENDS; ETC.
------------------------------
(a) So long as no Event of Default shall have occurred and be
continuing:
(i) Pledgor shall be entitled to exercise any and all voting and
other consensual rights pertaining to the Pledged Collateral or any part
thereof for any purpose not inconsistent with the terms of this Agreement or
the Note Purchase Agreement; provided, however, that Pledgor shall not
-------- -------
exercise or refrain from exercising any such right if Secured Party shall
have notified Pledgor that, in Secured Party's judgment, such action would
have a material adverse effect on the value of the Pledged Collateral or any
part thereof; and provided, further, that Pledgor 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. It is understood, however, that neither (A) the voting by Pledgor of
any Pledged Shares for or
5
<PAGE>
Pledgor's consent to the election of directors at a regularly scheduled
annual or other meeting of stockholders (or by written consent) or with
respect to incidental matters at any such meeting nor (B) Pledgor's consent
to or approval of any action otherwise permitted under this Agreement and
the Note Purchase Agreement shall be deemed inconsistent with the terms of
this Agreement or the Note Purchase Agreement within the meaning of this
Section 7(a)(i), and no notice of any such voting or consent need be given
to Secured Party;
(ii) Pledgor shall be entitled to receive and retain, and to
utilize free and clear of the lien of this Agreement (but subject to the
provisions of the Note Purchase Agreement), any and all dividends, principal
and interest paid in respect of the Pledged Collateral; provided, however,
-------- -------
that any and all
(A) dividends, principal and interest paid or payable other
than in cash in respect of, and instruments and other property
received, receivable or otherwise distributed in respect of, or in
exchange for, any Pledged Collateral,
(B) dividends and other distributions paid or payable in cash
in respect of any Pledged Collateral in connection with a partial or
total liquidation or dissolution or in connection with a reduction of
capital, capital surplus or paid-in-surplus, and
(C) cash paid, payable or otherwise distributed in redemption
of or in exchange for any Pledged Shares,
shall be, and shall forthwith be delivered to Secured Party to hold as,
Pledged Collateral and shall, if received by Pledgor, be received in trust
for the benefit of Secured Party, be segregated from the other property or
funds of Pledgor and be forthwith delivered to Secured Party as Pledged
Collateral in the same form as so received (with all necessary
indorsements); and
(iii) Secured Party shall promptly execute and deliver (or
cause to be executed and delivered) to Pledgor all such proxies, dividend
payment orders and other instruments as Pledgor may from time to time
reasonably request for the purpose of enabling Pledgor to exercise the
voting and other consensual rights which it is entitled to exercise pursuant
to paragraph (i) above and to receive the dividends, principal or interest
payments which it is authorized to receive and retain pursuant to paragraph
(ii) above.
(b) Upon the occurrence and during the continuation of an Event of
Default:
(i) upon written notice from Secured Party to Pledgor, all rights
of Pledgor to exercise the voting and other consensual rights which it would
otherwise be entitled to exercise pursuant to Section 7(a)(i) shall cease,
and all
6
<PAGE>
such rights shall thereupon become vested in Secured Party who shall
thereupon have the sole right to exercise such voting and other consensual
rights;
(ii) all rights of Pledgor to receive the dividends and interest
payments which it would otherwise be authorized to receive and retain
pursuant to Section 7(a)(ii) shall cease, and all such rights shall
thereupon become vested in Secured Party who shall thereupon have the sole
right to receive and hold as Pledged Collateral such dividends and interest
payments; and
(iii) all dividends, principal and interest payments which are
received by Pledgor contrary to the provisions of paragraph (ii) of this
Section 7(b) shall be received in trust for the benefit of Secured Party,
shall be segregated from other funds of Pledgor and shall forthwith be paid
over to Secured Party as Pledged Collateral in the same form as so received
(with any necessary indorsements).
(c) 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(b)(i) and to receive all dividends and other distributions which it may be
entitled to receive under Section 7(a)(ii) or Section 7(b)(ii), (i) Pledgor
shall promptly execute and deliver (or cause to be executed and delivered) to
Secured Party all such proxies, dividend payment 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), Pledgor hereby grants to
Secured Party an irrevocable proxy to vote the Pledged Shares and to exercise
all other rights, powers, privileges and remedies to which a holder of the
Pledged Shares would be entitled (including, without limitation, giving or
withholding written consents of shareholders, calling special meetings of
shareholders and voting at such meetings), which proxy shall be effective,
automatically and without the necessity of any action (including any transfer of
any Pledged Shares on the record books of the issuer thereof) by any other
Person (including the issuer of the Pledged Shares or any officer or agent
thereof), upon the occurrence of an Event of Default and which proxy shall only
terminate upon the payment in full of the Secured Obligations.
SECTION 8. SECURED PARTY APPOINTED ATTORNEY-IN-FACT. Pledgor hereby
----------------------------------------
irrevocably appoints Secured Party as Pledgor's attorney-in-fact, with full
authority in the place and stead of Pledgor and in the name of Pledgor, 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 file one or more financing or continuation statements, or
amendments thereto, relative to all or any part of the Pledged Collateral
without the signature of Pledgor (to the extent permitted by applicable law);
7
<PAGE>
(b) during the continuance of any Event of Default, to ask, 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 Pledged
Collateral;
(c) during the continuance of any Event of Default, to receive,
endorse and collect any instruments made payable to Pledgor representing any
divi dend, principal or interest payment or other distribution in respect of the
Pledged Collateral or any part thereof and to give full discharge for the same;
and
(d) during the continuance of any Event of Default, to file any claims
or take any action or institute any proceedings that Secured Party may deem
necessary or desirable for the collection of any of the Pledged Collateral or
otherwise to enforce the rights of Secured Party with respect to any of the
Pledged Collateral.
SECTION 9. SECURED PARTY MAY PERFORM. If Pledgor 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 Pledgor under Section 14(b).
SECTION 10. STANDARD OF CARE. The powers conferred on Secured Party
----------------
hereunder are solely to protect its interest in the Pledged 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 Pledged Collateral in its
possession and the accounting for moneys actually received by it hereunder,
Secured Party shall have no duty as to any Pledged 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 Pledged 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 Pledged Collateral) to preserve
rights against any parties with respect to any Pledged 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 Pledged Collateral, or
(d) initiating any action to protect the Pledged 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 Pledged Collateral
in its possession if such Pledged Collateral is accorded treatment substantially
equal to that which Secured Party accords its own property consisting of
negotiable securities.
SECTION 11. REMEDIES.
--------
(a) If any Event of Default shall have occurred and be continuing,
Secured Party may exercise in respect of the Pledged 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
8
<PAGE>
applies to the affected Pledged Collateral), and Secured Party may also in its
sole discretion, without notice except as specified below, sell the Pledged
Collateral or any part thereof in one or more parcels at public or private sale,
at any exchange or broker's board or 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, irrespective of the impact of any such sales on the
market price of the Pledged Collateral. Secured Party or any Holder may be the
purchaser of any or all of the Pledged Collateral at any such sale and Secured
Party, as agent for and representative of Holders (but not any Holder or Holders
in its or their respective individual capacities unless Requisite Holders shall
otherwise agree in writing), shall be entitled, for the purpose of bidding and
making settlement or payment of the purchase price for all or any portion of the
Pledged 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 Pledged
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 Pledgor, and Pledgor 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. Pledgor agrees that, to the extent notice of
sale shall be required by law, at least ten days' notice to Pledgor 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 Pledged 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. Pledgor hereby waives any claims against Secured Party arising by
reason of the fact that the price at which any Pledged 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 Pledged Collateral to more than one offeree.
If the proceeds of any sale or other disposition of the Pledged Collateral are
insufficient to pay all the Secured Obligations, Pledgor shall be liable for the
deficiency and the fees of any attorneys employed by Secured Party to collect
such deficiency.
(b) Pledgor 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 Pledged Collateral
conducted without prior registration or qualification of such Pledged 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 Pledged Collateral
for their own account, for investment and not with a view to the distribution or
resale thereof. Pledgor acknowledges that any such 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
9
<PAGE>
statement under the Securities Act) and Pledgor 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.
(c) If Secured Party determines to exercise its right to sell any or
all of the Pledged Collateral, upon written request, Pledgor shall and shall
cause each issuer (which is a Subsidiary of Pledgor) of any Pledged Shares to be
sold hereunder from time to time to furnish to Secured Party all such
information as Secured Party may request in order to determine the number of
shares and other instruments included in the Pledged Collateral which may be
sold by Secured Party in exempt transactions under the Securities Act and the
rules and regulations of the Securities and Exchange Commission thereunder, as
the same are from time to time in effect.
SECTION 12. 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 Pledged Collateral may, in the discretion of Secured Party, be held by
Secured Party as Pledged Collateral for, and/or then, or at any 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 reasonable compensation to
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 Pledgor, 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 13;
SECOND: To the payment of all other Secured Obligations in such
order as Secured Party shall elect; and
THIRD: To the payment to or upon the order of Pledgor, or to
whosoever 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.
10
<PAGE>
SECTION 13. INDEMNITY AND EXPENSES.
----------------------
(a) Pledgor agrees to indemnify Secured Party and each Holder 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 or such Holder's gross negligence or willful
misconduct as finally determined by a court of competent jurisdiction.
(b) Pledgor 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 incur in
connection with (i) the administration of this Agreement, (ii) the custody or
preservation of, or the sale of, collection from, or other realization upon, any
of the Pledged Collateral, (iii) the exercise or enforcement of any of the
rights of Secured Party hereunder, or (iv) the failure by Pledgor to perform or
observe any of the provisions hereof.
SECTION 14. CONTINUING SECURITY INTEREST; TRANSFER OF NOTES. This
-----------------------------------------------
Agreement shall create a continuing security interest in the Pledged Collateral
and shall (a) remain in full force and effect until the payment in full of all
Secured Obligations, (b) be binding upon Pledgor, 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 gener ality of the foregoing clause (c), any Holder may
assign or otherwise transfer any Notes held by it to any other Person, and such
other Person shall thereupon become vested with all the benefits in respect
thereof granted to Holders herein or otherwise. Upon the payment in full of all
Secured Obligations, the security interest granted hereby shall terminate and
all rights to the Pledged Collateral shall revert to Pledgor. Upon any such
termination Secured Party will, at Pledgor's expense, execute and deliver to
Pledgor such documents as Pledgor shall reasonably request to evidence such
termination and Pledgor shall be entitled to the return, upon its request and at
its expense, against receipt and without recourse to Secured Party, of such of
the Pledged Collateral as shall not have been sold or otherwise applied pursuant
to the terms hereof.
SECTION 15. 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 Pledged Collateral), solely
in accordance with this Agreement and the Note Purchase Agreement.
11
<PAGE>
(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
Pledged Collateral held hereunder, together with all records and other documents
necessary or appropriate in connection with the 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 16. AMENDMENTS; ETC. No amendment, modification, termination
---------------
or waiver of any provision of this Agreement, and no consent to any departure by
Pledgor therefrom, shall in any event be effective unless the same shall be in
writing and signed by Secured Party and, in the case of any such amendment or
modification, by Pledgor. Any such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which it was given.
SECTION 17. 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, or four 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, 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 18. 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
12
<PAGE>
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 19. 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 20. 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.
SECTION 21. GOVERNING LAW; TERMS. THIS AGREEMENT AND THE RIGHTS AND
--------------------
OBLIGATIONS OF THE PARTIES HEREUNDER 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 PLEDGED
COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF
NEVADA. Unless otherwise defined herein or in the Note Purchase Agreement, terms
used in Articles 8 and 9 of the Uniform Commercial Code in the State of Nevada
are used herein as therein defined.
SECTION 22. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL
----------------------------------------------
JUDICIAL PROCEEDINGS BROUGHT AGAINST PLEDGOR ARISING OUT OF OR RELATING TO THIS
AGREEMENT 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 PLEDGOR
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. Pledgor 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 Pledgor at
its address provided in Section 17, such service being hereby acknowledged by
Pledgor to be sufficient for personal jurisdiction in any action against Pledgor
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
13
<PAGE>
other manner permitted by law or shall limit the right of Secured Party to bring
proceedings against Pledgor in the courts of any other jurisdiction.
SECTION 23. WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED BY
--------------------
APPLICABLE LAW, PLEDGOR 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. Pledgor and Secured Party each acknowledge that this waiver
is a material inducement for Pledgor and Secured Party to enter into a business
relationship, that Pledgor 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. Pledgor 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.
SECTION 24. 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]
14
<PAGE>
IN WITNESS WHEREOF, Pledgor 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.
HACIENDA HAWAIIAN PROPERTIES, INC.
By: /s/ Thomas K. Land
------------------------------------
Title: Treasurer and Asst. Secretary
SUNAMERICA LIFE INSURANCE COMPANY, as
Secured Party
By: /s/ Stephen P. Hanover
------------------------------------
Title: Authorized Agent
S-1
<PAGE>
SCHEDULE I
Attached to and forming a part of the Hacienda Hawaiian Properties,
Inc. Pledge Agreement dated as of July 29, 1997 between Hacienda Hawaiian
Properties, Inc., as Pledgor, and SunAmerica Life Insurance Company, as Secured
Party.
Part A
<TABLE>
<CAPTION>
Stock
Class of Certificate Par Number of Percentage
Stock Issuer Stock Nos. Value Shares Interest
- ---------------------- -------- ----------- ----- --------- ----------
<S> <C> <C> <C> <C> <C>
Sahara Las Vegas Corp. Common 6 $10.00 2 3.51%
</TABLE>
I-1
<PAGE>
SCHEDULE II
PLEDGE AMENDMENT
This Pledge Amendment, dated ____________, 19__, is delivered pursuant
to Section 6(b) of the Pledge Agreement referred to below. The undersigned
hereby agrees that this Pledge Amendment may be attached to the Hacienda
Hawaiian Pledge Agreement dated July 29, 1997, between the undersigned and
SunAmerica Life Insurance Company, as Secured Party (the "PLEDGE AGREEMENT,"
capitalized terms defined therein being used herein as therein defined), and
that the Pledged Shares listed on this Pledge Amendment shall be deemed to be
part of the Pledged Shares and shall become part of the Pledged Collateral and
shall secure all Secured Obligations.
HACIENDA HAWAIIAN PROPERTIES, INC.
By: ___________________________
Title:
<TABLE>
<CAPTION>
Stock
Class of Certificate Par Number of Percentage
Stock Issuer Stock Nos. Value Shares Interest
- ----------------- -------- ----------- ----- --------- ----------
<S> <C> <C> <C> <C> <C>
</TABLE>
II-1
<PAGE>
EXHIBIT 23
Santa Fe 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 Santa Fe Gaming
Corporation and subsidiaries for the three and nine month periods ended June 30,
1997 and 1996, as indicated in our report dated August 11, 1997 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 June 30, 1997 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
August 14, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 10,205,138
<SECURITIES> 0
<RECEIVABLES> 3,089,338
<ALLOWANCES> 0
<INVENTORY> 1,169,741
<CURRENT-ASSETS> 18,398,809
<PP&E> 193,162,047
<DEPRECIATION> 49,223,564
<TOTAL-ASSETS> 215,168,018
<CURRENT-LIABILITIES> 27,832,403
<BONDS> 162,235,666
0
20,090,427
<COMMON> 61,954
<OTHER-SE> 4,947,568
<TOTAL-LIABILITY-AND-EQUITY> 215,168,018
<SALES> 0
<TOTAL-REVENUES> 80,406,118
<CGS> 0
<TOTAL-COSTS> 46,179,938
<OTHER-EXPENSES> 27,927,407
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,948,978
<INCOME-PRETAX> (10,650,205)
<INCOME-TAX> (2,902,340)
<INCOME-CONTINUING> (7,747,865)
<DISCONTINUED> 0
<EXTRAORDINARY> 372,323
<CHANGES> 0
<NET-INCOME> (7,375,542)
<EPS-PRIMARY> (1.37)
<EPS-DILUTED> 0
</TABLE>
