<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: MARCH 31, 1998
[ ] 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
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SANTA FE GAMING CORPORATION
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
NEVADA 88-0304348
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
4949 N. RANCHO DRIVE, LAS VEGAS, NEVADA 89130
- -------------------------------------------------------------------------------
(Address of principal executive office and zip code)
(702) 658-4300
-------------------------------------------------------
(Registrant's telephone number, including area code)
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by a check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. YES NO
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
6,195,356 as of MAY 14, 1998
- -------------------------------------------------------------------------------
Amount Outstanding Date
<PAGE>
SANTA FE GAMING CORPORATION
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Condensed Financial Statements
Balance Sheets at March 31, 1998
(unaudited) and September 30, 1997. . . . . . . . . . . . . 2
Statements of Operations for the three and six months
ended March 31, 1998 and 1997 (unaudited) . . . . . . . . . 3
Statement of Changes in Stockholders' Equity
for the six months ended March 31, 1998
(unaudited) . . . . . . . . . . . . . . . . . . . . . . . . 4
Statements of Cash Flows for the six months
ended March 31, 1998 and 1997 (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
1
<PAGE>
SANTA FE GAMING CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31 September 30,
ASSETS 1998 1997
- ------------------------------------------------------------- ------------ -------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and short-term investments $25,225,743 $15,146,217
Accounts receivable, net 1,076,572 910,867
Inventories 1,240,640 1,248,199
Prepaid expenses & other 3,977,142 3,546,812
Assets held for sale 1,605,000 1,605,000
------------ -------------
Total current assets 33,125,097 22,457,095
Land held for development 36,589,065 36,589,065
Property and equipment, net 112,014,367 104,161,796
Goodwill, net 43,925,152 44,641,391
Other assets 12,126,402 8,446,931
------------ -------------
Total assets $237,780,083 $216,296,278
------------ -------------
------------ -------------
LIABILITIES and STOCKHOLDERS' EQUITY
- ------------------------------------------------------------
Current liabilities:
Current portion of long-term debt $70,988,329 $6,644,979
Accounts payable 5,136,657 5,117,059
Interest payable 7,365,653 6,612,750
Accrued and other liabilities 7,712,280 6,525,215
Debt due upon sale of assets 1,559,000 1,559,000
------------ -------------
Total current liabilities 92,761,919 26,459,003
Long-term debt - less current portion 132,515,031 168,978,838
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 21,227,621 20,469,492
Additional paid-in capital 51,513,504 51,513,504
Accumulated deficit (60,212,172) (51,098,739)
------------ -------------
Total 12,590,907 20,946,211
Less treasury stock - 4,875 shares, at cost (87,774) (87,774)
------------ -------------
Total stockholders' equity 12,503,133 20,858,437
------------ -------------
Total liabilities and stockholders' equity $237,780,083 $216,296,278
------------ -------------
------------ -------------
</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 Six Months Six Months
Ended Ended Ended Ended
MARCH 31, 1998 MARCH 31, 1997 MARCH 31, 1998 MARCH 31, 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenues:
Casino $23,272,800 $21,448,942 $45,252,711 $41,326,115
Hotel 1,417,122 1,478,359 2,851,056 3,018,243
Food and beverage 5,382,471 5,271,530 10,709,689 10,543,773
Other revenues 1,889,935 2,465,653 3,758,413 4,406,936
-------------- -------------- -------------- ------------
Gross revenues 31,962,328 30,664,484 62,571,869 59,295,067
Less casino promotional allowances (3,291,408) (3,182,193) (6,541,703) (6,404,937)
-------------- -------------- -------------- ------------
Net operating revenues 28,670,920 27,482,291 56,030,166 52,890,130
-------------- -------------- -------------- ------------
Operating expenses:
Casino 11,725,165 10,398,711 22,605,997 21,029,528
Hotel 503,285 447,276 952,308 861,994
Food and beverage 3,574,062 3,544,401 6,951,686 7,459,811
Other operating expenses 731,514 706,321 1,498,696 1,474,146
Selling, general & administrative 3,156,335 2,775,359 6,199,503 5,361,462
Corporate expenses 963,024 875,043 1,779,141 1,687,123
Utilities & property expenses 2,903,488 2,990,955 6,189,428 5,972,824
Depreciation & amortization 3,005,835 2,760,061 6,138,597 5,487,597
-------------- -------------- -------------- ------------
Total operating expenses 26,562,708 24,498,127 52,315,356 49,334,485
-------------- -------------- -------------- ------------
Operating income 2,108,212 2,984,164 3,714,810 3,555,645
Interest expense 5,993,844 5,718,786 12,070,114 11,363,898
-------------- -------------- -------------- ------------
Loss before income tax benefit (3,885,632) (2,734,622) (8,355,304) (7,808,253)
Federal income tax benefit 0 (808,011) 0 (2,411,285)
-------------- -------------- -------------- ------------
Net loss (3,885,632) (1,926,611) (8,355,304) (5,396,968)
Dividends paid or accrued on preferred shares 379,065 379,064 758,129 758,129
-------------- -------------- -------------- ------------
Net loss applicable to common shares ($4,264,697) ($2,305,675) ($9,113,433) ($6,155,097)
-------------- -------------- -------------- ------------
-------------- -------------- -------------- ------------
Average common shares outstanding 6,195,356 6,195,356 6,195,356 6,195,356
-------------- -------------- -------------- ------------
-------------- -------------- -------------- ------------
Loss per common share:
net loss ($0.63) ($0.31) ($1.35) ($0.87)
dividends paid or accrued on preferred shares ($0.06) ($0.06) ($0.12) ($0.12)
-------------- -------------- -------------- ------------
Loss per common share ($0.69) ($0.37) ($1.47) ($0.99)
-------------- -------------- -------------- ------------
</TABLE>
See the accompanying Notes to Consolidated Condensed Financial Statements.
3
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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, 1997 $61,954 $20,469,492 $51,513,504 ($51,098,739) ($87,774) $20,858,437
Net loss (8,355,304) (8,355,304)
Preferred stock dividend accrued 758,129 (758,129) 0
------- ----------- ----------- ------------ -------- -----------
Balances, March 31, 1998 $61,954 $21,227,621 $51,513,504 ($60,212,172) ($87,774) $12,503,133
------- ----------- ----------- ------------ -------- -----------
------- ----------- ----------- ------------ -------- -----------
</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>
Six Months Six Months
Ended Ended
March 31, 1998 March 31, 1997
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Cash and short-term investments provided by
(used in) operations ($1,398,189) $984,307
Gain on sale of land held for development 0 (725,179)
Decrease (increase) in accounts receivable, net (165,705) 112,391
Increase in accounts receivable, officer 0 (25,404)
Increase in inventories 7,559 72,693
Increase in prepaid expenses & other (430,330) (66,907)
Decrease in deferred income taxes 0 (2,397,178)
Increase in other assets (3,829,162) (2,020,897)
Increase (decrease) in accounts payable 384,616 (2,236,183)
Increase (decrease) in interest payable 752,903 (174,488)
Increase in accrued and other liabilities 1,427,701 368,592
----------- ----------
Net cash used in operating activities (3,250,607) (6,108,253)
Cash flows from investing activities:
Proceeds from sale of land held for development 0 3,150,000
Capital expenditures (2,660,987) (542,209)
----------- ----------
Net cash provided by (used in) investing activities (2,660,987) 2,607,791
----------- ----------
Cash flows from financing activities:
Cash proceeds of long-term debt 57,500,000 1,675,658
Cash paid on long-term debt (41,508,880) (1,557,627)
----------- ----------
Net cash provided by financing activities 15,991,120 118,031
----------- ----------
Increase (decrease) in cash and short-term investments 10,079,526 (3,382,431)
Cash and short-term investments,
beginning of period 15,146,217 17,497,824
----------- ----------
Cash and short-term investments,
end of period $25,225,743 $14,115,393
----------- ----------
----------- ----------
</TABLE>
See the accompanying Notes to Consolidated Condensed Financial Statements.
5
<PAGE>
SANTA FE GAMING CORPORATION AND SUBSIDIARIES
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, and through an indirect wholly-owned subsidiary of the
Company, Sahara Las Vegas Corp. ("SLVC"), on Las Vegas Boulevard South and in
Henderson, Nevada, for possible development opportunities.
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, 1997. The results of operations for the six month period ended
March 31, 1998 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 March 31, 1998, the results of its operations for the three and
six month periods ended March 31, 1998 and 1997, the changes in stockholders'
equity for the six month period ended March 31, 1998, and cash flows for the
six month periods ended March 31, 1998 and 1997.
Certain reclassifications have been made in the 1997 consolidated financial
statements in order to conform to the presentation used in 1998.
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.
Significant estimates used by the Company include estimated useful lives for
depreciable and amortizable assets, certain other estimated liabilities and
valuation reserves, and estimated cash flows in assessing the recoverability
of long-lived assets. Actual results may differ from estimates.
6
<PAGE>
RECENTLY ISSUED ACCOUNTING STANDARDS
During the quarter ended December 31, 1997, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 128 "Earnings per Share." SFAS
No. 128 requires the presentation of basic net income (loss) per share and
diluted net income (loss) per share. Basic per share amounts are computed by
dividing net income (loss) by average shares outstanding during the period.
Diluted per share amounts are computed by dividing net income (loss) by
average shares outstanding plus the dilutive net income (loss) by average
shares outstanding plus the dilutive effect of common share equivalents. The
effect of options outstanding was not included in diluted calculations during
the quarter ended March 31, 1998 since the Company incurred a net loss during
the three-month and six-month periods ended March 31, 1998.
The American Institute of Certified Public Accountants' Accounting Standards
Executive Committee issued Statement of Position ("SOP") 98-5 "Reporting on
the Costs of Start-up Activities." This standard provides guidance on the
financial reporting for start-up costs and organization costs. This standard
requires costs of start-up activities and organization costs to be expensed
as incurred. This standard is effective for fiscal years beginning after
December 15, 1998, though earlier application is encouraged. Management
believes that this SOP could have a material impact on the consolidated
financial statements depending on the status of the Company's current and
future expansion projects at the time of adoption of this standard.
NOTE 2 - CASH AND SHORT-TERM INVESTMENTS
At March 31, 1998, approximately $9.3 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 March 31, 1998, SFHI did
not meet the conditions precedent to making a distribution to the Company.
At March 31, 1998, approximately $12.7 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 Finance Corp. were
issued. As of March 31, 1998, PHI did not meet the conditions precedent to
making a distribution to the Company.
At March 31, 1998, approximately $2.4 million of the Company's consolidated
cash and short-term investments was held by SLVC and was subject to certain
restrictions and limitations on its use by the terms of $57.5 million
principal amount of notes due 1999 ("SLVC Notes") of SLVC.
7
<PAGE>
NOTE 3 - ASSETS HELD FOR SALE
In November 1997, the Company entered into an agreement to sell the 22 acre
parcel of land next to the Santa Fe for approximately $3.6 million. The
agreement is subject to certain contingencies and, pursuant to an amendment
entered into on May 12, 1998, will terminate if closing does not occur before
August 13, 1998. Pursuant to the amendment, the buyer must pay the purchase
price in cash.
NOTE 4 - PROPERTY AND EQUIPMENT, NET
In March 1998, the Company acquired, for approximately $10.7 million, gaming
equipment and furniture and fixtures previously under lease at the Santa Fe.
The Company funded the acquisition with a down payment of $100,000 in March
1998 with cash from operations and the balance of the $10.7 million purchase
price with proceeds from a $14 million note placement in April 1998. (See
Note 10)
In December 1997, the Company acquired, for approximately $1.1 million,
gaming equipment previously under lease at the Pioneer. In January 1998, the
Pioneer acquired, for approximately $500,000, an additional 108 gaming
machines from available working capital.
NOTE 5 - CURRENT PORTION OF LONG-TERM DEBT
As of March 31, 1998, the Company's current liabilities exceeded current
assets by $59.6 million. The Company has approximately $71.0 million in
current maturities of long term debt due to third parties during the
twelve-month period ending March 31, 1999, comprised primarily of $5.2
million principal amount of 10 1/4% Subordinated Debentures due June 1998
(the "10 1/4% Debentures"), $60.0 million principal amount of 13 1/2% Notes
issued by Pioneer Finance Corp. and guaranteed by the Company, a $4.8 million
balloon payment due in December 1998 on the note payable by the Company to
Sierra Construction Corp. ("Sierra Construction") and principal amortization
payments under other notes payable and capital leases. The scheduled
maturities applicable to third party debt under notes payable and capital
leases at SFHI and PHI during the twelve month period ending March 31, 1999
are $700,000 and $30,000, respectively.
Although management has in the past and is currently exploring refinancing or
debt modification alternatives, as well as possible dispositions or financing
of certain assets, in order to satisfy the current maturities of long-term
debt obligations as they become due in the twelve month period ending March
31, 1999, 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 may require the
approval of the Nevada Gaming Authorities for such financings or asset sales.
If the Company is ultimately unable to refinance or modify any such debt
prior to maturity, and/or obtain sufficient proceeds from
8
<PAGE>
asset dispositions or financings to repay such debt, 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.
NOTE 6 - LONG-TERM DEBT
In November 1997, the Company entered into an amended and restated agreement
with respect to the SLVC Notes pursuant to which the principal amount of
notes was increased from $35 million to $57.5 million. SLVC issued two
tranches of promissory notes, $37 million principal amount with an interest
rate of 9.75% and $20.5 million with an interest rate of 13.25%. Certain
other provisions of the loan agreement were amended, including the
elimination of any sinking fund principal payments prior to maturity in
December 1999. The additional proceeds were used by SLVC primarily to
acquire the 39 acre parcel of land in Henderson, Nevada from its affiliate
Santa Fe Valley, Inc. ("SFVI") for cash consideration of $20 million. SFVI
used approximately $5 million to repay the outstanding first mortgage
indebtedness and paid a dividend of $5 million to PHI. The balance of the
proceeds of approximately $10 million was retained by SFVI.
In March 1998, the Company entered into a purchase agreement to acquire
certain gaming and other equipment under lease at the Santa Fe for $10.7
million. The Company made a $100,000 down payment in March 1998 and paid the
balance of the purchase price in April 1998 with a portion of the proceeds of
the $14 million note placement. (See Note 10)
In March 1998, holders of a majority of the 11% Notes consented to three
proposals to amend the Indenture under which the 11% Notes were issued and,
as a result, all three proposals became effective. Pursuant to the
amendments, SFHI was permitted to incur $14 million of senior secured
indebtedness; granted a security interest in certain gaming equipment to
secure two promissory notes in the aggregate principal amount of
approximately $10 million to obtain an extension of the maturity of the two
promissory notes from May 1998 until April 2001 and a reduction in the
interest rate to 11% and is permitted to lease 3 acres for development of a
non-gaming hotel. SFHI also expects to purchase additional gaming equipment
and to fund in part the construction of a parking garage with a portion of
the proceeds.
NOTE 7 - LEASES
In November 1997, SFHI amended the terms of operating leases for gaming and
other equipment to extend the term of the leases from up to 36 months to 48
months, to defer payment on the leases until August 1998 and to replace older
gaming equipment with new
9
<PAGE>
equipment. In January 1998, the Company entered into operating leases for an
additional 200 slot and video poker machines with terms between 36 and 48
months. In March 1998, the Company acquired the equipment subject to lease.
(See Notes 4, 6, and 10)
In December 1997, the Pioneer purchased gaming equipment previously subject
to lease for approximately $1.1 million, as a result of which monthly rental
expense for gaming equipment decreased by $44,000.
NOTE 8 - SUPPLEMENTAL INFORMATION
Supplemental statement of cash flows information for the three month periods
ended March 31, 1998 and 1997 is presented below:
<TABLE>
<CAPTION>
(dollars in thousands)
1998 1997
------- -------
<S> <C> <C>
Operating Activities:
Cash paid during the period for interest,
net of amount capitalized of $108,337
and $-0- for 1998 and 1997, respectively $10,708 $10,746
------- -------
------- -------
Investing and Financing Activities:
Debt incurred in connection with the
acquisition of machinery and equipment $ 9,409 $ 552
------- -------
------- -------
</TABLE>
NOTE 9 - CONTINGENCIES
In February 1998, the Company amended its agreement with the owner of a
recreational vehicle park, which purchased the rights and obligations under
contracts with members of Camperland, a recreational vehicle park previously
owned and operated by the Company. In accordance with the amendment, the
Company (i) reconveyed a first deed of trust on 14 acres of vacant land owned
by the existing park, which secured performance by the existing park's
operators in connection with the assumption of the Camperland contracts, and
(ii) was relieved of its obligation, in certain situations, to make payment
of $750,000 under certain circumstances and of all performance obligations
with regard to the Camperland contract.
NOTE 10 - SUBSEQUENT EVENT
SFHI Note Issuance
In April 1998, SFHI consummated the issuance of $14 million principal amount
of 9.5% senior secured indebtedness (the "9.5% Notes") contemplated by the
consent solicitation relating to its 11% Notes. (See Note 6) The 9.5%
Notes require quarterly interest only payments, and mature December 15, 2000.
SFHI used approximately $10.7 million of proceeds to purchase gaming and
other equipment under lease and approximately $1.2 million of the proceeds
toward the purchase
10
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of additional gaming equipment. SFHI expects to use the balance of the loan
proceeds to acquire additional gaming equipment and to fund in part the
construction of a parking structure at the Santa Fe.
In addition, SFHI modified the terms of outstanding promissory notes
aggregating approximately $10 million (the "Equipment Notes") in connection
with a sale by the Company of the Equipment Notes to a third party to reduce
the interest rate to 11% and to extend the maturity date from May 1998 to
April 2001. SFHI also granted a security interest in gaming and other
equipment to secure the modified notes.
Sale of Notes
In April 1998, the Company consummated the sale of the Equipment Notes for
cash proceeds of approximately $9 million. The Company expects to use the
cash proceeds for working capital purposes, including, without limitation,
repayment of indebtedness.
11
<PAGE>
10. Supplemental Statement of Subsidiary Information -
For The Six Months Ended March 31, 1998 and 1997
The Company's primary operations are in the hotel/casino industry and in
fiscal years 1998 and 1997 were conducted through PHI and SFHI. "Other" below
includes financial information for the Company's other operations before
eliminating entries. Identifiable assets listed below excludes balances due
between affiliates. In addition to the financial information for the six
months ended March 31, 1998 and 1997, as set forth in the table below, see
notes 2 and 4 for additional discussion of subsidiary operations.
<TABLE>
<CAPTION>
(dollars in thousands) Year PHI SFHI Other Eliminations TOTAL
- ---------------------- ---- --- ---- ----- ------------ -----
<S> <C> <C> <C> <C> <C> <C>
Operating revenues 1998 $20,355 $35,136 $1,267 ($728) $ 56,030
------- ------- ------ ------ --------
------- ------- ------ ------ --------
1997 $21,107 $30,568 $1,859 ($644) $ 52,890
------- ------- ------ ------ --------
------- ------- ------ ------ --------
Operating income (loss) 1998 ($544) $5,854 ($988) ($607) $ 3,715
------- ------- ------ ------ --------
------- ------- ------ ------ --------
1997 $942 $2,176 $739 ($301) $ 3,556
------- ------- ------ ------ --------
------- ------- ------ ------ --------
Interest expense 1998 $4,071 $6,710 $1,896 ($607) $ 12,070
------- ------- ------ ------ --------
------- ------- ------ ------ --------
1997 $4,007 $6,446 $1,212 ($301) $ 11,364
------- ------- ------ ------ --------
------- ------- ------ ------ --------
Depreciation and amortization 1998 $2,785 $2,519 $835 $6,139
------- ------- ------ ------ --------
------- ------- ------ ------ --------
1997 $2,793 $2,602 $93 $5,488
------- ------- ------ ------ --------
------- ------- ------ ------ --------
Rents 1998 $482 $1,214 $1,696
------- ------- ------ ------ --------
------- ------- ------ ------ --------
1997 $489 $1,454 $1,943
------- ------- ------ ------ --------
------- ------- ------ ------ --------
Capital expenditures 1998 $2,142 $9,888 $40 $ 12,070
------- ------- ------ ------ --------
------- ------- ------ ------ --------
1997 $455 $512 $127 $ 1,094
------- ------- ------ ------ --------
------- ------- ------ ------ --------
Identifiable assets 1998 $97,023 $85,840 $56,162 ($1,245) $237,780
------- ------- ------ ------ --------
------- ------- ------ ------ --------
1997 $112,600 $79,197 $29,592 ($1,245) $220,144
------- ------- ------ ------ --------
------- ------- ------ ------ --------
</TABLE>
12
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11. Supplemental Statement of Subsidiary Information -
For The Three Months Ended March 31, 1998 and 1997
The Company's primary operations are in the hotel/casino industry and in
fiscal years 1998 and 1997 were conducted through PHI and SFHI. "Other" below
includes financial information for the Company's other operations before
eliminating entries. Identifiable assets listed below excludes balances due
between affiliates. In addition to the financial information for the three
months ended March 31, 1998 and 1997, as set forth in the table below, see
notes 2 and 4 for additional discussion of subsidiary operations.
<TABLE>
<CAPTION>
(dollars in thousands) Year PHI SFHI Other Eliminations TOTAL
- ---------------------- ---- --- ---- ----- ------------ -----
<S> <C> <C> <C> <C> <C> <C>
Operating revenues 1998 $10,445 $17,994 $809 ($577) $28,671
------- ------- ------ ------ -------
------- ------- ------ ------ -------
1997 $11,178 $15,371 $1,190 ($257) $27,482
------- ------- ------ ------ -------
------- ------- ------ ------ -------
Operating income 1998 ($224) $3,144 ($305) ($507) $ 2,108
------- ------- ------ ------ -------
------- ------- ------ ------ -------
1997 $1,192 $1,416 $527 ($151) $ 2,984
------- ------- ------ ------ -------
------- ------- ------ ------ -------
Interest expense 1998 $2,026 $3,374 $1,101 ($507) $ 5,994
------- ------- ------ ------ -------
------- ------- ------ ------ -------
1997 $2,033 $3,211 $626 ($151) $ 5,719
------- ------- ------ ------ -------
------- ------- ------ ------ -------
Depreciation and amortization 1998 $1,351 $1,076 $579 $ 3,006
------- ------- ------ ------ -------
------- ------- ------ ------ -------
1997 $1,393 $1,314 $53 $ 2,760
------- ------- ------ ------ -------
------- ------- ------ ------ -------
Rents 1998 $175 $610 $ 785
------- ------- ------ ------ -------
------- ------- ------ ------ -------
1997 $211 $837 $ 1,048
------- ------- ------ ------ -------
------- ------- ------ ------ -------
Capital expenditures 1998 $864 $9,598 $23 $10,485
------- ------- ------ ------ -------
------- ------- ------ ------ -------
1997 $222 $352 $0 $ 574
------- ------- ------ ------ -------
------- ------- ------ ------ -------
</TABLE>
13
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INDEPENDENT ACCOUNTANTS' REVIEW REPORT
Santa Fe Gaming Corporation:
We have reviewed the accompanying consolidated condensed balance sheet of
Santa Fe Gaming Corporation and subsidiaries as of March 31, 1998, the
related consolidated condensed statements of operations for the three-month
and six-month periods ended March 31, 1998 and 1997, stockholders' equity for
the six-month period ended March 31, 1998 and cash flows for the six-month
periods ended March 31, 1998 and 1997, 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, 1997, and the related consolidated
statements of operations, stockholders' equity and cash flows for the year
then ended (not presented herein); and in our report dated December 8, 1997
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, 1997 is fairly
stated, in all material respects, in relation to the consolidated balance
sheet from which it has been derived.
As discussed in Note 5 to the consolidated condensed financial statements, as
of March 31, 1998 the Company's current liabilities exceeded current assets
by $59.6 million, which is due to $71.0 million in current maturities of long
term debt due to third parties during the twelve-months ended March 31, 1999.
Management of the Company is exploring alternatives to address the $71.0
million current maturities of long term debt, which consist primarily of the
Pioneer Hotel, Inc. 13 1/2% Notes of $60 million, including, but not limited
to, disposition of assets, modifications to existing lease agreements,
possible reduction of indebtedness and/or refinancing or modification of the
13 1/2% Notes. 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, 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. 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.
DELOITTE & TOUCHE LLP
Las Vegas, Nevada
May 14, 1998
14
<PAGE>
SANTA FE GAMING CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - SIX MONTHS ENDED MARCH 31, 1998 AND 1997
CONSOLIDATED
Consolidated revenues for the six month period ended March 31, 1998 were
$56.0 million, a $3.1 million or 5.9% increase from $52.9 million for the
same period in fiscal 1997. Revenues increased by $4.6 million at the Santa
Fe Hotel and Casino (the "Santa Fe") and decreased by $700,000 at the Pioneer
Hotel and Gambling Hall (the "Pioneer"). The prior period's revenues
included a $700,000 gain on the sale of real property.
Consolidated operating income for the six month period ended March 31, 1998
was $3.7 million, a $100,000 or 4.5% increase from $3.6 million for the same
period in fiscal 1997. Operating income increased by $3.7 million at the
Santa Fe and decreased by $1.5 million at the Pioneer. Operating income of
Sahara Las Vegas Corp. ("SLVC") decreased by $1.0 million, primarily due to
the amortization of debt issue costs associated with the issuance of an
additional $37.5 million in principal amount of notes (the "SLVC Notes") in
November 1997.
Consolidated interest expense for the six month period ended March 31, 1998
was $12.1 million, a $700,000 increase compared to $11.4 million for the same
period in fiscal 1997. Interest expense of SLVC increased by $900,000 in
the 1998 period due to the issuance of the additional SLVC Notes in November
1997.
Consolidated loss before income taxes for the six month period ended March 31,
1998 was $8.4 million, a $600,000 increase compared to net loss of $7.8 million
in the same period in the prior year. Loss before income taxes decreased by
$3.4 million at the Santa Fe and increased by $1.6 million at the Pioneer.
The Company did not record an income tax benefit in the current fiscal year
due to the uncertainty of the Company's ability to recognize a benefit of the
net operating loss. Consolidated net loss, applicable to common shares, was
$9.1 million in the 1998 period compared to $6.2 million in the prior year
period.
SANTA FE
Revenues at the Santa Fe increased 15.0%, or $4.6 million, in the six months
ended March 31, 1998 to $35.1 million compared to $30.6 million in the same
period in the prior year. Casino revenues increased 19.9%, or $4.6 million, to
$27.8 million from $23.2 million when compared to the same six month period of
1997. Management believes that Santa Fe's revenues in prior periods were
adversely impacted as a result of increased competition in its market area and
restricted access to the property due to road construction that was ongoing from
April 1996 through February 1998.
15
<PAGE>
Operating expenses increased by 3.1%, or $900,000. Casino expenses had
volume-related increases of 10.2%, or $1.2 million. Similarly, selling,
general and administrative expenses increased 10.9%, or $400,000, due to
increased advertising costs. Such increases were partially offset by cost
control related decreases of 10.8%, or $500,000, in food and beverage
expenses. Accordingly, operating income increased by $3.7 million, or
169.1%, to $5.9 million in 1998 from $2.2 million in 1997.
Santa Fe Hotel, Inc. ("SFHI") is negotiating with the Teamsters, Operating
Engineers, Culinary and Bartenders Unions ("Unions") with respect to
collective bargaining agreements covering certain employees at the Santa Fe.
If negotiations result in agreements between the SFHI and the Unions,
operating expenses are expected to increase. In the event negotiations fail
to result in agreements, the Unions may call a strike, which would result in
operating revenues being adversely affected. In either event, there would
be a material adverse effect on the results of operations and financial
condition of the Santa Fe and the Company.
PIONEER
Revenues at the Pioneer decreased 3.6%, or $700,000, to $20.4 million as
compared to $21.1 million in the prior year. Casino revenues were $17.4 million
in 1998, representing a decrease of 3.8%, or $700,000 from $18.1 million when
compared to the 1997 period. The decrease in the current period's revenues is
believed to be primarily due to the competitive gaming market environment in and
around Laughlin, including Indian gaming facilities opened in Arizona and
Southern California, and new casinos opened in Las Vegas.
Operating expenses increased 3.6%, or $700,000, to $20.9 million. Casino
expenses increased 4.2%, or $400,000 and selling, general and administrative
expenses increased 7.8%, or $200,000, primarily due to increased advertising and
promotional expenses. Accordingly, operating income decreased by 157.8% or
$1.5 million to a loss of $500,000 in fiscal 1998 from income of $900,000 in
fiscal 1997.
RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 1998 AND 1997
CONSOLIDATED
Consolidated revenues for the three month period ended March 31, 1998 were
$28.7 million, a $1.2 million, or 4.3%, increase from $27.5 million for the
same period in fiscal 1997. Revenues increased by $2.6 million at the Santa
Fe and decreased by $700,000 at the Pioneer. The prior period's revenues
include a $700,000 gain on the sale of real property.
Consolidated operating income for the three month period ended March 31, 1998
was $2.1 million, a $900,000, or 29.3%, decrease from $3.0 million for the same
period in fiscal 1997. Operating income increased by $1.7 million at the Santa
Fe and decreased by $1.4
16
<PAGE>
million at the Pioneer. Operating income of SLVC decreased by $600,000,
primarily due to the amortization of debt issue costs associated with the
issuance of the additional SLVC Notes in November 1997.
Consolidated interest expense for the three month period ended March 31, 1998
was $6.0 million, a $300,000 increase compared to $5.7 million for the same
period in fiscal 1997. Interest expense of SLVC increased by $600,000 in the
1998 period due to the issuance the additional SLVC Notes in November 1997.
Consolidated loss before income taxes for the three month period ended March
31, 1998 was $3.9 million, a $1.2 million increase compared to $2.7 million in
the same period in the prior year. Net loss before income taxes decreased by
$1.6 at the Santa Fe and increased by $1.4 million at the Pioneer.
The Company did not record an income tax benefit in the current quarter due to
the uncertainty of the Company's ability to recognize a benefit of the net
operating loss. Consolidated net loss applicable to common shares was $4.3
million compared to $2.3 million in the prior year period.
SANTA FE
Revenues at the Santa Fe increased 17.1%, or $2.6 million, in the three months
ended March 31, 1998 to $18.0 million as compared to $15.4 million in the same
period in the prior year. Casino revenues increased 22.0%, or $2.6 million, to
$14.4 million from $11.8 million when compared to the same three month period of
1997. Management believes that Santa Fe's revenues in prior periods were
adversely impacted as a result of increased competition in its market area and
restricted access to the property due to road construction that was ongoing from
April 1996 through February 1998.
Operating expenses increased by 6.4%, or $900,000. Casino expenses had
volume-related increases of 16.6%, or $900,000. Similarly, selling, general
and administrative expenses increased 15.8%, or $300,000, due to increased
advertising costs. Depreciation and amortization expense decreased 18.1%, or
$200,000, primarily due to fixed assets placed in service at the opening of
the Santa Fe becoming fully depreciated. Accordingly, operating income
increased $1.7 million or 122.0% to $3.1 million in 1998 from $1.4 million in
1997.
PIONEER
Revenues at the Pioneer decreased 6.6%, or $700,000, to $10.4 million in the
March 1998 quarter as compared to $11.2 million in the prior year. Casino
revenues were $8.9 million in 1998, representing a decrease of 8.1%, or
$700,000 from $9.6 million when compared to the 1997 period. The decrease in
the current period's revenues is believed to be
17
<PAGE>
primarily due to the competitive gaming market environment in and around
Laughlin, including Indian gaming facilities opened in Arizona and Southern
California, and new casinos opened in Las Vegas.
Operating expenses increased 6.8%, or $700,000, to $10.7 million in the quarter
ended March 31, 1998. Casino expenses increased 8.1%, or $400,000, and selling,
general and administrative expenses increased 16.6%, or $200,000, primarily due
to increased advertising and promotional expenses. Accordingly, operating
income decreased by 118.8% or $1.4 million, to a loss of $200,000 in the fiscal
1998 quarter from income of $1.2 million in the fiscal 1997 quarter.
LIQUIDITY AND CAPITAL RESOURCES; TRENDS AND FACTORS RELEVANT TO
FUTURE OPERATIONS
As of March 31, 1998, the Company ("SFGC") held cash and short-term
investments of $25.2 million compared to $15.1 million at September 30, 1997.
In April 1998, SFHI issued $14 million principal amount of senior notes,
$10.6 million of the proceeds of which was used to pay the remaining balance
of the purchase price for equipment previously subject to lease and
approximately $1.2 million of the proceeds of which was used toward the
purchase of additional gaming equipment. SFHI expects to use the remaining
proceeds to purchase additional equipment and to fund in part the
construction of a parking structure. Additionally, in April 1998 SFGC sold
promissory notes issued by SFHI with an aggregate principal amount of
approximately $10 million for approximately $9 million in cash. SFGC expects
to use net proceeds from the sale of notes for working capital purposes,
including, without limitations, repayment of indebtedness. (See
Liquidity-Corporate and Liquidity-SFHI below)
The Company's cash used for operations was $3.3 million for the six months
ended March 31, 1998 as compared to $6.1 million for the prior year period.
The improvement is due primarily to increased cash flows from operations at
the Santa Fe. Cash used for investing activities was $2.7 million during the
six month period ended March 1998, as compared to cash provided by investing
activities of $2.6 million during the six month period ended March 1997. The
current period use represents the acquisition of gaming equipment at the
Pioneer. Cash provided from financing activities was $16.0 million in the
1998 six month period compared to $100,000 during the same period in 1997.
This is primarily the net proceeds resulting from the placement of the
additional $22.5 million principal amount of SLVC Notes in November 1997.
The Company owns, through an indirect wholly owned subsidiary, an approximately
39 acre parcel of real property in Henderson, Nevada, located in the southeast
Las Vegas Valley. The Company is evaluating the potential development of a
hotel/casino and entertainment complex on this property. The Company has
completed preliminary engineering and architectural drawings. Any future
development is subject to, among other things, the Company's ability to obtain
necessary financing. No assurance can be given that the Company will obtain
development financing or develop successfully the Henderson property. (See
Liquidity-Corporate and Liquidity-SLVC below)
The Company's earnings from operations before interest, taxes, depreciation,
amortization and rents ("EBITDAR") were $6.9 million and $13.3 million for
the three and six months ended March 31, 1998, respectively, as compared to
$7.7 million and $12.7 million for the
18
<PAGE>
three and six months ended March 31, 1997, respectively. EBITDAR for the
1998 three and six month periods represents .97 and 1.01 times rent and
interest expense, respectively, compared to .95 and 1.13 times rent and
interest expense in the prior year three and six month periods,
respectively. In the fiscal 1998 six month period, the Company reported
approximately $1.7 million in rent expense compared to $1.9 million in the
fiscal 1997 period. The Company will incur less rent expense in future
periods, offset in part, by increased interest expense as a result of the $14
million note placement by SFHI in April 1998 and the application of net
proceeds therefrom. (See Liquidity-SFHI below) EBITDAR should not be
construed as a substitute for operating income or a better indicator of
liquidity than cash flow from operating activities, which are determined in
accordance with GAAP. It is included herein to provide additional
information with respect to the ability of the Company to meet its future
debt service, capital expenditure and working capital requirements. Although
EBITDAR is not necessarily a measure of the Company's ability to fund its
cash needs, management believes that certain investors find EBITDAR to be a
useful tool for measuring the ability of the Company to service its debt.
DEBT OBLIGATIONS - The Company has approximately $71.0 million in current
maturities of long term debt due to third parties during the twelve-month
period ending March 31, 1999, comprised primarily of $5.2 million principal
amount of 10 1/4% Subordinated Debentures due June 1998 (the "10 1/4%
Debentures"), $60.0 million principal amount of 13 1/2% Notes due December
1998 issued by Pioneer Finance Corp. and guaranteed by the Company (the "13
1/2% Notes"), a $4.8 million balloon payment due in December 1998 on a note
payable by the Company to Sierra Construction Corp. ("Sierra Construction")
and principal amortization payments under other notes payable and capital
leases. The scheduled maturities applicable to third party debt under notes
payable and capital leases at SFHI and PHI during the twelve month period
ending March 31, 1999 are $700,000 and $30,000, respectively.
Although management has in the past and is currently exploring refinancing or
debt modifications alternatives, as well as possible dispositions or financing
of certain assets, in order to satisfy the current maturities of long-term debt
obligations as they become due in the twelve month period ending March 31, 1999,
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 may require the approval of the Nevada Gaming
Authorities for such financings or asset sales. 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,
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.
The Company had $132.5 million in long-term debt, net of current maturities
and debt discount, as of March 31, 1998. Of such amounts, approximately
$57.5 million and $66.3 million mature in December 1999 and December 2000,
respectively, comprised primarily of $57.5 million principal amount of SLVC
Notes issued by SLVC and guaranteed by the
19
<PAGE>
Company and $99 million of 11% Notes due December 2000 (the "11% Notes")
issued by SFHI and guaranteed by the Company, of which $33 million is held by
SLVC.
Debt agreements restrict the distribution of cash from certain of the Company's
subsidiaries to the Company. Cash flow from SFHI, PHI and SLVC is not
currently, and is 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, PHI and SFHI, (collectively "Corporate") must rely on existing
cash and available resources, including the 22 acre parcel of real property
subject to a sale agreement, or cause subsidiaries to dispose of or refinance
assets, to provide liquidity to fund Corporate cash requirements including
obligations that may arise as a result of the Company's guarantee of subsidiary
debt. See more detailed discussion of Liquidity for SLVC, PHI, SFHI and
Corporate, below.
LIQUIDITY - CORPORATE - Approximately $4.1 million of the Company's current
assets at March 31, 1998, including approximately $900,000 of cash and
short-term investments, was held by Corporate.
In April 1998, the Company consummated the sale of promissory notes ("Equipment
Notes") from SFHI in the aggregate principal amount of approximately $10
million for cash proceeds of approximately $9 million. The Company expects to
use the cash proceeds for working capital purposes including, without
limitation, repayment of indebtedness.
In November 1997, the Company entered into an agreement to sell the 22 acre
parcel of land next to the Santa Fe for approximately $3.6 million. The
agreement is subject to certain contingencies and, pursuant to an amendment
entered into on May 12, 1998, will terminate if closing does not occur before
August 13, 1998. Pursuant to the amendment, the buyer must pay the purchase
price in cash.
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 $5.2 million principal
amount of the 10 1/4% Debentures, a $5.1 million note payable to Sierra
Construction 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 $5.1 million as of March 31, 1998).
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, are required to be paid in
20
<PAGE>
cash. The Company is a party to financing arrangements that restrict the
Company's ability to exchange the preferred stock to subordinated notes
commencing 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 dividends due in March and September
1997 and March 1998. To the extent dividends in an amount equal to dividend
payments for one dividend period have accrued and remain unpaid for two
years, 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 and debt service requirements
through the twelve month period ending March 31, 1999, including the maturity
of $5.2 million principal amount of 101/4% Debentures in June 1998 and the
$4.8 million note due Sierra Construction in December 1998, although no
assurance can be given to that effect. Available resources include proceeds
that may be realized from the sale of the 22 acre parcel of real property
discussed above.
The Company has guaranteed the debt of its subsidiaries, PHI, SLVC and SFHI,
including $60 million principal amount of 13 1/2% Notes due December 1998.
Furthermore, in the event that cash at SLVC, SFHI or PHI is insufficient to
meet liquidity requirements, Corporate may make contributions, or, to the
extent permitted by financing arrangements, loans to SLVC, SFHI or PHI to
prevent an event of default under debt instruments to which SLVC, SFHI or PHI
is a party and which loans have been guaranteed by Corporate. In order to
generate necessary liquidity, the Company may cause its subsidiaries to
dispose of or refinance certain assets to generate sufficient liquidity to
meet the cash requirements. No assurance can be given that Corporate would
have available resources to make such contributions or loans. See Liquidity
- - SFHI, Liquidity - PHI and Liquidity - SLVC.
LIQUIDITY - SFHI - At March 31, 1998, approximately $12.4 million of the
Company's current assets, including approximately $9.3 million of cash and
short term investments, was held by SFHI.
In April 1998, SFHI consummated the issuance of $14 million principal amount
of 9.5% senior secured notes (the "9.5% Notes"). The 9.5% Notes have an
interest rate of 9.5%, require quarterly interest only payments, and mature
on December 15, 2000. SFHI used approximately $10.6 million of net proceeds
from the issuance of the 9.5% Notes to pay the balance of the $10.7 million
purchase price for gaming and other equipment under lease and approximately
$1.2 million toward the purchase of additional gaming equipment. SFHI
expects to use the balance of the loan proceeds to acquire additional gaming
equipment and to fund in part the construction of a parking structure at the
Santa Fe. In addition, in connection with the sale of the Equipment Notes by
SFGC to a third party, SFHI modified the terms of the Equipment Notes to
reduce the interest rate to 11% and to extend the maturity dates from May
1998 to April 2001. SFHI also granted a security interest in gaming and
other equipment to secure the modified notes.
21
<PAGE>
Results of operations at the Santa Fe for the three and six months ended
March 31, 1998 generated EBITDAR of $5.1 million and $10.1 million,
approximately 1.29 and 1.28 times rent and interest expense, respectively,
compared to $3.8 and $6.7 million of EBITDAR in 1997, or approximately .94
and .85 times rent and interest expense, respectively. In the fiscal 1998
six month period, the Santa Fe reported approximately $1.2 million in rent
expense compared to $1.5 million in the fiscal 1997 period. Management
believes that Santa Fe's EBITDAR in prior periods was adversely impacted as a
result of increased competition in its market area and restricted access to
the property due to road construction that was ongoing from April 1996
through February 1998.
SFHI's principal uses of cash from operations are for operating lease
payments, corporate charges, interest payments on indebtedness and capital
expenditures to maintain the facility. SFHI's lease payments in future
periods will be decreased, offset in part, by increased interest expense, as
a result of the issuance of the 9.5% Notes on to placement in April 1998 and
the use of net proceeds therefrom, as discussed above. Capital expenditures
to maintain the facility in fiscal 1998 are expected to be approximately the
same that was expended in fiscal 1997. SFHI expects to incur approximately
$5.0 million in improvements, including gaming equipment, pylon signs, and a
parking structure, through the remainder of fiscal 1998. The Company expects
to use approximately $1.9 million of the proceeds of the 9.5% Notes issued to
fund in part such costs.
Management believes that, based on operations for the six month period ended
March 31, 1998, SFHI will have sufficient cash resources to meet its
operating and debt service requirements through the twelve month
period ending March 31, 1999, although no assurance can be given to that
effect. Results for the 1998 first and second quarters improved compared to
the same quarters in the prior year. However, results for the 1998 first
and second quarters are not necessarily indicative of results for the entire
fiscal year. SFHI is exploring alternatives to improve liquidity, including,
but not limited to, possible refinancings or modification of the 9.5% Notes
and 11% Notes. The Company has no arrangements for any refinancings,
dispositions or other financings. 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 capital contributions or make
advances to SFHI. No assurance can be given that Corporate would have
available resources to make contributions or advances. See
"Liquidity-Corporate".
LIQUIDITY - PHI - At March 31, 1998, approximately $14.2 million of the
Company's current assets, including approximately $12.7 million of cash and
short term investments, was held by PHI. A wholly-owned subsidiary (the
"Pioneer Subsidiary") held $9.6 million of the cash and short-term
investments held by the Pioneer.
Results of operations at the Pioneer for the three and six months ended March
31, 1998, generated EBITDAR of $1.6 million and $3.3 million, approximately
.73 and .72 times rent and interest expense, respectively, compared to $3.0
million and $4.7 million of EBITDAR in 1997, or approximately 1.36 and 1.04
times rent and interest expense, respectively. Pioneer reported rent expense
of approximately $500,000 in both the 1997 and 1998 six
22
<PAGE>
month periods. Rent in future periods will be less compared to the current
six month ended March 31, 1998 due to the purchase of gaming equipment
previously under lease in December 1997.
PHI's principal uses of cash are for lease payments, corporate charges,
interest payments on indebtedness and capital expenditures to maintain the
facility. Capital expenditures to maintain the facility in fiscal 1998 are
expected to be approximately the same that was expended in fiscal 1997.
However, PHI expects to incur approximately $1.8 million to purchase gaming
equipment in the 1998 period.
Management believes that, based on operations for the six month period ended
March 31, 1998, PHI will have sufficient cash and available resources to meet
its operating requirements through the twelve months ending March 31, 1999,
although no assurance can be given to that effect. Results for the 1998
three and six month periods ended March 31, 1998 were down compared to the
same periods in the prior year. Approximately $9.6 million of cash is held
by a subsidiary and could be available to satisfy in part the obligations
under the 13 1/2% Notes. The 13 1/2% Notes mature in December 1998. PHI is
exploring alternatives to improve liquidity and to address the maturity of
the 13 1/2% Notes, including, but not limited to, modifications to existing
lease agreements, and a possible reduction of indebtedness or refinancing or
modification of the 13 1/2% Notes. The Company has no arrangements for any
such refinancings, modifications, dispositions or other financings and no
assurance can be given that PHI will successfully make such arrangements.
LIQUIDITY - SLVC - At March 31, 1998, approximately $2.4 million of the
Company's cash and short-term investments was held by SLVC.
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 SLVC Notes. SLVC's principal use 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 SLVC Notes.
Additional potential required uses of cash by SLVC include the redemption of
$7.0 million principal amount of SLVC Notes or, alternatively, the purchase
of $7.0 million principal amount of 11% Notes, if SFHI 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.
SLVC holds a 39 acre parcel of real property in Henderson, Nevada and is
evaluating the development of a casino entertainment complex on the site.
Corporate has completed preliminary engineering and architectural drawings.
Due to restrictions in the SLVC Notes, any future development costs will be
the responsibility of Corporate and any future development is subject to,
among other things, the Company's ability to obtain necessary financing. No
assurance can be given that the Company will obtain development financing or
develop successfully the Henderson
23
<PAGE>
property.
Management believes that SLVC has available resources, consisting primarily
of restricted working capital and interest income on the 11% Notes held as
collateral, to meet operating and debt service requirements through the
twelve months ending March 31, 1998, although no assurance can be given to
that effect.
RELATED PARTIES In November 1993, Mr. Lowden, Chairman of the Board, Chief
Executive Officer and 53% stockholder of the Company, 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. Mr.
Lowden has advised the Company he has reduced the loan balance to $777,000 by
repaying an additional $100,000 in May 1998. 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. The market
value of the Pledge Shares has from time to time been less than three times
the outstanding loan balance. 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, including the 13 1/2% Notes, SLVC Notes, the
11% Notes and the 9.5 Notes.
From 1991 through 1993 LICO, a company wholly-owned by Mr. Lowden borrowed an
aggregate of $476,000 from a subsidiary of the Company, pursuant to an
unsecured demand loan which bore interest at 2% over the prime rate. The
outstanding balance of the loan including accrued interest was $700,000 as of
December 31, 1997. In January 1998, the amount outstanding under the loan
was satisfied in full through the offset of amounts due Mr. Lowden under
compensation arrangements.
COMPUTERIZED OPERATIONS AND THE YEAR 2000
During recent years, there has been significant global awareness raised
regarding the potential disruption to business operations worldwide resulting
form the inability of current technology to process properly the change from
the year 1999 to 2000. Although, based on a review of its data processing,
operating and other computer-based systems, the Company does not currently
believe that it will experience any significant adverse effects or material
costs resulting therefrom, the Company cannot provide any assurance in this
regard, and any such costs or effect could materially and adversely effect
the operations
24
<PAGE>
of the Company.
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 and 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,
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
None
Item 2 - Changes in Securities
None
Item 3 - Defaults Upon Senior Securities
None
Item 4 - Submission of Matters to a vote of Security Holders
The Annual Meeting of Shareholders was held on March 19, 1998, wherein the
following matters were submitted to a vote:
The result of the vote taken on the election of Director was as follows:
Thomas K. Land 6,016,690
The result of the vote taken for ratification of selection of Deloitte &
Touche LLP as outside auditors are as follows:
For: 6,030,979 Against: 30,791 Votes abstaining: 21,481
The results of the vote taken for ratification of approval of amendment to
the 1993 Key Employee Stock Option Plan are as follows:
For: 4,060,731 Against: 180,657 Votes abstaining: 31,856
Item 5 - Other Information
None
26
<PAGE>
Item 6 - Exhibits and Reports on Form 8-K
A. Exhibits:
10.90 Purchase Agreement by and between Santa Fe Gaming
Corporation and Steve Allen dated November 21, 1997
10.91 First Supplemental Indenture with respect to 11% First
Mortgage Notes due 2000 between Santa Fe Hotel Inc.,
Santa Fe Gaming Corporation and IBJ Schroder Bank &
Trust Company dated as of April 14, 1998
10.92 Amended and Restated Note by an between Santa Fe Hotel
Inc., Santa Fe Gaming Corporation in favor of PDS
Financial Corporation-Nevada, as Collateral Agent dated
April 14, 1998
10.93 Security Agreement between Santa Fe Hotel Inc. and PDS
Financial Corporation-Nevada, as Collateral Agent dated
April 14, 1998
10.94 Amended and Restated Promissory Note by and between
Santa Fe Hotel Inc., Santa Fe Gaming Corporation in
favor of PDS Financial Corporation-Nevada, as
Collateral Agent dated April 14, 1998
10.95 Security Agreement between Santa Fe Hotel Inc. and PDS
Financial Corporation-Nevada dated April 14, 1998
10.96 Note Purchase Agreement dated as of April 14, 1998
among Santa Fe Gaming Corporation, Santa Fe Hotel Inc.,
SunAmerica Life Insurance Company and Credit Suisse
First Boston Mortgage Capital LLC
10.97 Form of Promissory Note due December 15, 2000
10.98 Deed of Trust, Fixture Filing and Financing Statement
and Security Agreement with Assignment of Rents
executed and delivered on April 14, 1998 by Santa Fe
Hotel Inc. in favor of SunAmerica Life Insurance
Company, as Collateral Agent.
10.99 Security Agreement dated as of April 14, 1998 by Santa
Fe Hotel Inc. in favor of SunAmerica Life Insurance
Company, as Collateral Agent.
27
<PAGE>
10.100 Environmental Indemnity Agreement dated as of April 14,
1998 by Santa Fe Hotel Inc. in favor of SunAmerica Life
Insurance Company, as Collateral Agent.
10.101 Guaranty dated as of April 14, 1998 by Santa Fe Gaming
Corporation in favor of SunAmerica Life Insurance
Company, as Collateral Agent.
10.102 Subordination and Intercreditor Agreement dated as of
April 14, 1998 among SunAmerica Life Insurance Company,
as Collateral Agent, Santa Fe Hotel Inc. and IBJ
Schroder Bank & Trust Company, as Trustee
23 Consent of Deloitte & Touche LLP.
27 Financial Data Schedule.
B. Reports: 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: May 14, 1998
28
<PAGE>
------------------------
SANTA FE HOTEL INC.,
as Issuer
SANTA FE GAMING CORPORATION,
as Guarantor
and
IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee
------------------------
FIRST SUPPLEMENTAL INDENTURE
Dated April 14, 1998
------------------------
$115,000,000
11% FIRST MORTGAGE NOTES DUE 2000
and
$11,500,000
11% FIRST MORTGAGE NOTES DUE 2000
Issuable upon exercise of Warrants
<PAGE>
FIRST SUPPLEMENTAL INDENTURE, dated as of April 14, 1998 (the
"Supplement"), by and among SANTA FE HOTEL INC., a Nevada corporation (the
"Company"), SANTA FE GAMING CORPORATION, a Nevada corporation formerly known as
Sahara Gaming Corporation (the "Guarantor"), and IBJ SCHRODER BANK & TRUST
COMPANY, a New York banking corporation, as Trustee (the "Trustee").
RECITALS
The Company has heretofore executed and delivered to the Trustee an
Indenture, dated as of December 29, 1993 (the "Indenture"), under which the
Company's 11% First Mortgage Notes due 2000 (the "Notes") in the aggregate
principal amount of $115,000,000 were issued, and as of April 14, 1998,
$99,408,000 principal amount of the Notes are outstanding.
The Company has solicited the consent of the Holders to certain proposed
amendments (the "Amendments") to the Indenture, as described in the Consent
Solicitation Statement dated February 16, 1998, as supplemented by the
Supplement dated March 4, 1998 and the Supplement dated March 12, 1998 (the
Consent Solicitation Statement, as so supplemented, is referred to herein as the
"Solicitation Statement"), copies of which are attached hereto as Exhibit A.
The Company has received and accepted the consent of the Holders of at
least a majority in principal amount of the Notes to the Amendments, and desires
to amend the Indenture to reflect such Amendments.
In accordance with Section 9.2 of the Indenture, the Company, the Guarantor
and the Trustee desire to amend the Indenture as provided herein.
NOW, THEREFORE, the parties hereto agree to amend and supplement the
Indenture as follows:
AGREEMENTS
Section 1. DEFINED TERMS. Capitalized terms not otherwise defined
herein shall have the meanings ascribed to them in the Indenture.
Section 2. AMENDMENT TO SECTION 1.1 OF INDENTURE.
(a) The following definitions in Section 1.1 of the Indenture are
hereby amended to provide in their entirety as follows:
"PERMITTED ADDITIONAL INDEBTEDNESS" means (i) Permitted Refinancing
Indebtedness; (ii) nonrecourse Indebtedness solely to finance the purchase of
furniture, fixtures or equipment for use in the operations of Permitted Lines of
Business secured by a Lien on such furniture, fixtures or equipment;
(iii) Indebtedness payable to any of, or among, the Company and any Restricted
Subsidiary; (iv) recourse Indebtedness not exceeding $2 million in the aggregate
incurred solely to finance the purchase of furniture, fixtures or equipment for
use in the operations of Permitted Lines of Business; (v) Indebtedness under any
revolving credit facilities and/or term loans,
<PAGE>
PROVIDED that the aggregate amount of such Indebtedness outstanding at any time
shall not exceed $5 million; (vi) Indebtedness of the Company or any Restricted
Subsidiary outstanding as of the date of this Indenture; (vii) to the extent
that such incurrence does not result in the incurrence by the Company or any
Restricted Subsidiary of any obligation for the payment of borrowed money of
others, Indebtedness incurred solely in respect of performance bonds and
completion guarantees; (viii) up to $14 million of Indebtedness secured by some
or all of the Collateral (the "Senior Notes"); and (ix) other Indebtedness,
PROVIDED that (a) the Company's Consolidated Coverage Ratio, calculated
cumulatively for the four most recent consecutive fiscal quarters of the Company
and ending prior to the date of incurrence of the referent Indebtedness (giving
effect to (1) the incurrence of the referent Indebtedness as if it had occurred
on the first day of such four-quarter period and (2) the repayment of any other
Indebtedness being repaid with proceeds from the referent Indebtedness as if
such other Indebtedness had been repaid at the beginning of such four-quarter
period), shall not be less than 2.0-to-1.0, (b) the aggregate amount of the
referent Indebtedness (excluding any such Indebtedness incurred to finance the
acquisition of gaming equipment, which may equal up to 100% of the acquisition
cost of such gaming equipment) does not exceed 75% of the costs of the projects
and assets with respect to which such Indebtedness is incurred and (c) the
referent Indebtedness does not mature or require payments of principal or
partial redemption prior to maturity of the Notes.
"PERMITTED LIENS" means (i) statutory liens to secure the performance of
obligations, surety or appeal bonds, performance bonds or other obligations of a
like nature (including, without limitation, mechanic's, worker's, material
provider's and maritime liens) incurred in the ordinary course of business
(exclusive of obligations in respect of the payment of borrowed money), or for
taxes, assessments or governmental charges or claims, PROVIDED that in each case
the obligations are not yet delinquent or are being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted and any
reserve or other appropriate provision for accounting purposes as shall be
required in conformity with GAAP shall have been made therefore; (ii) subleases
granted to others not interfering in any material respect with the business of
the Company or any Restricted Subsidiary; (iii) leases in respect of the real
property on which facilities owned or leased by the Company or any Restricted
Subsidiary are located; (iv) Liens arising from UCC financing statements
regarding property leased by the Company or any Restricted Subsidiary;
(v) easements, rights-of-way, navigational servitudes, restrictions, minor
defects or irregularities in title and other similar charges or encumbrances
that do not interfere in any material respect with the ordinary conduct of
business of the Company or any Restricted Subsidiary; (vi) Liens in existence as
of the date of the Indenture and identified in SCHEDULE I thereto; (vii) Liens
granted by third party lessors or fee owners with respect to real property as to
which the Company or a Restricted Subsidiary has a leasehold interest;
(viii) first priority Liens securing up to $14 million principal amount of
Senior Notes, advances made by holders thereof on behalf of the Company and fees
and expenses of the holders thereof incurred in connection with such Senior
Notes; (ix) first priority Liens with respect to the equipment listed on
Exhibit B hereto granted to secure (a) the amended and restated promissory note
in the principal amount of $4,961,556, dated as of April 14, 1998, issued by the
Company, and/or (b) the amended and restated note in the principal amount of
$4,978,440, dated as of April 14, 1998, issued by the Company; (x) the lease
contemplated by Section 4.13(f) hereof and easements, rights-of-way and
restrictions granted in connection with such lease, (xi) Liens created by the
2
<PAGE>
Collateral Documents, and (xii) Liens granted by any ground lessee of the Santa
Fe and secured by such ground lessee's lease-hold interest in the Santa Fe and
related personal property.
(b) The following new definition is added to Section 1.1 of the
Indenture:
"SENIOR NOTES" shall have the meaning specified in clause (viii)
of the definition of Permitted Additional Indebtedness.
Section 3. AMENDMENT TO SECTION 4.13 OF INDENTURE. Section 4.13 of the
Indenture is hereby amended by the addition of the following paragraph:
(f) Notwithstanding anything herein to the contrary, this
SECTION 4.13 shall not apply to the Company's lease of approximately
three acres of the real property described on Exhibit C hereto to a
third party developer for the development of a non-gaming hotel and
related amenities or any acts taken by or on behalf of the Company in
connection therewith or incidental thereto.
Section 4. SUBORDINATION AGREEMENT. The Trustee, the Company and the
Guarantor are authorized to enter into a subordination agreement with the
holders of the Senior Notes, or their representative, with respect to the
relative priorities of the holders of the Notes and the Senior Notes with
respect to the Collateral and other rights and remedies of such holders.
Section 5. AMENDMENTS TO COLLATERAL DOCUMENTS. Any of the Collateral
Documents may be amended by the Company, the Guarantor and the Trustee to the
extent necessary or desirable to permit the issuance of the Senior Notes, the
grant of the Liens contemplated by clauses (viii), (ix), (x) or (xii) of the
definition of Permitted Liens and the subordination of the Lien of the Deed of
Trust (as defined in the Indenture) to the Liens contemplated by clauses (viii),
(ix) and (x) of the definition of Permitted Liens, the lease of land as
contemplated by Section 4.13(f) hereof, or otherwise to effect the Amendments as
described in the Solicitation Statement.
Section 6. EFFECTIVE DATE. This Supplement shall be effective as of
March 18, 1998.
Section 7. INDENTURE RATIFIED. Except as hereby otherwise expressly
provided, the Indenture is in all respects ratified and confirmed, and all the
terms, provisions and conditions thereof shall be and remain in full force and
effect.
Section 8. COUNTERPARTS. This Supplement may be executed in any number
of counterparts, each of which shall be an original, but such counterparts shall
together constitute but one and the same instrument.
Section 9. SUPPLEMENTAL INDENTURE IS AN INDENTURE. This Supplement is
an amendment to and implementation of the Indenture, and the Indenture and this
Supplement shall be read together from and after the effectiveness of this
Supplement.
Section 10. GOVERNING LAW. This Supplement shall be governed by and
construed in accordance with the laws of the State of New York.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Supplement to be
duly executed as of the day and year first above written.
THE COMPANY:
SEAL: SANTA FE HOTEL INC.
By /s/ Paul W. Lowden
-------------------------------
Name: Paul W. Lowden
Title: President
ATTEST: /s/ Suzanne Lowden
--------------------------
Name: Suzanne Lowden
Title: President
SEAL: GUARANTOR:
SANTA FE GAMING CORPORATION
By: /s/ Paul W. Lowden
-------------------------------
Name: Paul W. Lowden
Title: President
ATTEST: /s/ Suzanne Lowden
--------------------------
Name: Suzanne Lowden
Title: Executive V.P.
SEAL: TRUSTEE:
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/ Terence Rawlins
-------------------------------
Name: Terence Rawlins
Title: Assistant Vice President
ATTEST: /s/ Barbara McCluskey
--------------------------
Name: Barbara McCluskey
Title: Assistant Secretary
4
<PAGE>
AMENDED AND RESTATED NOTE
$4,978,440 Las Vegas, Nevada
April 14, 1998
This Amended and Restated Note (the "Note"), dated April 14, 1998, is
entered into by and between Santa Fe Hotel Inc., a Nevada corporation (the
"Borrower"), and Santa Fe Gaming Corporation, a Nevada corporation ("SFGC"),
concurrent and in connection with the simultaneous sale of the Note from SFGC to
PDS Financial Corporation - Nevada, a Nevada corporation ("PDS") (the "Sale").
SFGC or its permitted assigns, including PDS, are referred to herein as the
"Holder."
RECITALS
WHEREAS, that certain Revolving Loan Note (the "Revolving Note") dated
December 1996 was issued by the Borrower in favor of SFGC in the maximum
principal amount of Five Million Dollars ($5,000,000);
WHEREAS, in connection with the sale of this Revolving Note by SFGC to PDS
pursuant to the Purchase Agreement, the Borrower and SFGC desire to modify
certain terms of the Revolving Note to, among other things, convert the
Revolving Note to a term note and in connection therewith to amend and restate
the Revolving Note in its entirety as provided herein and the Borrower desires
to grant a security interest in certain of its assets to secure obligations
arising under the Note;
WHEREAS, the restatement and amendment of the Revolving Note and grant of
the security interest are contingent upon the consummation of the transactions
contemplated by the Sale.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the Borrower and the Holder agree as follows:
1. The Borrower, for value received, hereby unconditionally promises to
pay to the order of the Holder, at the address specified in writing by the
Holder to the Borrower in lawful money of the United States of America and in
immediately available funds, on April 14, 2001 the principal amount of (a) FOUR
MILLION NINE HUNDRED SEVENTY EIGHT THOUSAND FOUR HUNDRED FORTY DOLLARS
($4,978,440), or, if less, (b) the aggregate unpaid principal amount hereunder.
The Borrower further agrees to pay interest in like money at such office on the
unpaid principal amount hereof from time to time outstanding at the rate of
eleven percent (11%) per annum (the "Contract Rate"), payable monthly in
arrears.
2. Prepayment.
(a) The Borrower shall prepay from time to time in part the amounts
due on this Note in an amount equal to the net proceeds received by the
Borrower from any disposition in the ordinary course of business of the
Collateral (as such term is defined in
<PAGE>
that certain Security Agreement of even date herewith between the Borrower
and PDS, as collateral agent). Notwithstanding the foregoing, the Borrower
shall not be required to prepay any amounts due on this Note as a result of
a sale by the Borrower of all or substantially all of the Collateral to an
entity at least a majority of the voting interests of which are owned
directly or indirectly by the Lowden Family (as defined herein) if such
entity assumes this Note and SFHI's obligations under the Security
Agreement.
(b) The Borrower may prepay the amount due on this Note in whole or
in part at any time and from time to time (i) at 101% of the principal
amount so prepaid plus interest thereon to the prepayment date if such
prepayment occurs at any time from the date hereof through December 15,
1999, or (ii) at 100% of the principal amount so prepaid plus interest
thereon to the prepayment date if such prepayment occurs thereafter, in
either case upon thirty (30) days' prior written notice.
3. This Note is secured by certain Collateral (as such term is defined in
that certain Security Agreement of even date herewith between the Borrower and
PDS, as collateral agent).
4. The Borrower shall pay interest on overdue principal and on overdue
installments of interest on this Note at the Contract Rate plus five percent
(5.0%) (the "Default Rate"), to the extent lawful.
5. Upon the Borrower's failure to pay (i) interest under this Note when
due, which failure continues for a period of fifteen (15) days or (ii) principal
under this Note when due, which failure continues for a period of five (5) days,
then all amounts then remaining unpaid on this Note shall become, or may be
declared to be, immediately due and payable.
6. The Holder may not assign, sell or transfer this Note or any interest
herein to a third party without the prior written consent of the Borrower, which
consent shall not be unreasonably withheld. If such consent is not given or
denied by the Borrower within five (5) business days after the Borrower's
receipt of Holder's written request for such consent, which request shall
specify the person to which the Note or an interest herein is proposed to be
assigned, sold or transferred and the structure of the proposed assignment, sale
or transfer, the Borrower shall be deemed to have consented to such proposed
assignment, sale or transfer.
7. In the event the Borrower enters into any transaction, merger,
consolidation, liquidation, windup or dissolution, or conveys, sells, leases,
transfers or otherwise disposes of in one transaction or a series of
transactions all or substantially all of its property or assets, this Note shall
become immediately due and payable on the date (the "Sale Date") such event
occurs. Notwithstanding the foregoing, (a) the Borrower may merge or
consolidate with, or dispose of all or substantially all of its assets to, an
entity at least a majority of the voting interests of which are owned directly
or indirectly by the Lowden Family (as such term is defined herein), in either
case without this Note becoming due and payable, if the entity with which the
Borrower merges or consolidates or to which all or substantially all of such
assets are transferred assumes this Note and (b) the Borrower may assign its
rights and obligations hereunder to an entity at least a majority of the voting
interests of which are owned directly or indirectly by the Lowden Family in
connection with the sale of all or substantially all of the Collateral to such
entity if such entity
2
<PAGE>
assumes this Note. For purposes of this Note, "Lowden Family" shall mean
Mr. Paul Lowden and Mrs. Suzanne Lowden and the executors, administrators or
legal representatives of their estates, heirs, distributees and beneficiaries,
any trust as to which any of the foregoing is a settlor or co-settlor, any
trustee of the estate of any of the foregoing that is bankrupt or insolvent, any
guardian or conservator of any of the foregoing that is adjudged disabled or
incompetent, and any corporation, partnership or other entity which is an
affiliate of any of the foregoing. Lowden Family shall also mean any lineal
descendants of the grandparents of such persons, but only to the extent that the
beneficial ownership of the voting interests held by such lineal descendants was
directly received (by gift, trust or sale) from any such person.
8. The occurrence of any one or more of the following shall constitute an
event of default (collectively, "Events of Default" and individually each an
"Event of Default") hereunder: (a) any failure to pay the principal outstanding
under this Note on the Maturity Date (or any earlier maturity date, whether by
acceleration, redemption or otherwise), which failure continues for a period of
five days, and (b) any failure to pay any installment of interest under this
Note on the Due Date therefor, which failure continues to exist for a period of
15 days. If any such event shall occur, Holder or its permitted assigns or
their permitted assigns may declare the entire unpaid principal balance hereof
and all accrued interest thereon and all other amounts due hereunder to be
immediately due and payable and thereby accelerate the maturity hereof, and
Holder or its permitted assigns or their permitted assigns may proceed to
exercise any rights and remedies that they may have under this Note.
9. The Borrower hereby waives presentment and demand for payment, notice
of dishonor, protest and notice of protest of this Note and agrees to pay all
costs of collection when incurred (including, without limitation, reasonable
attorneys' fees and disbursements), and including all reasonable costs and
expenses incurred in connection with the pursuit by Holder (or its permitted
assignee) or in connection with any of Holder's (or its permitted assignee's)
collection efforts, whether or not suit on this Note is filed and all such costs
and expenses shall be payable on demand.
10. The Borrower covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon or plead or in any manner whatsoever claim
or take the benefit or advantage of, any usury, stay or extension law or any
other law which would prohibit or forgive the Borrower from paying all or any
portion of the principal of, or interest on, this Note, wherever enacted, now or
at any time hereafter in force, or which may otherwise affect the covenants or
the performance of this Note; and the Borrower (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein or therein granted to Holder or its permitted assigns but will
suffer and permit the execution of every such power as though no such law had
been enacted.
11. This Note shall be governed by and construed in accordance with the
laws of the State of Nevada.
12. This Note may not be changed or terminated orally, but only by an
agreement in writing signed by any party against whom enforcement of such change
or termination is sought.
3
<PAGE>
13. All parties now and hereafter liable with respect to this Note,
whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and other notices of any kind.
SANTA FE HOTEL INC.
By: /s/ Thomas K. Land
-----------------------------------
Name: Thomas K. Land
Title: Chief Financial Officer
4
<PAGE>
---------------------------------------------------------------
SECURITY AGREEMENT
Dated as of April 14, 1998
between
SANTA FE HOTEL INC.
and
PDS Financial Corporation - Nevada, as
Collateral Agent
---------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Section 1. Definitions and Interpretation . . . . . . . . . . . . . 1
1.01 Certain Defined Terms . . . . . . . . . . . . . . . 1
1.02 Interpretation. . . . . . . . . . . . . . . . . . . 3
Section 2. Collateral . . . . . . . . . . . . . . . . . . . . . . . 4
2.01 Grant . . . . . . . . . . . . . . . . . . . . . . . 4
2.02 Perfection. . . . . . . . . . . . . . . . . . . . . 4
2.03 Attorney-in-Fact. . . . . . . . . . . . . . . . . . 4
2.04 Use of Collateral . . . . . . . . . . . . . . . . . 5
2.05 Rights and Secured obligations. . . . . . . . . . . 5
Section 4. Representations and Warranties . . . . . . . . . . . . . 5
4.01 Organization, Powers and Good Standing. . . . . . . 5
4.02 No Conflict . . . . . . . . . . . . . . . . . . . . 5
4.03 Governmental Approvals. . . . . . . . . . . . . . . 6
4.04 Filings, Etc. . . . . . . . . . . . . . . . . . . . 6
4.05 Locations of Collateral, Offices and Names. . . . . 6
4.06 Title to Collateral; Validity and Perfection of
Security Interest; Absence of Other Liens . . . . . 6
Section 5. Covenants. . . . . . . . . . . . . . . . . . . . . . . . 7
5.01 Books and Records . . . . . . . . . . . . . . . . . 7
5.02 Removals, Etc.. . . . . . . . . . . . . . . . . . . 7
5.03 Sales and Other Liens . . . . . . . . . . . . . . . 7
5.04 Further Assurances. . . . . . . . . . . . . . . . . 7
5.05 Verification, Etc.. . . . . . . . . . . . . . . . . 8
5.06 Payment of Charges and Claims . . . . . . . . . . . 8
5.07 Duty of Care. . . . . . . . . . . . . . . . . . . . 8
5.08 Protection of Security; Notice of Levy. . . . . . . 8
Section 6. Events of Defaults, Remedies, Etc. . . . . . . . . . . . 9
6.01 Events of Default . . . . . . . . . . . . . . . . . 9
6.02 Remedies, Etc.. . . . . . . . . . . . . . . . . . . 9
6.03 Private Sale. . . . . . . . . . . . . . . . . . . . 10
6.04 Application of Proceeds . . . . . . . . . . . . . . 10
Section 7. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . 11
7.01 Waiver. . . . . . . . . . . . . . . . . . . . . . . 11
7.02 Notices . . . . . . . . . . . . . . . . . . . . . . 11
7.03 Secured Party Expenses, Including Attorneys' Fees . 12
7.04 Amendments, Etc.. . . . . . . . . . . . . . . . . . 12
7.05 Successors and Assigns. . . . . . . . . . . . . . . 12
7.06 Survival. . . . . . . . . . . . . . . . . . . . . . 13
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7.07 Agreements Superseded . . . . . . . . . . . . . . . 13
7.08 Counterparts. . . . . . . . . . . . . . . . . . . . 13
7.09 GOVERNING LAW AND CHOICE OF FORUM . . . . . . . . . 13
7.10 WAIVER OF TRIAL BY JURY . . . . . . . . . . . . . . 13
7.11 Payments Set Aside. . . . . . . . . . . . . . . . . 14
7.12 Continuing Security Interest; Termination . . . . . 14
7.13 Waiver and Estoppel . . . . . . . . . . . . . . . . 15
7.14 Authorization . . . . . . . . . . . . . . . . . . . 15
7.15 Bankruptcy No Discharge . . . . . . . . . . . . . . 16
7.16 Nature of Agreement . . . . . . . . . . . . . . . . 16
Annex 1 -- List of Collateral
Annex 2 -- List of Locations
Annex 3 -- Existing Liens
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This SECURITY AGREEMENT, dated as of April 14, 1998 (as amended or
supplemented from time to time, this "AGREEMENT"), is made between Santa Fe
Hotel Inc. (the "OBLIGOR") and PDS Financial Corporation - Nevada, as collateral
agent for the Holders (as defined herein) (in such capacity, the "SECURED
PARTY").
RECITALS
A. The Obligor executed and delivered the Revolving Loan Note (the
"Original Note") dated as of December 1996 in favor of Santa Fe Gaming
Corporation ("SFGC"), in the original principal amount of Five Million Dollars
($5,000,000).
B. The Original Note is being sold by SFGC to the Secured Party, and
concurrent therewith and with the execution and delivery of this Agreement, the
Obligor has executed and delivered the Amended and Restated Note (together with
any extension, modification or renewal thereof, the "Note") dated as of the date
hereof in the principal amount of Four Million Nine Hundred Seventy Eight Four
Hundred Forty ($4,978,440.00), which Note amends and restates in its entirety
the Original Note, which amendments include without limitation the extension of
the maturity date from May 31, 1998 to April 14, 2001.
D. To induce the Secured Party to purchase the Original Note and amend
and restate the Original Note as provided in the Note and in order to secure
payment of the Note and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Obligor has agreed to
pledge and grant a security interest in the Collateral (as defined herein) as
security for the Secured Obligations (as defined herein). Accordingly, the
Obligor agrees with the Secured Party as follows:
Section 1. DEFINITIONS AND INTERPRETATION.
1.01 CERTAIN DEFINED TERMS. The following terms shall have the
following meanings under this Agreement:
"APPLICABLE LAW" means, with respect to a Person, all provisions of
the following applicable to such Person: (i) constitutions, treaties, statutes,
laws, rules, regulations and ordinances of any Governmental Authority (including
the Gaming Control Act and similar gaming laws of other jurisdictions);
(ii) Governmental Approvals; and (iii) orders, decisions, judgments, awards and
decrees of any Governmental Authority.
"BANKRUPTCY LAW" means title 11, U.S. Code or any similar federal or
state law for the relief of debtors.
"CHARGES" means all federal, state, county, city, municipal or other
taxes, levies, assessments or charges that, if not paid when due, may result in
a Lien of any Governmental Authority against Collateral.
"COLLATERAL" shall have the meaning assigned to that term in
SECTION 2.01.
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"CONTRACTUAL OBLIGATION" means any note, bond, mortgage or indenture
or any franchise, license, permit, agreement or other instrument or obligation.
"EVENT OF DEFAULT" shall have the meaning assigned to that term in
SECTION 6.01.
"GAMING AUTHORITY" means any agency, authority, board, bureau,
commission, department, office or instrumentality of any nature whatsoever of
any governmental or quasi-governmental unit, whether of federal, state, local or
foreign jurisdiction or otherwise and whether now or hereafter in existence, or
any officer or official thereof, including without limitation the Nevada Gaming
Commission, Nevada State Gaming Control Board, Clark County Liquor and Gaming
Licensing Board and Nevada City Counsel.
"GAMING CONTROL LAWS" means the Nevada Gaming Control Act or any other
similar federal, state or local law, statute, ordinance, rule, license, order,
permit or regulation related to the gaming industry, whether now or hereafter in
existence, each as from time to time amended, or any successor provision of law.
"GOVERNMENTAL APPROVAL" means an authorization, consent, approval,
permit, license, registration or filing made with any Governmental Authority.
"GOVERNMENTAL AUTHORITY" means any agency, authority, board, bureau,
commission, department, office or instrumentality or any nature whatsoever of
any governmental or quasi-governmental unit, whether federal, state, county,
district, city or other political subdivision or otherwise and whether now or
hereafter in existence, or any officer or official thereof.
"HOLDER" or "HOLDERS" means PDS Financial Corporation - Nevada or its
permitted assigns.
"LIENS" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset
(including any agreement to give any security interest). For the purposes of
this Agreement, a Person shall be deemed to own subject to a Lien any asset that
it has acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease obligation or other title retention
agreement relating to such asset.
"MATERIAL ADVERSE EFFECT" means (a) a condition or event materially
adverse to, (b) a material adverse effect on or (c) a material adverse change
in, as the case may be, any one or more of the following: (i) the business,
assets, results of operations, financial condition or prospects of Obligor,
(ii) the ability of the Obligor to perform its obligations hereunder or under
the Note or (iii) the Collateral or the Security Interest.
"OTHER COLLATERAL" shall have the meaning assigned to that term in
SECTION 7.14.
"OTHER OBLIGOR" shall have the meaning assigned to that term in
SECTION 7.14.
"PAYMENT DEFAULT" shall mean any default described in SECTION 6.01(a).
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"PERMITTED LIENS" means (i) statutory liens to secure the performance
of obligations, surety or appeal bonds, performance bonds or other obligations
of a like nature (including, without limitation, mechanic's, worker's and
material provider's liens) incurred in the ordinary course of business
(exclusive of obligations in respect of the payment of borrowed money), or for
taxes, assessments or governmental charges or claims; (ii) subleases granted to
others not interfering in any material respect with the business of the Company;
(iii) leases in respect of the real property on which facilities owned or leased
by the Company are located; (iv) Liens arising from UCC financing statements
regarding property leased by the Company; (v) easements, rights-of-way,
restrictions, minor defects or irregularities in title and other similar charges
or encumbrances that do not interfere in any material respect with the ordinary
conduct of business of the Company; (vi) Liens in existence as of the date of
this Agreement and identified in Annex 3 hereto; and (vii) Liens granted by
third party lessors or fee owners with respect to real property as to which the
Company has a leasehold interest.
"PERSON" means any individual, corporation, partnership, joint
venture, incorporated or unincorporated association, joint-stock company, trust,
unincorporated organization or government or other agency or political
subdivision thereof or other entity of any kind.
"PROCEEDS" shall have the meaning assigned to that term in
SECTION 2.01(b).
"SECURED OBLIGATIONS" shall mean any and all present and future
obligations and liabilities of the Obligor arising under the Note or this
Agreement, in each case whether due or not due, direct or indirect, joint and/or
several, absolute or contingent, voluntary or involuntary, liquidated or
unliquidated, determined or undetermined, now or hereafter existing, renewed or
restructured, and to the extent permitted by Applicable Law, whether or not from
time to time decreased or extinguished and later increased, created or incurred,
whether or not arising after the commencement of a proceeding under Bankruptcy
Law (including post-petition interest) and whether or not allowed or allowable
as a claim in any such proceeding, and whether or not recovery of any such
obligation or liability may be barred by a statute of limitations or such
obligation or liability may otherwise be unenforceable.
"SECURITY INTEREST" shall have the meaning assigned to that term in
Section 2.01.
"SUPPLEMENTAL DOCUMENTATION" means financing statements, continuation
statements, consents, acknowledgments, assignments, notices of security interest
in deposit accounts, schedules of Collateral and other instruments or documents
necessary or reasonably requested by the Secured Party to perfect and maintain
perfected the security interest in favor of the Secured Party in any Collateral
and the Proceeds thereof, subject only to Permitted Liens.
"UNIFORM COMMERCIAL CODE" shall mean the Uniform Commercial Code as in
effect in the State of Nevada from time to time or, by reason of mandatory
application, any other applicable jurisdiction.
1.02 INTERPRETATION. In this Agreement, unless otherwise indicated,
the singular includes the plural and plural the singular; words importing either
gender include the other
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gender; references to statutes or regulations are to be construed as including
all statutory or regulatory provisions consolidating, amending or replacing the
statute or regulation referred to; references to "writing" include printing,
typing, lithography and other means of reproducing words in a tangible visible
form; the words "including," "includes" and "include" shall be deemed to be
followed by the words "without limitation;" references 'to articles,
sections (or subdivisions of sections), exhibits, annexes or schedules are to
this Agreement; references to agreements and other contractual instruments shall
be deemed to include all subsequent amendments, extensions and other
modifications to such instruments; and references to Persons include their
respective permitted successors and assigns.
Section 2. COLLATERAL.
2.01 GRANT. As collateral security for the prompt payment in full
when due (whether at stated maturity, by acceleration or otherwise) and
performance of the Secured Obligations, the Obligor hereby pledges, conveys,
assigns, transfers and grants to the Secured Party a security interest (the
"SECURITY INTEREST") in all of the Obligor's right, title and interest in and to
the following property (collectively, the "COLLATERAL"):
(a) the property described on Annex 1 hereto and incorporated herein
by this reference; and
(b) all proceeds and products in whatever form of all or any part of
the Collateral, including all proceeds of insurance (together with all rights to
recover and proceed with respect to the same), and all additions, and
accessories to, substitutions for and replacements of all or any part of the
Collateral (collectively, the "PROCEEDS").
2.02 PERFECTION. Concurrently with the execution and delivery of this
Agreement, the Obligor shall (a) file such financing statements and other
documents in such offices as shall be necessary or as the Secured Party may
reasonably request to perfect and establish the priority (subject only to
Permitted Liens) of the Liens granted by this Agreement, and (b) take all such
other actions as shall be necessary or as the Secured Party has requested to
perfect and establish the priority (subject only to such Permitted Liens) of the
Liens granted by this Agreement.
2.03 ATTORNEY-IN-FACT. Subject to the rights of the Obligor under
SECTION 2.04, the Secured Party is hereby irrevocably appointed the
attorney-in-fact of the Obligor for the purpose of carrying out the provisions
of this Agreement and taking any action and executing any instruments which the
Secured Party may deem necessary or reasonably advisable to accomplish the
purposes of this Agreement, to preserve the validity, perfection and priority
(subject only to Permitted Liens) of the Liens granted by this Agreement and,
upon the occurrence and continuance of any Payment Default or Event of Default,
to exercise its rights, remedies, powers and privileges under this Agreement.
Subject to SECTION 7.12, this appointment as attorney-in-fact is irrevocable and
coupled with an interest. Without limiting the generality of the foregoing, the
Secured Party shall be entitled under this Agreement upon the occurrence and
continuation of any Payment Default or Event of Default (i) to ask, demand,
collect, sue for, recover, receive and give receipt and, discharge for amounts
due and to become due under and in respect of all or any
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part of the Collateral; (ii) to receive, endorse and collect any instruments,
documents and chattel paper in connection with clause (i) above; and (iii) to
execute, in connection with any sale or disposition of the Collateral under
SECTION 6, any endorsements, assignments, bills of sale or other instruments of
conveyance or transfer with respect to all or any part of the Collateral.
2.04 USE OF COLLATERAL. So long as no Payment Default or Event of
Default shall have occurred and be continuing, the Obligor shall be entitled to
use and possess the Collateral and to exercise its rights, title and interest in
all Collateral, subject to the rights, remedies, powers and privileges of the
Secured Party under SECTION 6.
2.05 RIGHTS AND SECURED OBLIGATIONS.
(a) No reference in this Agreement to proceeds or to the sale or
other disposition of Collateral shall authorize the Obligor to sell or otherwise
dispose of any Collateral except to the extent otherwise expressly permitted by
the terms hereof.
(b) Except as required by Applicable Law, the Secured Party shall not
be required to take steps necessary to preserve any rights against prior parties
to any part of the Collateral.
Section 4. REPRESENTATIONS AND WARRANTIES. The Obligor represents
and warrants to the Secured Party as follows:
4.01 ORGANIZATION, POWERS AND GOOD STANDING. The Obligor is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Nevada, and has all requisite corporate power and authority and
the legal right to own and operate its properties and to carry on its business
as presently conducted. The Obligor has all requisite corporate power and
authority to enter into this Agreement and to carry out the transactions
contemplated hereby. The execution, delivery and performance by the Obligor of
this Agreement has been duly authorized by all necessary corporate action on the
part of the Obligor. This Agreement has been duly executed and delivered by the
obligor. This Agreement is a legal, valid and binding obligation of the
Obligor, enforceable against the Obligor in accordance with its terms, except as
enforceability may be limited by (a) equitable principles, (b) limitations
imposed by applicable laws upon the enforceability of rights to indemnification
and (c) commercial reasonableness.
4.02 NO CONFLICT. The execution, delivery and performance by the
Obligor of this Agreement and the Note, and the consummation of the transactions
contemplated hereby, do not (a) violate any provision of the charter or by-laws
of the Obligor, (b) conflict with, result in a breach of or constitute (or, with
the giving of notice or lapse of time, or both, constitute) default under, or
require the approval or consent of any Person (other than those consents
previously obtained) pursuant to, any material Contractual Obligation of the
Obligor or violate any provision of Applicable Law binding on the Obligor, which
violation could have a Material Adverse Effect, or (c) result in the creation or
imposition of any Lien upon any of the Collateral except for Liens created under
this Agreement.
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4.03 GOVERNMENTAL APPROVALS. Except for filings and recordings in
connection with the perfection of Liens created by this Agreement (including any
necessary Supplemental Documentation), no Governmental Approval is or will be
required in connection with the execution, delivery and performance by the
Obligor of this Agreement or the consummation of the transactions contemplated
hereby or, to the extent permitted by Applicable Law, the exercise by the
Secured Party of any rights or remedies hereunder, or to ensure the legality,
validity or enforceability hereof, except as may be required in connection with
the disposition of Collateral by applicable federal and state antitrust laws,
and Governmental Approvals required under any Gaming Control Laws.
4.04 FILINGS, ETC. The Obligor has delivered to the Secured Party a
duly executed UCC-1 financing statement containing a correct description of the
Collateral for filing in the office of the Secretary of State of the State of
Nevada to establish a valid and perfected Lien in favor of the Secured Party in
all Collateral in which a Lien may be perfected by such filings, and no further
or subsequent filing, recording or registration is necessary in any such
jurisdiction, except as provided under Applicable Law with respect to the filing
of continuation statements.
4.05 LOCATIONS OF COLLATERAL, OFFICES AND NAMES. (a) The Obligor's
chief executive office and principal place of business is located at the address
set forth in SECTION 7.02 hereof, (b) all other places of business of the
Obligor and all other locations at which any tangible Collateral or books and
records related to any Collateral, including computer programs, printouts and
other computer materials, are (or during the past four (4) months were) located
are identified in ANNEX 2, and (c) there are no prior or current trade or legal
names used to identify the Obligor in its business or in the ownership of its
properties other than those identified in ANNEX 2.
4.06 TITLE TO COLLATERAL; VALIDITY AND PERFECTION OF SECURITY
INTEREST; ABSENCE OF OTHER LIENS.
(a) The Obligor has good and marketable title to all Collateral and
"rights" in all Collateral within the meaning of Section 9-203 of the UCC.
(b) Upon filing of a UCC-1 financing statement with the Nevada
Secretary of State, the Security Interest in favor of the Secured Party created
hereunder shall constitute a valid and perfected Lien in all of the Collateral
and secure payment and performance of the Secured Obligations. The Collateral
is free and clear of all Liens other than the Security Interest and Permitted
Liens;
(c) Except for financing statements naming the Secured Party as
secured party, the Obligor has filed no financing statement covering any
Collateral.
Section 5. COVENANTS.
5.01 BOOKS AND RECORDS. The Obligor shall:
(a) keep full and accurate books and records relating to the
Collateral at the chief executive office of the Obligor and stamp or otherwise
mark such books and records in
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such manner as the Secured Party may reasonably require in order to reflect the
Liens granted by this Agreement; and
(b) permit representatives of the Secured Party, upon reasonable
notice, at any time during normal business hours to inspect and make abstracts
from its books and records pertaining to the Collateral, permit representatives
of the Secured Party to be present at the Obligor's place of business to receive
copies of all communications and remittances relating to the Collateral and
forward copies of any notices or communications received by the Obligor with
respect to the Collateral, all in such manner as the Secured Party may request.
5.02 REMOVALS, ETC. Without at least thirty (30) days' prior written
notice to the Secured Party, the Obligor shall not (i) maintain any of its books
and records with respect to the Collateral at any office or maintain its
principal place of business at any place other than at the address initially
indicated for notices to it under SECTION 7.02 or at one of the locations
identified in ANNEX 1 or in transit from one of such locations to another or
(ii) change its corporate name, or the name under which it does business, from
the name shown on the signature pages to this Agreement.
5.03 SALES AND OTHER LIENS. Without the prior written consent of the
Secured Party, the Obligor shall not create, incur or assume any Lien upon, or
file or authorize to be filed, in any jurisdiction, any financing statement or
like instrument with respect to, all or any part of the Collateral in which the
Secured Party is not named as the secured party. The Obligor shall use its best
efforts to cause to be promptly released of record any Lien on any Collateral
not permitted by this SECTION 5.03. The Obligor shall not dispose of any or all
of the Collateral without the consent of the Secured Party, which consent shall
not be unreasonably withheld; PROVIDED, HOWEVER, that the Obligor shall not be
prohibited from disposing of any or all of the Collateral in the ordinary course
of business provided the Obligor complies with Section 6(b) of the Note.
5.04 FURTHER ASSURANCES. The Obligor shall, at its own expense,
perform at the request of the Secured Party, such acts as may be necessary or
advisable in the reasonable opinion of the Secured Party, or that the Secured
Party may reasonably request at any time, to assure the attachment, perfection
and first priority (subject to Permitted Liens) of the security interest in
favor of the Secured Party to the Collateral, to exercise the rights and
remedies of the Secured Party hereunder or to carry out the intent of this
Agreement. Without limitation, at the Secured Party's request, the Obligor
shall execute and deliver (or use reasonable efforts to cause any third party to
execute and deliver) to the Secured Party, at any time and from time to time,
all Supplemental Documentation that the Secured Party may reasonably request, in
form and substance reasonably acceptable to the Secured Party.
5.05 VERIFICATION, ETC. During the existence of any Payment Default
or Event of Default, the Secured Party may at any time require the Obligor to
segregate all Proceeds so that they are capable of identification in such manner
that the Secured Party shall have a perfected first priority Lien therein,
subject only to Permitted Liens.
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5.06 PAYMENT OF CHARGES AND CLAIMS. The Obligor shall pay (a) all
Charges imposed upon any Collateral, and (b) all claims (including claims for
labor, services and materials) that have become due and payable and, under
Applicable Law, have or may become Liens (other than Permitted Liens) upon any
Collateral, in each case before any penalty shall be incurred with respect
thereto; PROVIDED that unless foreclosure, levy or similar proceedings shall
have commenced, the Obligor need not pay or discharge any such Charges or claims
the amount, applicability or validity of which is being contested in good faith
by appropriate proceedings, and for which adequate reserves are established in
accordance with generally accepted accounting principles. If the Obligor fails
to pay or obtain the discharge of any Charge, claim or Lien required to be paid
or discharged under this SECTION 5.06 and asserted against any portion of the
Collateral, the Obligor will promptly notify the Secured Party of such event.
The Secured Party may, at any time and from time to time, in its sole discretion
and without waiving or releasing any obligation of the Obligor under this
Agreement or the other Collateral Documents or waiving any Default or Event of
Default, make such payment required to be paid or discharged under this
SECTION 5.06, obtain such discharge or take such other action with respect
thereto as the Secured Party deems advisable; PROVIDED that the Secured Party
shall be under no obligation whatsoever to take any of the foregoing actions.
5.07 DUTY OF CARE. The Secured Party shall have no duty of care with
respect to the Collateral, except that the Secured Party shall have an
obligation to exercise reasonable care with respect to Collateral in its
possession; PROVIDED that (a) the Secured Party shall be deemed to have
exercised reasonable care if Collateral in its possession is accorded treatment
substantially comparable to that which the Secured Party accords its own
property, and (b) the Secured Party shall have no obligation to take any actions
to preserve rights against other parties or property with respect to any
Collateral. Without limitation, the Secured Party shall bear no risk or expense
with respect to any Collateral.
5.08 PROTECTION OF SECURITY; NOTICE OF LEVY. The Obligor shall, at
its own cost and expense, take any and all actions necessary to defend title to
the Collateral against all Persons and against all claims and demands and to
preserve, protect and defend the security interest in favor of the Secured Party
and the priority thereof, against any adverse Liens not permitted under this
Agreement. The Obligor will promptly notify the Secured Party of any attachment
or other legal process levied against any Collateral.
Section 6. EVENTS OF DEFAULTS, REMEDIES, ETC.
6.01 EVENTS OF DEFAULT. The occurrence and continuance of one or more
of the following events shall constitute an "EVENT OF DEFAULT":
(a) The Obligor shall fail to pay any installment of interest on the
Note when due and payable and the continuance of such failure for thirty
(30) days; or
(b) The Obligor shall fail to pay all or any part of the principal on
the Note when and as the same shall become due and payable, at maturity,
redemption, by acceleration or otherwise and the continuance of such failure for
five (5) days.
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6.02 REMEDIES, ETC. If any Event of Default shall have occurred and
be continuing:
(a) the Secured Party may declare all unpaid principal, together with
accrued interest thereon and together with all other amounts owing to the
Secured Party under this Agreement and/or the Note, to be forthwith due and
payable.
(b) The Secured Party in its discretion may require the Obligor to,
and the Obligor shall, assemble the Collateral owned by it at such place or
places, reasonably convenient to both the Secured Party and the Obligor,
designated in the Secured Party's request;
(c) The Secured Party in its discretion may make any reasonable
compromise or settlement it deems desirable with respect to any of the
Collateral and may extend the time of payment, arrange for payment in
installments, or otherwise amend, revise, release, modify or otherwise change
the terms of, all or any part of the Collateral;
(d) The Secured Party in its discretion may, in its name or in the
name of the Obligor or otherwise, demand, sue upon or otherwise enforce
performance under, and demand, sue for, collect or receive any money or property
at any time payable or receivable on account of or in exchange for all or any
part of, the Collateral, but shall be under no obligation to do so;
(e) The Secured Party in its discretion may, upon five (5) business
days' prior written notice to the Obligor of the time and place, which the
Obligor agrees and acknowledges shall constitute commercially fair and
reasonable notice, with respect to all or any part of the Collateral which shall
then be or shall thereafter come into the possession, custody or control of the
Secured Party or any of its agents, sell, lease or otherwise dispose of all or
any part of such Collateral, at such place or places as the Secured Party deems
best, for cash, for credit or for future delivery (without thereby assuming any
credit risk) and at public or private sale, without demand of performance or
notice of intention to effect any such disposition or of time or place of any
such sale (except such notice as is required above or by applicable statute and
cannot be waived), and the Secured Party or any other Person may be the
purchaser, lessee or recipient of any or all of the Collateral so disposed of at
any public sale (or, to the extent permitted by law, at any private sale) and
thereafter hold the same absolutely, free from any claim or right of whatsoever
kind. The Secured Party may, without notice or publication, adjourn any public
or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for the sale, and such sale may be made
at any time or place to which the sale may be so adjourned; and
(f) The Secured Party shall have, and in its discretion may exercise,
all of the rights, remedies, powers and privileges with respect to the
Collateral of a secured party under the UCC (whether or not the UCC is in effect
in the jurisdiction where such rights, remedies, powers and privileges are
asserted) and such additional rights, remedies, powers and privileges to which a
secured party is entitled under the laws in effect in any jurisdiction where any
rights, remedies, powers and privileges in respect of this Agreement or the
Collateral may be asserted, including the right, to the maximum extent permitted
by law, to exercise all voting, consensual and other powers of ownership
pertaining to the Collateral as if the Secured Party were the sole and
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absolute owner of the Collateral (and the obligor agrees to take all such action
as may be appropriate to give effect to such right).
6.03 PRIVATE SALE. The Secured Party shall incur no liability as a
result of the sale, lease or other disposition of all or any part of the
Collateral at any private sale pursuant to SECTION 6.02 conducted in a
commercially reasonable manner. The Obligor hereby waives any claims against
the Secured Party arising by reason of the fact that the price at which the
Collateral may have been sold at such a private sale was less than the price
which might have been obtained at a public sale or was less than the aggregate
amount of the Secured Obligations, even if the Secured Party accepts the first
offer received and does not offer the Collateral to more than one offeree.
6.04 APPLICATION OF PROCEEDS.
(a) Except as otherwise expressly provided in this Agreement and
except as provided below in this SECTION 6.04, the proceeds of, or other
realization upon, all or any part of the Collateral by virtue of the exercise of
remedies under SECTION 6.02, and any other cash at the time held by the Secured
Party under this SECTION 6, shall be applied by the Secured Party:
FIRST, to the Secured Party for amounts due under SECTION 7.03;
SECOND, to the payment in full of the remaining Secured Obligations in
such manner as the Secured Party may determine; and
THIRD, to the payment to the Obligor, or its respective successors or
assigns, or as a court of competent jurisdiction may direct, of any surplus then
remaining.
As used in this SECTION 6, "PROCEEDS" of Collateral shall mean cash,
securities and other property realized in respect of, and distributions in kind
of, Collateral, including any property received under any bankruptcy,
reorganization or other similar proceeding as to the Obligor or any issuer of,
or account debtor or other obligor on, any of the Collateral.
(b) Any surplus of cash and any notes and other Collateral held by
the Secured Party and remaining after payment in full of all the Secured
Obligations shall be reassigned and redelivered as provided in Section 7.12.
(c) Payments received from any third party on account of any
Collateral shall not reduce the Secured Obligations until paid in cash to the
Secured Party. The application of proceeds by the Secured Party shall be
without prejudice to the Secured Party's rights as against the Obligor or other
Persons with respect to any Secured Obligations that may then be or remain
unpaid.
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<PAGE>
Section 7. MISCELLANEOUS.
7.01 WAIVER.
(a) Nothing contained in this Agreement and no act done or omitted by
or on the part of the Secured Party to exercise and no delay in exercising, and
no course of dealing with respect to, any right, remedy, power or privilege
under this Agreement shall operate as a waiver of such right, remedy, power or
privilege, nor shall any single or partial exercise of any right, remedy, power
or privilege under this Agreement preclude any other or further exercise of any
such right, remedy, power or privilege or the exercise of any other right,
remedy, power or privilege. The rights, remedies, powers and privileges
provided in this Agreement are cumulative and not exclusive of any rights,
remedies, powers and privileges provided by law.
(b) Nothing contained in this Agreement and no act done or omitted by
the Secured Party pursuant to the powers and rights granted to it under this
Agreement shall be deemed to be a waiver by the Secured Party of its rights and
remedies under any of the Collateral Documents, and this Agreement is made and
accepted without prejudice to any of the rights and remedies possessed by the
Secured Party under the terms of any of the Collateral Documents. All
obligations of the Obligor and the rights of the Secured Party hereunder shall
be in addition to and not in limitation of those contained in any of the other
Collateral Documents and provided by Applicable Law.
7.02 NOTICES. Any notices and communications to be given under this
Agreement shall be given in writing and delivered in person or delivered by
registered or certified first-class mail, postage prepaid, by overnight courier
(for next business day delivery), or by facsimile transmission to the intended
recipient at the address or facsimile number specified below or, as to any
party, at such other address or facsimile number as shall be designated by such
party in a notice to each other party.
To the Obligor: Santa Fe Hotel Inc.
4949 North Rancho Drive
Las Vegas, Nevada 89130
Attention: Chief Financial Officer
Telecopy: (702) 658-4303
With a copy to: Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, California 90071
Attention: Karen E. Bertero, Esq.
Telecopy: (213) 229-7520
To the Secured Party: PDS Financial Corporation - Nevada
6171 McLeod Drive
Las Vegas, Nevada 89120-4048
Attention: President
Telecopy: (702) 740-8692
11
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With a copy to: Frommelt & Eide, Ltd.
580 International Centre
900 Second Avenue South
Minneapolis, Minnesota 55402
Attention: David R. Mylrea, Esq.
Telecopy: (612) 342-2761
7.03 SECURED PARTY EXPENSES, INCLUDING ATTORNEYS' FEES. Regardless of
the occurrence of a Default or Event of Default, the Obligor agrees to pay to
the Secured Party any and all advances, charges, costs and expenses, including
the reasonable fees and expenses of attorneys and any experts or agents, that
the Secured Party may incur in connection with (a) the administration of this
Agreement, (b) the creation, perfection or continuation of the Security Interest
or protection of the Collateral or its priority in the Collateral, including the
discharging of any prior or junior Lien or adverse claim against the Collateral
or any part thereof that is not permitted hereby or by the Note, (c) the
custody, preservation or sale of, collection from, or other realization upon,
any of the Collateral, (d) the exercise or enforcement of any of the rights,
powers or remedies of the Secured Party under this Agreement, any other
Collateral Document or under Applicable Law, or (e) the failure by the Obligor
to perform or observe any of the provisions hereof. All such amounts and all
other amounts payable hereunder shall be payable on demand, together with
interest at the Default Rate.
7.04 AMENDMENTS, ETC. Any provision of this Agreement may be
modified, supplemented or waived only by an instrument in writing duly executed
by the Obligor and the Secured Party. Any such modification, supplement or
waiver shall be for such period and subject to such conditions as shall be
specified in the instrument effecting the same and shall be binding upon the
Secured Party, each holder of any of the Secured Obligations and the Obligor,
and any such waiver shall be effective only in the specific instance and for the
purposes for which given.
7.05 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the Obligor, the Secured Party and each Holder and their
respective successors and permitted assigns. Neither the Obligor nor the
Secured Party shall assign or transfer its respective rights or obligations
under this Agreement without the prior written consent of the other party, which
consent shall not be unreasonable withheld.
7.06 SURVIVAL. All representations and warranties made in this
Agreement or in any certificate or other document delivered pursuant to or in
connection with this Agreement shall survive the execution and delivery of this
Agreement or such certificate or other document (as the case may be).
7.07 AGREEMENTS SUPERSEDED. This Agreement supersedes all prior
agreements and understandings, written or oral, among the parties with respect
to the subject matter of this Agreement.
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7.08 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties to this Agreement may execute this Agreement
by signing any such counterpart.
7.09 GOVERNING LAW AND CHOICE OF FORUM.
(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS (OTHER THAN THE RULES REGARDING CONFLICTS OF LAWS) OF THE STATE
OF NEVADA. TO THE EXTENT APPLICABLE, THE UCC SHALL GOVERN THE PERFECTION AND
PRIORITY OF THE SECURITY INTEREST, THE EFFECT THEREOF, AND ALL OTHER MATTERS TO
WHICH THE UCC APPLIES PURSUANT TO THE TERMS THEREOF.
(b) The parties agree that all actions or proceedings arising in
connection with this Agreement shall be tried and litigated in state or Federal
courts located in the County of Clark, State of Nevada, unless such actions or
proceedings are required to be brought in another court to obtain subject matter
jurisdiction over the matter in controversy. EACH OF THE OBLIGOR AND THE
SECURED PARTY WAIVES ANY RIGHT IT MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON
CONVENIENS, TO ASSERT THAT IT IS NOT SUBJECT TO THE JURISDICTION OF SUCH COURTS
OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH
THIS SECTION.
7.10 WAIVER OF TRIAL BY JURY. THE OBLIGOR AND THE SECURED PARTY WAIVE
THE RIGHT TO A TRIAL BY JURY IN ANY ACTION UNDER THIS AGREEMENT OR ANY ACTION
ARISING OUT OF THE TRANSACTIONS CONTEMPLATED HEREBY, REGARDLESS OF WHICH PARTY
INITIATES SUCH ACTION OR ACTIONS.
THE OBLIGOR SPECIFICALLY AGREES THAT IT HAS READ AND FULLY UNDERSTANDS
EACH OF THE FOREGOING WAIVERS CONTAINED IN THIS AGREEMENT AND THAT SUCH WAIVERS
ARE KNOWINGLY MADE, WITHOUT DURESS, ARE NEGOTIATED AND BARGAINED FOR TERMS OF
THIS AGREEMENT, AND ARE MATERIAL INDUCEMENTS TO THE SECURED PARTY, WITHOUT WHICH
THE LOAN WOULD NOT HAVE BEEN EXTENDED BY THE SECURED PARTY TO THE OBLIGOR.
7.11 PAYMENTS SET ASIDE. Notwithstanding anything to the contrary
herein contained, this Agreement, the Secured Obligations and the security
interest in favor of the Secured Party shall continue to be effective or be
reinstated, as the case may be, if at any time any payment, or any part thereof,
of any or all of the Secured Obligations is rescinded, invalidated, declared to
be fraudulent or preferential or otherwise required to be restored or returned
by the Secured Party in connection with any bankruptcy, reorganization or
similar proceeding involving the obligor, any other party liable with respect to
the Secured Obligations or otherwise, if the proceeds of any Collateral are
required to be returned by the Secured Party
13
<PAGE>
under any such circumstances. Without limiting the generality of the foregoing,
if prior to any such rescission, invalidation, declaration, restoration or
return, this Agreement shall have been canceled or surrendered or the security
interest in favor of the Secured Party or any Collateral shall have been
released or terminated in connection with such cancellation or surrender, this
Agreement and the security interest in favor of the Secured Party and such
Collateral shall be reinstated in full force and effect, and such prior
cancellation or surrender shall not diminish, discharge or otherwise affect the
obligations of the obligor in respect of the amount of the affected payment or
application of proceeds, the security interest in favor of the Secured Party or
such Collateral.
7.12 CONTINUING SECURITY INTEREST; TERMINATION. Except as otherwise
permitted herein and except for such releases provided for under this Agreement,
this Agreement shall create a continuing security interest in the Collateral
and, except as provided herein or therein, the security interest in favor of the
Secured Party and all agreements, representations and warranties made herein
shall survive until, and this Agreement shall terminate only upon, the payment
and performance in full of all principal and any interest on the Note and all
other Secured Obligations then due and owing. Any investigation at any time
made by or on behalf of the Secured Party shall not diminish the right of the
Secured Party to rely on any such agreements, representations or warranties
herein.
Notwithstanding anything in this Agreement or Applicable Law to the
contrary, the agreements of the Obligor set forth in SECTION 7.03 shall survive
the payment of all other Secured Obligations and the termination of this
Agreement. After payment of all principal and any interest on the Note and the
payment of all other Secured Obligations then due and owing, the Secured Party
shall, upon the request and at the expense of the Obligor, forthwith assign,
transfer and deliver to the Obligor or its order, against receipt and without
warranty or recourse to the Secured Party, such of the Collateral as may be in
the possession of the Secured Party or to which the Secured Party may have an
interest and as shall not have been sold or otherwise applied pursuant to the
terms hereof. The Secured Party shall execute, deliver and acknowledge (if
acknowledgment is appropriate) any necessary or proper instruments of
termination, satisfaction or release to evidence the release of any Collateral.
7.13 WAIVER AND ESTOPPEL. Except as otherwise provided in this
Agreement, the Obligor hereby waives: (a) presentment, demand for payment or
performance (including diligence in making demands hereunder), notice of
dishonor or nonperformance, protest, acceptance and notice of acceptance of this
Agreement, and all other notices of any kind including (i) notice of the
existence, creation or incurrence of new or additional Secured Obligations,
(ii) notice of any action taken or omitted by the Secured Party in reliance
hereon, (iii) notice of any default by any Other Obligor, (iv) notice that any
portion of the secured obligations is due, (v) notice of any action against any
Other Obligor, or any enforcement or other action with respect to Collateral or
other Collateral, or the assertion of any right of the Secured Party hereunder;
(b) during the existence of an Event of Default, notice prior to taking
possession or control of any Collateral or any bond or security that might be
required by any court prior to allowing the Secured Party to exercise any of
their rights, powers or remedies; (c) the benefit of all valuation,
appraisement, redemption and exemption laws; (d) any rights to require
marshaling of the Collateral upon any sale or otherwise to direct the order in
which the
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Collateral shall be sold; (e) any right to assert against the Secured Party any
defense (legal or equitable), set-off, counterclaim and other right that the
Obligor may now or any time hereafter have against any Other Obligor; (f) any
rights to require the Secured Party to proceed against any Person, proceed
against or exhaust any Collateral or any other security interests or guaranties
or pursue any other remedy in the Secured Party's power, or to pursue any of
such rights in any particular order or manner, and any defenses arising by
reason of any disability or defense of any Person; (g) the right to require the
Secured Party to proceed against any Other Obligor, to proceed against or
exhaust any Other Collateral or to pursue any other remedy in the Secured
Party's power whatsoever and the right to have the property of any Other Obligor
first applied to the discharge of the Secured Obligations; (h) all rights and
benefits under Applicable Law purporting to reduce a guarantor's obligations in
proportion to the obligation of the principal or providing that the obligation
of a surety or guarantor must neither be larger nor i other respects more
burdensome than that of the principal; (i) the benefit of any statute of
limitations affecting the Secured Obligations or the Obligor's liability
hereunder; (j) all defenses that at any time may be available to the Obligor by
virtue of any valuation, stay, moratorium or other law now or hereafter in
effect; (k) any rights and other benefits arising out of any failure of the
Secured Party to hold a commercially reasonable public or private foreclosure
sale or otherwise to comply with Applicable Law in connection with a disposition
of Collateral or Other Collateral.
7.14 AUTHORIZATION. The Obligor authorizes the Secured Party, without
notice to or further assent by the Obligor, and without affecting the Obligor's
liability hereunder or the security interest in favor of the Secured Party
(regardless of whether any subrogation or similar right that the Obligor may
have or any other right or remedy of the Obligor is extinguished or impaired),
from time to time to:
(a) take and hold other collateral ("OTHER COLLATERAL") with respect
to the Secured Obligations or any portion thereof from any other Person ("OTHER
OBLIGOR"), perfect a Lien on such other Collateral, take any other action in
respect of, any such Other Collateral or Lien or any part thereof;
(b) otherwise deal with any Other Obligor and any Other Collateral as
the Secured Party may elect in its sole discretion.
7.15 BANKRUPTCY NO DISCHARGE. Without limiting SECTION 7.13, this
Agreement and the security interest in favor of the Secured Party shall not be
discharged or otherwise affected by any bankruptcy, reorganization or similar
proceeding commenced by or against any Other Obligor, including (a) any
discharge of, or bar or stay against collecting, all or any part of the Secured
Obligations in or as a result of any such proceeding, whether or not assented to
by the Secured Party, and (b) any disallowance of all or any portion of the
Secured Party's claim for repayment of the Secured Obligations.
7.16 NATURE OF AGREEMENT. This Agreement is independent of and not in
consideration of or contingent upon the liability of any Other Obligor and
foreclosure or other action may be taken against all or any Collateral and a
separate action or actions may be brought and prosecuted against the Obligor
whether or not any foreclosure or other action is taken with respect to any
Other Collateral or other action is brought or prosecuted against any Other
Obligor
15
<PAGE>
or whether any Other Obligor is joined in any such action or actions. This
Agreement shall be construed as continuing, absolute and unconditional without
regard to (and the Obligor waives any and all defenses based upon):
(a) the legality, validity or enforceability of the Note, any of the
Secured Obligations, any Lien or Other Collateral;
(b) any increase, decrease or other change in the amount or time,
manner or place of payment of the Secured Obligations or any part thereof or
other amendment to the terms and conditions of the Note or any provision
thereof;
(c) any exchange, release (whether intentionally or unintentionally),
or non-perfection of any Lien on any Other Collateral or any part thereof or any
release of or settlement with any Other Obligor in respect of this Agreement or
the Secured Obligations;
(d) any exercise in such manner and order as the Secured Party elects
in its sole discretion, failure to exercise, waiver, or termination of, any of
the remedies or rights of such Secured Party against any Other Obligor in
respect of any Secured Obligations or any Other Collateral; or
(e) any other circumstance whatsoever (with or without notice to or
knowledge of the Obligor), whether or not similar to any of the foregoing, that
constitutes, or might be construed to constitute, an equitable or legal
discharge of any Other Obligor for the Secured Obligations, in bankruptcy or in
any other instance.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Security Agreement to
be duly executed and delivered as of the day and year first above written.
SANTA FE HOTEL INC.
By: /s/ Thomas K. Land
------------------------------
Name: Thomas K. Land
Title: Chief Financial Officer
PDS FINANCIAL CORPORATION - NEVADA,
as Collateral Agent
By: /s/ Johan P. Finley
------------------------------
Name: Johan P. Finley
Title: President
17
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ANNEX 1
LIST OF COLLATERAL
<PAGE>
ANNEX 2
(b) 1. PDS Financial Corporation - Nevada
6171 McLeod Drive
Las Vegas, Nevada 89120-4048
2. Unique Slot & Repair, Inc.
4405 E. Sahara Avenue
Suite 5
Las Vegas, Nevada 98104
(c) Santa Fe Operating Limited Partnership
<PAGE>
ANNEX 3
LIENS COVERING THE COLLATERAL
<PAGE>
AMENDED AND RESTATED
PROMISSORY NOTE
$4,961,556 Dated as of April 14, 1998
This Amended and Restated Promissory Note (the "Note"), dated April 14,
1998, is entered into by and between Santa Fe Hotel Inc., a Nevada corporation
("SFHI"), and Santa Fe Gaming Corporation, a Nevada corporation ("SFGC"),
concurrent and in connection with the simultaneous sale of the Note from SFGC to
PDS Financial Corporation - Nevada, a Nevada corporation ("PDS") (the "Sale").
SFGC or its permitted assigns, including PDS, are referred to herein as the
"Holder."
RECITALS
WHEREAS, that certain Promissory Note (the "Original Note") dated as of
June 14, 1995, was issued by SFHI in favor of Sahara Nevada Corp. ("SNC"), a
Nevada corporation and a wholly-owned subsidiary of SFGC, in the principal
amount of Eight Million Dollars ($8,000,000), and the principal amount of the
Original Note was reduced by payments such that the principal amount outstanding
as of the date hereof under the Original Note is Four Million Nine Hundred Sixty
One Thousand Five Hundred Fifty Six Dollars ($4,961,556);
WHEREAS, SFHI and SNC modified the terms of the Original Note on May 13,
1996 to extend the maturity date of the Original Note to December 31, 1997,
defer the payment of interest and permit partial repayments of principal;
WHEREAS, SFHI and SNC modified the terms of the Original Note on December
16, 1997 to extend the maturity date of the Original Note to May 31, 1998 and to
defer the payment of interest;
WHEREAS, SNC transferred the Original Note to SFGC on April 8, 1998;
WHEREAS, in connection with the sale of the Original Note by SFGC to PDS
pursuant to the Purchase Agreement, SFGC and SFHI desire to modify the terms of
the Original Note and in connection therewith to amend and restate the Original
Note in its entirety as provided herein and SFHI desires to grant a security
interest in certain of its assets to secure obligations arising under this Note;
WHEREAS, the restatement and amendment of the Original Note and grant of
the security interest are contingent upon the consummation of the Sale.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, SFHI and the Holder agree as follows:
1. This Note is issued by SFHI in favor of the Holder in the principal
amount of Four Million Nine Hundred Sixty One Thousand Five Hundred Fifty Six
Dollars ($4,961,556).
<PAGE>
2. SFHI, for value received, hereby promises to pay to the order of the
Holder, at the address specified in writing by the Holder to SFHI, the principal
sum of Four Million Nine Hundred Sixty One Thousand Five Hundred Fifty Six
Dollars ($4,961,556) or such other principal sum as shall be outstanding
hereunder, on April 14, 2001 (the "Maturity Date") in accordance with the
provisions hereof, and to pay interest thereon from the date first above written
on the unpaid principal amount of this Note from time to time outstanding,
monthly, in arrears, on the first day of each month commencing June 30, 1998, at
the rate of eleven percent (11%) per annum (the "Contract Rate"), until
principal of this Note is paid in full (such date for any particular month being
hereinafter referred to as a "Due Date").
3. Payments of interest shall be made on each Due Date in the amount of
Forty Five Thousand Six Hundred Thirty Five Dollars ($45,635). The entire
outstanding principal balance, together with all accrued and unpaid interest,
shall be due and payable on Maturity Date or on the Sale Date (as hereinafter
defined).
4. Payments of principal of, and premium, if any, and interest on this
Note shall be made at the address of the Holder specified in writing.
Principal, premium, if any, and interest shall be paid in lawful money of the
United States of America that at the time of payment is legal tender for payment
of public and private debts and in immediately available funds. Interest on
this Note shall be computed on the basis of a 360-day year of twelve 30-day
months.
5. This Note is secured by certain Collateral (as such term is defined in
that certain Security Agreement of even date herewith between SFHI and PDS, as
Collateral Agent (the "Security Agreement")).
6. (a) In the event SFHI enters into any transaction, merger,
consolidation, liquidation, windup or dissolution, or conveys, sells, leases,
transfers or otherwise disposes of in one transaction or a series of
transactions all or substantially all of its property or assets, this Note shall
become immediately due and payable on the date (the "Sale Date") such event
occurs. Notwithstanding the foregoing, (i) SFHI may merge or consolidate with,
or dispose of all or substantially all of its assets to, an entity at least a
majority of the voting interests of which are owned directly or indirectly by
the Lowden Family (as such term is defined herein), in either case without this
Note becoming due and payable, if the entity with which SFHI merges or
consolidates or to which all or substantially all of such assets are transferred
assumes this Note and (ii) SFHI may assign its rights and obligations hereunder
to an entity at least a majority of the voting interests of which are owned
directly or indirectly by the Lowden Family in connection with the sale of all
or substantially all of the Collateral to such entity if such entity assumes
this Note. For purposes of this Note, "Lowden Family" shall mean Mr. Paul
Lowden and Mrs. Suzanne Lowden and the executors, administrators or legal
representatives of their estates, heirs, distributees and beneficiaries, any
trust as to which any of the foregoing is a settlor or co-settlor, any trustee
of the estate of any of the foregoing that is bankrupt or insolvent, any
guardian or conservator of any of the foregoing that is adjudged disabled or
incompetent, and any corporation, partnership or other entity which is an
affiliate of any of the foregoing. Lowden Family shall also mean any lineal
descendants of the grandparents of such persons, but only to the extent that the
beneficial ownership of the voting interests held by such lineal descendants was
directly received (by gift, trust or sale) from any such person.
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<PAGE>
(b) SFHI shall prepay from time to time in part the amounts due on this
Note in an amount equal to the net proceeds received by SFHI from any
disposition in the ordinary course of business of the Collateral (as such term
is defined in the Security Agreement). Notwithstanding the foregoing, SFHI
shall not be required to prepay any amounts due on this Note as a result of a
sale by SFHI of all or substantially all of the Collateral to an entity at least
a majority of the voting interests of which are owned directly or indirectly by
the Lowden Family if such entity assumes this Note and SFHI's obligations under
the Security Agreement.
(c) SFHI may prepay the amount due on this Note in whole or in part at any
time and from time to time (i) at 101% of the principal amount so prepaid plus
interest thereon to the prepayment date if such prepayment occurs at any time
from the date hereof through December 15, 1999, or (ii) at 100% of the principal
amount so prepaid plus interest thereon to the prepayment date if such
prepayment occurs thereafter, in either case upon thirty (30) days' prior
written notice.
7. SFHI shall pay interest on overdue principal and on overdue
installments of interest on this Note at the Contract Rate plus five percent
(5.0%) (the "Default Rate"), to the extent lawful.
8. The occurrence of any one or more of the following shall constitute an
event of default (collectively, "Events of Default" and individually each an
"Event of Default") hereunder: (a) any failure to pay the principal outstanding
under this Note on the Maturity Date (or any earlier maturity date, whether by
acceleration, redemption or otherwise), which failure continues for a period of
five days, and (b) any failure to pay any installment of interest under this
Note on the Due Date therefor, which failure continues to exist for a period of
15 days. If any such event shall occur, Holder or its permitted assigns or
their permitted assigns may declare the entire unpaid principal balance hereof
and all accrued interest thereon and all other amounts due hereunder to be
immediately due and payable and thereby accelerate the maturity hereof, and
Holder or its permitted assigns or their permitted assigns may proceed to
exercise any rights and remedies that they may have under this Note.
9. SFHI hereby waives presentment and demand for payment, notice of
dishonor, protest and notice of protest of this Note and agrees to pay all costs
of collection when incurred (including, without limitation, reasonable
attorneys' fees and disbursements), and including all reasonable costs and
expenses incurred in connection with the pursuit by Holder (or its permitted
assignee) or in connection with any of Holder's (or its permitted assignee's)
collection efforts, whether or not suit on this Note is filed and all such costs
and expenses shall be payable on demand.
10. SFHI covenants (to the extent that it may lawfully do so) that it will
not at any time insist upon or plead or in any manner whatsoever claim or take
the benefit or advantage of, any usury, stay or extension law or any other law
which would prohibit or forgive SFHI from paying all or any portion of the
principal of, or interest on, this Note, wherever enacted, now or at any time
hereafter in force, or which may otherwise affect the covenants or the
performance of this Note; and SFHI (to the extent that it may lawfully do so)
hereby expressly waives all benefit or advantage of any such law and covenants
that it will not hinder, delay or impede the execution
3
<PAGE>
of any power herein or therein granted to the Holder or its assigns but will
suffer and permit the execution of every such power as though no such law had
been enacted.
11. The Holder may not assign, sell or transfer this Note or any interest
herein without the prior written consent of SFHI, which consent shall not be
unreasonably withheld. If such consent is not given or denied by SFHI within
five (5) business days after SFHI's receipt of the Holder's written request for
such consent, which request shall specify the person to which the Note or an
interest herein is proposed to be assigned, sold, or transferred and the
structure of the proposed assignment, sale or transfer, SFHI shall be deemed to
have consented to such proposed assignment, sale or transfer.
12. This Note shall be governed by and construed in accordance with the
laws of the State of Nevada.
13. This Note may not be changed or terminated orally, but only by an
agreement in writing signed by any party against whom enforcement of such change
or termination is sought.
IN WITNESS WHEREOF, Santa Fe Hotel Inc. has caused this Note to be duly
executed as of the date and year first above written.
SANTA FE HOTEL INC.
By: /s/ Thomas K. Land
------------------------------
Name: Thomas K. Land
Title: Chief Financial Officer
4
<PAGE>
---------------------------------------------------------------
SECURITY AGREEMENT
Dated as of April 14, 1998
between
SANTA FE HOTEL INC.
and
PDS Financial Corporation - Nevada, as
Collateral Agent
---------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Section 1. Definitions and Interpretation. . . . . . . . . . . . . .1
1.01 Certain Defined Terms . . . . . . . . . . . . . . . 1
1.02 Interpretation. . . . . . . . . . . . . . . . . . . 4
Section 2. Collateral . . . . . . . . . . . . . . . . . . . . . . . 4
2.01 Grant . . . . . . . . . . . . . . . . . . . . . . . 4
2.02 Perfection. . . . . . . . . . . . . . . . . . . . . 4
2.03 Attorney-in-Fact. . . . . . . . . . . . . . . . . . 4
2.04 Use of Collateral . . . . . . . . . . . . . . . . . 5
2.05 Rights and Secured obligations. . . . . . . . . . . 5
Section 4. Representations and Warranties . . . . . . . . . . . . . 5
4.01 Organization, Powers and Good Standing. . . . . . . 5
4.02 No Conflict . . . . . . . . . . . . . . . . . . . . 6
4.03 Governmental Approvals. . . . . . . . . . . . . . . 6
4.04 Filings, Etc. . . . . . . . . . . . . . . . . . . . 6
4.05 Locations of Collateral, Offices and Names. . . . . 6
4.06 Title to Collateral; Validity and Perfection of
Security Interest; Absence of Other Liens . . . . . 6
Section 5. Covenants. . . . . . . . . . . . . . . . . . . . . . . . 7
5.01 Books and Records . . . . . . . . . . . . . . . . . 7
5.02 Removals, Etc.. . . . . . . . . . . . . . . . . . . 7
5.03 Sales and Other Liens . . . . . . . . . . . . . . . 7
5.04 Further Assurances. . . . . . . . . . . . . . . . . 7
5.05 Verification, Etc.. . . . . . . . . . . . . . . . . 8
5.06 Payment of Charges and Claims . . . . . . . . . . . 8
5.07 Duty of Care. . . . . . . . . . . . . . . . . . . . 8
5.08 Protection of Security; Notice of Levy. . . . . . . 8
Section 6. Events of Defaults, Remedies, Etc. . . . . . . . . . . . 9
6.01 Events of Default . . . . . . . . . . . . . . . . . 9
6.02 Remedies, Etc.. . . . . . . . . . . . . . . . . . . 9
6.03 Private Sale. . . . . . . . . . . . . . . . . . . . 10
6.04 Application of Proceeds . . . . . . . . . . . . . . 10
Section 7. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . 11
7.01 Waiver. . . . . . . . . . . . . . . . . . . . . . . 11
7.02 Notices . . . . . . . . . . . . . . . . . . . . . . 11
7.03 Secured Party Expenses, Including Attorneys' Fees . 12
7.04 Amendments, Etc.. . . . . . . . . . . . . . . . . . 12
7.05 Successors and Assigns. . . . . . . . . . . . . . . 13
7.06 Survival. . . . . . . . . . . . . . . . . . . . . . 13
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7.07 Agreements Superseded . . . . . . . . . . . . . . . 13
7.08 Counterparts. . . . . . . . . . . . . . . . . . . . 13
7.09 GOVERNING LAW AND CHOICE OF FORUM . . . . . . . . . 13
7.10 WAIVER OF TRIAL BY JURY . . . . . . . . . . . . . . 14
7.11 Payments Set Aside. . . . . . . . . . . . . . . . . 14
7.12 Continuing Security Interest; Termination . . . . . 14
7.13 Waiver and Estoppel . . . . . . . . . . . . . . . . 15
7.14 Authorization . . . . . . . . . . . . . . . . . . . 15
7.15 Bankruptcy No Discharge . . . . . . . . . . . . . . 16
7.16 Nature of Agreement . . . . . . . . . . . . . . . . 16
Annex 1 -- List of Collateral
Annex 2 -- List of Locations
Annex 3 -- Existing Liens
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This SECURITY AGREEMENT, dated as of April 14, 1998 (as amended or
supplemented from time to time, this "AGREEMENT"), is made between Santa Fe
Hotel Inc. (the "OBLIGOR") and PDS Financial Corporation - Nevada, as collateral
agent for the Holders (as defined herein) (in such capacity, the "SECURED
PARTY").
RECITALS
A. The Obligor executed and delivered the Promissory Note (the "Original
Note") dated as of June 14, 1995 in favor of Sahara Nevada Corp. ("SNC"), a
wholly-owned subsidiary of Santa Fe Gaming Corporation ("SFGC"), in the original
principal amount of Eight Million Dollars ($8,000,000).
B. The Original Note was transferred by SNC to SFGC on April 8, 1998.
C. The Original Note is being sold by SFGC to the Secured Party, and
concurrent therewith and with the execution and delivery of this Agreement, the
Obligor has executed and delivered the Amended and Restated Note (together with
any extension, modification or renewal thereof, the "Note") dated as of the date
hereof in the principal amount of Four Million Nine Hundred Sixty-One Thousand
Five Hundred Fifty-Six ($4,961,556.00), which Note amends and restates in its
entirety the Original Note, which amendments include without limitation the
extension of the maturity date from May 31, 1998 to April 14, 2001.
D. To induce the Secured Party to purchase the Original Note and amend
and restate the Original Note as provided in the Note and in order to secure
payment of the Note and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Obligor has agreed to
pledge and grant a security interest in the Collateral (as defined herein) as
security for the Secured Obligations (as defined herein). Accordingly, the
Obligor agrees with the Secured Party as follows:
Section 1. DEFINITIONS AND INTERPRETATION.
1.01 CERTAIN DEFINED TERMS. The following terms shall have the
following meanings under this Agreement:
"APPLICABLE LAW" means, with respect to a Person, all provisions of
the following applicable to such Person: (i) constitutions, treaties, statutes,
laws, rules, regulations and ordinances of any Governmental Authority (including
the Gaming Control Act and similar gaming laws of other jurisdictions);
(ii) Governmental Approvals; and (iii) orders, decisions, judgments, awards and
decrees of any Governmental Authority.
"BANKRUPTCY LAW" means title 11, U.S. Code or any similar federal or
state law for the relief of debtors.
"CHARGES" means all federal, state, county, city, municipal or other
taxes, levies, assessments or charges that, if not paid when due, may result in
a Lien of any Governmental Authority against Collateral.
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"COLLATERAL" shall have the meaning assigned to that term in
SECTION 2.01.
"CONTRACTUAL OBLIGATION" means any note, bond, mortgage or indenture
or any franchise, license, permit, agreement or other instrument or obligation.
"EVENT OF DEFAULT" shall have the meaning assigned to that term in
SECTION 6.01.
"GAMING AUTHORITY" means any agency, authority, board, bureau,
commission, department, office or instrumentality of any nature whatsoever of
any governmental or quasi-governmental unit, whether of federal, state, local or
foreign jurisdiction or otherwise and whether now or hereafter in existence, or
any officer or official thereof, including without limitation the Nevada Gaming
Commission, Nevada State Gaming Control Board, Clark County Liquor and Gaming
Licensing Board and Nevada City Counsel.
"GAMING CONTROL LAWS" means the Nevada Gaming Control Act or any other
similar federal, state or local law, statute, ordinance, rule, license, order,
permit or regulation related to the gaming industry, whether now or hereafter in
existence, each as from time to time amended, or any successor provision of law.
"GOVERNMENTAL APPROVAL" means an authorization, consent, approval,
permit, license, registration or filing made with any Governmental Authority.
"GOVERNMENTAL AUTHORITY" means any agency, authority, board, bureau,
commission, department, office or instrumentality or any nature whatsoever of
any governmental or quasi-governmental unit, whether federal, state, county,
district, city or other political subdivision or otherwise and whether now or
hereafter in existence, or any officer or official thereof.
"HOLDER" or "HOLDERS" means PDS Financial Corporation - Nevada or its
permitted assigns.
"LIENS" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset
(including any agreement to give any security interest). For the purposes of
this Agreement, a Person shall be deemed to own subject to a Lien any asset that
it has acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease obligation or other title retention
agreement relating to such asset.
"MATERIAL ADVERSE EFFECT" means (a) a condition or event materially
adverse to, (b) a material adverse effect on or (c) a material adverse change
in, as the case may be, any one or more of the following: (i) the business,
assets, results of operations, financial condition or prospects of Obligor,
(ii) the ability of the Obligor to perform its obligations hereunder or under
the Note or (iii) the Collateral or the Security Interest.
"OTHER COLLATERAL" shall have the meaning assigned to that term in
SECTION 7.14.
"OTHER OBLIGOR" shall have the meaning assigned to that term in
SECTION 7.14.
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"PAYMENT DEFAULT" shall mean any default described in SECTION 6.01(a).
"PERMITTED LIENS" means (i) statutory liens to secure the performance
of obligations, surety or appeal bonds, performance bonds or other obligations
of a like nature (including, without limitation, mechanic's, worker's and
material provider's liens) incurred in the ordinary course of business
(exclusive of obligations in respect of the payment of borrowed money), or for
taxes, assessments or governmental charges or claims; (ii) subleases granted to
others not interfering in any material respect with the business of the Company;
(iii) leases in respect of the real property on which facilities owned or leased
by the Company are located; (iv) Liens arising from UCC financing statements
regarding property leased by the Company; (v) easements, rights-of-way,
restrictions, minor defects or irregularities in title and other similar charges
or encumbrances that do not interfere in any material respect with the ordinary
conduct of business of the Company; (vi) Liens in existence as of the date of
this Agreement and identified in Annex 3 hereto; and (vii) Liens granted by
third party lessors or fee owners with respect to real property as to which the
Company has a leasehold interest.
"PERSON" means any individual, corporation, partnership, joint
venture, incorporated or unincorporated association, joint-stock company, trust,
unincorporated organization or government or other agency or political
subdivision thereof or other entity of any kind.
"PROCEEDS" shall have the meaning assigned to that term in
SECTION 2.01(b).
"SECURED OBLIGATIONS" shall mean any and all present and future
obligations and liabilities of the Obligor arising under the Note or this
Agreement, in each case whether due or not due, direct or indirect, joint and/or
several, absolute or contingent, voluntary or involuntary, liquidated or
unliquidated, determined or undetermined, now or hereafter existing, renewed or
restructured, and to the extent permitted by Applicable Law, whether or not from
time to time decreased or extinguished and later increased, created or incurred,
whether or not arising after the commencement of a proceeding under Bankruptcy
Law (including post-petition interest) and whether or not allowed or allowable
as a claim in any such proceeding, and whether or not recovery of any such
obligation or liability may be barred by a statute of limitations or such
obligation or liability may otherwise be unenforceable.
"SECURITY INTEREST" shall have the meaning assigned to that term in
Section 2.01.
"SUPPLEMENTAL DOCUMENTATION" means financing statements, continuation
statements, consents, acknowledgments, assignments, notices of security interest
in deposit accounts, schedules of Collateral and other instruments or documents
necessary or reasonably requested by the Secured Party to perfect and maintain
perfected the security interest in favor of the Secured Party in any Collateral
and the Proceeds thereof, subject only to Permitted Liens.
"UNIFORM COMMERCIAL CODE" shall mean the Uniform Commercial Code as in
effect in the State of Nevada from time to time or, by reason of mandatory
application, any other applicable jurisdiction.
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1.02 INTERPRETATION. In this Agreement, unless otherwise indicated,
the singular includes the plural and plural the singular; words importing either
gender include the other gender; references to statutes or regulations are to be
construed as including all statutory or regulatory provisions consolidating,
amending or replacing the statute or regulation referred to; references to
"writing" include printing, typing, lithography and other means of reproducing
words in a tangible visible form; the words "including," "includes" and
"include" shall be deemed to be followed by the words "without limitation;"
references 'to articles, sections (or subdivisions of sections), exhibits,
annexes or schedules are to this Agreement; references to agreements and other
contractual instruments shall be deemed to include all subsequent amendments,
extensions and other modifications to such instruments; and references to
Persons include their respective permitted successors and assigns.
Section 2. COLLATERAL.
2.01 GRANT. As collateral security for the prompt payment in full
when due (whether at stated maturity, by acceleration or otherwise) and
performance of the Secured Obligations, the Obligor hereby pledges, conveys,
assigns, transfers and grants to the Secured Party a security interest (the
"SECURITY INTEREST") in all of the Obligor's right, title and interest in and to
the following property (collectively, the "COLLATERAL"):
(a) the property described on Annex 1 hereto and incorporated herein
by this reference; and
(b) all proceeds and products in whatever form of all or any part of
the Collateral, including all proceeds of insurance (together with all rights to
recover and proceed with respect to the same), and all additions, and
accessories to, substitutions for and replacements of all or any part of the
Collateral (collectively, the "PROCEEDS").
2.02 PERFECTION. Concurrently with the execution and delivery of this
Agreement, the Obligor shall (a) file such financing statements and other
documents in such offices as shall be necessary or as the Secured Party may
reasonably request to perfect and establish the priority (subject only to
Permitted Liens) of the Liens granted by this Agreement, and (b) take all such
other actions as shall be necessary or as the Secured Party has requested to
perfect and establish the priority (subject only to such Permitted Liens) of the
Liens granted by this Agreement.
2.03 ATTORNEY-IN-FACT. Subject to the rights of the Obligor under
SECTION 2.04, the Secured Party is hereby irrevocably appointed the
attorney-in-fact of the Obligor for the purpose of carrying out the provisions
of this Agreement and taking any action and executing any instruments which the
Secured Party may deem necessary or reasonably advisable to accomplish the
purposes of this Agreement, to preserve the validity, perfection and priority
(subject only to Permitted Liens) of the Liens granted by this Agreement and,
upon the occurrence and continuance of any Payment Default or Event of Default,
to exercise its rights, remedies, powers and privileges under this Agreement.
Subject to SECTION 7.12, this appointment as attorney-in-fact is irrevocable and
coupled with an interest. Without limiting the generality of the foregoing, the
Secured Party shall be entitled under this Agreement upon the occurrence and
continuation of
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any Payment Default or Event of Default (i) to ask, demand, collect, sue for,
recover, receive and give receipt and, discharge for amounts due and to become
due under and in respect of all or any part of the Collateral; (ii) to receive,
endorse and collect any instruments, documents and chattel paper in connection
with clause (i) above; and (iii) to execute, in connection with any sale or
disposition of the Collateral under SECTION 6, any endorsements, assignments,
bills of sale or other instruments of conveyance or transfer with respect to all
or any part of the Collateral.
2.04 USE OF COLLATERAL. So long as no Payment Default or Event of
Default shall have occurred and be continuing, the Obligor shall be entitled to
use and possess the Collateral and to exercise its rights, title and interest in
all Collateral, subject to the rights, remedies, powers and privileges of the
Secured Party under SECTION 6.
2.05 RIGHTS AND SECURED OBLIGATIONS.
(a) No reference in this Agreement to proceeds or to the sale or
other disposition of Collateral shall authorize the Obligor to sell or otherwise
dispose of any Collateral except to the extent otherwise expressly permitted by
the terms hereof.
(b) Except as required by Applicable Law, the Secured Party shall not
be required to take steps necessary to preserve any rights against prior parties
to any part of the Collateral.
Section 4. REPRESENTATIONS AND WARRANTIES. The Obligor represents
and warrants to the Secured Party as follows:
4.01 ORGANIZATION, POWERS AND GOOD STANDING. The Obligor is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Nevada, and has all requisite corporate power and authority and
the legal right to own and operate its properties and to carry on its business
as presently conducted. The Obligor has all requisite corporate power and
authority to enter into this Agreement and to carry out the transactions
contemplated hereby. The execution, delivery and performance by the Obligor of
this Agreement has been duly authorized by all necessary corporate action on the
part of the Obligor. This Agreement has been duly executed and delivered by the
obligor. This Agreement is a legal, valid and binding obligation of the
Obligor, enforceable against the Obligor in accordance with its terms, except as
enforceability may be limited by (a) equitable principles, (b) limitations
imposed by applicable laws upon the enforceability of rights to indemnification
and (c) commercial reasonableness.
4.02 NO CONFLICT. The execution, delivery and performance by the
Obligor of this Agreement and the Note, and the consummation of the transactions
contemplated hereby, do not (a) violate any provision of the charter or by-laws
of the Obligor, (b) conflict with, result in a breach of or constitute (or, with
the giving of notice or lapse of time, or both, constitute) default under, or
require the approval or consent of any Person (other than those consents
previously obtained) pursuant to, any material Contractual Obligation of the
Obligor or violate any provision of Applicable Law binding on the Obligor, which
violation could have a Material Adverse Effect,
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<PAGE>
or (c) result in the creation or imposition of any Lien upon any of the
Collateral except for Liens created under this Agreement.
4.03 GOVERNMENTAL APPROVALS. Except for filings and recordings in
connection with the perfection of Liens created by this Agreement (including any
necessary Supplemental Documentation), no Governmental Approval is or will be
required in connection with the execution, delivery and performance by the
Obligor of this Agreement or the consummation of the transactions contemplated
hereby or, to the extent permitted by Applicable Law, the exercise by the
Secured Party of any rights or remedies hereunder, or to ensure the legality,
validity or enforceability hereof, except as may be required in connection with
the disposition of Collateral by applicable federal and state antitrust laws,
and Governmental Approvals required under any Gaming Control Laws.
4.04 FILINGS, ETC. The Obligor has delivered to the Secured Party a
duly executed UCC-1 financing statement containing a correct description of the
Collateral for filing in the office of the Secretary of State of the State of
Nevada to establish a valid and perfected Lien in favor of the Secured Party in
all Collateral in which a Lien may be perfected by such filings, and no further
or subsequent filing, recording or registration is necessary in any such
jurisdiction, except as provided under Applicable Law with respect to the filing
of continuation statements.
4.05 LOCATIONS OF COLLATERAL, OFFICES AND NAMES. (a) The Obligor's
chief executive office and principal place of business is located at the address
set forth in SECTION 7.02 hereof, (b) all other places of business of the
Obligor and all other locations at which any tangible Collateral or books and
records related to any Collateral, including computer programs, printouts and
other computer materials, are (or during the past four (4) months were) located
are identified in ANNEX 2, and (c) there are no prior or current trade or legal
names used to identify the Obligor in its business or in the ownership of its
properties other than those identified in ANNEX 2.
4.06 TITLE TO COLLATERAL; VALIDITY AND PERFECTION OF SECURITY
INTEREST; ABSENCE OF OTHER LIENS.
(a) The Obligor has good and marketable title to all Collateral and
"rights" in all Collateral within the meaning of Section 9-203 of the UCC.
(b) Upon filing of a UCC-1 financing statement with the Nevada
Secretary of State, the Security Interest in favor of the Secured Party created
hereunder shall constitute a valid and perfected Lien in all of the Collateral
and secure payment and performance of the Secured Obligations. The Collateral
is free and clear of all Liens other than the Security Interest and Permitted
Liens;
(c) Except for financing statements naming the Secured Party as
secured party, the Obligor has filed no financing statement covering any
Collateral.
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Section 5. COVENANTS.
5.01 BOOKS AND RECORDS. The Obligor shall:
(a) keep full and accurate books and records relating to the
Collateral at the chief executive office of the Obligor and stamp or otherwise
mark such books and records in such manner as the Secured Party may reasonably
require in order to reflect the Liens granted by this Agreement; and
(b) permit representatives of the Secured Party, upon reasonable
notice, at any time during normal business hours to inspect and make abstracts
from its books and records pertaining to the Collateral, permit representatives
of the Secured Party to be present at the Obligor's place of business to receive
copies of all communications and remittances relating to the Collateral and
forward copies of any notices or communications received by the Obligor with
respect to the Collateral, all in such manner as the Secured Party may request.
5.02 REMOVALS, ETC. Without at least thirty (30) days' prior written
notice to the Secured Party, the Obligor shall not (i) maintain any of its books
and records with respect to the Collateral at any office or maintain its
principal place of business at any place other than at the address initially
indicated for notices to it under SECTION 7.02 or at one of the locations
identified in ANNEX 1 or in transit from one of such locations to another or
(ii) change its corporate name, or the name under which it does business, from
the name shown on the signature pages to this Agreement.
5.03 SALES AND OTHER LIENS. Without the prior written consent of the
Secured Party, the Obligor shall not create, incur or assume any Lien upon, or
file or authorize to be filed, in any jurisdiction, any financing statement or
like instrument with respect to, all or any part of the Collateral in which the
Secured Party is not named as the secured party. The Obligor shall use its best
efforts to cause to be promptly released of record any Lien on any Collateral
not permitted by this SECTION 5.03. The Obligor shall not dispose of any or all
of the Collateral without the consent of the Secured Party, which consent shall
not be unreasonably withheld; PROVIDED, HOWEVER, that the Obligor shall not be
prohibited from disposing of any or all of the Collateral in the ordinary course
of business provided the Obligor complies with Section 6(b) of the Note.
5.04 FURTHER ASSURANCES. The Obligor shall, at its own expense,
perform at the request of the Secured Party, such acts as may be necessary or
advisable in the reasonable opinion of the Secured Party, or that the Secured
Party may reasonably request at any time, to assure the attachment, perfection
and first priority (subject to Permitted Liens) of the security interest in
favor of the Secured Party to the Collateral, to exercise the rights and
remedies of the Secured Party hereunder or to carry out the intent of this
Agreement. Without limitation, at the Secured Party's request, the Obligor
shall execute and deliver (or use reasonable efforts to cause any third party to
execute and deliver) to the Secured Party, at any time and from time to time,
all Supplemental Documentation that the Secured Party may reasonably request, in
form and substance reasonably acceptable to the Secured Party.
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5.05 VERIFICATION, ETC. During the existence of any Payment Default
or Event of Default, the Secured Party may at any time require the Obligor to
segregate all Proceeds so that they are capable of identification in such manner
that the Secured Party shall have a perfected first priority Lien therein,
subject only to Permitted Liens.
5.06 PAYMENT OF CHARGES AND CLAIMS. The Obligor shall pay (a) all
Charges imposed upon any Collateral, and (b) all claims (including claims for
labor, services and materials) that have become due and payable and, under
Applicable Law, have or may become Liens (other than Permitted Liens) upon any
Collateral, in each case before any penalty shall be incurred with respect
thereto; PROVIDED that unless foreclosure, levy or similar proceedings shall
have commenced, the Obligor need not pay or discharge any such Charges or claims
the amount, applicability or validity of which is being contested in good faith
by appropriate proceedings, and for which adequate reserves are established in
accordance with generally accepted accounting principles. If the Obligor fails
to pay or obtain the discharge of any Charge, claim or Lien required to be paid
or discharged under this SECTION 5.06 and asserted against any portion of the
Collateral, the Obligor will promptly notify the Secured Party of such event.
The Secured Party may, at any time and from time to time, in its sole discretion
and without waiving or releasing any obligation of the Obligor under this
Agreement or the other Collateral Documents or waiving any Default or Event of
Default, make such payment required to be paid or discharged under this
SECTION 5.06, obtain such discharge or take such other action with respect
thereto as the Secured Party deems advisable; PROVIDED that the Secured Party
shall be under no obligation whatsoever to take any of the foregoing actions.
5.07 DUTY OF CARE. The Secured Party shall have no duty of care with
respect to the Collateral, except that the Secured Party shall have an
obligation to exercise reasonable care with respect to Collateral in its
possession; PROVIDED that (a) the Secured Party shall be deemed to have
exercised reasonable care if Collateral in its possession is accorded treatment
substantially comparable to that which the Secured Party accords its own
property, and (b) the Secured Party shall have no obligation to take any actions
to preserve rights against other parties or property with respect to any
Collateral. Without limitation, the Secured Party shall bear no risk or expense
with respect to any Collateral.
5.08 PROTECTION OF SECURITY; NOTICE OF LEVY. The Obligor shall, at
its own cost and expense, take any and all actions necessary to defend title to
the Collateral against all Persons and against all claims and demands and to
preserve, protect and defend the security interest in favor of the Secured Party
and the priority thereof, against any adverse Liens not permitted under this
Agreement. The Obligor will promptly notify the Secured Party of any attachment
or other legal process levied against any Collateral.
Section 6. EVENTS OF DEFAULTS, REMEDIES, ETC.
6.01 EVENTS OF DEFAULT. The occurrence and continuance of one or more
of the following events shall constitute an "EVENT OF DEFAULT":
(a) The Obligor shall fail to pay any installment of interest on the
Note when due and payable and the continuance of such failure for thirty
(30) days; or
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(b) The Obligor shall fail to pay all or any part of the principal on
the Note when and as the same shall become due and payable, at maturity,
redemption, by acceleration or otherwise and the continuance of such failure for
five (5) days.
6.02 REMEDIES, ETC. If any Event of Default shall have occurred and
be continuing:
(a) the Secured Party may declare all unpaid principal, together with
accrued interest thereon and together with all other amounts owing to the
Secured Party under this Agreement and/or the Note, to be forthwith due and
payable.
(b) The Secured Party in its discretion may require the Obligor to,
and the Obligor shall, assemble the Collateral owned by it at such place or
places, reasonably convenient to both the Secured Party and the Obligor,
designated in the Secured Party's request;
(c) The Secured Party in its discretion may make any reasonable
compromise or settlement it deems desirable with respect to any of the
Collateral and may extend the time of payment, arrange for payment in
installments, or otherwise amend, revise, release, modify or otherwise change
the terms of, all or any part of the Collateral;
(d) The Secured Party in its discretion may, in its name or in the
name of the Obligor or otherwise, demand, sue upon or otherwise enforce
performance under, and demand, sue for, collect or receive any money or property
at any time payable or receivable on account of or in exchange for all or any
part of, the Collateral, but shall be under no obligation to do so;
(e) The Secured Party in its discretion may, upon five (5) business
days' prior written notice to the Obligor of the time and place, which the
Obligor agrees and acknowledges shall constitute commercially fair and
reasonable notice, with respect to all or any part of the Collateral which shall
then be or shall thereafter come into the possession, custody or control of the
Secured Party or any of its agents, sell, lease or otherwise dispose of all or
any part of such Collateral, at such place or places as the Secured Party deems
best, for cash, for credit or for future delivery (without thereby assuming any
credit risk) and at public or private sale, without demand of performance or
notice of intention to effect any such disposition or of time or place of any
such sale (except such notice as is required above or by applicable statute and
cannot be waived), and the Secured Party or any other Person may be the
purchaser, lessee or recipient of any or all of the Collateral so disposed of at
any public sale (or, to the extent permitted by law, at any private sale) and
thereafter hold the same absolutely, free from any claim or right of whatsoever
kind. The Secured Party may, without notice or publication, adjourn any public
or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for the sale, and such sale may be made
at any time or place to which the sale may be so adjourned; and
(f) The Secured Party shall have, and in its discretion may exercise,
all of the rights, remedies, powers and privileges with respect to the
Collateral of a secured party under the UCC (whether or not the UCC is in effect
in the jurisdiction where such rights, remedies, powers and privileges are
asserted) and such additional rights, remedies, powers and privileges to which
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a secured party is entitled under the laws in effect in any jurisdiction where
any rights, remedies, powers and privileges in respect of this Agreement or the
Collateral may be asserted, including the right, to the maximum extent permitted
by law, to exercise all voting, consensual and other powers of ownership
pertaining to the Collateral as if the Secured Party were the sole and absolute
owner of the Collateral (and the obligor agrees to take all such action as may
be appropriate to give effect to such right).
6.03 PRIVATE SALE. The Secured Party shall incur no liability as a
result of the sale, lease or other disposition of all or any part of the
Collateral at any private sale pursuant to SECTION 6.02 conducted in a
commercially reasonable manner. The Obligor hereby waives any claims against
the Secured Party arising by reason of the fact that the price at which the
Collateral may have been sold at such a private sale was less than the price
which might have been obtained at a public sale or was less than the aggregate
amount of the Secured Obligations, even if the Secured Party accepts the first
offer received and does not offer the Collateral to more than one offeree.
6.04 APPLICATION OF PROCEEDS.
(a) Except as otherwise expressly provided in this Agreement and
except as provided below in this SECTION 6.04, the proceeds of, or other
realization upon, all or any part of the Collateral by virtue of the exercise of
remedies under SECTION 6.02, and any other cash at the time held by the Secured
Party under this SECTION 6, shall be applied by the Secured Party:
FIRST, to the Secured Party for amounts due under SECTION 7.03;
SECOND, to the payment in full of the remaining Secured Obligations in
such manner as the Secured Party may determine; and
THIRD, to the payment to the Obligor, or its respective successors or
assigns, or as a court of competent jurisdiction may direct, of any surplus then
remaining.
As used in this SECTION 6, "PROCEEDS" of Collateral shall mean cash,
securities and other property realized in respect of, and distributions in kind
of, Collateral, including any property received under any bankruptcy,
reorganization or other similar proceeding as to the Obligor or any issuer of,
or account debtor or other obligor on, any of the Collateral.
(b) Any surplus of cash and any notes and other Collateral held by
the Secured Party and remaining after payment in full of all the Secured
Obligations shall be reassigned and redelivered as provided in Section 7.12.
(c) Payments received from any third party on account of any
Collateral shall not reduce the Secured Obligations until paid in cash to the
Secured Party. The application of proceeds by the Secured Party shall be
without prejudice to the Secured Party's rights as against the Obligor or other
Persons with respect to any Secured Obligations that may then be or remain
unpaid.
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Section 7. MISCELLANEOUS.
7.01 WAIVER.
(a) Nothing contained in this Agreement and no act done or omitted by
or on the part of the Secured Party to exercise and no delay in exercising, and
no course of dealing with respect to, any right, remedy, power or privilege
under this Agreement shall operate as a waiver of such right, remedy, power or
privilege, nor shall any single or partial exercise of any right, remedy, power
or privilege under this Agreement preclude any other or further exercise of any
such right, remedy, power or privilege or the exercise of any other right,
remedy, power or privilege. The rights, remedies, powers and privileges
provided in this Agreement are cumulative and not exclusive of any rights,
remedies, powers and privileges provided by law.
(b) Nothing contained in this Agreement and no act done or omitted by
the Secured Party pursuant to the powers and rights granted to it under this
Agreement shall be deemed to be a waiver by the Secured Party of its rights and
remedies under any of the Collateral Documents, and this Agreement is made and
accepted without prejudice to any of the rights and remedies possessed by the
Secured Party under the terms of any of the Collateral Documents. All
obligations of the Obligor and the rights of the Secured Party hereunder shall
be in addition to and not in limitation of those contained in any of the other
Collateral Documents and provided by Applicable Law.
7.02 NOTICES. Any notices and communications to be given under this
Agreement shall be given in writing and delivered in person or delivered by
registered or certified first-class mail, postage prepaid, by overnight courier
(for next business day delivery), or by facsimile transmission to the intended
recipient at the address or facsimile number specified below or, as to any
party, at such other address or facsimile number as shall be designated by such
party in a notice to each other party.
To the Obligor: Santa Fe Hotel Inc.
4949 North Rancho Drive
Las Vegas, Nevada 89130
Attention: Chief Financial Officer
Telecopy: (702) 658-4303
With a copy to: Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, California 90071
Attention: Karen E. Bertero, Esq.
Telecopy: (213) 229-7520
To the Secured Party: PDS Financial Corporation - Nevada
6171 McLeod Drive
Las Vegas, Nevada 89120-4048
Attention: President
Telecopy: (702) 740-8692
11
<PAGE>
With a copy to: Frommelt & Eide, Ltd.
580 International Centre
900 Second Avenue South
Minneapolis, Minnesota 55402
Attention: David R. Mylrea, Esq.
Telecopy: (612) 342-2761
7.03 SECURED PARTY EXPENSES, INCLUDING ATTORNEYS' FEES. Regardless of
the occurrence of a Default or Event of Default, the Obligor agrees to pay to
the Secured Party any and all advances, charges, costs and expenses, including
the reasonable fees and expenses of attorneys and any experts or agents, that
the Secured Party may incur in connection with (a) the administration of this
Agreement, (b) the creation, perfection or continuation of the Security Interest
or protection of the Collateral or its priority in the Collateral, including the
discharging of any prior or junior Lien or adverse claim against the Collateral
or any part thereof that is not permitted hereby or by the Note, (c) the
custody, preservation or sale of, collection from, or other realization upon,
any of the Collateral, (d) the exercise or enforcement of any of the rights,
powers or remedies of the Secured Party under this Agreement, any other
Collateral Document or under Applicable Law, or (e) the failure by the Obligor
to perform or observe any of the provisions hereof. All such amounts and all
other amounts payable hereunder shall be payable on demand, together with
interest at the Default Rate.
7.04 AMENDMENTS, ETC. Any provision of this Agreement may be
modified, supplemented or waived only by an instrument in writing duly executed
by the Obligor and the Secured Party. Any such modification, supplement or
waiver shall be for such period and subject to such conditions as shall be
specified in the instrument effecting the same and shall be binding upon the
Secured Party, each holder of any of the Secured Obligations and the Obligor,
and any such waiver shall be effective only in the specific instance and for the
purposes for which given.
7.05 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the Obligor, the Secured Party and each Holder and their
respective successors and permitted assigns. Neither the Obligor nor the
Secured Party shall assign or transfer its respective rights or obligations
under this Agreement without the prior written consent of the other party, which
consent shall not be unreasonable withheld.
7.06 SURVIVAL. All representations and warranties made in this
Agreement or in any certificate or other document delivered pursuant to or in
connection with this Agreement shall survive the execution and delivery of this
Agreement or such certificate or other document (as the case may be).
7.07 AGREEMENTS SUPERSEDED. This Agreement supersedes all prior
agreements and understandings, written or oral, among the parties with respect
to the subject matter of this Agreement.
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7.08 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties to this Agreement may execute this Agreement
by signing any such counterpart.
7.09 GOVERNING LAW AND CHOICE OF FORUM.
(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS (OTHER THAN THE RULES REGARDING CONFLICTS OF LAWS) OF THE STATE
OF NEVADA. TO THE EXTENT APPLICABLE, THE UCC SHALL GOVERN THE PERFECTION AND
PRIORITY OF THE SECURITY INTEREST, THE EFFECT THEREOF, AND ALL OTHER MATTERS TO
WHICH THE UCC APPLIES PURSUANT TO THE TERMS THEREOF.
(b) The parties agree that all actions or proceedings arising in
connection with this Agreement shall be tried and litigated in state or Federal
courts located in the County of Clark, State of Nevada, unless such actions or
proceedings are required to be brought in another court to obtain subject matter
jurisdiction over the matter in controversy. EACH OF THE OBLIGOR AND THE
SECURED PARTY WAIVES ANY RIGHT IT MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON
CONVENIENS, TO ASSERT THAT IT IS NOT SUBJECT TO THE JURISDICTION OF SUCH COURTS
OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH
THIS SECTION.
7.10 WAIVER OF TRIAL BY JURY. THE OBLIGOR AND THE SECURED PARTY WAIVE
THE RIGHT TO A TRIAL BY JURY IN ANY ACTION UNDER THIS AGREEMENT OR ANY ACTION
ARISING OUT OF THE TRANSACTIONS CONTEMPLATED HEREBY, REGARDLESS OF WHICH PARTY
INITIATES SUCH ACTION OR ACTIONS.
THE OBLIGOR SPECIFICALLY AGREES THAT IT HAS READ AND FULLY UNDERSTANDS
EACH OF THE FOREGOING WAIVERS CONTAINED IN THIS AGREEMENT AND THAT SUCH WAIVERS
ARE KNOWINGLY MADE, WITHOUT DURESS, ARE NEGOTIATED AND BARGAINED FOR TERMS OF
THIS AGREEMENT, AND ARE MATERIAL INDUCEMENTS TO THE SECURED PARTY, WITHOUT WHICH
THE LOAN WOULD NOT HAVE BEEN EXTENDED BY THE SECURED PARTY TO THE OBLIGOR.
7.11 PAYMENTS SET ASIDE. Notwithstanding anything to the contrary
herein contained, this Agreement, the Secured Obligations and the security
interest in favor of the Secured Party shall continue to be effective or be
reinstated, as the case may be, if at any time any payment, or any part thereof,
of any or all of the Secured Obligations is rescinded, invalidated, declared to
be fraudulent or preferential or otherwise required to be restored or returned
by the Secured Party in connection with any bankruptcy, reorganization or
similar proceeding involving the obligor, any other party liable with respect to
the Secured Obligations or otherwise, if the proceeds of any Collateral are
required to be returned by the Secured Party
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under any such circumstances. Without limiting the generality of the foregoing,
if prior to any such rescission, invalidation, declaration, restoration or
return, this Agreement shall have been canceled or surrendered or the security
interest in favor of the Secured Party or any Collateral shall have been
released or terminated in connection with such cancellation or surrender, this
Agreement and the security interest in favor of the Secured Party and such
Collateral shall be reinstated in full force and effect, and such prior
cancellation or surrender shall not diminish, discharge or otherwise affect the
obligations of the obligor in respect of the amount of the affected payment or
application of proceeds, the security interest in favor of the Secured Party or
such Collateral.
7.12 CONTINUING SECURITY INTEREST; TERMINATION. Except as otherwise
permitted herein and except for such releases provided for under this Agreement,
this Agreement shall create a continuing security interest in the Collateral
and, except as provided herein or therein, the security interest in favor of the
Secured Party and all agreements, representations and warranties made herein
shall survive until, and this Agreement shall terminate only upon, the payment
and performance in full of all principal and any interest on the Note and all
other Secured Obligations then due and owing. Any investigation at any time
made by or on behalf of the Secured Party shall not diminish the right of the
Secured Party to rely on any such agreements, representations or warranties
herein.
Notwithstanding anything in this Agreement or Applicable Law to the
contrary, the agreements of the Obligor set forth in SECTION 7.03 shall survive
the payment of all other Secured Obligations and the termination of this
Agreement. After payment of all principal and any interest on the Note and the
payment of all other Secured Obligations then due and owing, the Secured Party
shall, upon the request and at the expense of the Obligor, forthwith assign,
transfer and deliver to the Obligor or its order, against receipt and without
warranty or recourse to the Secured Party, such of the Collateral as may be in
the possession of the Secured Party or to which the Secured Party may have an
interest and as shall not have been sold or otherwise applied pursuant to the
terms hereof. The Secured Party shall execute, deliver and acknowledge (if
acknowledgment is appropriate) any necessary or proper instruments of
termination, satisfaction or release to evidence the release of any Collateral.
7.13 WAIVER AND ESTOPPEL. Except as otherwise provided in this
Agreement, the Obligor hereby waives: (a) presentment, demand for payment or
performance (including diligence in making demands hereunder), notice of
dishonor or nonperformance, protest, acceptance and notice of acceptance of this
Agreement, and all other notices of any kind including (i) notice of the
existence, creation or incurrence of new or additional Secured Obligations,
(ii) notice of any action taken or omitted by the Secured Party in reliance
hereon, (iii) notice of any default by any Other Obligor, (iv) notice that any
portion of the secured obligations is due, (v) notice of any action against any
Other Obligor, or any enforcement or other action with respect to Collateral or
other Collateral, or the assertion of any right of the Secured Party hereunder;
(b) during the existence of an Event of Default, notice prior to taking
possession or control of any Collateral or any bond or security that might be
required by any court prior to allowing the Secured Party to exercise any of
their rights, powers or remedies; (c) the benefit of all valuation,
appraisement, redemption and exemption laws; (d) any rights to require
marshaling of the Collateral upon any sale or otherwise to direct the order in
which the
14
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Collateral shall be sold; (e) any right to assert against the Secured Party any
defense (legal or equitable), set-off, counterclaim and other right that the
Obligor may now or any time hereafter have against any Other Obligor; (f) any
rights to require the Secured Party to proceed against any Person, proceed
against or exhaust any Collateral or any other security interests or guaranties
or pursue any other remedy in the Secured Party's power, or to pursue any of
such rights in any particular order or manner, and any defenses arising by
reason of any disability or defense of any Person; (g) the right to require the
Secured Party to proceed against any Other Obligor, to proceed against or
exhaust any Other Collateral or to pursue any other remedy in the Secured
Party's power whatsoever and the right to have the property of any Other Obligor
first applied to the discharge of the Secured Obligations; (h) all rights and
benefits under Applicable Law purporting to reduce a guarantor's obligations in
proportion to the obligation of the principal or providing that the obligation
of a surety or guarantor must neither be larger nor i other respects more
burdensome than that of the principal; (i) the benefit of any statute of
limitations affecting the Secured Obligations or the Obligor's liability
hereunder; (j) all defenses that at any time may be available to the Obligor by
virtue of any valuation, stay, moratorium or other law now or hereafter in
effect; (k) any rights and other benefits arising out of any failure of the
Secured Party to hold a commercially reasonable public or private foreclosure
sale or otherwise to comply with Applicable Law in connection with a disposition
of Collateral or Other Collateral.
7.14 AUTHORIZATION. The Obligor authorizes the Secured Party, without
notice to or further assent by the Obligor, and without affecting the Obligor's
liability hereunder or the security interest in favor of the Secured Party
(regardless of whether any subrogation or similar right that the Obligor may
have or any other right or remedy of the Obligor is extinguished or impaired),
from time to time to:
(a) take and hold other collateral ("OTHER COLLATERAL") with respect
to the Secured Obligations or any portion thereof from any other Person ("OTHER
OBLIGOR"), perfect a Lien on such other Collateral, take any other action in
respect of, any such Other Collateral or Lien or any part thereof;
(b) otherwise deal with any Other Obligor and any Other Collateral as
the Secured Party may elect in its sole discretion.
7.15 BANKRUPTCY NO DISCHARGE. Without limiting SECTION 7.13, this
Agreement and the security interest in favor of the Secured Party shall not be
discharged or otherwise affected by any bankruptcy, reorganization or similar
proceeding commenced by or against any Other Obligor, including (a) any
discharge of, or bar or stay against collecting, all or any part of the Secured
Obligations in or as a result of any such proceeding, whether or not assented to
by the Secured Party, and (b) any disallowance of all or any portion of the
Secured Party's claim for repayment of the Secured Obligations.
7.16 NATURE OF AGREEMENT. This Agreement is independent of and not in
consideration of or contingent upon the liability of any Other Obligor and
foreclosure or other action may be taken against all or any Collateral and a
separate action or actions may be brought and prosecuted against the Obligor
whether or not any foreclosure or other action is taken with respect to any
Other Collateral or other action is brought or prosecuted against any Other
Obligor
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or whether any Other Obligor is joined in any such action or actions. This
Agreement shall be construed as continuing, absolute and unconditional without
regard to (and the Obligor waives any and all defenses based upon):
(a) the legality, validity or enforceability of the Note, any of the
Secured Obligations, any Lien or Other Collateral;
(b) any increase, decrease or other change in the amount or time,
manner or place of payment of the Secured Obligations or any part thereof or
other amendment to the terms and conditions of the Note or any provision
thereof;
(c) any exchange, release (whether intentionally or unintentionally),
or non-perfection of any Lien on any Other Collateral or any part thereof or any
release of or settlement with any Other Obligor in respect of this Agreement or
the Secured Obligations;
(d) any exercise in such manner and order as the Secured Party elects
in its sole discretion, failure to exercise, waiver, or termination of, any of
the remedies or rights of such Secured Party against any Other Obligor in
respect of any Secured Obligations or any Other Collateral; or
(e) any other circumstance whatsoever (with or without notice to or
knowledge of the Obligor), whether or not similar to any of the foregoing, that
constitutes, or might be construed to constitute, an equitable or legal
discharge of any Other Obligor for the Secured Obligations, in bankruptcy or in
any other instance.
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IN WITNESS WHEREOF, the parties have caused this Security Agreement to be
duly executed and delivered as of the day and year first above written.
SANTA FE HOTEL INC.
By: /s/ Thomas K. Land
------------------------------------
Name: Thomas K. Land
Title: Chief Financial Officer
PDS FINANCIAL CORPORATION - NEVADA,
as Collateral Agent
By: /s/ Johan P. Finley
------------------------------------
Name: Johan P. Finley
Title: President
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ANNEX 1
LIST OF COLLATERAL
<PAGE>
ANNEX 2
(b) 1. PDS Financial Corporation - Nevada
6171 McLeod Drive
Las Vegas, Nevada 89120-4048
2. Unique Slot & Repair, Inc.
4405 E. Sahara Avenue
Suite 5
Las Vegas, Nevada 98104
(c) Santa Fe Operating Limited Partnership
<PAGE>
ANNEX 3
LIENS COVERING THE COLLATERAL
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SANTA FE GAMING CORPORATION
SANTA FE HOTEL INC.
NOTE PURCHASE AGREEMENT
9.50% NOTES DUE DECEMBER 15, 2000
____________________________
AS OF APRIL 14, 1998
____________________________
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
SANTA FE GAMING CORPORATION
SANTA FE HOTEL INC.
NOTE PURCHASE AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Certain Defined Terms. . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Accounting Terms; Utilization of GAAP for Purposes of
Calculations Under Agreement . . . . . . . . . . . . . . . . . . . . . 21
1.3 Other Definitional Provisions. . . . . . . . . . . . . . . . . . . . . 21
SECTION 2. THE NOTES; CLOSING; DELIVERY . . . . . . . . . . . . . . . . . . . . . 21
2.1 Authorization of Issuance of Notes . . . . . . . . . . . . . . . . . . 21
2.2 Purchase and Sale of Notes . . . . . . . . . . . . . . . . . . . . . . 21
2.3 Closing and Delivery of Notes. . . . . . . . . . . . . . . . . . . . . 22
2.4 Certain Terms of the Notes; Payment of Interest. . . . . . . . . . . . 22
2.5 General Provisions Regarding Payments; Optional Redemption;
Mandatory Redemption and Change in Control Repurchase. . . . . . . . . 23
2.6 Replacement of Notes . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.7 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.8 Registration; Transfer; Registration of Transfer and Exchange. . . . . 28
2.9 Representation of Initial Holders. . . . . . . . . . . . . . . . . . . 29
SECTION 3. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . 29
3.1 Organization, Powers, Qualification, Good Standing and Other
Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.2 Authorization of Notes and Other Basic Documents and Related
Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.3 Financial Condition. . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.4 No Material Adverse Change; No Restricted SGC Payments . . . . . . . . 33
3.5 Title to Properties; Liens . . . . . . . . . . . . . . . . . . . . . . 33
3.6 Litigation; Adverse Facts. . . . . . . . . . . . . . . . . . . . . . . 33
3.7 Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
3.8 Performance of Agreements; Materially Adverse Agreements . . . . . . . 34
3.9 Governmental Regulation. . . . . . . . . . . . . . . . . . . . . . . . 34
3.10 Employee Benefit Plans and Employee Matters. . . . . . . . . . . . . . 34
3.11 Environmental Protection . . . . . . . . . . . . . . . . . . . . . . . 35
3.12 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
3.13 Certain Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
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3.14 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 4. CONDITIONS TO EFFECTIVENESS. . . . . . . . . . . . . . . . . . . . . . 37
4.1 Conditions to Obligations of Holders to Purchase Notes on the
Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 5. AFFIRMATIVE COVENANTS OF SGC AND COMPANY . . . . . . . . . . . . . . . 43
5.1 Financial Statements and Related Information . . . . . . . . . . . . . 43
5.2 Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
5.3 Corporate Existence, Etc.. . . . . . . . . . . . . . . . . . . . . . . 47
5.4 Payment of Taxes and Claims; Tax Consolidation . . . . . . . . . . . . 47
5.5 Maintenance of Properties; Insurance . . . . . . . . . . . . . . . . . 47
5.6 Compliance with Laws, etc. . . . . . . . . . . . . . . . . . . . . . . 48
5.7 Environmental Disclosure and Inspection. . . . . . . . . . . . . . . . 48
5.8 Remedial Action Regarding Hazardous Material . . . . . . . . . . . . . 49
5.9 Disposal of Company Stock. . . . . . . . . . . . . . . . . . . . . . . 49
5.10 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
5.11 Right of First Refusal . . . . . . . . . . . . . . . . . . . . . . . . 50
5.12 Permitted Ground Lease and Permitted Ground Lease Encumbrances . . . . 51
5.13 Certain Additional Covenants . . . . . . . . . . . . . . . . . . . . . 51
SECTION 6. NEGATIVE COVENANTS OF SGC AND COMPANY. . . . . . . . . . . . . . . . . 52
6.1 Restricted SGC Payments and Lowden Family Payments . . . . . . . . . . 52
6.2 Restricted Company Payments and Restricted Investments . . . . . . . . 52
6.3 Liens and Related Matters. . . . . . . . . . . . . . . . . . . . . . . 53
6.4 Fundamental Changes. . . . . . . . . . . . . . . . . . . . . . . . . . 54
6.5 Mergers and Consolidations . . . . . . . . . . . . . . . . . . . . . . 54
6.6 Additional Indebtedness of Company . . . . . . . . . . . . . . . . . . 55
6.7 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . 55
6.8 Sale and Leaseback . . . . . . . . . . . . . . . . . . . . . . . . . . 55
6.9 Amendments to Documents. . . . . . . . . . . . . . . . . . . . . . . . 55
6.10 Stay, Extension and Usury Laws . . . . . . . . . . . . . . . . . . . . 56
6.11 Government Regulation. . . . . . . . . . . . . . . . . . . . . . . . . 56
6.12 Conduct of Business. . . . . . . . . . . . . . . . . . . . . . . . . . 56
6.13 Limitation on Tax Sharing Payments and Agreements. . . . . . . . . . . 56
SECTION 7. EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . . 57
7.1 Failure to Make Payments When Due. . . . . . . . . . . . . . . . . . . 57
7.2 Default in Other Agreements. . . . . . . . . . . . . . . . . . . . . . 57
7.3 Breach of Certain Covenants. . . . . . . . . . . . . . . . . . . . . . 57
7.4 Breach of Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . 57
7.5 Other Defaults Under Basic Documents . . . . . . . . . . . . . . . . . 57
7.6 Involuntary Bankruptcy; Appointment of Receiver, etc.. . . . . . . . . 58
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7.7 Voluntary Bankruptcy; Appointment of Receiver, etc.. . . . . . . . . . 58
7.8 Judgments and Attachments. . . . . . . . . . . . . . . . . . . . . . . 58
7.9 Dissolution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
7.10 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . 59
7.11 Material Adverse Effect. . . . . . . . . . . . . . . . . . . . . . . . 59
7.12 Invalidity of Company Environmental Indemnity or the SGC Guaranty. . . 59
7.13 Impairment of Collateral . . . . . . . . . . . . . . . . . . . . . . . 59
7.14 Ownership of Company . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 8. COLLATERAL AGENT AND RELATIONS AMONG HOLDERS, ETC. . . . . . . . . . . 61
8.1 Appointment of Collateral Agent, Powers and Immunities . . . . . . . . 61
8.2 Reliance by Collateral Agent . . . . . . . . . . . . . . . . . . . . . 62
8.3 Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
8.4 Rights as Holder . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
8.5 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
8.6 Non-Reliance on Collateral Agent and Other Holders . . . . . . . . . . 64
8.7 Resignation or Removal of Collateral Agent . . . . . . . . . . . . . . 64
8.8 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 9. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
9.1 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . 65
9.2 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
9.3 Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
9.4 Ratable Sharing. . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
9.5 Independence of Covenants. . . . . . . . . . . . . . . . . . . . . . . 68
9.6 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
9.7 Survival of Representations, Warranties and Agreements . . . . . . . . 69
9.8 Failure or Indulgence Not Waiver; Remedies Cumulative. . . . . . . . . 69
9.9 Marshalling; Payments Set Aside. . . . . . . . . . . . . . . . . . . . 69
9.10 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
9.11 Obligations Several; Independent Nature of Holders' Rights . . . . . . 70
9.12 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
9.13 Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
9.14 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . 70
9.15 Consent to Jurisdiction and Service of Process . . . . . . . . . . . . 70
9.16 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . 71
9.17 Counterparts; Effectiveness. . . . . . . . . . . . . . . . . . . . . . 71
9.18 Conflicts With Other Basic Documents . . . . . . . . . . . . . . . . . 71
</TABLE>
iii
<PAGE>
SCHEDULES
<TABLE>
<S> <C>
1.1A Santa Fe Hotel Documents
1.1B Santa Fe Hotel Premises
1.1C Permitted Liens
2 Information Relating to Holders
3.1B Subsidiaries and Joint Ventures of SGC
3.1D Indebtedness
3.10 Employee Benefit Plans
</TABLE>
iv
<PAGE>
EXHIBITS
<TABLE>
<S> <C>
I Form of Note
II Form of SGC Guaranty
III Form of Company Deed of Trust
IV Form of Company Security Agreement
V Form of Company Environmental Indemnity
VI Form of Subordination and Intercreditor Agreement
VII Form of Assignment Agreement
VIII-A Form of Opinion of Gibson, Dunn & Crutcher LLP
VIII-B Form of Opinion of Jones Vargas
</TABLE>
v
<PAGE>
SANTA FE GAMING CORPORATION
SANTA FE HOTEL INC.
NOTE PURCHASE AGREEMENT
THIS NOTE PURCHASE AGREEMENT is made as of this 14th day of April,
1998 by and among Santa Fe Gaming Corporation (formerly named Sahara Gaming
Corporation), a Nevada corporation ("SGC"), Santa Fe Hotel Inc., a Nevada
corporation ("COMPANY"), SunAmerica Life Insurance Company, an Arizona
corporation ("SUNAMERICA"), Credit Suisse First Boston Mortgage Capital LLC, a
Delaware limited liability company ("CSFB"), and any other person or persons
party hereto from time to time after the date hereof as a holder (individually,
including SunAmerica and CSFB, a "HOLDER," and collectively, "HOLDERS") and
SunAmerica, as Collateral Agent (together with any successor, "COLLATERAL
AGENT").
RECITALS
WHEREAS, Company desires to issue and sell to Holders $14,000,000 in
principal amount of Company's 9.50% Notes due December 15, 2000 (the "NOTES");
WHEREAS, Company intends to grant a security interest in the Santa Fe
Hotel Facility and certain related property as security to secure the Notes and
its related obligations; and
WHEREAS, SGC has agreed to guaranty the payment of such obligations as
provided herein and in certain related documents;
NOW THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, Company, SGC, Holders and Collateral
Agent hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 CERTAIN DEFINED TERMS. The following terms used in this Agreement
shall have the following meanings:
"AFFILIATE" means, with respect to any Person, any other Person that,
directly or indirectly, is in control of, is controlled by, or is under common
control with, such Person. For the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling", "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct
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or cause the direction of the management and policies of that Person, whether
through the ownership of Voting Stock or by contract or otherwise. Without
limiting the foregoing, a Person shall be deemed to be "controlled by"
another Person if such other Person (i) possesses, directly or indirectly,
power to vote 10% or more of the securities having ordinary voting power for
the election of directors of such Person or (ii) with respect to any other
Person that is not a corporation, owns 10% or more of the equity interests of
such Person which are generally entitled to vote.
"AFFILIATE TRANSACTION" has the meaning assigned to such term in
subsection 6.7 hereof.
"AGREEMENT," "HEREOF" and "HEREUNDER" and words of similar import
refer to this Note Purchase Agreement, as it may hereafter be amended,
supplemented or otherwise modified from time to time.
"ALTA" has the meaning assigned to such term in subsection 4.1E
hereof.
"AMORTIZATION EXPENSE" means, for any period, amounts recognized
during such period as amortization of all goodwill and other assets classified
as Intangible Assets in accordance with GAAP.
"AVERAGE LIFE" means, as of any date of determination, with reference
to any Indebtedness, the quotient obtained by dividing (i) the sum of the
products of the number of years from the date of determination to the dates of
each successive scheduled principal payment or mandatory repurchase or repayment
of such Indebtedness multiplied by the amount of such principal payment by (ii)
the sum of all such principal payments.
"BANKRUPTCY CODE" means Title 11 of the United States Code entitled
"Bankruptcy", as now and hereafter in effect, or any successor statute.
"BASIC DOCUMENTS" means this Agreement, the Notes, the Company Deed of
Trust, the Company Security Agreement, the Company Environmental Indemnity, the
SGC Guaranty, the Subordination and Intercreditor Agreement and all other
instruments or documents now, heretofore or hereafter granting Liens on the
property of any Credit Party or any of their Affiliates to Collateral Agent for
the benefit of Holders and any other instruments or agreements now, heretofore
or hereafter entered into with or for the benefit of Collateral Agent or any
Holder in connection herewith or therewith in connection with the Notes.
"BOARD OF DIRECTORS" means the Board of Directors of any Credit Party
or one of their respective Subsidiaries, as the context requires, or any
committee thereof duly authorized to act on behalf of such Board of Directors.
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<PAGE>
"BUSINESS DAY" means any day excluding Saturday, Sunday and any day
which is a legal holiday under the laws of the State of California or Nevada or
is a day on which banking institutions located in either such state are
authorized or required by law or other governmental action to close.
"CAPITAL LEASE OBLIGATIONS" of a Person means any obligation that is
required to be classified and accounted for as a capital lease on the face of a
balance sheet of such Person prepared in accordance with GAAP; the amount of
such obligation shall be the capitalized amount thereof, determined in
accordance with GAAP; the stated maturity thereof shall be the date of the last
payment of rent or any other amount due under such lease prior to the first date
upon which such lease may be terminated by the lessee without payment of a
penalty; and such obligation shall be deemed secured by a Lien on any property
or assets to which such lease relates.
"CAPITAL STOCK" of any Person means any and all shares, rights to
purchase, warrants or options (whether or not currently exercisable),
participations or other equivalents of interests (however designated) in the
equity (which includes, but is not limited to, common stock, preferred stock and
partnership and joint venture interests) of such Person (excluding any debt
securities that are convertible into, or exchangeable for, such interests in
equity).
"CASH" means money, currency or a credit balance in a Deposit Account.
"CHANGE OF CONTROL" means an event or series of events by which
(i) SGC or Company sells, conveys, transfers or leases, directly or indirectly,
all or substantially all of its properties and assets to any Person or group (as
such term is used in Section 13(d) and 14(d) of the Exchange Act); (ii) any
Person or group (other than the Lowden Family) is or becomes the "beneficial
owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that
a Person or group shall be deemed to have "beneficial ownership" of all shares
that any such Person or group has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of securities representing (a) 25% or more of the combined voting
power of SGC's or Company's, as the case may be, Voting Stock and at such time
the Lowden Family together shall fail to beneficially own, directly or
indirectly, securities representing at least 30% of the combined voting power of
SGC's or Company's, as the case may be, Voting Stock or (b) more than 50% of the
combined voting power of SGC's or Company's Voting Stock, as the case may be;
(iii) SGC or Company consolidates with or merges into another Person or conveys,
transfers or leases all or substantially all its properties and assets to any
Person or any Person consolidates with or merges into SGC or Company, in either
event pursuant to a transaction in which the outstanding Voting Stock of SGC or
Company is changed into or exchanged for Cash, securities or other property with
the effect that any Person or group (other than the Lowden Family) becomes the
"beneficial owner," directly or indirectly, of securities representing (a) 25%
or more of the combined voting power of the Voting Stock of the Person that
continues
3
<PAGE>
after such consolidation or merger or who acquires such assets and at such
time the Lowden Family together shall fail to beneficially own, directly or
indirectly, securities representing at least 30% of the combined voting power
of such Voting Stock or (b) more than 50% of the combined voting power of the
Voting Stock of the Person that continues after such consolidation or merger
or who acquires such assets; (iv) during any period of 24 consecutive months,
individuals who at the beginning of such period constituted SGC's or
Company's Board of Directors, as the case may be, (together with any new or
replacement directors whose election by the Board of Directors or whose
nomination for election by the stockholders of SGC or Company, as the case
may be, was approved by a vote of at least a majority of the directors then
still in office who were either directors at the beginning of such period or
whose election or nomination for election was previously so approved) cease
for any reason to constitute a majority of the directors then in office; (v)
SGC ceases to own any of the outstanding Capital Stock, or all or
substantially all of the assets, of Company or any of its Subsidiaries,
except where such assets are disposed of pursuant to subsection 6.4 hereof;
or (vi) SGC and/or Company are deemed to have undergone a "Change of Control"
as defined in the Company Indenture.
"COLLATERAL" means all the real, personal and mixed property made
subject to a Lien pursuant to the Company Deed of Trust, the Company Security
Agreement or any other Basic Document.
"COLLATERAL AGENT" means SunAmerica Life Insurance Company in its
capacity as collateral agent for Holders, and any successor Collateral Agent
appointed pursuant to this Agreement.
"COMMISSION" means the Securities and Exchange Commission.
"COMPANY" has the meaning set forth in the Introduction to this
Agreement.
"COMPANY ALLOCABLE SHARE" of SGC's consolidated or combined group's
actual Tax liability for any taxable period means the product of (x) SGC's
consolidated or combined group's actual Tax liability for such taxable period
and (y) a fraction the numerator of which is the sum of the positive Tax
liabilities that Company and each Subsidiary would have incurred had each such
entity filed a separate tax return for such taxable period and the denominator
of which is the sum of the positive Tax liabilities that SGC and each of its
Subsidiaries (including Company and each Subsidiary) would have incurred had
each such entity filed a separate return for such taxable period.
"COMPANY DEED OF TRUST" means the Deed of Trust, Fixture Filing and
Financing Statement and Security Agreement with Assignment of Rents to be
entered into as of the Effective Date by Company in favor of Collateral Agent,
as beneficiary thereunder, pursuant to which Company grants to Title Company, as
trustee for the benefit of Collateral Agent on behalf of Holders, a first
priority Lien on, among other things, the Santa Fe Hotel Premises and Company's
right, title and interest in and to the
4
<PAGE>
Santa Fe Hotel Improvements to secure the Obligations of Company,
substantially in the form attached hereto as Exhibit III, as it may
thereafter be amended, supplemented or otherwise modified from time to time.
"COMPANY ENVIRONMENTAL INDEMNITY" means the Environmental Indemnity
Agreement to be entered into by Company and SGC as of the Effective Date in
favor of Collateral Agent for the benefit of Holders and certain other
indemnified parties therein pursuant to which Company and SGC indemnify
Collateral Agent for the benefit of Holders and certain other indemnified
parties therein against environmental risks, substantially in the form attached
hereto as Exhibit V, as it may thereafter be amended, supplemented or otherwise
modified from time to time.
"COMPANY INDENTURE" means that certain Indenture dated as of
December 29, 1993 among Company, SGC, as guarantor, and Company Indenture
Trustee, as amended by the First Supplemental Indenture dated on or prior to the
Effective Date among Company, SGC and Company Indenture Trustee, as it may
thereafter be amended, supplemented or otherwise modified from time to time.
"COMPANY INDENTURE CONSENT SOLICITATION" means the Solicitation of
Consents to Indenture Amendments dated February 16, 1998, the Supplement thereto
dated March 4, 1998 and the Supplement thereto dated March 12, 1998.
"COMPANY INDENTURE DEED OF TRUST" means that certain Deed of Trust and
Security Agreement with Assignment of Rents and Fixture Filing dated as of
December 29, 1993 by Company to Title Company, as trustee for the benefit of
Company Indenture Trustee.
"COMPANY INDENTURE NOTES" means the notes issued pursuant to the
Company Indenture.
"COMPANY INDENTURE TRUSTEE" means IBJ Schroder Bank & Trust Company,
as trustee under the Company Indenture, and any successor trustee under the
Company Indenture.
"COMPANY SECURITY AGREEMENT" means the Security Agreement to be
entered into by Company and Collateral Agent as of the Effective Date pursuant
to which Company grants to Collateral Agent on behalf of Holders a security
interest in certain of Company's assets including personal property and
fixtures, in substantially the form annexed hereto as Exhibit IV, as it may
thereafter be amended, supplemented or otherwise modified from time to time.
"COMPANY SEPARATE TAX" means the Tax for any taxable period that would
have been paid by Company and its Subsidiaries if they filed a consolidated or
combined return for such taxable period and all prior taxable periods.
5
<PAGE>
"CONSOLIDATED COVERAGE RATIO" with respect to any period means the
ratio of (i) the aggregate amount of Consolidated Operating Cash Flow for such
period to (ii) the aggregate amount of Consolidated Interest Expense for such
period.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, the total
interest expense of a Person and its Subsidiaries determined in accordance with
GAAP, including (i) interest expense attributable to Capital Lease Obligations,
(ii) amortization of debt discount, (iii) capitalized interest, (iv) Cash and
non-Cash interest payments, (v) commissions, discounts and other fees and
charges owed with respect to letters of credit and bankers' acceptance
financing, (vi) net costs under arrangements designed to protect such Person
against fluctuations in interest rates (including amortization of discounts) and
(vii) interest expense in respect of obligations of other Persons deemed to be
Indebtedness of Company or any Subsidiary under clause (v) or (vi) of the
definition of Indebtedness.
"CONSOLIDATED NET INCOME" means, for any period, the net income (or
loss) of a Person and its Subsidiaries determined in accordance with GAAP;
PROVIDED, HOWEVER, that there shall not be included in such Consolidated Net
Income: (i) any net income of any Person if such Person is not a Subsidiary,
except that (1) Company's equity in the net income of any such Person or
Subsidiary for such period shall be included in such Consolidated Net Income up
to the aggregate amount of Cash actually distributed by such Person or
Subsidiary during such period to Company or a Subsidiary as a dividend or other
distribution (subject, in the case of a dividend or other distribution to a
Subsidiary, to the limitations contained in clause (iii) below) and (2)
Company's equity in the net loss of any such Person or Subsidiary for such
period shall be included in determining such Consolidated Net Income; (ii) any
net income (or loss) of any Person acquired by Company or a Subsidiary in a
pooling of interests transaction for any period prior to the date of such
acquisitions; (iii) any net income (or loss) of any Subsidiary if such
Subsidiary is subject to restrictions, directly or indirectly, on the payment of
dividends or the making of distributions by such Subsidiary, directly or
indirectly, to Company, except that (a) Company's equity in the net income of
any such Subsidiary for such period shall be included in such Consolidated Net
Income up to the aggregate amount of Cash that could have been distributed by
such Subsidiary during such period to Company or another Subsidiary as a
dividend or other distribution (subject, in the case of a dividend or other
distribution to another Subsidiary, to the limitation contained in this clause)
unless at the time of computation no Cash would be permitted to be distributed,
and (b) Company's equity in the net loss of any such Subsidiary for such period
shall be included in determining such Consolidated Net Income; (iv) any gain or
loss realized upon the sale or other disposition of any property, plant or
equipment of Company or any of its Subsidiaries that is not sold or otherwise
disposed of in the ordinary course of business and any gain or loss realized
upon the sale or other disposition of any Capital Stock of any Person; and (v)
the cumulative effect of a change in accounting principles.
6
<PAGE>
"CONSOLIDATED OPERATING CASH FLOW" means, for any period, for any
Person, the aggregate amount of Consolidated Net Income before Consolidated
Interest Expense, income Taxes, depreciation expense, Amortization Expense and
any non-Cash amortization of debt issuance cost.
"CONTINGENT OBLIGATION," as applied to any Person, means any direct
or indirect liability, contingent or otherwise, of that Person (i) with
respect to any Indebtedness, lease, dividend or other obligation of another
Person if the primary purpose or intent thereof by the Person incurring the
Contingent Obligation is to provide assurance to the obligee of such
obligation of another Person that such obligation of another shall be paid or
discharged, or that any agreements relating thereto shall be complied with,
or that the holders of such obligation shall be protected (in whole or in
part) against loss in respect thereof, (ii) with respect to any letter of
credit issued for the account of that Person or as to which that Person is
otherwise liable for reimbursement of drawings, or (iii) under interest rate
agreements and currency agreements. Contingent Obligations shall include,
without limitation, (a) the direct or indirect guaranty, endorsement
(otherwise than for collection or deposit in the ordinary course of
business), co-making, discounting with recourse or sale with recourse by such
Person of the obligation of another Person, (b) the obligation to make
take-or-pay or similar payments if required regardless of non-performance by
any other party or parties to an agreement, and (c) any liability of such
Person for the obligation of another Person through any agreement (contingent
or otherwise) (X) to purchase, repurchase or otherwise acquire such
obligation or any security therefor, or to provide funds for the payment or
discharge of such obligation (whether in the form of loans, advances, stock
purchases, capital contributions or otherwise) or (Y) to maintain the
solvency or any balance sheet item, level of income or financial condition of
another if, in the case of any agreement described under subclauses (X) or
(Y) of this sentence, the primary purpose or intent thereof is as described
in the preceding sentence. For purposes of this definition, the amount of
any Contingent Obligation at any time of determination shall be computed as
the amount that, in light of all the facts and circumstances existing at such
time, represents the amount that reasonably can be expected at such time of
determination to become an actual or matured liability.
"CONTRACTUAL OBLIGATION," as applied to any Person, means any
provision of any security issued by that Person or any indenture, mortgage, deed
of trust, contract, undertaking, agreement or other instrument (i) to which such
Person is a party, (ii) by which that Person or any of its properties is bound
or (iii) to which such Person or any of its properties is subject, in each case
a breach or default of which could have a Material Adverse Effect.
"CREDIT PARTY" means Company, SGC and any other Subsidiary of SGC or
Company which is or becomes a party to a Basic Document.
"CSFB" has the meaning set forth in the Introduction to this
Agreement.
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<PAGE>
"DEPOSIT ACCOUNT" means a demand, time, savings, passbook or like
account with a bank, savings and loan association, credit union or like
organization, other than an account evidenced by a negotiable certificate of
deposit.
"DOLLARS" and the sign "$" mean the lawful money of the United States
of America.
"EFFECTIVE DATE" means the date on which all conditions to the
effectiveness of this Agreement set forth in subsection 4.1 are satisfied;
PROVIDED that if the Effective Date does not occur on or prior to April 15,
1998, this Agreement shall not become effective.
"EMPLOYEE BENEFIT PLAN" means any "employee benefit plan" as defined
in Section 3(3) of ERISA which is or was maintained or contributed to by SGC,
Company or any ERISA Affiliate.
"ENVIRONMENTAL CLAIM" means any accusation, allegation, notice of
violation, claim, demand, abatement order, cleanup order, removal order, or
other order or direction (conditional or otherwise) by any Governmental
Authority or other Person for any injury, loss or damage, including, without
limitation, personal injury (including sickness, disease or death), tangible or
intangible property damage, contribution, indemnity, indirect or consequential
damages, damage to the environment, nuisance, pollution, contamination or other
adverse effects on the environment, or for fines, penalties or restrictions or
to compel cleanup or remediation, in each case relating to, resulting from or in
connection with any Hazardous Material and relating to the Santa Fe Hotel
Facility.
"ENVIRONMENTAL LAWS" has the meaning set forth in the Company Deed of
Trust.
"ENVIRONMENTAL REPORT" means the Phase I Environmental Site Assessment
dated March 26, 1998 prepared by Western Technologies Inc. as project number
4188JL080, relating to the Santa Fe Hotel Facility and delivered to Holders
prior to the Effective Date.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute.
"ERISA AFFILIATE" means (i) any corporation which is a member of a
controlled group of corporations within the meaning of Section 414(b) of the
Internal Revenue Code of which SGC or Company is, or was at any time, a
member; (ii) any trade or business (whether or not incorporated) which is, or
was at any time, a member of a group of trades or businesses under common
control within the meaning of Section 414(c) of the Internal Revenue Code of
which SGC or Company is, or was at any time, a
8
<PAGE>
member; and (iii) any member of an Affiliated service group within the
meaning of Section 414(m) or (o) of the Internal Revenue Code of which SGC or
Company is a member.
"ERISA EVENT" means (i) a "reportable event" within the meaning of
Section 4043(c) of ERISA and the regulations issued thereunder with respect to
any Pension Plan (excluding those for which the provision for 30-day notice to
the PBGC has been waived by regulation); (ii) the failure to meet the minimum
funding standard of Section 412 of the Internal Revenue Code with respect to any
Pension Plan (whether or not waived in accordance with Section 412(d) of the
Internal Revenue Code) or the failure to make by its due date a required
installment under Section 412(m) of the Internal Revenue Code with respect to
any Pension Plan or the institution of a proceeding on behalf of a Multiemployer
Plan against Company, SGC or any Affiliate to enforce Section 515 of ERISA,
which proceeding is not dismissed within 30 days; (iii) the provision by the
administrator of any Pension Plan pursuant to Section 4041(a)(2) of ERISA of a
notice of intent to terminate such plan in a distress termination described in
Section 4041(c) of ERISA; (iv) the withdrawal by SGC, Company or any ERISA
Affiliates from any Pension Plan with two or more contributing sponsors or the
termination of any such Pension Plan resulting in liability pursuant to Sections
4063 or 4064 of ERISA; (v) the institution by the PBGC of proceedings to
terminate any Pension Plan, or the occurrence of any event or condition which
might constitute grounds under ERISA for the termination of, or the appointment
of a trustee to administer, any Pension Plan; (vi) the imposition of liability
on SGC, Company or any ERISA Affiliates pursuant to Section 4062(e) or 4069 of
ERISA or by reason of the application of Section 4212(c) of ERISA; (vii) the
withdrawal by SGC, Company or any of their respective ERISA Affiliates in a
complete or partial withdrawal (within the meaning of Sections 4203 and 4205 of
ERISA) from any Multiemployer Plan if there is any potential liability therefor,
or the receipt by SGC, Company or any of their respective ERISA Affiliates of
notice from any Multiemployer Plan that it is in reorganization or insolvency
pursuant to Section 4241 or 4245 of ERISA, or that it intends to terminate or
has terminated under Section 4041A or 4042 of ERISA; (viii) the occurrence of an
act or omission which could give rise to the imposition on SGC, Company or any
of their respective ERISA Affiliates of fines, penalties, Taxes or related
charges under Chapter 43 of the Internal Revenue Code or under Section 409 or
502(c), (i) or (l) of ERISA in respect of any Employee Benefit Plan; (ix) the
assertion of a material claim (other than routine claims for benefits) against
any Employee Benefit Plan other than a Multiemployer Plan or the assets thereof,
or against SGC, Company or any of their respective ERISA Affiliates in
connection with any such Employee Benefit Plan; (x) receipt from the Internal
Revenue Service of notice of the failure of any Pension Plan (or any other
Employee Benefit Plan intended to be qualified under Section 401(a) of the
Internal Revenue Code) to qualify under Section 401(a) of the Internal Revenue
Code, or the failure of any trust forming part of any Pension Plan to qualify
for exemption from taxation under Section 501(a) of the Internal Revenue Code;
or (xi) the adoption of an amendment to any Pension Plan that, pursuant to
Section 401(a)(29) of the Internal Revenue Code or pursuant to Section 307 of
ERISA, would require
9
<PAGE>
Company, SGC or any ERISA Affiliate timely to provide security to the plan or
would result in loss of tax exempt status of the trust of which such plan is
a part if not timely provided, or the imposition of a Lien pursuant to
Section 412(n) of the Internal Revenue Code.
"EVENT OF DEFAULT" has the meaning assigned to such term in Section 7
hereof.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as it may be
amended from time to time.
"EXCHANGEABLE STOCK" means any Capital Stock of a corporation that is
exchangeable or convertible into another security (other than into Capital Stock
of such corporation that is neither Exchangeable Stock nor Redeemable Stock).
"FISCAL YEAR" means the Fiscal Year of SGC and Company, the last day
of which occurs on September 30th of each year.
"FLOOD ACT" means the National Flood Insurance Act of 1968, as amended
by the Flood Disaster Protection Act of 1973 (42 U.S.C. Sections 4013 ET. SEQ.).
"GAAP" means, subject to the limitations on the application thereof
set forth in subsection 1.2, generally accepted accounting principles set forth
in opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession (including, without limitation, to the extent
applicable in the AICPA Audit and Accounting Guide, Audits of Casinos), in each
case as the same are applicable to the circumstances as of the date of
determination.
"GAMING AUTHORITIES" means, collectively, (a) the Nevada Gaming
Commission, (b) the Nevada State Gaming Control Board, and (c) any other
Governmental Authority that holds regulatory, licensing or permit authority over
gambling, gaming or casino activities conducted by SGC, Company or any of their
respective Subsidiaries within its jurisdiction.
"GAMING LAWS" means all statutes, rules, regulations, ordinances,
codes and administrative or judicial precedents (including, without limitation,
the Nevada Gaming Control Act (N.R.S. Ch. 463)) pursuant to which any Gaming
Authority possesses regulatory, licensing or permit authority over gambling,
gaming or casino activities conducted by SGC, Company or any of their respective
Subsidiaries within its jurisdiction.
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"GAMING LICENSE" means every license, franchise or other authorization
required on the date hereof or hereafter to own, lease, operate or otherwise
conduct gaming operations at the Santa Fe Hotel Facility or other gaming
activities of Company, including, without limitation, all such licenses granted
by any Gaming Authority and any Gaming Laws.
"GOVERNMENTAL AUTHORITY" means any agency, authority, board, bureau,
commission, department, office or instrumentality of any nature whatsoever of
any governmental or quasi-governmental unit, whether federal, state, county,
district, city or other political subdivision or otherwise and whether now or
hereafter in existence, or any officer or official thereof.
"HAZARDOUS MATERIALS" has the meaning set forth in the Company Deed of
Trust.
"HOLDER" and "HOLDERS" has the meaning set forth in the Introduction
to this Agreement and shall include the successors and assigns of any Holder.
"INDEBTEDNESS" of any Person means, without duplication, (i) the
principal of and premium (if any) in respect of (a) indebtedness of such Person
for money borrowed and (b) indebtedness evidenced by notes, debentures, bonds or
other similar instruments for the payment of which such Person is responsible or
liable; (ii) all Capital Lease Obligations of such Person; (iii) all obligations
of such Person issued or assumed as the deferred purchase price of property,
assets or services, all conditional sale obligations and all obligations under
any title retention agreement (but excluding trade accounts payable arising in
the ordinary course of business and due no more than three months from the date
the obligation is incurred, and also excluding trade accounts payable consisting
of fees for professional services); (iv) all obligations of such Person for the
reimbursement of any obligor on any letter of credit, banker's acceptance or
similar credit transaction (other than obligations with respect to letters of
credit securing obligations (other than obligations described in (i) through
(iii) above) entered into in the ordinary course of business of such Person to
the extent such letters of credit are not drawn upon or, if and to the extent
drawn upon, such drawing is reimbursed no later than the third Business Day
following receipt by such Person of a demand for reimbursement following payment
on the letter of credit); (v) all obligations of the type referred to in clauses
(i) through (iv) of other Persons and all dividends of other Persons for the
payment of which, in either case, such Person is responsible or liable as
obligor, guarantor or otherwise; and (vi) all obligations of the type referred
to in clauses (i) through (v) of other Persons secured by any Lien on any
property or asset of such Person (whether or not such obligation is assumed by
such Person), the amount of such obligation being deemed to be the lesser of the
value of such property or asset or the amount of the obligation so secured.
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"INDEPENDENT" when used with respect to any specified Person means a
Person who (i) does not have any material direct or indirect financial interest
in Company, SGC or any other obligor under the Notes or in any Affiliate of
Company, SGC or such other obligor and (ii) is not connected with Company, SGC
or such other obligor or any Affiliate of Company, SGC or such other obligor, as
an officer, employee, promoter, underwriter, trustee, partner, director or
Person performing similar functions. Whenever it is herein provided that any
Independent Person's opinion or certificate shall be furnished to Collateral
Agent, such Person shall be appointed by a written order of Company or SGC, as
applicable, and such opinion or certificate shall state that the signer has read
this definition and that the signer is Independent within the meaning hereof.
"INDEPENDENT FINANCIAL ADVISOR" means an accounting, appraisal or
investment banking firm of nationally recognized standing that is, in the
judgment of Company's Board of Directors, (i) qualified to perform the task for
which it has been engaged, and (ii) disinterested and Independent with respect
to Company, all of its Subsidiaries and each Affiliate and Related Person of
Company and/or the Lowden Family that is involved in an Affiliate Transaction or
other transaction with respect to which such firm has been engaged.
"INITIAL HOLDERS" means CSFB and SunAmerica.
"INTANGIBLE ASSETS" means the amount of (i) all Restricted Investments
in unconsolidated Subsidiaries and in Persons which are not Subsidiaries
(except, in each case, Restricted Investments which are readily marketable,
valued at the lower of cost or market value), and (ii) all unamortized debt
discount and expense, unamortized deferred charges, goodwill, patents,
trademarks, service marks, trade names, copyrights, organization and development
expenses and other intangible items, all of the foregoing as determined in
accordance with GAAP.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended, or any successor statutes.
"JOINT VENTURE" means a joint venture, partnership or other similar
arrangement, whether in corporate, partnership, limited liability company or
other legal form; PROVIDED that in no event shall any corporate Subsidiary of
any Person be considered to be a Joint Venture to which such Person is a party.
"JUNIOR SUBORDINATED NOTES" means the Junior Subordinated Notes under
and as defined in the Certificate of Designation of the SGC Preferred Stock or
any other securities that are issued in exchange for or to redeem, acquire or
otherwise pay SGC Preferred Stock.
"LATE CHARGES" has the meaning assigned to such term in subsection
2.4D hereof.
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"LIEN" means any lien, mortgage, pledge, assignment, security
interest, charge or encumbrance of any kind (including any conditional sale or
other title retention agreement, any lease in the nature thereof, any agreement
to give any security interest and any mechanic's liens) and any option, trust or
other preferential arrangement having the practical effect of any of the
foregoing.
"LOAN NOTICE" has the meaning assigned to such term in subsection 3.2C
hereof.
"LOWDEN FAMILY" means Mr. Paul Lowden and Mrs. Suzanne Lowden and the
executors, administrators or legal representatives of their estates, heirs,
distributees and beneficiaries, any trust as to which any of the foregoing is a
settlor or co-settlor, any trustee of the estate of any of the foregoing that is
bankrupt or insolvent, any guardian or conservator of any of the foregoing that
is adjudged disabled or incompetent, and any corporation, partnership or other
entity which is an Affiliate of any of the foregoing. Lowden Family shall also
mean any lineal descendants of the grandparents of such Persons, but only to the
extent that the beneficial ownership of the Voting Stock held by such lineal
descendants was directly received (by gift, trust or sale) from any such Person.
"LOWDEN FAMILY DISCLOSURE" has the meaning assigned to such term in
subsection 6.1 hereof.
"LOWDEN FAMILY PAYMENT" means any direct or indirect compensation,
salary, bonus or other payment or distribution or transfer of any nature made to
Mr. Paul Lowden or any other Person described in the definition of Lowden
Family, other than (i) any payment, distribution or transfer consisting solely
of shares of common stock of SGC or warrants, options and/or other rights to
acquire common stock of SGC or (ii) distributions made generally to the
shareholders of SGC in respect of their Capital Stock that are not prohibited
under this Agreement.
"MARKETABLE SECURITIES" means (i) Cash; (ii) securities issued or
fully guaranteed or insured by the United States Government or any agency
thereof having maturities of not more than six months from the date of
acquisition; (iii) certificates of deposit, time deposits, Eurodollar time
deposits, or bankers' acceptances having in each case a term of not more than
six months from the date of acquisition, issued by any commercial bank organized
under the laws of the United States of America or any state thereof or the
District of Columbia, each having combined capital and surplus of not less than
$500,000,000 and having a rating of "A" or better from both Standard & Poor's
Corporation and Moody's Investors Service, Inc.; (iv) commercial paper of an
issuer rated at least A-1 by Standard & Poor's Corporation or P-1 by Moody's
Investors Services, Inc. and in either case having a term of not more than three
months; or (v) any fund investing exclusively in investments of the types
described in clauses (i) through (iv) above, and if such fund has at least
$500,000,000 under management, including investments in repurchase obligations
of the foregoing investments.
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"MATERIAL ADVERSE EFFECT" means (i) a material adverse effect upon the
business, operations, properties, assets, liabilities or condition (financial or
otherwise) of SGC and its Subsidiaries, taken as a whole, the Santa Fe Hotel
Facility or Company or (ii) the impairment of the ability of any Credit Party to
perform, or of Collateral Agent or any Holder to enforce, any of the
Obligations.
"MULTIEMPLOYER PLAN" means a "multiemployer plan", as defined in
Section 3(37) of ERISA, to which SGC, Company or any of their respective ERISA
Affiliates is contributing or has an obligation to contribute to, or to which
such an obligation existed, or contribution was made within the last six years,
or to which Company or any of its ERISA Affiliates has, or ever has had, an
obligation to contribute.
"NOTES" means the $14,000,000 in principal amount of Company's 9.50%
Notes due December 15, 2000 issued to SunAmerica and CSFB on the Effective Date,
as they may hereafter be amended, modified or otherwise supplemented or replaced
from time to time.
"OBLIGATIONS" means all obligations of every nature of Company and
each other Credit Party from time to time owed to Collateral Agent, Holders or
any of them under this Agreement, the Notes or any other Basic Document, whether
for principal, interest, fees, expenses, indemnification or otherwise and
whether or not the obligation is allowed as a claim in any proceeding referred
to in subsection 7.6 or 7.7.
"OFFICERS' CERTIFICATE" means, as applied to any corporation, a
certificate executed on behalf of such corporation by (i) its chairman of the
board (if an officer) or its president or one of its vice presidents and
(ii) its chief financial officer or its treasurer.
"PBGC" means the Pension Benefit Guaranty Corporation (or any
successor thereto).
"PDS" means PDS Financial Corporation-Nevada, a Nevada corporation.
"PENSION PLAN" means any Employee Benefit Plan, other than a
Multiemployer Plan, which is subject to Section 412 of the Internal Revenue Code
or Section 302 of ERISA.
"PERMITTED ADDITIONAL INDEBTEDNESS" means (i) Permitted Refinancing
Indebtedness; (ii) nonrecourse Indebtedness solely to finance the purchase of
furniture, fixtures or equipment for use in the operations of Permitted Lines of
Business secured by a Lien on such furniture, fixtures or equipment (including
gaming equipment); (iii) Indebtedness payable to any of, or among, Company and
any Subsidiary; (iv) recourse Indebtedness not exceeding $2,000,000 in the
aggregate incurred solely to finance the purchase of furniture, fixtures or
equipment for use in the operations of Permitted Lines of Business; (v)
Indebtedness under any revolving credit facilities and/or term loans;
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PROVIDED that the aggregate amount of such Indebtedness outstanding at any
time shall not exceed $5,000,000; (vi) Indebtedness of Company or any
Subsidiary outstanding as of December 29, 1993 and identified as such on
Schedule 3.1D annexed hereto; (vii) to the extent that such incurrence does
not result in the incurrence by Company or any Subsidiary of any obligation
for the payment of borrowed money of others, Indebtedness incurred solely in
respect of performance bonds and completion guarantees; and (viii) other
Indebtedness; PROVIDED that (a) Company's Consolidated Coverage Ratio,
calculated cumulatively for the four most recent consecutive fiscal quarters
of Company and ending prior to the date of incurrence of such Indebtedness
(giving effect to (1) the incurrence of such Indebtedness as if it had
occurred on the first day of such four-quarter period and (2) the repayment
of any other Indebtedness being repaid with proceeds from such Indebtedness
as if such other Indebtedness had been repaid at the beginning of such
four-quarter period), shall not be less than 2.0-to-1.0, (b) the aggregate
amount of such Indebtedness (excluding any such Indebtedness incurred to
finance the acquisition of gaming equipment, which may equal 100% of the
acquisition cost of such gaming equipment) does not exceed 75% of the costs
of the projects and assets with respect to which such Indebtedness is
incurred and (c) such Indebtedness does not mature or require payments of
principal or partial redemption prior to maturity of the Notes.
"PERMITTED GROUND LEASE" means the proposed ground lease, and any
related documents entered into in connection therewith, by Company to a third
party developer of approximately three acres of real property included in the
Santa Fe Hotel Premises, all as more fully described in Proposal Three of the
Company Indenture Consent Solicitation and as approved by Requisite Holders
pursuant to subsection 5.12A hereof.
"PERMITTED GROUND LEASE ENCUMBRANCES" means any easements,
rights-of-way or other restrictions granted by Company and/or the ground
lessee in connection with the Permitted Ground Lease, as such easements,
rights-of-way and restrictions are approved by Requisite Holders pursuant to
subsection 5.12B hereof.
"PERMITTED LIENS" means (i) statutory Liens to secure the performance
of obligations, surety or appeal bonds, performance bonds or other obligations
of a like nature (including, without limitation, mechanic's, worker's, material
provider's and maritime Liens) incurred in the ordinary course of business
(exclusive of obligations in respect of the payment of borrowed money), or for
Taxes, assessments or governmental charges or claims; PROVIDED that in each case
the obligations are not yet delinquent or are being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted and any
reserve or other appropriate provision for accounting purposes as shall be
required in conformity with GAAP shall have been made therefore; (ii) subleases
granted to others not interfering in any material respect with the business of
Company or any Subsidiary; (iii) leases (other than ground leases) identified on
Schedule 1.1C annexed hereto or entered into after the Effective Date in respect
of the real property on which facilities owned or leased by Company are located;
PROVIDED that any
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such leases which are entered into after the Effective Date shall be related
to, and shall not interfere in any material respect with, the operations of,
or the revenues derived from, the Santa Fe Hotel Facility as operated by
Company on the Effective Date; (iv) the Permitted Ground Lease and any
Permitted Ground Lease Encumbrances; (v) Liens arising from UCC financing
statements regarding property leased by Company or any Subsidiary otherwise
permitted hereunder; (vi) easements, rights-of-way, navigational servitudes,
restrictions, minor defects or irregularities in title and other similar
charges or encumbrances that do not interfere in any material respect with
the ordinary conduct of business of Company or any Subsidiary; (vii) Liens in
existence as of the Effective Date and identified as such on Schedule 1.1C
annexed hereto; (viii) Liens granted by third party lessors or fee owners
with respect to real property as to which Company or a Subsidiary has a
leasehold interest and which are identified on Schedule 1.1C annexed hereto;
(ix) Liens created by any of the "Collateral Documents" as defined in the
Company Indenture, which Liens on Collateral are subject to the Subordination
and Intercreditor Agreement; (x) Liens with respect to the equipment listed
on Schedule 1.1C annexed hereto granted to secure the SFHI Notes; (xi)
purchase money security interests granted in connection with Indebtedness
incurred pursuant to clause (ii) of the definition of Permitted Additional
Indebtedness; PROVIDED that all such purchase money security interests shall
be limited to property acquired with the proceeds of such Indebtedness; and
(xii) Liens granted by the ground lessee under the Permitted Ground Lease
which are limited to the leasehold interest of such ground lessee under the
Permitted Ground Lease and related property owned by such ground lessee.
"PERMITTED LINES OF BUSINESS" means the existing gaming businesses of
Company and its Subsidiaries, and hotel, restaurant and other businesses related
to, or supportive of, such gaming businesses.
"PERMITTED REFINANCING INDEBTEDNESS" means Indebtedness of Company or
a Subsidiary (i) issued in exchange for, or (ii) the proceeds from the issuance
and sale or disbursement of which are used to substantially concurrently repay,
redeem, refund, refinance, discharge or otherwise retire for value, in whole or
in part (collectively, "repayment"), or constituting an amendment, modification
or supplement to, or a deferral or renewal of (collectively, an "amendment"),
any Indebtedness of Company or a Subsidiary (and any penalties, fees and
expenses actually incurred by Company or such Subsidiary in connection with the
repayment or amendment thereof) existing immediately after the original issuance
of the Notes or incurred pursuant to subsection 6.6, in a principal amount (or,
if such Permitted Refinancing Indebtedness provides for an amount less than the
principal amount thereof to be due and payable upon the acceleration thereof,
with an original issue price) not to exceed (a) the principal amount of the
Indebtedness so refinanced (or, if such Permitted Refinancing Indebtedness
refinances Indebtedness under a revolving credit facility or other agreement
providing a commitment for subsequent borrowings, with a maximum commitment not
to exceed the maximum commitment under such revolving credit facility or other
agreement) PLUS (b) unpaid accrued interest on such Indebtedness PLUS (c)
penalties, fees and expenses actually
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incurred by Company or such Subsidiary, as the case may be, in connection
with the repayment or amendment thereof; PROVIDED that Permitted Refinancing
Indebtedness of Company that constitutes a repayment of or an amendment to
Subordinated Indebtedness shall not have an Average Life less than the
Indebtedness to be so refinanced at the time of such incurrence, and shall
contain subordination and default provisions no less favorable in any
material respect to Holders of the Notes than those contained in such repaid
or amended Indebtedness.
"PERSON" means and includes natural persons, corporations, limited
liability companies, limited partnerships, general partnerships, limited
liability partnerships, joint stock companies, Joint Ventures, associations,
companies, trusts, banks and other organizations, whether or not legal entities,
and governments and agencies and political subdivisions thereof.
"PIONEER INDENTURE" means that certain Indenture dated as of
December 1, 1988 among Pioneer Finance Corp., Sahara Casino Partners, L.P., as
Guarantor, and Security Pacific National Bank, as Trustee, as amended by the
First Supplemental Indenture dated as of December 21, 1988, the Second
Supplemental Indenture dated as of September 30, 1993 among Pioneer Finance
Corp., Sahara Casino Partners, L.P., Pioneer Operating Limited Partnership,
Pioneer Hotel, Inc., SGC, as successor Guarantor, and Bank of America National
Trust and Savings Association, as Trustee, and the Third Supplemental Indenture
dated as of August 31, 1995 among Pioneer Finance Corp., SGC and Company
Indenture Trustee, as Trustee.
"POTENTIAL EVENT OF DEFAULT" means a condition or event that, after
notice or lapse of time or both, would constitute an Event of Default.
"REDEEMABLE STOCK" means any Capital Stock that by its terms or
otherwise is, or upon the happening of an event would be, required to be
redeemed or repurchased, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the holder thereof, in whole or in part, at any
time; PROVIDED, HOWEVER, that Capital Stock shall not be deemed to be Redeemable
Stock solely because such Capital Stock is redeemable in the event that the
holder thereof is not found suitable by a Gaming Authority.
"RELATED PERSON" of any Person means (i)(a) if such Person is a
corporation, any Person who is a director or officer (1) of such Person, (2) of
any Subsidiary of such Person or (3) of any Affiliate of such Person or (b) if
such Person is an individual, any immediate family member or lineal descendent
of such Person or spouse of such immediate family member or of such lineal
descendant, (ii) any Affiliate of any Person included in clause (i) and any
Person who is a director or officer of such Affiliate, or (iii) where such
Person is Company, any Subsidiary or SGC or any member of the Lowden Family,
until such time as a Change of Control shall occur.
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"RELEASE" has the meaning set forth in the Company Deed of Trust.
"REQUISITE HOLDERS" means Holders having or holding more than 50% of
the principal balance of the outstanding Notes.
"RESTRICTED COMPANY PAYMENT" means, as applied to any Person, (i) any
dividend on, or any distribution in respect of, or other means to purchase,
redeem or retire for value, any Capital Stock of Company or any Subsidiary,
other than, in the case of Company, through the issuance (as a dividend or stock
split thereon or in exchange therefor) solely of Company's own Capital Stock
(excluding Exchangeable Stock or Redeemable Stock) and, in the case of a
Subsidiary, with respect to shares of its Capital Stock owned, directly or
indirectly, by Company; and (ii) any principal payment on, or redemption,
repurchase, defeasance or other means to acquire or retire for value,
Subordinated Indebtedness during the continuance of any Event of Default
hereunder or prior to any scheduled principal payment or maturity.
"RESTRICTED INVESTMENT" means any guarantee of Indebtedness of, or any
loan or advancement to, or other investment in, any Affiliate or Related Person
of Company or of a Subsidiary.
"RESTRICTED SGC PAYMENT" means (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class of
Capital Stock of SGC now or hereafter outstanding, except a dividend payable
solely in shares of that class of Capital Stock to the holders of that class
or in options, warrants or other rights to purchase such Capital Stock, (ii)
any redemption, retirement, sinking fund or similar payment, purchase or
other acquisition for value, direct or indirect, of any shares of any class
of Capital Stock of SGC now or hereafter outstanding (other than in exchange
for Capital Stock of SGC or options, warrants or other rights to purchase
such Capital Stock), (iii) any payment made to retire, or to obtain the
surrender of, any outstanding warrants, options or other rights to acquire
shares of any class of Capital Stock of SGC now or hereafter outstanding, and
(iv) any payment or prepayment of principal of, premium, if any, or
redemption, purchase, retirement, defeasance (including in-substance or legal
defeasance), sinking fund or similar payment with respect to, any
Indebtedness of Company to SGC or any of SGC's Subsidiaries or Affiliates or
with respect to any Junior Subordinated Notes.
"SANTA FE HOTEL APPRAISAL" means a self-contained MAI appraisal of the
Santa Fe Hotel Facility, prepared to USPAP standards for loan purposes by an MAI
appraiser acceptable to Holders and licensed as an appraiser in the State of
Nevada, which shall be in form, scope and substance satisfactory to Requisite
Holders.
"SANTA FE HOTEL DOCUMENTS" means any and all agreements, contracts,
obligations, arrangements or understandings (whether written or oral and whether
express or implied), and other documents (including, without limitation, the
agreements and other documents specified on Schedule 1.1A annexed hereto) which
relate to the Santa Fe
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Hotel Facility and affect the priority of the Lien of the Company Deed of
Trust or which constitute Contractual Obligations; PROVIDED that any such
documentation in respect of leased or purchased furniture, fixtures or
equipment having a net book value of less than $1,000,000 shall not be
considered a Santa Fe Hotel Document.
"SANTA FE HOTEL FACILITY" means the Santa Fe Hotel Premises and the
Santa Fe Hotel Improvements.
"SANTA FE HOTEL IMPROVEMENTS" means all buildings, structures,
facilities and other improvements of every kind and description (if any) now
or hereafter located on the Santa Fe Hotel Premises, including all parking
areas, roads, driveways, walks, fences, walls, beams, recreation facilities,
drainage facilities, lighting facilities and other site improvements, all
water, sanitary and storm sewer, drainage, electricity, steam, gas, telephone
and other utility equipment and facilities, all plumbing, lighting, heating,
ventilating, air-conditioning, refrigerating, incinerating, compacting, fire
protection and sprinkler, surveillance and security, vacuum cleaning, public
address and communications equipment and systems, all screens, awnings, floor
coverings, partitions, elevators, escalators, motors, machinery, pipes,
fittings and other items of equipment and personal property of every kind and
description now or hereafter located on the Santa Fe Hotel Premises or
attached to the improvements that by the nature of their location thereon or
attachment thereto are real property under applicable law; and including all
materials intended for the construction, reconstruction, repair, replacement,
alteration, addition or improvement of or to such buildings, equipment,
fixtures, structures and improvements; PROVIDED that gaming equipment which
is subject to regulation pursuant to any Gaming Law shall not be considered a
Santa Fe Hotel Improvement.
"SANTA FE HOTEL PREMISES" means the real property owned by Company on
the Effective Date relating to the Santa Fe Hotel & Casino and situated in Las
Vegas, Nevada and more particularly described on Schedule 1.1B annexed hereto.
"SECURITIES ACT" means the Securities Act of 1933, as it may be
amended from time to time.
"SFHI NOTES" means (i) the amended and restated promissory note issued
by Company to SGC in a principal amount not exceeding $4,961,556 dated as of
April 14, 1998 and (ii) the amended and restated promissory note issued by
Company to SGC in a principal amount not exceeding $4,978,440 dated as of April
14, 1998, each as amended, supplemented, extended or otherwise modified from
time to time.
"SGC" has the meaning set forth in the Introduction to this Agreement.
"SGC GUARANTY" means the Guaranty to be issued by SGC as of the
Effective Date, substantially in the form attached hereto as Exhibit II, as it
may thereafter be amended, supplemented or otherwise modified from time to time.
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"SGC PREFERRED STOCK" means SGC's Exchangeable Redeemable Preferred
Stock, $2.14 liquidation preference per share, issued prior to the Effective
Date pursuant to the Certificate of Designation for Exchangeable Redeemable
Preferred Stock.
"STRUCTURING ADVISORY FEE" has the meaning assigned to such term in
subsection 2.4E hereof.
"SUBORDINATED INDEBTEDNESS" means any Indebtedness of Company or a
Subsidiary (whether outstanding on the date of this Agreement or thereafter
incurred) that is by its terms subordinate or junior in right of payment to the
Notes.
"SUBORDINATION AND INTERCREDITOR AGREEMENT" means the Subordination
and Intercreditor Agreement to be entered into by Company, SunAmerica and
Company Indenture Trustee as of the Effective Date substantially in the form of
Exhibit VI annexed hereto, as it may thereafter be amended, supplemented or
otherwise modified from time to time, pursuant to which the Lien of the Company
Indenture Deed of Trust is subordinated to the Lien of the Company Deed of Trust
and certain additional agreements are made by the parties to the Company
Indenture and this Agreement regarding their respective obligations thereunder.
"SUBSIDIARY" means, with respect to any Person, any corporation,
partnership, association, limited liability company, Joint Venture or other
business entity of which more than 50% of the total voting power of shares of
stock or other ownership interests entitled (without regard to the occurrence of
any contingency) to vote in the election of the Person or Persons (whether
directors, managers, trustees or other Persons performing similar functions)
having the power to direct or cause the direction of the management and policies
thereof is at the time owned or controlled, directly or indirectly, by that
Person or one or more of the other Subsidiaries of that Person or a combination
thereof.
"SUNAMERICA" has the meaning set forth in the Introduction to this
Agreement.
"TAX" means any federal, state, county, local or foreign taxes,
charges, fees, levies, other assessments, or withholding taxes or charges
imposed by any Governmental Authority, and includes any interest and penalties
(civil or criminal) or additions to any such taxes.
"TITLE COMPANY" has the meaning assigned to such term in subsection
4.1E hereof.
"TITLE POLICY" has the meaning assigned to such term in subsection
4.1E hereof
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"UNSUITABILITY DATE" has the meaning assigned to such term in
subsection 2.5D(i) hereof.
"UNSUITABLE HOLDER" has the meaning assigned to such term in
subsection 2.5D(i) hereof.
"VOTING STOCK" means any class of Capital Stock of any Person then
outstanding entitled to vote in elections of directors (without regard to the
occurrence of any contingency).
1.2 ACCOUNTING TERMS; UTILIZATION OF GAAP FOR PURPOSES OF CALCULATIONS
UNDER AGREEMENT. Except as otherwise expressly provided in this Agreement, all
accounting terms not otherwise defined herein shall have the meanings assigned
to them in conformity with GAAP. Financial statements and other information
required to be delivered by SGC or Company to Holders pursuant to subsections
5.1A and 5.1B shall be prepared in accordance with GAAP as in effect at the time
of such preparation (and delivered together with the reconciliation statements
provided for in subsection 5.1C). Calculations in connection with the
definitions, covenants and other provisions of this Agreement shall utilize
accounting principles and policies in conformity with those used to prepare the
financial statements referred to in subsection 3.3.
1.3 OTHER DEFINITIONAL PROVISIONS. References to "Sections" and
"subsections" shall be to Sections and subsections, respectively, of this
Agreement unless otherwise specifically provided. Any of the terms defined in
subsection 1.1 may, unless the context otherwise requires, be used in the
singular or the plural, depending on the reference.
SECTION 2. THE NOTES; CLOSING; DELIVERY
2.1 AUTHORIZATION OF ISSUANCE OF NOTES. Company has authorized the
issuance and sale of Notes in an aggregate principal amount of $7,000,000 to
CSFB, as a Holder, and the issuance and sale of Notes in an aggregate principal
amount of $7,000,000 to SunAmerica, as a Holder, pursuant to the terms and
conditions hereof and as provided herein.
2.2 PURCHASE AND SALE OF NOTES. On the Effective Date, subject to the
terms and conditions hereof, (i) SunAmerica shall pay the $7,000,000
subscription price of the Note to be purchased by SunAmerica (the "SUNAMERICA
NOTE"), $6.93 million of which shall be paid to Company or at its direction in
Cash by wire transfer of immediately available funds against delivery to
SunAmerica of the SunAmerica Note, and the remaining $70,000 of which shall be
credited against the subscription price of the SunAmerica Note and retained by
SunAmerica as its share of the Structuring Advisory Fee and (ii) CSFB shall pay
the $7,000,000 subscription price of the Note to be purchased
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by CSFB (the "CSFB NOTE"), $6.93 million of which shall be paid to Company or
at its direction in Cash by wire transfer of immediately available funds
against delivery to CSFB of the CSFB Note, and the remaining $70,000 of which
shall be credited against the subscription price of the CSFB Note and
retained by CSFB as its share of the Structuring Advisory Fee.
2.3 CLOSING AND DELIVERY OF NOTES. A pre-closing of the purchase and sale
of the Notes shall be held at O'Melveny & Myers LLP, 400 South Hope Street, Los
Angeles, CA on April 13, 1998 or at such other time and place as the parties may
agree upon. The "CLOSING", as used herein, shall mean the date that the Company
Deed of Trust is recorded and all conditions to the Effective Date hereunder
have been satisfied or waived by Holders. Subject to the terms of this
Agreement, at the Closing, Company shall deliver to CSFB a Note in the aggregate
principal amount of $7,000,000 and to SunAmerica a Note in the aggregate
principal amount of $7,000,000, and Company shall satisfy the terms and
conditions of the Closing set forth in subsection 4.1. If at the Closing
Company shall fail to tender the Notes to Holders as provided above in this
subsection 2.3 and in subsection 2.2, or any of the terms or conditions
specified in subsection 4.1 shall not have been fulfilled to each Holder's
satisfaction, Holders shall, at their election, be relieved of all further
obligations under this Agreement to purchase the Notes. In no event shall the
Closing occur after April 15, 1998.
2.4 CERTAIN TERMS OF THE NOTES; PAYMENT OF INTEREST.
A. INTEREST. The Notes shall bear interest at a rate of 9.50% per
annum, computed on the basis of a 360-day year of twelve 30 day months.
Interest on the Notes shall be payable quarterly on March 15, June 15, September
15 and December 15 of each year, commencing June 15, 1998 and at the scheduled
maturity of the Notes on December 15, 2000. In addition to the foregoing,
interest on the Notes shall be payable on and to any date of any prepayment,
redemption or other payment of the Notes (to the extent accrued on the amount of
the prepayment, redemption or other payment) and at maturity (including at any
accelerated maturity).
B. STATED MATURITY. The principal evidenced by the Notes matures on
December 15, 2000, and on such date, or on any accelerated maturity, the full
amount of principal then outstanding, and all accrued and unpaid interest
thereon, shall be due and payable.
C. POST-MATURITY INTEREST. From the occurrence and during the
continuance of an Event of Default, the principal of the Notes and, to the
extent permitted by applicable law, all accrued interest on the Notes and any
fees or other amounts owed hereunder shall bear interest (including
post-petition interest in any proceeding under the Bankruptcy Code or other
applicable bankruptcy laws) compounded monthly payable on demand at a rate
which is 2% per annum in excess of the interest rate otherwise payable under
this Agreement with respect to the Notes (or, in the case of
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any such fees and other amounts, at a rate which is 2% per annum in excess of
the interest rate otherwise payable under the Notes). Payment or acceptance
of the increased rates of interest provided for in this subsection 2.4C is
not a permitted alternative to timely payment and shall not constitute a
waiver of any Event of Default or otherwise prejudice or limit any rights or
remedies of Collateral Agent or any Holder. For the purpose of complying
with N.R.S. 99.050, Company hereby declares that it understands that to the
extent interest accrued under the Notes, Late Charges or other fees and
accruals under this Agreement and the other Basic Documents are added to the
outstanding principal owing hereunder and the other Basic Documents, a
compounding of interest results, which compounding is agreed to by Company as
a part of the terms of this Agreement and the other Basic Documents.
D. LATE CHARGES. If any payment of principal and/or interest or any
other amount payable hereunder or under the other Basic Documents is not paid
when due, Company shall pay to each Holder, on demand, a late charge (the "LATE
CHARGE") of five cents ($0.05) for each dollar so overdue in order to compensate
such Holder for its loss of the timely use of the money and frustration of such
Holder in the meeting of its financial commitments. Nothing contained herein
shall constitute an extension of any due date for, or a waiver of any Obligation
to pay, any amounts payable hereunder or under the other Basic Documents.
E. STRUCTURING ADVISORY FEE. On the Effective Date, Company shall
pay to Initial Holders a structuring advisory fee in the amount of $140,000 (the
"STRUCTURING ADVISORY FEE"), which Structuring Advisory Fee shall be credited
against the subscription price of the Notes as set forth in subsection 2.2
hereof.
2.5 GENERAL PROVISIONS REGARDING PAYMENTS; OPTIONAL REDEMPTION; MANDATORY
REDEMPTION AND CHANGE IN CONTROL REPURCHASE.
A. GENERAL PROVISIONS REGARDING PAYMENTS.
(i) MANNER AND TIME OF PAYMENT. All payments by Company of
principal, interest, fees and other Obligations hereunder and under the
Notes shall be made in Dollars in same day funds, without reductions of any
payment on account of any defense, set-off or counterclaim, free of any
restriction or condition and without surrender or presentation of such
Note, and delivered to the applicable Holder not later than 11:00 A.M. (Los
Angeles time) on the date due at its address and in the manner set forth on
Schedule 2 annexed hereto (or at such other place and in such other manner
as such Holder may designate from time to time by written notice to
Company). Funds received by the applicable Holder after that time on such
due date shall be deemed to have been paid by Company on the next
succeeding Business Day. Whenever any payment to be made hereunder shall
be stated to be due on a day that is not a Business Day, such payment shall
be made on the next succeeding Business Day.
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(ii) APPLICATION AND APPORTIONMENT OF PAYMENTS. All payments made
hereunder shall be applied FIRST to Late Charges, costs and expenses owing
to Collateral Agent and then to Holders hereunder and under the other Basic
Documents, SECOND to accrued interest due under the Notes pari passu
according to the principal balance of each Note as provided below, and
THIRD to the principal balance of the Notes pari passu according to the
principal balance of each Note as provided below. Subject to subsection
2.5E, aggregate principal, interest and applicable late charge payments
shall be ratably apportioned among all outstanding Notes to which such
payments relate.
(iii) NOTATION OF PAYMENT. Each Holder agrees that before
disposing of any Note held by it, or any part thereof (other than by
granting participations therein), such Holder shall make a notation thereon
of all principal payments previously made thereon and of the date to which
interest thereon has been paid; PROVIDED that the failure to make (or any
error in the making of) a notation on the Note shall not limit or otherwise
affect the Obligations of Company hereunder or under such Note or any
payments of principal or interest on such Note.
B. OPTIONAL REDEMPTION. The Notes shall be redeemable at any time
in whole or in part at the option of Company at a price paid in immediately
available funds of (i) 101% of the principal amount thereof from the Effective
Date to June 15, 2000 and (ii) 100% of the principal amount thereof from and
after such date, in each case together with accrued interest to the redemption
date. Company shall give Holders not less than thirty days prior written notice
of a redemption pursuant to this subsection 2.5B and shall not redeem Notes
pursuant to this subsection 2.5B except in a minimum aggregate principal amount
of $1,000,000 and integral multiples of $100,000 thereof.
C. MANDATORY REDEMPTION AND CHANGE IN CONTROL REPURCHASE.
(i) PAYMENT REQUIRED UNDER COMPANY DEED OF TRUST. Company shall
redeem or otherwise pay the principal amount of the Notes and accrued
interest thereon as required pursuant to the Company Deed of Trust, at a
redemption price equal to the redemption price payable in connection with
the optional redemption of Notes, pursuant to subsection 2.5B, plus accrued
and unpaid interest thereon to the redemption date.
(ii) CHANGE-OF-CONTROL REPURCHASE. If there is a Change of Control
(the date of such Change of Control being the "CHANGE OF CONTROL DATE"),
then Company shall promptly thereafter notify each Holder in writing of
such occurrence and not later than ten Business Days after such Change of
Control Date shall commence an offer to repurchase (the "CHANGE OF CONTROL
REPURCHASE OFFER") all of the outstanding Notes on the Change of Control
Payment Date (as defined below) at a purchase price in Cash equal to 101%
of the aggregate principal amount of the Notes plus accrued and unpaid
interest to the date of
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repurchase (and at no other premium). The Change of Control Repurchase
Offer shall remain open for 20 Business Days following the date Company
mails notice of the Change of Control Repurchase Offer to Holders or
such longer period required by applicable law (the "CHANGE OF CONTROL
PAYMENT DATE"). Notice of a Change of Control Repurchase Offer shall
be mailed by Company to Holders of the Notes at their last registered
addresses with copies to Collateral Agent. The notice shall contain
all instructions and materials necessary to enable such Holders to tender
Notes pursuant to the Change of Control Repurchase Offer. The notice
shall state:
(1) that the Change of Control Repurchase Offer is being made
pursuant to this subsection 2.5C(ii), that Notes may be surrendered in
whole or in part (in denominations of $1,000 and integral multiples
thereof), and that all Notes tendered shall be accepted for payment;
(2) that any Notes not tendered shall continue to accrue
interest;
(3) that any Notes accepted for payment pursuant to the Change
of Control Repurchase Offer shall cease to accrue interest after the
date on which such Notes are paid;
(4) that Holders electing to have Notes purchased pursuant to a
Change of Control Repurchase Offer shall be required to surrender
their Notes, with the form entitled "Option of Holder to Elect
Repurchase" on the reverse of the Note completed, to Company prior to
the close of business on the Change of Control Payment Date;
(5) that each Holder shall be entitled to withdraw its election
if Company receives, not later than the close of business on the
Business Day immediately preceding the Change of Control Payment Date,
a telegram, telex, facsimile transmission or letter setting forth the
name of such Holder, the principal amount of Notes such Holder
delivered for purchase and a statement that such Holder is withdrawing
such Holder's election to have such Notes purchased;
(6) that Holders whose Notes are tendered only in part shall be
issued Notes representing the unpurchased portion of the Notes
surrendered;
(7) the instructions which Holders must follow in order to
tender their Notes; and
(8) the circumstances and relevant facts regarding such Change
of Control (including but not limited to information with respect to
pro forma historical financial information after giving effect to such
Change of Control,
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information regarding the Persons acquiring control and such Persons'
business plans going forward).
On the Change of Control Payment Date, Company shall (A) accept for
payment Notes or portions thereof tendered pursuant to the Change of
Control Repurchase Offer, (B) promptly transfer to Holders immediately
available funds sufficient to pay the purchase price of all Notes or
portions thereof so tendered and (C) promptly deliver to such Holders a new
Note equal in principal amount to any unpurchased portion of the Note
surrendered. If the events which give rise to a Change of Control
Repurchase Offer cease to exist prior to completion of such repurchase
offer, then Company shall not be obligated to repurchase any of the Notes
and may revoke any offer set forth above (whether before or after
acceptance thereof by any Holder) and shall not be liable to make the
payments set forth above with respect to any revoked offer.
D. REPURCHASE PURSUANT TO ANY GAMING LAW.
(i) If required to be found suitable by any Gaming Authority, all
Holders and beneficial owners of Notes, whether Initial Holders, beneficial
owners or subsequent transferees, shall be subject to the suitability provisions
of the applicable Gaming Law and shall apply for a finding of suitability within
the earlier of (i) 30 days after the applicable Gaming Authority requests that
such Holder or beneficial owner apply for a finding of suitability, or (ii) the
time period prescribed by such Gaming Authority for such application. Any
Holder or beneficial owner required to be found suitable shall pay all costs of
the investigation for such finding. In the event that any Gaming Authority
determines that any Holder or beneficial owner is not suitable under such Gaming
Authority's Gaming Laws or such Holder or beneficial owner fails to submit for a
finding of suitability as required by such Gaming Authority in its sole
discretion, then, promptly after the date (the "UNSUITABILITY DATE") that such
Holder or beneficial owner (the "UNSUITABLE HOLDER") is found unsuitable or
fails to submit for a finding of suitability, SGC and Company shall provide
written notice to that effect to such Unsuitable Holder and the Unsuitable
Holder must thereafter dispose of, pursuant to subsection 2.5D(ii), all Notes
the Unsuitable Holder then possesses, either directly, indirectly or
beneficially. Immediately upon the Unsuitability Date, the Unsuitable Holder
shall have no further right (a) to exercise, directly or indirectly, through any
trustee or nominee or any other Person or entity, any right conferred by any
Note(s) and (b) to receive any interest or any other distribution or payment
with respect to any such Note(s) or any remuneration in any form from Company or
SGC; PROVIDED, HOWEVER, that after the Unsuitability Date, interest on any such
Note(s) shall continue to accrue for the benefit of any subsequent Holder
thereof.
(ii) Within 30 days after receipt of the notice referred to in
clause (i) above or such shorter period as the Gaming Authorities may
prescribe, (1) the Unsuitable Holder shall sell its Note(s) either directly
or through a bona fide brokerage
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transaction, in either case on arm's-length terms, to a Person who has not
previously been found unsuitable by the Gaming Authorities and who is not an
Affiliate of the Unsuitable Holder or (2) at the election of Company, Company
may redeem such Unsuitable Holder's Notes at the lower of (i) the principal
amount thereof, or (ii) the amount which the Unsuitable Holder paid for the
Note(s), together in either case with accrued interest up to the
Unsuitability Date.
(iii) The provisions of this subsection 2.5D shall be construed in
accordance with the provisions of the applicable Gaming Laws.
E. PRO RATA REDEMPTION. Except as otherwise provided in this
Agreement, in the event of any redemption in which the aggregate principal
amount of Notes to be redeemed is less than the entire principal amount of Notes
outstanding, Company shall apply all payments made hereunder FIRST to fees, Late
Charges, costs and expenses owing to Collateral Agent hereunder and under the
other Basic Documents, SECOND to accrued interest due under the Notes pro rata
and THIRD to the principal balance of the Notes pro rata (with such adjustments
as may be deemed appropriate by Company so that only Notes in denominations of
$1,000, or integral multiples thereof, shall be purchased). Holders whose Notes
are purchased only in part shall be issued new Notes equal in principal amount
to the unpurchased portion of the Notes surrendered in connection with a
redemption.
2.6 REPLACEMENT OF NOTES. Upon receipt of evidence reasonably
satisfactory to Company of the loss, theft, destruction or mutilation of a Note
and upon delivery of an unsecured indemnity agreement reasonably satisfactory to
Company from any Holder of such Note or, in the case of any such mutilation,
upon the surrender of such Note for cancellation to Company at its principal
office, Company, at its expense, shall execute and deliver, in lieu thereof, a
new Note of like tenor, dated in the case of a Note, so that there shall be no
loss of interest. Any Note in lieu of which any such new Note has been so
executed and delivered by Company, thereupon shall not be deemed an outstanding
Note for any purpose under this Agreement. Notwithstanding the foregoing
provisions of this subsection 2.6, if any Note of which SunAmerica or CSFB or
any other institutional Holder is the owner is lost, stolen or destroyed, then
the affidavit of such Holder's Treasurer or Assistant Treasurer (or other
responsible officials), setting forth the name of the owner of such Note and the
circumstances with respect to such loss, theft or destruction, shall be accepted
as satisfactory evidence thereof, and no indemnity shall be required as a
condition to the execution and delivery by Company of a new Note in lieu of such
Note (or as a condition to the payment thereof, if due and payable) other than
SunAmerica's or CSFB's or such Holder's written agreement to indemnify Company.
2.7 TAXES. In the event of the passage of any state, federal, municipal
or other governmental law, order, rule or regulation subsequent to the date
hereof (i) deducting from the value of real property for the purpose of taxation
any Lien or encumbrance thereon or in any manner changing or modifying the laws
now in force governing the
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taxation of the Company Deed of Trust or Indebtedness secured by mortgages
(other than laws governing income, franchise and similar Taxes generally) or
the manner of collecting Taxes thereon and (ii) imposing a Tax to be paid by
Collateral Agent or any Holder, either directly or indirectly, on any of the
Company Deed of Trust, this Agreement, the SGC Guaranty or any of the other
Basic Documents, or requiring an amount of Taxes to be withheld or deducted
therefrom, SGC and Company shall promptly notify Collateral Agent or such
Holder, as applicable, of such event. In such event, SGC and Company shall
(i) jointly and severally agree to enter into such further instruments as may
be reasonably necessary or desirable to obligate Company to make additional
payments to fully and timely discharge such items and (ii) jointly and
severally guarantee such additional payments. If SGC and Company are not
permitted by law to do that which is required by the preceding sentence,
Collateral Agent or such Holder, as applicable, shall be entitled to exercise
any or all of its rights and remedies under the Basic Documents, including
the right to accelerate the Obligations. The obligations of SGC and Company
under this subsection shall survive the payment of the Notes.
2.8 REGISTRATION; TRANSFER; REGISTRATION OF TRANSFER AND EXCHANGE.
A. Company shall maintain a register for its Notes, which shall
provide for the registration of the Notes and of transfers of the Notes. Upon
surrender for registration or transfer of any Note or any portion thereof
together with an Assignment Agreement in the form of Exhibit VII annexed hereto
entered into by the transferring Holder and the applicable transferee or
transferees, Company, at its expense, shall execute and deliver, in the name of
the designated transferee or transferees and the transferor, as applicable, one
or more new Notes, as applicable; PROVIDED, HOWEVER, that in connection with any
such transfer, Holder requesting the transfer shall provide to Company evidence
reasonably satisfactory to it that the transfer is to a "qualified institutional
buyer" or an "accredited investor," as such terms are defined in Rule 144A and
501, respectively, of the Securities Act, and is exempt from the registration
requirements of the Securities Act, and, if the transfer is to an entity or
Person other than a "qualified institutional buyer", Company shall be provided
with an opinion of counsel reasonably satisfactory to it that the transfer is so
exempt from the registration requirements of the Securities Act; PROVIDED
FURTHER, that, in connection with any transfer, Holder requesting such transfer
shall provide to Company, Collateral Agent and the other Holders an amendment to
Schedule 2 annexed hereto that sets forth payment and other information with
respect to such transferee or transferees and shall also deliver to Collateral
Agent and each other Holder an Intercreditor Assumption Agreement and the
Assignment Agreement referred to above executed by each such transferee;
PROVIDED, FURTHER, that Company shall not be required to register the transfer
of Notes to a transferee with a principal amount of less than $1,000,000; and
PROVIDED FURTHER that, if no Event of Default has occurred and is continuing,
Company shall have the right to consent (which consent shall not be unreasonably
withheld or delayed) to any transfer of the Notes that causes either Initial
Holder to hold less than 51% of the principal amount of Notes acquired by such
Initial Holder on the date hereof. Notes may be exchanged at the
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option of any Holder thereof for Notes of a like aggregate principal amount
in the same name but in different denominations. Whenever any Notes are so
surrendered for exchange, Company, at its expense, shall execute and deliver
the Notes which Holder making the exchange is entitled to receive. All Notes
issued upon any registration of transfer or exchange thereof shall be the
valid Obligations of Company, evidencing the same Indebtedness, and entitled
to the same benefits, as Notes surrendered upon such registration of transfer
or exchange. Each Note presented or surrendered for registration or transfer
or exchange shall (if so required by Company) be duly endorsed, or be
accompanied by a written instrument of transfer in form satisfactory to
Company, duly executed by Holder thereof or its attorney duly authorized in
writing.
B. In connection with any transfer of the Notes pursuant to the
exemption from the provisions of Section 5 of the Securities Act afforded by
Rule 144A promulgated thereunder, Company hereby agrees to provide (i) at the
request of any transferring Holder, including any transferee thereof or Person
who has been granted a participation in any Note pursuant to this Agreement, to
such Holder and to any prospective transferee designated to Company in writing
by such Holder, and (ii) at such prospective transferee's request to such Holder
or Company, the information required by paragraph (d)(4)(i) (or any successor
provision) of Rule 144A under the Securities Act.
2.9 REPRESENTATION OF INITIAL HOLDERS. Each Initial Holder represents to
SGC and Company that on the Effective Date such Initial Holder is an "accredited
investor" within the meaning of Section 501 of the Securities Act, is acquiring
the Notes for investment and not with a view to the distribution or sale thereof
within the meaning of the Securities Act, subject, however, to any requirement
of law that the disposition of its property be at all times within its control.
SECTION 3. REPRESENTATIONS AND WARRANTIES
To induce Holders to enter into this Agreement, and to hold the Notes
hereunder, SGC and Company each represent, warrant and covenant to each Holder,
as of the Effective Date, as follows:
3.1 ORGANIZATION, POWERS, QUALIFICATION, GOOD STANDING AND OTHER MATTERS.
A. ORGANIZATION AND POWERS; QUALIFICATION AND GOOD STANDING. Each
Credit Party is a corporation duly organized, validly existing and in good
standing under the laws of the State of Nevada. Each Credit Party has all
requisite corporate power and authority to own and operate its properties, to
carry on its business as now conducted and as proposed to be conducted, to enter
into the Basic Documents to which it is or may be party and to carry out the
transactions contemplated thereby. Each Credit Party is qualified to do
business and in good standing in Nevada and in every other jurisdiction where
its assets are located and wherever necessary to carry out its business and
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operations, except in such other jurisdictions where the failure to be so
qualified or in good standing has not had and will not have a Material
Adverse Effect.
B. SUBSIDIARIES AND JOINT VENTURES. All of the Subsidiaries and
Joint Ventures of SGC as of the Effective Date are identified on Schedule 3.1B
annexed hereto. The Capital Stock of each of the Subsidiaries of SGC identified
on Schedule 3.1B annexed hereto is duly authorized, validly issued, fully paid
and nonassessable. Each of the Subsidiaries and Joint Ventures of SGC
identified on Schedule 3.1B annexed hereto is a corporation or other entity duly
organized or formed, validly existing and in good standing under the laws of its
respective jurisdiction of incorporation set forth therein, has all requisite
power and authority to own and operate its properties and to carry on its
business as now conducted and as proposed to be conducted, and is qualified to
do business and in good standing in every jurisdiction where its assets are
located and wherever necessary to carry out its business and operations, in each
case except where failure to be so qualified or in good standing or a lack of
such corporate power and authority has not had and will not have a Material
Adverse Effect. Schedule 3.1B annexed hereto correctly sets forth, as of the
Effective Date, the ownership interest of SGC and each of its Subsidiaries in
each of their respective Subsidiaries and Joint Ventures.
C. CAPITALIZATION. The authorized Capital Stock of SGC consists of
100,000,000 shares of common stock, par value $0.01 per share, of which
6,195,356 shares are outstanding, and 10,000,000 shares of preferred stock, par
value $0.01 per share, of which 8,556,651 shares of SGC Preferred Stock are
outstanding. The authorized Capital Stock of Company consists of 1,000 shares
of common stock, no par value per share, of which 1,000 shares are issued and
outstanding.
D. EXISTING COMPANY INDEBTEDNESS AND RELATED MATTERS. Company is
not liable with respect to any Indebtedness except for the Notes and
Indebtedness listed on Schedule 3.1D annexed hereto. Such Schedule 3.1D
correctly identifies the maturity date and the amount and date of all
amortization or other payments required to be made in respect of such
Indebtedness and the Persons who are obligated (whether pursuant to a guaranty
or otherwise) to pay such Indebtedness.
E. SANTA FE HOTEL DOCUMENTS. Schedule 1.1A is a true, correct and
complete disclosure of all Santa Fe Hotel Documents in existence as of the
Effective Date, and, except as set forth on Schedule 1.1A annexed hereto, no
surveys, reports (including physical inspection and environmental reports),
permits, licenses, correspondence or any other documents relating to the Santa
Fe Hotel Facility disclose any facts, conditions or circumstances that could
reasonably be expected to have a Material Adverse Effect or to adversely affect
the priority of the Lien of the Company Deed of Trust; PROVIDED that, for
purposes of this subsection 3.1E, the definition of "Material Adverse Effect"
shall not include a material adverse effect upon the business,
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operations, properties, assets, liabilities or condition (financial or
otherwise) of SGC and its Subsidiaries, taken as a whole.
F. OTHER BASIC DOCUMENTS. All representations and warranties in
each other Basic Document are true and correct in all material respects.
3.2 AUTHORIZATION OF NOTES AND OTHER BASIC DOCUMENTS AND RELATED MATTERS.
A. AUTHORIZATION OF NOTES AND OTHER BASIC DOCUMENTS. The execution
and delivery by each Credit Party of each Basic Document to which each is a
party and the performance by each Credit Party of their respective Obligations
thereunder have been duly authorized by all necessary corporate action on the
part of each such Credit Party, as applicable.
B. NO CONFLICT. The execution, delivery and performance by each
Credit Party of each Basic Document to which it is party, and the consummation
of the transactions contemplated by the Basic Documents, do not and will not
(i) violate any provision of any law or any governmental rule or regulation
(including any Gaming Laws or, based on the representation and warranty of
Initial Holders contained in subsection 2.9 hereof, federal securities laws)
applicable to any Credit Party or any of their respective Subsidiaries, the
Certificate or Articles of Incorporation or Bylaws of any Credit Party or any of
their respective Subsidiaries or any order, judgment or decree of any court or
other agency of government binding on any Credit Party or any of their
respective Subsidiaries, (ii) conflict with, result in a breach of or constitute
(with due notice or lapse of time or both) a default under the Company
Indenture, the Company Indenture Consent Solicitation, the Santa Fe Hotel
Documents or any other Contractual Obligation of any Credit Party or any of
their respective Subsidiaries, (iii) result in or require the creation or
imposition of any Lien upon any of the properties or assets of any Credit Party
(other than any Liens created under any of the Basic Documents in favor of
Collateral Agent or Holders), or (iv) require any approval of stockholders or
any approval or consent of any Person under any Contractual Obligation of any
Credit Party or any of their respective Subsidiaries, except for such approvals
or consents which shall be obtained on or before the Effective Date and
disclosed in writing to Holders.
C. GOVERNMENTAL CONSENTS. Assuming the accuracy of Initial Holders'
representation contained in subsection 2.9, the execution, delivery and
performance by each Credit Party and their respective Subsidiaries of each Basic
Document and the consummation of the transactions contemplated by each Basic
Document do not and will not require any registration with, consent or approval
of, or notice to, or other action to, with or by, any federal, state or other
Governmental Authority or regulatory body, including but not limited to any
Gaming Authorities, except for the notice to be delivered by Company to the
appropriate Nevada Gaming Authorities prior to 30 days after the end of the
quarter in which the Effective Date occurs (the "LOAN NOTICE") pursuant to
Regulations 8.130 and 3.020 under the applicable Nevada Gaming Laws.
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D. BINDING OBLIGATION. Each of the Basic Documents to which each
Credit Party is party has been duly executed and delivered by each such Credit
Party, as applicable, and is the legally valid and binding obligation of each
such Credit Party, as applicable, enforceable against each such Credit Party in
accordance with its respective terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or limiting
creditors' rights generally or by equitable principles relating to
enforceability.
E. OFFERINGS. No Credit Party or any of their respective
Subsidiaries has, directly or indirectly, offered the Notes, or any part
thereof, or (within the last six months) any similar securities for sale to, or
solicited any offer to buy any of the same from, or otherwise approached or
negotiated in respect thereof with, anyone other than Initial Holders and their
Affiliates and not more than 10 other institutional investors. Assuming the
accuracy of the representations and warranties of Initial Holders contained in
subsection 2.9, the offer, issuance and sale of the Notes to Holders in
conformity with the terms of this Agreement constitute transactions exempt from
the registration requirements of Section 5 of the Securities Act and comply or
will comply with federal securities and state blue sky laws applicable to such
offer, sale and issuance.
F. USE OF PROCEEDS. SGC and Company will use the proceeds of the
Notes as provided in subsection 5.10 hereof.
G. THE COMPANY INDENTURE CONSENT SOLICITATION. The Company
Indenture Consent Solicitation has been approved by the requisite holders of the
Company Indenture Notes, and the Basic Documents are in all respects consistent
with and do not conflict with any term of the Company Indenture, the Company
Indenture Consent Solicitation or any related document.
3.3 FINANCIAL CONDITION. SGC and Company have heretofore delivered to
Holders at Holders' request, the following financial statements and
information: the audited consolidated financial statements of SGC and its
Subsidiaries for the Fiscal Years ended September 30, 1997, 1996 and 1995 and
the unaudited consolidated financial statements of Company for the Fiscal
Years ended September 30, 1997, 1996 and 1995 and the unaudited consolidated
financial statements of SGC and its Subsidiaries and the unaudited
consolidated financial statements of Company for the fiscal quarter ended
December 31, 1997. All such statements were prepared in conformity with GAAP
and fairly present the consolidated financial position of the entities
described in such financial statements as at the respective dates thereof and
the results of operations and cash flows (on a consolidated basis) of the
entities described therein for each of the periods then ended. SGC and its
Subsidiaries do not (and will not following the issuance of the Notes) have
any material Contingent Obligation or liability for Taxes, long-term lease or
unusual forward or long-term commitment that is not reflected in the
aforementioned financial statements or the notes thereto and which in any
such case is material in relation to the
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business, operations, properties, assets, condition (financial or otherwise)
or prospects of SGC, Company, or any of their respective Subsidiaries.
3.4 NO MATERIAL ADVERSE CHANGE; NO RESTRICTED SGC PAYMENTS. Since
December 31, 1997, no event or change has occurred that has caused or evidences,
either in any case or in the aggregate, a Material Adverse Effect. Since
December 31, 1997, neither SGC nor Company has directly or indirectly declared,
ordered, paid or made, or set apart any sum or property for, any Restricted SGC
Payment or agreed to do so.
3.5 TITLE TO PROPERTIES; LIENS. SGC and Company have (i) good, sufficient
and legal title to all fee interests constituting real property Collateral,
(ii) valid leasehold interests in all real or personal leasehold property
constituting Collateral and (iii) good title to all other property and assets
reflected in the financial statements referred to in subsection 3.3, in each
case except (a) as disclosed in the notes to such financial statements, (b) for
assets disposed of since the date of such financial statements in the ordinary
course of business or as otherwise permitted under subsection 6.4 and (c) in the
case of clause (iii) above, if the failure to have good title for such other
property and assets could not have a Material Adverse Effect. Except as
permitted by this Agreement, the properties and assets of Company are free and
clear of Liens.
3.6 LITIGATION; ADVERSE FACTS. Except as disclosed in SGC's Annual Report
on Form 10-K for the Fiscal Year ending September 30, 1997 and Quarterly Report
on Form 10-Q for the quarter ended December 31, 1997, there are no actions,
suits, proceedings, arbitrations or governmental investigations (whether or not
purportedly on behalf of any Credit Party or any of their respective
Subsidiaries) at law or in equity or before or by any federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, pending or, to the knowledge of any Credit
Party, threatened against any Credit Party or any of their respective
Subsidiaries or any property of any Credit Party or any of their respective
Subsidiaries that, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect. No Credit Party or any of
their respective Subsidiaries is (i) in violation of any applicable laws that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect or (ii) subject to or in default with respect to any
final judgments, writs, injunctions, decrees, rules or regulations of any court
or any federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect.
3.7 PAYMENT OF TAXES. Except to the extent permitted by subsection 5.4,
all tax returns and reports of each Credit Party and their respective
Subsidiaries required to be filed by any of them have been timely filed, and all
Taxes, assessments, fees and other governmental charges upon any Credit Party
and their respective Subsidiaries and upon their respective properties, assets,
income, businesses and franchises which are due and payable have been paid or
are being contested in good faith by appropriate proceedings.
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No Credit Party knows of any proposed Tax assessment against any Credit Party
or any of their respective Subsidiaries, and any such proposed Tax assessment
is being actively contested by such Credit Party or Subsidiary, as
applicable, in good faith and by appropriate proceedings; PROVIDED that such
reserves or other appropriate provisions, if any, as shall be required in
conformity with GAAP shall have been made or provided therefor. No
Governmental Authority has, during the past three years, examined, or is in
the process of examining, any tax return of any Credit Party or any of their
respective Subsidiaries. No Governmental Authority has proposed (tentatively
or definitively), asserted or assessed, or, to the knowledge of any Credit
Party, threatened to propose or assert, any deficiency, assessment or claim
for Taxes, no such delinquency, assessment or claim could reasonably be
expected to have a Material Adverse Effect and, to the best knowledge of each
Credit Party, there would be no basis for any such delinquency, assessment or
claim. There are no agreements, waivers or other arrangements providing for
an extension of time with respect to the assessment of any Tax or deficiency
against any Credit Party or any of their respective Subsidiaries or with
respect to any tax return filed or to be filed by any Credit Party or any of
their respective Subsidiaries. Following the Effective Date, the assessment
of any additional Taxes for periods for which returns have been filed is not
expected to exceed the liability recorded therefor on the financial
statements delivered to Holders pursuant to subsection 3.3. There are no
material unresolved questions or claims concerning the Tax liability of any
Credit Party or any of their respective Subsidiaries.
3.8 PERFORMANCE OF AGREEMENTS; MATERIALLY ADVERSE AGREEMENTS. No Credit
Party or any of their respective Subsidiaries is in default in the performance,
observance or fulfillment of any of the obligations, covenants or conditions
contained in any of its Contractual Obligations, and no such default could
reasonably be expected to result in a Material Adverse Effect. To the knowledge
of SGC and Company, no condition exists that, with the giving of notice or the
lapse of time or both, would constitute such a default.
3.9 GOVERNMENTAL REGULATION. No Credit Party or any of their respective
Subsidiaries is subject to regulation under the Public Utility Holding Company
Act of 1935, the Federal Power Act, the Interstate Commerce Act or the
Investment Company Act of 1940 or under any other federal or state statute or
regulation which may limit its ability to incur Indebtedness or which may
otherwise render all or any portion of the Obligations unenforceable.
3.10 EMPLOYEE BENEFIT PLANS AND EMPLOYEE MATTERS.
A. Each Credit Party and each of their respective ERISA Affiliates
are in compliance in all material respects with all applicable provisions and
requirements of ERISA and the regulations and published interpretations
thereunder with respect to each Employee Benefit Plan, and have performed all
their obligations under each Employee Benefit Plan. No ERISA Event has occurred
or is reasonably expected to occur.
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B. Schedule 3.10 annexed hereto lists all Employee Benefit Plans.
Except to the extent required under Section 4980B of the Internal Revenue Code,
no Employee Benefit Plan provides health or welfare benefits (through the
purchase of insurance or otherwise) for any retired or former employees of any
Credit Party or any of their respective ERISA Affiliates. As of the most recent
valuation date for any Pension Plan, no Pension Plan has any unfunded benefit
liabilities (as defined in Section 4001(a)(18) of ERISA).
3.11 ENVIRONMENTAL PROTECTION. Without exception:
(i) the operations of Company related to the Santa Fe Hotel
Facility comply in all material respects with all Environmental Laws;
(ii) Company has obtained all Governmental Authorizations under
Environmental Laws necessary to its operations related to the Santa Fe
Hotel Facility, and all such Governmental Authorizations are in good
standing, and Company is in compliance with all material terms and
conditions of such Governmental Authorizations;
(iii) Company has not received (a) any notice or claim to the
effect that it is or may be liable to any Person as a result of or in
connection with any Hazardous Material related to the Santa Fe Hotel
Facility or (b) any letter or request for information under Section 104 of
the Comprehensive Environmental Response, Compensation, and Liability Act
(42 U.S.C. Section 9604) or comparable state laws with respect to the
Santa Fe Hotel Facility, and, none of the operations of Company are the
subject of any federal or state investigation relating to or in connection
with any Hazardous Material at the Santa Fe Hotel Facility or any Hazardous
Material in any other manner related to the Santa Fe Hotel Facility;
(iv) Company is not a party to any judicial or administrative
proceeding alleging the violation of or liability under any Environmental
Laws which if adversely determined could reasonably be expected to have a
Material Adverse Effect;
(v) neither of Company nor the Santa Fe Hotel Facility is subject
to any outstanding written order or agreement with any Governmental
Authority or private party relating to (a) any Environmental Laws or (b)
any Environmental Claims;
(vi) Company has no contingent liability in connection with any
Release of any Hazardous Material related to the Santa Fe Hotel Facility
which could reasonably be expected to have a Material Adverse Effect;
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(vii) Company, and, to the best knowledge of each officer of SGC
and Company, none of its predecessors have filed any notice under any
Environmental Law indicating past or present treatment or Release of
Hazardous Material at the Santa Fe Hotel Facility, and none of Company's
operations involves the generation, transportation, treatment, storage or
disposal of hazardous waste, as defined under 40 C.F.R. Parts 260-270 or
any state equivalent;
(viii) except as disclosed in the Environmental Report, no
Hazardous Material exists on, under or about the Santa Fe Hotel Facility in
a manner that has a reasonable possibility of giving rise to an
Environmental Claim having a Material Adverse Effect, and Company and, to
Company's knowledge, its predecessors have not filed any notice or report
of a Release of any Hazardous Material that has a reasonable possibility of
giving rise to an Environmental Claim having a Material Adverse Effect;
(ix) neither Company nor, to the best knowledge of each officer of SGC
and Company, any of its predecessors have disposed of any Hazardous
Material in a manner that has a reasonable possibility of giving rise to an
Environmental Claim having a Material Adverse Effect;
(x) to the knowledge of SGC and Company, no underground storage tanks
or surface impoundments are on or at the Santa Fe Hotel Facility; and
(xi) no Lien in favor of any Person relating to or in connection with
any Environmental Claim has been filed or has been attached to the Santa Fe
Hotel Facility.
3.12 SOLVENCY. Upon the consummation of all the transactions contemplated
by this Agreement and the Basic Documents: (i) the present fair salable value
of the assets of each Credit Party as an entirety will exceed the amount that
would be required to pay their probable liability on existing Indebtedness
(whether matured or unmatured, liquidated or unliquidated, absolute, fixed or
contingent), as they become absolute and matured; (ii) the sum of the
Indebtedness (whether matured or unmatured, liquidated or unliquidated,
absolute, fixed or contingent) of each Credit Party will not exceed the
aggregate value of all of their property, fairly valued, assuming sale in an
orderly manner and not subject to any type of distressed or forced liquidation;
(iii) the capital of each Credit Party will not be unreasonably small for such
Credit Party to carry on their businesses; and (iv) no Credit Party intends to,
nor does it or believe it will, by virtue of consummating the transactions
contemplated hereby, incur Indebtedness that will be beyond its ability to pay
as they mature.
3.13 CERTAIN FEES. No broker's or finder's fee or commission is or will be
payable with respect to this Agreement or any of the transactions contemplated
hereby, and SGC and Company hereby jointly and severally indemnify each Holder
against, and
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agree that they shall hold each Holder harmless from, any claim, demand or
liability for any such broker's or finder's fees alleged to have been
incurred in connection herewith or therewith and any expenses (including
reasonable fees, expenses and disbursements of counsel) arising in connection
with any such claim, demand or liability.
3.14 DISCLOSURE. No representation or warranty of any Credit Party or
any of their respective Subsidiaries contained in any Basic Document or in any
other document, certificate or written statement furnished to any Holder by or
on behalf of any Credit Party or any of their respective Subsidiaries for use in
connection with the transactions contemplated by this Agreement, taken as a
whole, contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein or
therein not misleading in light of the circumstances in which the same were
made.
SECTION 4. CONDITIONS TO EFFECTIVENESS
4.1 CONDITIONS TO OBLIGATIONS OF HOLDERS TO PURCHASE NOTES ON THE
EFFECTIVE DATE. The obligations of each Holder to purchase the Notes to be
purchased by such Holder pursuant to this Agreement are subject to the
fulfillment, at or prior to the Effective Date, of the following conditions, any
one or more of which may be waived by Holders:
A. CREDIT PARTY DOCUMENTS. On or before the Effective Date, each of
SGC and Company shall deliver or cause to be delivered to Holders the following:
(i) Certified copies of the Articles or Certificate of
Incorporation of each Credit Party (including, in the case of SGC, the
Certificate of Designations for the SGC Preferred Stock), together with a
good standing certificate from the Secretary of State of the State of
Nevada and, to the extent generally available, a certificate or other
evidence of good standing as to payment of any applicable franchise or
similar Taxes from the appropriate taxing authority of such state, each
dated a recent date prior to the Effective Date;
(ii) Copies of the Bylaws of each Credit Party, certified as of the
Effective Date by its corporate secretary or an assistant secretary;
(iii) Resolutions of Board of Directors of each Credit Party
approving and authorizing the execution, delivery and performance of this
Agreement and the other Basic Documents to which it is a party, certified
as of the Effective Date by its corporate secretary or an assistant
secretary as being in full force and effect without modification or
amendment;
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(iv) Signature and incumbency certificates of the officers of each
Credit Party executing this Agreement and the other Basic Documents to
which it is a party;
(v) in the case of Company, executed originals of this Agreement,
the Notes to be issued to Holders on the Effective Date (duly executed in
accordance with subsection 2.3, payable to such Holders and with
appropriate insertions), the Company Deed of Trust, the Company Security
Agreement, the Company Environmental Indemnity, the Subordination and
Intercreditor Agreement and the other Basic Documents to which it is party;
(vi) in the case of SGC, executed originals of this Agreement, the
Company Environmental Indemnity, the SGC Guaranty and the other Basic
Documents to which it is party; and
(vii) such other documents as any Holder may reasonably request.
B. LEGAL OPINIONS. Holders shall have received (i) originally
executed copies of one or more favorable written opinions of Gibson, Dunn &
Crutcher LLP and Jones Vargas, counsel for the Credit Parties, dated as of the
Effective Date and setting forth substantially the matters in the opinions
designated in Exhibit VIII-A and Exhibit VIII-B annexed hereto, respectively,
and as to such other matters as Holders may reasonably request, and shall be
entitled to rely on all opinions delivered to Company Indenture Trustee in
connection with the amendment of the Company Indenture, and (ii) evidence
satisfactory to Holders that the Credit Parties have requested such counsel to
deliver such opinions to Holders.
C. OFFICERS' CERTIFICATE REGARDING CERTAIN CONDITIONS. The
following conditions shall be satisfied and each Credit Party shall have
delivered to Holders an Officers' Certificate, in form and substance
satisfactory to Holders, to that effect:
(i) The representations and warranties of each Credit Party, as the
case may be, contained herein and in the other Basic Documents shall be
true, correct and complete in all material respects on and as of the
Effective Date to the same extent as though made on and as of that date;
(ii) No event shall have occurred and be continuing as of the
Effective Date, or would result from the consummation of the issuance of
the Notes or the other transactions contemplated by the Basic Documents,
that would constitute an Event of Default or a Potential Event of Default;
(iii) Each Credit Party shall have performed all agreements and
satisfied all conditions which this Agreement and the other Basic Documents
provide shall
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be performed or satisfied by each such Credit Party on or before the
Effective Date; and
(iv) No Credit Party has given notice to Collateral Agent or any
Holder under Nevada Revised Statute Section 106 or otherwise that any
Indebtedness evidenced by any Note issued on or after the Effective Date
will not be secured by the Lien so created by the Company Deed of Trust or
any other Basic Document.
D. PERFECTION OF SECURITY INTERESTS AND RELATED MATTERS. Company
shall have taken or caused to be taken such actions in such a manner so that
Collateral Agent, for the benefit of Holders, has a valid and perfected first
priority security interest in all Collateral, in which a Lien is purported to be
granted by the Basic Documents or any of them, executed as of the Effective
Date. Such actions shall include, without limitation: (i) evidence that
original counterparts of the Company Deed of Trust and the Subordination and
Intercreditor Agreement have been recorded in all locations to the extent
necessary or desirable, in the judgment of Collateral Agent, to create a valid
and enforceable first priority Lien (subject only to Permitted Liens) on the
Santa Fe Hotel Facility in favor of Collateral Agent for the benefit of Holders;
(ii) the delivery to Collateral Agent of Uniform Commercial Code financing
statements, executed by Company as to the Collateral granted by Company for all
jurisdictions as may be necessary or desirable to perfect Collateral Agent's
security interest in such Collateral; and (iii) evidence reasonably satisfactory
to Collateral Agent that all other filings, recordings and other actions
Collateral Agent deems necessary or advisable to establish, preserve and perfect
the first priority Liens (subject only to Permitted Liens) granted to Collateral
Agent, for the benefit of Holders, in the Collateral shall have been made.
E. TITLE POLICY FOR SANTA FE HOTEL FACILITY. Holders shall have
received a 1970 Form B American Land Title Association ("ALTA") extended
coverage mortgagee form of title insurance policy, together with all
endorsements required by Holders, in the amount of not less than $14,000,000
(the "TITLE POLICY") (with proof of the payment of the premiums thereon) or
commitment therefor in form and substance acceptable to Holders issued by United
Title of Nevada, Inc. ("TITLE COMPANY"), insuring the Lien of the Company Deed
of Trust to be a first priority Lien against the Santa Fe Hotel Facility, free
and clear of all defects, encumbrances and exceptions, except those provided for
herein or approved by Holders and their counsel in writing, together with such
affirmative insurance as Holders may require. The Title Policy shall contain,
among other things:
(i) full coverage against mechanic's Liens (filed and inchoate),
parties in possession and survey matters;
(ii) a foundation endorsement;
(iii) a contiguity endorsement;
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(iv) a zoning endorsement;
(v) a reference to the survey but no survey exceptions except those
theretofore approved in writing by Holders and their counsel;
(vi) Form 100 and 116.1 endorsements;
(vii) an access to public streets endorsement; and
(viii) such other items and endorsements requested by Holders.
F. UCC AND JUDGMENT SEARCHES. Holders shall have received current
searches of the UCC filing offices and judgment searches with the Offices of the
Secretary of State of Nevada and the local recorder's office in Clark County and
elsewhere showing no security interests or judgments affecting the Santa Fe
Hotel Premises, the Santa Fe Hotel Improvements, Company or SGC other than those
provided for herein.
G. SANTA FE HOTEL SURVEY. Holders shall have received a current
survey prepared by a surveyor acceptable to Holders and licensed as a land
surveyor in the State of Nevada, that shall (a) be satisfactory, in form, scope
and substance, to Holders, and (b) contain the legal description of the Santa Fe
Hotel Facility in form, scope and substance satisfactory to Holders, with a
surveyor's certification in a form acceptable to Holders from the surveyor to
Holders and Title Company and other Persons reasonably requested by Holders.
H. FLOOD INSURANCE. Holders shall have been provided with
satisfactory evidence, which may be in the form of a letter from an insurance
broker, municipal engineer, land surveyor or other knowledgeable source
unaffiliated with Company, as to whether (a) the Santa Fe Hotel Premises are
located in an area designated by the Department of Housing and Urban Development
as having special flood or mudslide hazards, and (b) the community in which the
Santa Fe Hotel Premises are located is participating in the National Flood
Insurance Program. If both of the aforesaid conditions exist, Holders shall
receive satisfactory policies of flood insurance covering the Santa Fe Hotel
Improvements as required by the Flood Act.
I. INSURANCE. Holders shall have received evidence, satisfactory to
Holders, of insurance required to be procured and maintained pursuant to
subsection 5.5 hereof, Section 8 of the Company Security Agreement and Section 6
of the Company Deed of Trust indicating that, with respect to casualty
insurance, such policies of insurance have been endorsed to name Collateral
Agent, on behalf of Holders, as loss payee pursuant to a standard mortgagee
clause, and, with respect to liability insurance, such policies of insurance
name Collateral Agent, on behalf of Holders, as an additional insured.
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J. PRELIMINARY SANTA FE HOTEL APPRAISAL. Holders shall have
received and approved a preliminary Santa Fe Hotel Appraisal.
K. NECESSARY CONSENTS AND APPROVALS. On or before the Effective
Date, SGC and Company shall have obtained all consents and approvals to the
transactions contemplated under this Agreement and the other Basic Documents of
any Person required under any Contractual Obligation or other obligation
(including obligations imposed by law) of SGC or Company or any of their
respective Affiliates and of any Governmental Authority, including without
limitation all consents and approvals relating to the subordination of the Lien
of the Company Indenture Deed of Trust to the Lien of the Company Deed of Trust.
Such consents and approvals shall be in full force and effect, and any
applicable waiting periods shall have expired by the Effective Date without any
action taken or threatened to be taken by any competent Governmental Authority
which might restrain, prevent or otherwise impose adverse conditions on the
transactions contemplated under this Agreement.
L. ENVIRONMENTAL INFORMATION. Holders shall have received and
approved the Environmental Report and a reliance letter in favor of Collateral
Agent from the consultant who prepared the Environmental Report, in a form
satisfactory to Holders.
M. CHANGES IN STRUCTURE. Any changes in the management, capital or
ownership structure of SGC or its Subsidiaries not previously disclosed to
Holders shall be satisfactory to Holders in all respects.
N. NO MATERIAL ADVERSE EFFECT. Since December 31, 1997, no Material
Adverse Effect (in the sole opinion of Holders) shall have occurred.
O. COMPLETION OF PROCEEDINGS. All corporate and other proceedings
taken or to be taken in connection with the transactions contemplated hereby and
all documents incidental thereto not previously found acceptable by Holders and
its counsel shall be satisfactory in form and substance to Holders and such
counsel, and Holders and its counsel shall have received all such counterpart
originals or certified copies of such documents as Holders may reasonably
request.
P. NO INJUNCTIONS, RESTRAINING ORDER OR ADVERSE LITIGATION. No
order, judgment or decree of any court, arbitrator or Governmental Authority
shall purport to enjoin or restrain any Holder from acquiring any Notes on the
Effective Date. As of the Effective Date, there shall not be pending or, to the
knowledge of SGC or Company, threatened, any action, suit, proceeding,
governmental investigation or arbitration against SGC, Company or any of their
respective Subsidiaries or any property of SGC, Company or any of their
respective Subsidiaries that has not been disclosed by SGC or Company in writing
pursuant to subsection 3.6 prior to the execution of this Agreement, and there
shall have occurred no development not so disclosed in any such action, suit,
proceeding,
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governmental investigation or arbitration so disclosed, that, in either
event, in the opinion of Holders, could be expected to have a Material
Adverse Effect; and no injunction or other restraining order shall have been
issued and no hearing to cause an injunction or other restraining order to be
issued shall be pending or noticed with respect to any action, suit or
proceeding seeking to enjoin or otherwise prevent the consummation of, or to
recover any damages or obtain relief as a result of, the transactions
contemplated by this Agreement, the Basic Documents or the acquisition of the
Notes hereunder.
Q. NO VIOLATION OF LAW. The acquisition of the Notes shall not
violate any law including, without limitation, Regulation G, Regulation T or
Regulation X of the Board of Governors of the Federal Reserve System.
R. SANTA FE HOTEL DOCUMENTS. On the Effective Date (i) Holders
shall have received copies of all Santa Fe Hotel Documents in existence on the
Effective Date, all in form and substance approved by Holders (which approval
shall not be unreasonably withheld or delayed); (ii) Holders shall have received
an Officers' Certificate from SGC and Company stating that the applicable Santa
Fe Hotel Documents to which such Person is a party are in full force and effect
and no material term or condition thereof has been amended, modified or waived,
that all agreements and conditions contained in the Santa Fe Hotel Documents and
any agreements or documents referred to therein required to be performed or
complied with by SGC, Company and their respective Affiliates and, to the
knowledge of SGC and Company, the other parties thereto on or before the
Effective Date shall have been so performed or satisfied and that none of SGC,
Company or any of their respective Affiliates, or, to the knowledge of SGC or
Company, any other party to any Santa Fe Hotel Documents is in default in the
performance of or compliance with any of the terms or provisions thereof.
S. OTHER INDEBTEDNESS DOCUMENTS. On the Effective Date (i) Holders
shall have received any agreements or other documents relating to all
Indebtedness described on Schedule 3.1D annexed hereto; and (ii) Holders shall
have received an Officers' Certificate from SGC and Company stating that such
documents are in full force and effect and no term or condition thereof has been
amended, modified or waived, and that neither SGC nor any of its Subsidiaries is
in default in the performance of or compliance with any of the terms or
provisions thereof.
T. PAYMENT OF FEES AND EXPENSES. Without limiting the provisions of
subsection 9.2, Company shall have paid by wire transfer of immediately
available funds, the reasonable fees, charges and disbursements arising in
connection with the preparation, execution and delivery of the Basic Documents,
including but not limited to the reasonable fees and expenses of counsel to
SunAmerica and CSFB, O'Melveny & Myers LLP, Henderson & Nelson and Cadwalader
Wickersham & Taft, as applicable, and the reasonable fees and expenses of
Company's counsel, Gibson, Dunn & Crutcher LLP and Jones Vargas, to the extent
an invoice therefor is received by Company not less than one Business Day prior
to the Effective Date; the appraisers retained to deliver the Santa Fe
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Hotel Appraisal; environmental and other consultants; closing costs; escrow
fees; title issuance premiums; title search and survey costs; and the
reasonable out-of-pocket expenses of Holders; PROVIDED that the selection of
the appraiser and any environmental or other consultant or experts shall not
be made without Company's prior consent, which shall not be unreasonably
withheld.
U. USE OF PROCEEDS. SGC and Company shall be prepared to use the
Note proceeds in accordance with subsection 5.10 hereof.
V. SUBORDINATION AND INTERCREDITOR AGREEMENT. Company, SunAmerica
and Company Indenture Trustee shall have entered into the Subordination and
Intercreditor Agreement, and the same shall have been recorded in the
appropriate county records.
SECTION 5. AFFIRMATIVE COVENANTS OF SGC AND COMPANY
SGC and Company each hereby covenants and agrees that, until payment
in full of the Obligations, unless Requisite Holders shall otherwise give
written consent, SGC and Company shall perform, and shall cause each of its
respective Subsidiaries to perform, all covenants in this Section 5.
5.1 FINANCIAL STATEMENTS AND RELATED INFORMATION. SGC and Company shall
maintain and cause the other Credit Parties to maintain a system of accounting
established in accordance with sound business practices to permit preparation of
financial statements in conformity with GAAP. SGC and Company shall deliver to
each Holder:
A. QUARTERLY, ANNUAL AND OTHER REPORTS:
(i) QUARTERLY FINANCIALS: as soon as available and in any event
within 45 days after the end of each of the first three fiscal quarters of
each Fiscal Year, the unaudited consolidated balance sheet of Company and
its Subsidiaries as at the end of such fiscal quarter and the related
unaudited consolidated statement of income of Company and its Subsidiaries
for such fiscal quarter and for the period from the beginning of the then
current Fiscal Year to the end of such fiscal quarter, setting forth in
each case in comparative form the corresponding figures for the
corresponding periods of the previous Fiscal Year, all in reasonable detail
and certified by the chief financial officer of Company that they fairly
present the financial condition of Company and its Subsidiaries as at the
dates indicated and the results of their operations for the periods
indicated, subject to changes resulting from normal year-end adjustments;
(ii) ANNUAL FINANCIALS: as soon as available and in any event within
90 days after the end of each Fiscal Year, the unaudited consolidated
balance sheet of
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Company and its Subsidiaries as at the end of such Fiscal Year and the
related unaudited consolidated statement of income of Company and its
Subsidiaries for such Fiscal Year, setting forth in each case in
comparative form the corresponding figures for the previous Fiscal Year,
all in reasonable detail and certified by the chief financial officer of
Company that they fairly present the financial condition of Company and its
Subsidiaries as at the dates indicated and the results of their operations
for the periods indicated; and
(iii) COMMISSION FILINGS: as soon as available all annual and
quarterly reports and such other information, documents and reports that
SGC is required to file with the Commission pursuant to Sections 13 and
15(d) of the Exchange Act
B. OFFICERS' CERTIFICATES: together with each delivery of
quarterly and annual financial statements of SGC and Company pursuant to
subsection 5.1A above, an Officers' Certificate of SGC and Company, as the
case may be, stating that the signers have reviewed the terms of this
Agreement and have made, or caused to be made under their supervision, a
review in reasonable detail of the transactions and condition of SGC or
Company, as the case may be, and their respective Subsidiaries during the
accounting period covered by such financial statements and that such review
has not disclosed the existence during or at the end of such accounting
period, and that the signers do not have knowledge of the existence as at the
date of such Officers' Certificate, of any condition or event that
constitutes an Event of Default or Potential Event of Default, or, if any
such condition or event existed or exists, specifying the nature and period
of existence thereof and what action SGC, Company and their respective
Subsidiaries have taken, are taking and propose to take with respect thereto;
C. RECONCILIATION STATEMENTS: if, as a result of any change in
accounting principles and policies from those used in the preparation of the
audited financial statements referred to in subsection 3.3, the consolidated
financial statements of SGC or Company and their respective Subsidiaries
delivered pursuant to subsection 5.1A will differ in any material respect from
the consolidated financial statements that would have been delivered pursuant to
such subsections had no such change in accounting principles and policies been
made, then together with the first delivery of financial statements pursuant to
subsection 5.1A following such change, a written statement of the chief
accounting officer or chief financial officer of SGC or Company, as the case may
be, setting forth the differences which would have resulted if such financial
statements had been prepared without giving effect to such change;
D. COMMISSION FILINGS AND PRESS RELEASES: promptly upon their
becoming available, copies of (a) all financial statements, reports, notices and
proxy statements sent or made available generally by SGC or Company to their
respective security holders, (b) all regular and periodic reports and all
registration statements (other than on Form S-8 or a similar form) and
prospectuses, if any, filed by SGC or any of its Subsidiaries with any
securities exchange or with the Commission or any governmental or
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private regulatory authority, and (c) all press releases and other statements
made available generally by SGC or any of its Subsidiaries to the public
concerning material developments in the business of SGC or any of its
Subsidiaries;
E. EVENTS OF DEFAULT, ETC.: promptly upon any officer of any Credit
Party obtaining knowledge (i) of any condition or event that constitutes an
Event of Default or Potential Event of Default, or becoming aware that any
Holder has given any notice or taken any other action with respect to a claimed
Event of Default or Potential Event of Default, (ii) that any Person has given
any notice to SGC, Company or any of their respective Subsidiaries or taken any
other action with respect to a claimed default or event or condition of the type
referred to in subsection 7.2, or (iii) of the occurrence of any event or change
that has caused or evidences, either in any case or in the aggregate, a Material
Adverse Effect, an Officers' Certificate specifying the nature and period of
existence of such condition, event or change, or specifying the notice given or
action taken by any such Person and the nature of such claimed Event of Default,
Potential Event of Default, default, event or condition, and what action SGC,
Company and their respective Subsidiaries have taken, are taking and propose to
take with respect thereto;
F. LITIGATION OR OTHER PROCEEDINGS: promptly upon any officer of
any Credit Party obtaining knowledge of (X) the institution of, or non-frivolous
threat of, any action, suit, proceeding (whether administrative, judicial or
otherwise), governmental investigation or arbitration against SGC, Company or
any of their Subsidiaries or any property of SGC, Company or any of their
Subsidiaries (collectively, "PROCEEDINGS") not previously disclosed in writing
by SGC or Company to Holders or (Y) any material development in any Proceeding
that, in any case:
(1) if adversely determined, has a reasonable possibility of
giving rise to a Material Adverse Effect; or
(2) seeks to enjoin or otherwise prevent the consummation of, or
to recover any damages or obtain relief as a result of, the
transactions contemplated hereby;
written notice thereof together with such other information as may be reasonably
available to SGC, Company or any of their respective Subsidiaries to enable
Holders and their counsel to evaluate such matters;
G. AMENDMENTS TO CERTAIN DOCUMENTS: with reasonable promptness but
in any event within three Business Days of the execution thereof, copies of any
amendment, supplement or modification to any Santa Fe Hotel Document (including
the Company Indenture and related documents), and copies of any agreement (or
any amendment, supplement or modification to any agreement) evidencing
Indebtedness in excess of $1,000,000 of SGC or any of its Subsidiaries or any
security agreement, deed of
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trust or other document relating thereto or any agreement or document
relating to the Santa Fe Hotel Facility;
H. ERISA EVENTS: promptly upon becoming aware of the occurrence of
or forthcoming occurrence of any ERISA Event, a written notice specifying the
nature thereof, what action SGC, Company or any of their respective ERISA
Affiliates has taken, is taking or proposes to take with respect thereto and,
when known, any action taken or threatened by the Internal Revenue Service, the
Department of Labor or the PBGC with respect thereto; and upon the request of
any Holder copies of each Schedule B (Actuarial Information) to the annual
report (Form 5500 Series) filed by SGC, Company or any of their respective ERISA
Affiliates with the Internal Revenue Service with respect to each Pension Plan
and such other documents or governmental reports or filings relating to any
Employee Benefit Plan as any Holder shall reasonably request;
I. ENVIRONMENTAL AUDITS AND REPORTS: promptly upon receipt thereof,
copies of all environmental audits and reports, whether or not prepared by or on
behalf of any Credit Party or by Independent consultants, with respect to any
environmental matters relating to the Santa Fe Hotel Facility;
J. SANTA FE HOTEL APPRAISAL: within 45 days after the Effective
Date, the Santa Fe Hotel Appraisal;
K. ESTOPPEL CERTIFICATES: within 60 days after the Effective Date,
estoppel certificates, in the form provided by Holders to Company prior to the
Effective Date, executed by existing lessees of the Santa Fe Hotel Premises;
PROVIDED that SGC and Company shall only be obligated to use best efforts to
obtain such estoppel certificates; and
L. OTHER INFORMATION: with reasonable promptness, such other
information and data with respect to any Credit Party or any of their respective
Subsidiaries as from time to time may be reasonably requested by Collateral
Agent or any Holder.
5.2 INSPECTION. No more than once a fiscal quarter unless an Event of
Default or Potential Event of Default has occurred and is continuing, SGC and
Company shall permit any authorized representative designated by any Holder or
Holders of at least a majority in principal amount of the Notes, at such
Person's own expense (unless a Potential Event of Default or an Event of Default
has occurred and is continuing, in which case at SGC's and Company's expense),
to visit and inspect any Credit Party's properties or the properties of any of
their respective Subsidiaries, including their financial and accounting records,
and to make copies and take extracts therefrom, and to discuss their affairs,
finances and accounts with the chief financial officer and any other Persons
approved by the chief financial officer, under the chief financial officer's
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direction, and, unless an Event of Default shall have occurred and be
continuing, all upon at least three Business Days' notice and at reasonable
times during normal business hours.
5.3 CORPORATE EXISTENCE, ETC. Except as permitted under subsections 6.4
and 6.5, SGC and Company shall preserve and keep in full force and effect their
respective corporate existence and the corporate existence of each other Credit
Party (if any) and all rights and franchises material to their respective
businesses; PROVIDED, HOWEVER, that SGC and Company shall not be required to
preserve any such right, license or franchise, or corporate or other existence
of any other Credit Party (other than SGC or Company), if the Board of Directors
of SGC and such Credit Party, as the case may be, shall determine in good faith
in accordance with their respective charters that the preservation thereof is no
longer desirable in the conduct of the business of SGC and its Subsidiaries,
taken as a whole, and Company and that the loss thereof is not adverse in any
material respect to Holders and will not have a Material Adverse Effect.
5.4 PAYMENT OF TAXES AND CLAIMS; TAX CONSOLIDATION. SGC and Company
shall, and shall cause each of their respective Subsidiaries to, pay all Taxes,
assessments and other governmental charges imposed upon it or any of its
properties or assets or in respect of any of its income, businesses or
franchises before any penalty accrues thereon, and all claims (including,
without limitation, claims for labor, services, materials and supplies) for sums
that have become due and payable and that by law have or may become a Lien upon
any of its properties or assets, prior to the time when any penalty or fine
shall be incurred with respect thereto; PROVIDED that no such charge or claim
need be paid if being contested in good faith by appropriate proceedings timely
instituted and diligently conducted and if such reserve or other appropriate
provision, if any, as shall be required in conformity with GAAP shall have been
made therefor. SGC and Company shall not, nor shall they permit any of their
respective Subsidiaries to, file or consent to the filing of any consolidated
income tax return with any Person (other than SGC, Company or any of their
respective Subsidiaries). To the extent that the terms and provisions of the
Company Deed of Trust regarding payment of Taxes and assessments on the Santa Fe
Hotel Facility conflict with the terms and provisions of this Agreement, the
terms and provisions of the Company Deed of Trust shall govern.
5.5 MAINTENANCE OF PROPERTIES; INSURANCE. SGC and Company shall, and
shall cause each of their respective Subsidiaries to, maintain or cause to be
maintained in good repair, working order and condition, ordinary wear and tear
excepted, all material properties used or useful in the business of SGC, Company
and their respective Subsidiaries (including, without limitation, intellectual
property) and from time to time shall make or cause to be made all appropriate
repairs, renewals and replacements thereof. SGC and Company shall maintain or
cause to be maintained, with financially sound and reputable insurers, insurance
with respect to their respective properties and businesses and the properties
and businesses of their respective Subsidiaries against loss or damage of the
kinds customarily carried or maintained under similar circumstances by
corporations of established reputation engaged in similar businesses. To the
extent that
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the terms and provisions regarding the payment of insurance contained in the
Company Deed of Trust conflict with the terms and provisions of this
subsection 5.5, the terms and provisions of the Company Deed of Trust shall
govern.
5.6 COMPLIANCE WITH LAWS, ETC.
A. GENERALLY. SGC and Company shall, and shall cause each of
their respective Subsidiaries to, comply in all material respects with the
requirements of all applicable laws, rules, regulations and orders of any
Governmental Authority, including but not limited to all applicable
Environmental Laws and Gaming Laws, noncompliance with which could reasonably
be expected to cause a Material Adverse Effect.
B. LOAN NOTICE. Prior to 30 days after the end of the quarter in
which the Effective Date occurs, Company shall deliver to the appropriate Nevada
Gaming Authorities, with copies to each Holder, the Loan Notice.
5.7 ENVIRONMENTAL DISCLOSURE AND INSPECTION.
A. Company shall exercise due diligence in order to comply and use
its best efforts to cause (i) all tenants under any leases or occupancy
agreements affecting any portion of the Santa Fe Hotel Facility and (ii) all
other Persons on or occupying such property, to comply with all Environmental
Laws.
B. After the occurrence and during the continuance of an Event of
Default or otherwise at any time upon the reasonable request of any Holder or
Holders holding not less than 50% of the principal amount of the Notes, Company
agrees that such Holder or Holders may, from time to time and in its or their
sole and absolute discretion, retain, at Company's expense, an Independent
Financial Advisor to review any report relating to Hazardous Material prepared
by or for Company and, whether or not any such report exists, upon reasonable
notice to Company, conduct its own investigation of the Santa Fe Hotel Facility,
and SGC and Company each agree to use their respective best efforts to obtain
permission for the professional consultant of such Holder or Holders to conduct
its own investigation of the Santa Fe Hotel Facility. Company hereby grants to
Collateral Agent and its agents, employees, consultants and contractors the
right to enter into or on the Santa Fe Hotel Facility to perform such tests on
such property as are reasonably necessary to conduct such a review and/or
investigation. Any such investigation of the Santa Fe Hotel Facility shall be
conducted, unless otherwise agreed to by Company and the requesting Holder,
during normal business hours and, to the extent reasonably practicable, shall be
conducted with prior notice. Company and Holders each hereby acknowledge and
agree that any report of any investigation conducted at the request of Holders
pursuant to this subsection 5.7 shall be obtained and shall be used by such
Holder(s) for the purposes of Holders' internal credit analysis, to monitor the
Notes and to protect Holders' security interests created by the Basic Documents.
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C. Company shall promptly advise Holders in writing and in
reasonable detail of (i) any Release of any Hazardous Material on or relating to
the Santa Fe Hotel Facility required to be reported to any Governmental
Authority under any applicable Environmental Laws, (ii) any and all written
communications with respect to any Environmental Claims or with respect to any
Release of Hazardous Material required to be reported to any Governmental
Authority, (iii) any remedial action taken by Company or, to Company's or SGC's
knowledge, any other Person in response to (X) any Hazardous Material on, under
or about the Santa Fe Hotel Facility, or (Y) any Environmental Claim that
reasonably could have a Material Adverse Effect, (iv) Company's discovery of any
occurrence or condition on any real property adjoining or in the vicinity of the
Santa Fe Hotel Facility that reasonably could cause the Santa Fe Hotel Facility
or any part thereof to be subject to (X) any restrictions on the ownership or
transferability thereof or (Y) any material restriction on the occupancy or use
thereof under any Environmental Laws, and (v) any request for information from
any Governmental Authority that indicates such Governmental Authority is
investigating whether Company may be potentially responsible for a Release of
Hazardous Material.
D. Company shall promptly notify Holders of any action that Company
has taken or proposes to take that reasonably could be expected to subject
Company to Environmental Claims, Environmental Laws, or environmental rules or
regulations (including, without limitation, laws, rules and regulations
requiring additional environmental permits or licenses) not theretofore
applicable to the Santa Fe Hotel Facility or operations of Company.
E. Company shall, at its own expense, provide copies of such
documents or information as any Holder may reasonably request in relation to any
matters disclosed pursuant to this subsection 5.7.
5.8 REMEDIAL ACTION REGARDING HAZARDOUS MATERIAL. Company shall promptly
take any and all necessary remedial action in connection with the presence,
storage, use, disposal, transportation or Release of any Hazardous Material on,
under or about the Santa Fe Hotel Facility in order to comply in all material
respects with all applicable Environmental Laws and Governmental Authorizations.
In the event Company undertakes any remedial action with respect to any
Hazardous Material on, under or about the Santa Fe Hotel Facility, Company shall
conduct and complete such remedial action in compliance with all applicable
Environmental Laws and other applicable legal requirements (including lawful
policies, orders and directives of federal, state and local Governmental
Authorities).
5.9 DISPOSAL OF COMPANY STOCK. SGC shall own not less than all of the
Capital Stock and other equity securities of Company.
5.10 USE OF PROCEEDS. Company shall use the Cash proceeds of the Notes to
(a) purchase from PDS on the Effective Date certain gaming and other equipment
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currently leased from PDS (as further described in the Company Indenture Consent
Solicitation) for a purchase price not to exceed $10.7 million in the aggregate,
(b) purchase additional gaming equipment from PDS in an amount not to exceed
$1.9 million, (c) either (X) purchase two pylon signs, (Y) build an approximate
250-space, one-level parking structure on a portion of the Santa Fe Hotel
Premises or (Z) make improvements to the Santa Fe Hotel Facility or purchase
furniture, fixtures or equipment for use at the Santa Fe Hotel Facility, in any
case in an amount not to exceed $1.4 million, and (d) pay all fees and costs
payable by Company and/or SGC in connection with the transactions described
herein and in the other Basic Documents.
5.11 RIGHT OF FIRST REFUSAL. In the event that SGC, Company or any of
their respective Affiliates desire to refinance the Notes or the Company
Indenture Notes pursuant to any debt financing with a Person other than
SunAmerica or one or more of its Affiliates (such financing, a "THIRD PARTY
FINANCING"), SGC and Company shall first obtain from such Person a bona fide
written proposal (a "THIRD PARTY PROPOSAL") to provide such Third Party
Financing which shall state all of the material terms and conditions of the
Third Party Financing, including the applicable principal amount, interest rate,
maturity and amortization and fees thereof, and SGC and Company shall deliver
copies of such Third Party Proposal to SunAmerica together with other
information reasonably required by SunAmerica with respect to such Third Party
Financing.
SunAmerica or one or more of its designees shall then have the right to
provide any Third Party Financing upon the same terms and conditions stated in
the Third Party Proposal by giving written notice of their willingness to
provide such financing to Company within 5 Business Days of receipt by
SunAmerica of such Third Party Proposal and other information referred to in the
preceding paragraph, it being understood that if SunAmerica or one or more of
its designees elects to provide Third Party Financing, such Persons shall have a
reasonable period of time, and in any event not less than 30 days, to close such
Third Party Financing. If SunAmerica or one or more of its designees elect or
are deemed to elect not to provide such Third Party Financing, then Company may
enter into the Third Party Financing on the same terms and conditions as set
forth in the Third Party Proposal delivered to SunAmerica. If the terms of the
Third Party Financing are changed from those set forth in the Third Party
Proposal delivered to the SunAmerica in any manner that is favorable to the
lender, then Company shall be obligated to deliver to SunAmerica written notice
of such changes, and SunAmerica or one of more of its designees shall again have
a right to provide the Third Party Financing on the basis of such changed terms
in accordance with the terms and provisions (and within the time periods set
forth) above. If Company fails to consummate the Third Party Financing within
six (6) months after delivery of the Third Party Proposal to SunAmerica, then
Company shall be obligated to redeliver the Third Party Proposal to SunAmerica
prior to consummating such Third Party Financing with a third party, and
SunAmerica or one or more of its designees shall again have a right to provide
the Third Party Financing in accordance with the terms and provisions (and
within the time periods set forth) above.
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In no event shall this subsection 5.11 or any election by any Holder
to provide a Third Party Financing constitute a deferral or waiver of any
required payment under any Basic Document or other term or provision of any
Basic Document.
5.12 PERMITTED GROUND LEASE AND PERMITTED GROUND LEASE ENCUMBRANCES.
A. Neither Company nor any of its Subsidiaries shall enter into any
proposed Permitted Ground Lease, unless such proposed Permitted Ground Lease
(i) contains customary language expressly subordinating the interests of the
ground lessee under such Permitted Ground Lease to the Lien of Holders created
under the Basic Documents and (ii) is otherwise in form and substance reasonably
satisfactory to Requisite Holders. Upon approval by Requisite Holders of such
proposed Permitted Ground Lease, Collateral Agent shall deliver to the ground
lessee on behalf of Holders a customary non-disturbance and attornment
agreement, in form and substance reasonably satisfactory to Requisite Holders
and the ground lessee, for the benefit of the ground lessee under the Permitted
Ground Lease.
B. Neither Company nor any of its Subsidiaries shall permit the
creation of any proposed Permitted Ground Lease Encumbrance on any property
leased to a third party developer under the Permitted Ground Lease, unless the
terms and provisions of such proposed Permitted Ground Lease Encumbrance are in
form and substance reasonably satisfactory to Requisite Holders. Upon approval
by Requisite Holders of any such proposed Permitted Ground Lease Encumbrance,
Collateral Agent shall execute and acknowledge for recordation such
subordination agreements, in form and substance reasonably satisfactory to
Requisite Holders, as may be reasonably requested by the beneficial owner of
such Permitted Ground Lease Encumbrance and/or Company for the purpose of
subordinating the Lien of the Basic Documents to such Permitted Ground Lease
Encumbrance.
5.13 CERTAIN ADDITIONAL COVENANTS. Company represents, warrants and
covenants as follows:
(i) Company has done or caused to be done and shall do all things
necessary to observe organizational formalities and preserve its existence.
(ii) Company shall maintain all of its books, records, financial
statements and bank accounts separate from those of its Affiliates.
Company assets shall not be listed as assets on the financial statement of
any entity other than on the consolidated financial statements of SGC.
Company shall maintain its books, records, resolutions and agreements as
official records.
(iii) Company shall be, and at all times shall hold itself out to
the public as, a legal entity separate and distinct from any other entity
(including any Affiliate of Company), shall correct any known
misunderstanding regarding its status as a
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separate entity, shall conduct business in its own name, shall not identify
itself or any of its Affiliates as a division or part of any other
Affiliate or Person and shall maintain and utilize a separate telephone
number and separate stationery, invoices and checks.
(iv) Company shall not commingle the funds and other assets of
Company with those of any of its Affiliates or any other Person and
shall hold all of its assets in its own name.
(v) The stationery, invoices, and checks utilized by Company or
utilized to collect its funds or pay its expenses shall bear its own name
and shall not bear the name of any other entity unless such entity is
clearly designated as being Company's agent.
SECTION 6. NEGATIVE COVENANTS OF SGC AND COMPANY
SGC and Company each hereby covenants and agrees that, until payment
in full of all of the Obligations, unless Requisite Holders shall otherwise give
prior written consent, SGC and Company shall perform, and shall cause each of
their respective Subsidiaries to perform, all covenants set forth in this
Section 6.
6.1 RESTRICTED SGC PAYMENTS AND LOWDEN FAMILY PAYMENTS. SGC shall not,
and shall not permit any of its Subsidiaries to, directly or indirectly,
declare, make or pay any Restricted SGC Payment.
SGC and Company shall not, and shall not permit any of their
Subsidiaries to, directly or indirectly, declare, make or pay Lowden Family
Payments except that (i) Paul Lowden may be paid a salary during each fiscal
year not to exceed the salary and bonus paid to Paul Lowden during the fiscal
year ended September 30, 1997, as disclosed in writing by SGC to Initial Holders
prior to November 25, 1997 (the "LOWDEN FAMILY DISCLOSURE"), (ii) the other
members of the Lowden Family that are currently employed by Company as disclosed
in the Lowden Family Disclosure may be paid a salary not to exceed the amount
set forth in the Lowden Family Disclosure and (iii) Paul Lowden and the other
members of the Lowden Family described in clause (ii) above may receive health
benefits extended generally to employees or executive officers of SGC or its
Subsidiaries and may also receive other non-Cash benefits described in the
Lowden Family Disclosure and payable generally to other employees or executive
officers of SGC and its Subsidiaries.
6.2 RESTRICTED COMPANY PAYMENTS AND RESTRICTED INVESTMENTS. Company shall
not, and shall not permit any Subsidiary to, directly or indirectly, make a
Restricted Company Payment or a Restricted Investment unless (a) after giving
effect thereto, no Event of Default or Potential Event of Default shall have
occurred and be continuing and
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(b) after giving effect thereto, the aggregate amount of all Restricted
Company Payments and Restricted Investments does not exceed (1) 50% of
cumulative Consolidated Net Income (or if such cumulative Consolidated Net
Income is a loss, minus 100% of such loss) accrued after December 29, 1993,
less any negative extraordinary charges not reflected in such cumulative
Consolidated Net Income, PLUS (2) net proceeds from any issuance (other than
an issuance to a Subsidiary) by Company of its Capital Stock (excluding
Exchangeable Stock or Redeemable Stock), PLUS (3) 100% of the principal
amount of any loans or advances made or Indebtedness guaranteed, if such
loans, advances or guarantees constitute Restricted Investments, to the
extent that such principal is repaid by a Person other than Company or a
Subsidiary. Notwithstanding the foregoing, Company and its Subsidiaries may
make Restricted Company Payments in the form of dividends paid within 60 days
after the date of their declaration, if at the date of declaration the
payment would have been a permitted Restricted Company Payment. Payments
pursuant to usual and customary indemnification arrangements for directors
and officers shall be excluded from the definitions of Restricted Company
Payments and Restricted Investments.
6.3 LIENS AND RELATED MATTERS. (a) Company shall not, and shall not
permit any Subsidiary to, directly or indirectly, create, incur, assume or
suffer to exist or otherwise cause or suffer to become effective any Lien on any
right, title or interest to any Collateral (a "RESTRICTED ENCUMBRANCE");
PROVIDED, HOWEVER, that a Restricted Encumbrance shall be permitted if: (i) such
Restricted Encumbrance is a Permitted Lien and is junior to the Lien of the
Basic Documents; or (ii) (a) such Restricted Encumbrance is junior to the Lien
of the Basic Documents, (b) the aggregate principal amount of the Indebtedness
secured by such Restricted Encumbrance does not exceed 75% of the aggregate cost
of the improvements, projects and assets with respect to which such Indebtedness
is incurred (except where such Restricted Encumbrance secures only repayment of
Indebtedness incurred pursuant to clause (v) of the definition of Permitted
Additional Indebtedness, in which case the portion thereof that is used to fund
capital additions and capital improvements to the Collateral does not exceed 75%
of the aggregate costs of such capital additions and capital improvements), (c)
except in the case of Indebtedness incurred pursuant to clause (v) of the
definition of Permitted Additional Indebtedness, such Restricted Encumbrance
secures Indebtedness that does not mature or require payments of principal or
partial redemption prior to the maturity of the Notes, and (d) the net proceeds
from such Indebtedness are used either for capital expenditures or working
capital purposes or for future capital additions or improvements to the
Collateral or, pending such use, invested in Marketable Securities pledged to
Collateral Agent as additional security for the Notes by instruments reasonably
satisfactory to Collateral Agent.
(b) If Company, or any other Credit Party other than SGC, shall create or
assume any Lien upon any of its properties or assets, whether now owned or
hereafter acquired, other than Liens excepted by the provisions of subsection
6.3(a), it shall make or cause to be made effective provision whereby the
Obligations will be secured by such Lien equally
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and ratably with any and all other Indebtedness secured thereby as long as
any such Indebtedness shall be so secured; PROVIDED that, notwithstanding the
foregoing, this covenant shall not be construed as a consent by Requisite
Holders to the creation or assumption of any such Lien not permitted by the
provisions of subsection 6.3(a).
(c) Except with respect to specific property encumbered to secure payment
of particular Indebtedness permitted hereunder, neither Company nor any other
Credit Party (other than SGC) shall enter into any agreement prohibiting the
creation or assumption of any Lien upon any of its properties or assets, whether
now owned or hereafter acquired.
6.4 FUNDAMENTAL CHANGES. Company shall not (i) form, acquire or otherwise
permit to exist any Subsidiary or Joint Venture or any investment in the Capital
Stock or other ownership interest in any Person, except that Company may own the
Capital Stock in its Subsidiaries set forth on Schedule 3.1B annexed hereto, so
long as, until payment in full of the Obligations, such scheduled Subsidiaries
remain inactive, (ii) liquidate or dissolve, (iii) merge into or consolidate
with any Person or (iv) sell or otherwise transfer any Collateral, except sales
of obsolete equipment in the ordinary course of business and sales of personal
property assets with a net book value not to exceed $1,000,000 in the aggregate;
PROVIDED, HOWEVER, that nothing in this subsection 6.4 shall prohibit the grant
or creation of any Lien permitted under subsection 6.3.
6.5 MERGERS AND CONSOLIDATIONS OF SGC. SGC shall not consolidate or merge
with or into or sell, assign, transfer or lease all or substantially all of its
properties or assets as an entirety to any Person unless: (i) either (a) SGC
shall be the continuing Person or (b) the Person formed by or surviving any such
consolidation or merger (if other than SGC) is a corporation organized and
existing under the laws of the United States, any State or the District of
Columbia, and the corporation formed by or surviving any such consolidation or
merger assumes all of the Obligations of SGC; (ii) immediately after giving
effect to the transaction, no Event of Default or Potential Event of Default
shall have occurred and be continuing; and (iii) such transaction shall not
result in or cause the loss of any Gaming License.
In connection with any consolidation, merger, transfer or lease
contemplated by this subsection 6.5, SGC shall deliver, or cause to be
delivered, to Collateral Agent, in form and substance reasonably satisfactory to
Collateral Agent, an Officers' Certificate and an opinion of counsel, each
stating that such consolidation, merger, transfer or lease and the supplemental
agreement in respect thereto comply with this subsection 6.5 and that all
conditions precedent herein provided for relating to such transaction have been
complied with. Upon any consolidation or merger or any transfer of all or
substantially all of the assets of SGC in accordance with this subsection 6.5,
the successor corporation formed by such consolidation or into which SGC is
merged or to which such transfer is made, shall succeed to, and be substituted
for, and may exercise every right and power of,
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SGC under this Agreement with the same effect as if such successor
corporation had been named as SGC herein.
6.6 ADDITIONAL INDEBTEDNESS OF COMPANY. Company shall not, and shall not
permit any Subsidiary to, directly or indirectly, create, incur, issue, assume,
guarantee or suffer to exist, or otherwise in any manner become or remain liable
with respect to, any Indebtedness other than the Notes and the Company Indenture
Notes and other than Permitted Additional Indebtedness.
6.7 TRANSACTIONS WITH AFFILIATES. Neither Company nor any of its
Subsidiaries shall (i) enter into any loan or advance to or guarantee with, or
for the benefit of, any Affiliate of Company or any Subsidiary, or (ii) sell,
lease, transfer or otherwise dispose of any of its property, services or assets
to, or purchase any property, services or assets from, any such Affiliate,
except in either case to the extent any such transaction referenced in clause
(i) or (ii) above would be permitted as a Restricted Company Payment or a
Restricted Investment pursuant to subsection 6.2 (each of the transactions
listed in the foregoing sentence, an "AFFILIATE TRANSACTION"). Notwithstanding
the foregoing, any transaction otherwise prohibited by the preceding sentence
shall be permitted if (a) such transaction is on commercially reasonable terms
available in third-party, arm's-length transactions and (b)(1) in the case of a
transaction involving or having a value of more than $1 million but less than $3
million, Company has delivered to Collateral Agent an Officers' Certificate to
the effect that clause (a) has been satisfied or (2) in the case of a
transaction or series of transactions with an Affiliate involving or having a
value of $3 million or more within any consecutive 12 month period, Company has
caused to be delivered to Collateral Agent an opinion of an Independent
Financial Advisor to the effect that the transaction is fair to Company or the
relevant Subsidiary, as the case may be, from a financial point of view. This
covenant shall not apply to any contract, agreement, loan, advance or other
arrangement in existence as of the date hereof.
6.8 SALE AND LEASEBACK. Company shall not, and shall not permit any
Subsidiary to, enter into any arrangement with any lender or investor or to
which such lender or investor is a party providing for the lease by Company or
any Subsidiary of real property or any other asset that has been or is to be
sold or transferred by Company or any Subsidiary to such lender or investor or
to any Person to whom the funds have been or are to be advanced by such lender
or investor, which advance is secured by such property, assets or rental
obligations of Company or any Subsidiary (each such transaction, a
"SALE/LEASEBACK"). Notwithstanding the foregoing, Company and any Subsidiary
may enter into any such Sale/Leaseback transaction provided that the cumulative
net Cash proceeds of all such Sale/Leaseback transactions shall not exceed $5
million.
6.9 AMENDMENTS TO DOCUMENTS. Company shall not amend, modify, supplement,
extend, renew, alter or otherwise change the terms of any Santa Fe Hotel
Document
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except with the consent of Holders of more than 50% of the Notes, which
consent shall not be unreasonably withheld.
6.10 STAY, EXTENSION AND USURY LAWS. No Credit Party shall, nor shall they
permit any of their respective Subsidiaries to (to the extent each may lawfully
do so), at any time insist upon, plead or in any manner whatsoever claim or take
the benefit or advantage of, any stay or extension law or any usury law or other
law that would prohibit or forgive any Credit Party from paying all or a portion
of the principal of or premium, if any, or interest on the Notes as contemplated
herein, wherever enacted, now or at any time hereinafter in force, or that may
materially affect the covenants or the performance by any Credit Party of their
respective Obligations hereunder in a manner inconsistent with the provisions
hereof. Each of SGC and Company expressly waives all benefit or advantage of
any such law. If a court of competent jurisdiction prescribes that any Credit
Party may not waive its rights to take the benefit or advantage of any stay or
extension law or any usury law or other law in accordance with the prior
sentence, then the Obligation to pay interest on the Notes shall be reduced to
the maximum legal limit under applicable law governing the interest payable in
connection with the Notes, and any amount of interest or premium, if any, paid
by any Credit Party that is deemed illegal shall be deemed to have been a
prepayment of principal (without penalty) on the Notes.
6.11 GOVERNMENT REGULATION. SGC and Company shall not, and shall not
permit any of their respective Subsidiaries to, be or become subject to,
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, the Interstate Commerce Act or the Investment Company Act of 1940 or
under any other federal or state statute or regulation which may limit its
ability to incur Indebtedness or which may otherwise render all or any portion
of the Obligations unenforceable.
6.12 CONDUCT OF BUSINESS. Company shall not, and shall not permit any
Subsidiary to, engage in or conduct any business activity, or enter into any
Contractual Obligation, other than activities and Contractual Obligations
relating to the operations of Permitted Lines of Business and present or future
gaming and hotel operations of Company.
6.13 LIMITATION ON TAX SHARING PAYMENTS AND AGREEMENTS. Notwithstanding
any agreement to the contrary, Company shall not, and shall not permit any of
its Subsidiaries to, make any payment to SGC or any of its Subsidiaries (other
than Company or any of its Subsidiaries) with respect to any liability for Taxes
for any taxable period in excess of the lesser of (i) the Company Separate Tax
for such taxable period or (ii) the Company Allocable Share of SGC's
consolidated or combined group's actual Tax liability for such taxable period.
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SECTION 7. EVENTS OF DEFAULT
If any one or more of the following conditions or events ("EVENTS OF
DEFAULT") shall occur:
7.1 FAILURE TO MAKE PAYMENTS WHEN DUE. Failure by Company to pay any
installment of principal of any Note when due, whether at stated maturity, by
acceleration, by notice of voluntary prepayment, by mandatory prepayment,
redemption or otherwise; or failure by Company to pay any interest on any Note
or any other amount due under this Agreement within 15 days after the date due;
or
7.2 DEFAULT IN OTHER AGREEMENTS. (i) Failure of any Credit Party or any
of their respective Subsidiaries to pay when due any principal of or interest on
any Indebtedness (other than Indebtedness referred to in subsection 7.1) in an
aggregate principal amount of $5,000,000 or more, in each case beyond the end of
any grace period provided therefor; or (ii) breach or default by any Credit
Party or any of their respective Subsidiaries with respect to any other material
term of any items of Indebtedness with an aggregate principal amount of
$5,000,000 or more or any loan agreement, mortgage, indenture or other agreement
relating to such Indebtedness, including but not limited to the Company
Indenture, if the effect of such breach or default is to cause that Indebtedness
to become or be declared due and payable prior to its stated maturity or the
stated maturity of any underlying obligation, as the case may be; or
(iii) breach or default by Company under any Santa Fe Hotel Document if such
breach or default is not cured within any applicable grace period; PROVIDED that
any such failure, breach or default with respect to the Pioneer Indenture, which
failure, breach or default does not involve any voluntary or involuntary case
under the Bankruptcy Code or under any other applicable bankruptcy, insolvency
or similar law now or hereafter in effect, shall not be considered an Event of
Default hereunder so long as no claim is made on, under or in respect of the
guaranty given by SGC in respect thereof.
7.3 BREACH OF CERTAIN COVENANTS. Failure of SGC or Company to perform or
comply with any term or condition contained in subsection 2.5, 5.3, 5.9, 5.10 or
5.11 or Section 6 of this Agreement; or
7.4 BREACH OF WARRANTY. Any representation, warranty, certification or
other statement made by any Credit Party or any of their respective Subsidiaries
in any Basic Document shall be false in any material respect on the date as of
which made; or
7.5 OTHER DEFAULTS UNDER BASIC DOCUMENTS. Any Credit Party shall default
in the performance of or compliance with any term contained in this Agreement or
any of the other Basic Documents, other than any such term referred to in any
other subsection of this Section 7, and such default shall not have been
remedied or waived within 30 days after the earlier of (i) an officer of any
Credit Party becoming aware of such default or (ii) receipt by SGC or Company of
notice from any Holder of such default; or
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7.6 INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. (i) A court
having jurisdiction in the premises shall enter a decree or order for relief in
respect of any Credit Party or any of their respective material Subsidiaries in
an involuntary case under the Bankruptcy Code or under any other applicable
bankruptcy, insolvency or similar law now or hereafter in effect, which decree
or order is not stayed; or any other similar relief shall be granted under any
applicable federal or state law; or (ii) an involuntary case shall be commenced
against any Credit Party or any of their respective material Subsidiaries under
the Bankruptcy Code or under any other applicable bankruptcy, insolvency or
similar law now or hereafter in effect; or a decree or order of a court having
jurisdiction in the premises for the appointment of a receiver, liquidator,
sequestrator, trustee, custodian or other officer having similar powers over any
Credit Party or any of their respective material Subsidiaries, or over all or a
substantial part of its property, shall have been entered; or there shall have
occurred the involuntary appointment of an interim receiver, trustee or other
custodian of any Credit Party or any of their respective material Subsidiaries
for all or a substantial part of its property; or a warrant of attachment,
execution or similar process shall have been issued against any substantial part
of the property of any Credit Party or any of their respective material
Subsidiaries, and any such event described in this clause (ii) shall continue
for 60 days unless dismissed, bonded or discharged, it being understood that
"material Subsidiary" under subsections 7.6, 7.7 and 7.9 shall include Company
and its successors; or
7.7 VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. (i) Any Credit
Party or any of their respective material Subsidiaries shall have an order for
relief entered with respect to it or commence a voluntary case under the
Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar
law now or hereafter in effect, or shall consent to the entry of an order for
relief in an involuntary case, or to the conversion of an involuntary case to a
voluntary case, under any such law, or shall consent to the appointment of or
taking possession by a receiver, trustee or other custodian for all or a
substantial part of its property; or any Credit Party or any of their respective
material Subsidiaries shall make any assignment for the benefit of creditors; or
(ii) any Credit Party or any of their respective material Subsidiaries shall be
unable, or shall fail generally, or shall admit in writing its inability, to pay
its debts as such debts become due; or the Board of Directors of any Credit
Party or any of their respective material Subsidiaries (or any committee
thereof) shall adopt any resolution or otherwise authorize any action to approve
any of the actions referred to in clause (i) above or this clause (ii); or
7.8 JUDGMENTS AND ATTACHMENTS. Any money judgment, writ or warrant of
attachment or similar process involving in the aggregate at any time an amount
in excess of $5,000,000 (in either case not adequately covered by insurance as
to which a solvent and unaffiliated insurance company has acknowledged coverage)
shall be entered or filed against any Credit Party or any of their respective
Subsidiaries or any of their respective assets and shall remain undischarged,
unvacated, unbonded or unstayed for a period of 60
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days (or in any event later than five days prior to the date of any proposed
sale thereunder); or
7.9 DISSOLUTION. Any order, judgment or decree shall be entered against
any Credit Party or any of their respective material Subsidiaries decreeing the
dissolution or split up of any Credit Party or that Subsidiary and such order
shall remain undischarged or unstayed for a period in excess of 30 days; or
7.10 EMPLOYEE BENEFIT PLANS. There shall occur one or more ERISA Events
which individually or in the aggregate results in or might reasonably be
expected to result in liability of the Credit Parties or any of their ERISA
Affiliates in excess of $500,000 during the term of this Agreement; or there
shall exist an amount of unfunded benefit liabilities (as defined in Section
4001(a)(18) of ERISA), individually or in the aggregate for all Pension Plans of
the Credit Parties and their ERISA Affiliates (excluding for purposes of such
computation any Pension Plans with respect to which assets exceed benefit
liabilities), which exceeds $500,000; or
7.11 MATERIAL ADVERSE EFFECT. Any event or change shall occur that has
caused or evidences, either in any case or in the aggregate, a Material Adverse
Effect; or
7.12 INVALIDITY OF COMPANY ENVIRONMENTAL INDEMNITY OR THE SGC GUARANTY.
The Company Environmental Indemnity or any guaranty of the Obligations,
including, without limitation, the SGC Guaranty, for any reason, other than the
satisfaction in full of all Obligations, ceases to be in full force and effect
or is declared to be null and void, or any guarantor or indemnitor, including
but not limited to SGC or Company, denies that it has any further liability
under any indemnity or guaranty or under any make-well agreement or under the
Company Environmental Indemnity or gives notice to such effect, in each case, to
the extent it relates to the Obligations; or
7.13 IMPAIRMENT OF COLLATERAL. (A) A judgment creditor of any Credit Party
or any of their respective Subsidiaries shall obtain possession of any portion
of the Collateral under the Basic Documents by any means, including, without
limitation, levy, distraint, replevin or self-help, (B) any substantial portion
of the Collateral shall be taken by eminent domain or condemnation, (C) any of
the Basic Documents shall cease for any reason to be in full force and effect,
or any party thereto shall purport to disavow its Obligations thereunder or
shall declare that it does not have any further Obligations thereunder or shall
contest the validity or enforceability thereof, or Holders shall cease to have a
valid and perfected first priority security interest in any Collateral therein
except as permitted under the terms of such Basic Document, or (D) Collateral
Agent's security interests or Liens, in each case on behalf of Holders, in
Collateral under the Basic Documents shall become otherwise impaired or
unenforceable; or
7.14 OWNERSHIP OF COMPANY. SGC shall cease to own all of the Capital Stock
of Company.
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THEN in addition to all other remedies of Collateral Agent or Holders hereunder,
under the other Basic Documents or at law or equity, (i) upon the occurrence of
any Event of Default described in subsection 7.6 or 7.7 with respect to SGC,
Company or any of Company's Subsidiaries, each of the unpaid principal amount of
and accrued interest on the Notes (to the full extent permitted by applicable
law) and all other Obligations shall automatically become immediately due and
payable, without presentment, demand, protest or other requirements of any kind,
all of which are hereby expressly waived by SGC and Company and (ii) upon the
occurrence and during the continuation of any other Event of Default, Requisite
Holders may, by written notice to Company, declare all or a portion of the
amounts described in clause (i) above relating to the Notes and all other
Obligations owed to Holders of the Notes to be, and the same shall forthwith
become immediately due and payable. Company acknowledges, and the parties
hereto agree, that each Holder has the right to maintain its investment in the
Notes free from repayment by Company (except as herein specifically provided
for).
Notwithstanding anything to the contrary contained in the preceding
paragraph except for the last sentence thereof, if at any time after an
acceleration of Obligations pursuant to such paragraph SGC and Company shall pay
all arrears of interest and all payments on account of principal which shall
have become due otherwise than as a result of such acceleration (with interest
on principal, premium (if any) and, to the extent permitted by law, on overdue
interest, at the rates specified in this Agreement and Late Charges) and all
Events of Default and Potential Events of Default (other than non-payment of the
principal of and accrued interest as aforesaid on the Obligations, in each case
which is due and payable solely by virtue of acceleration) shall be remedied or
waived pursuant to subsection 9.1, then Requisite Holders, by written notice to
SGC and Company, may at their option rescind and annul such acceleration and its
consequences; but such action shall not affect any subsequent Event of Default
or Potential Event of Default or impair any right consequent thereon. The
provisions of this paragraph are intended merely to bind Holders to a decision
which may be made at the election of the percentage of Holders referenced above
and are not intended to benefit any Credit Party and do not grant any Credit
Party the right to require Holders to rescind or annul any acceleration
hereunder, even if the conditions set forth herein are met.
SGC and Company hereby waive to the extent not prohibited by
applicable law which cannot itself be waived (i) all presentments, demands for
performance, notices of nonperformance (except to the extent required by the
provisions hereof), (ii) any requirement of diligence or promptness on the part
of any Holder of Notes in the enforcement of its rights under the provisions of
this Agreement, (iii) any and all notices of every kind and description which
may be required to be given by any statute or rule of law (except to the extent
required by the provisions of this Agreement), and (iv) to the extent permitted
by applicable law, any defense of any kind (other than payment) which it may now
or hereafter have with respect to its liability under the Notes.
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No course of dealing between any Credit Party or any of their
respective Subsidiaries and any Holder shall operate as a waiver of any of the
rights of any Holder under any Basic Document. No delay or omission in
exercising any right under any Basic Document shall operate as a waiver of such
right or any other right. A waiver on any one occasion shall not be construed
as a bar to or waiver of any right or remedy on any other occasion. The
remedies provided in this Section 7 are in addition to all rights and remedies
available to each Holder under the Basic Documents or any other document or by
law or equity.
In consideration of, among other things, Holders' agreement to acquire
the Notes, to the extent permitted by applicable law, Company agrees that if a
petition is filed by or against it commencing a case under the Bankruptcy Code,
or if Company is the subject of any insolvency, bankruptcy, receivership,
readjustment of Indebtedness, dissolution, reorganization, liquidation or
similar proceeding, under state or federal law, voluntary or involuntary,
Collateral Agent on behalf of Holders shall be immediately and absolutely
entitled to, and Company hereby consents to, the following relief, singly,
alternatively or cumulatively, and Company shall not object to, contest or
oppose any motion, application, complaint or other proceeding by Collateral
Agent to obtain such relief, and Company shall take all actions necessary to
enable Collateral Agent to obtain such relief, including: (a) Collateral Agent
shall be entitled to the immediate termination of the automatic stay imposed by
Section 362 of the Bankruptcy Code so as to enable it to exercise all of its
rights and remedies under this Agreement and the other Basic Documents or
applicable law; (b) Collateral Agent shall be entitled to the immediate
dismissal of such case pursuant to Section 305(a)(1) of the Bankruptcy Code
(with attorney's fees and other costs), and Company agrees that such dismissal
shall be in the interests of creditors and itself; and (c) Collateral Agent
shall be entitled to the immediate dismissal of such case under Section 1112(b)
of the Bankruptcy Code for cause, and Company agrees that the filing of such
case by it shall per se be deemed to have been commenced in bad faith and solely
for the improper purpose of impeding once again the exercise of Collateral
Agent's rights and remedies with attendant unnecessary delay and needless cost.
SECTION 8. COLLATERAL AGENT AND RELATIONS AMONG HOLDERS, ETC.
8.1 APPOINTMENT OF COLLATERAL AGENT, POWERS AND IMMUNITIES. Each
Holder of Notes hereby irrevocably appoints and authorizes Collateral Agent
to act as its agent under the Basic Documents with such powers as are
expressly delegated to Collateral Agent by the terms of this Agreement and
the other Basic Documents, together with such other powers as are reasonably
incidental thereto. Collateral Agent (which term as used in this sentence and
in subsections 8.5 and 8.6 hereof shall include reference to its Affiliates
and the officers, directors, employees and agents of Collateral Agent and of
its Affiliates): (a) shall not have any duties or responsibilities except
those expressly set forth in this Agreement or in any other Basic Document,
or be a trustee for any Holder; (b) shall not be required to take any action
which is contrary to this Agreement or any
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other Basic Document or applicable law; (c) shall not be required to initiate
or conduct any litigation or collection proceedings hereunder or under any
other Basic Document; and (d) shall not be responsible for any action taken
or omitted to be taken by it hereunder or under any other Basic Document or
under any other document or instrument referred to or provided for herein or
therein or in connection herewith or therewith, except for its own gross
negligence or willful misconduct. Neither Collateral Agent nor any Holder
nor any of their respective Affiliates shall be responsible to any other
Holder for any recitals, statements, representations or warranties made by
any Credit Party or any other Person contained in this Agreement or in any
certificate or other document referred to or provided for in, or received by
any Holder under, this Agreement or any other Basic Document, for the value,
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement, any other Basic Document or any other document referred to or
provided for herein or therein, for the creation, perfection or priority of
any Lien on or in any of the Collateral or for any failure by any Credit
Party or any other Person to perform its Obligations hereunder or thereunder.
Collateral Agent may employ agents and attorneys-in-fact and shall not be
responsible for the negligence or misconduct of any such agents of
attorneys-in-fact selected by it with reasonable care. Except as otherwise
provided under this Agreement, Collateral Agent shall take such action under
the Basic Documents to which it is a party as shall be directed by Requisite
Holders. As to any matters not expressly provided for by any Basic Document,
Collateral Agent shall not be required to take any action or exercise any
discretion, but shall be required to act or to refrain from acting upon
instructions of Requisite Holders and shall in all cases be fully protected
in acting, or in refraining from acting, hereunder or under any other Basic
Document in accordance with the instructions of Requisite Holders, and such
instructions of Requisite Holders and any action taken or failure to act
pursuant thereto shall be binding on all Holders. These provisions of this
Section 8 are solely for the benefit of Collateral Agent and Holders and none
of Company or the other Credit Parties shall have any rights as a third party
beneficiary of any of the provisions hereof.
8.2 RELIANCE BY COLLATERAL AGENT. Collateral Agent shall be entitled to
rely upon any certificate, notice or other document (including any cable,
telegram, telecopy or telex) believed by it to be genuine and correct and to
have been signed or sent by or on behalf of the proper Person or Persons, and
upon advice and statements of legal counsel, Independent Financial Advisors and
other experts selected by Collateral Agent. Collateral Agent agrees to make
such demands and give such notices under the Basic Documents as Requisite
Holders may request, to take such action to enforce the Basic Documents or any
guaranty or undertaking under the Basic Documents and to foreclose upon, collect
and dispose of the Collateral or any portion thereof, or enforce any such
guaranty or undertaking, and to release any part of the Collateral as may be
directed by Requisite Holders; PROVIDED, HOWEVER, that neither the consent nor
the direction of Requisite Holders shall be required for the release of any part
of the Collateral which is otherwise permitted under this Agreement or the other
Basic Documents. Collateral Agent may at any time request directions from
Requisite Holders with respect to this
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Agreement or the other Basic Documents as to any course of action or other
matter relating hereto or to such other Basic Documents. Except as otherwise
provided herein or in the other Basic Documents, directions given by
Requisite Holders to Collateral Agent hereunder shall be binding on all
Holders for all purposes. Each Holder agrees not to take any action
whatsoever to enforce any term or provision of this Agreement or any of the
other Basic Documents, or to enforce any of its rights in respect of the
Collateral or in connection with any guaranties or undertakings given in any
of the Basic Documents, except through Collateral Agent in accordance with
this Agreement.
8.3 DEFAULTS. Collateral Agent shall not be deemed to have knowledge or
notice of the occurrence of a Potential Event of Default or Event of Default
unless Collateral Agent has received written notice from any Holder or Company
referring to this Agreement, describing such Potential Event of Default or Event
of Default and stating that such notice is a "Notice of Default." In the event
that Collateral Agent receives such a notice of the occurrence of a Potential
Event of Default or Event of Default, Collateral Agent shall give notice thereof
to Holders. Collateral Agent shall (subject to the last sentence of subsection
8.5 hereof) take such action with respect to such Potential Event of Default or
Event of Default as shall be reasonably directed by Requisite Holders; PROVIDED
that, unless and until Collateral Agent shall have received such directions,
Collateral Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Potential Event of Default
or Event of Default as it shall deem advisable in the best interest of Holders
except to the extent that this Agreement expressly requires that such action be
taken, or not taken, only with the consent or upon the authorization of
Requisite Holders or all Holders.
8.4 RIGHTS AS HOLDER. With respect to the Notes held by Collateral Agent,
it shall have the same rights and powers hereunder as any Holder and may
exercise the same as though it was not acting as Collateral Agent, and the terms
"Holder" or "Holders" shall, unless the context otherwise indicates, include
Collateral Agent in its individual capacity. Collateral Agent may (without
having to account therefor to any Holder) accept deposits from, extend credit
(on a secured or unsecured basis) to and generally engage in any kind of
financing, insurance, trust or other business with any Credit Party or any of
its Affiliates, as if it was not acting as Collateral Agent. Each Holder and
its Affiliates may (without having to account therefor to Collateral Agent, or
any other Holder) accept deposits from, extend credit (on a secured or unsecured
basis) to and generally engage in any kind of financing, insurance, trust or
other business with any Credit Party or any of its Affiliates, as if it was not
acting as Holder.
8.5 INDEMNIFICATION. Each Holder agrees to indemnify Collateral Agent (to
the extent not reimbursed by SGC or Company), ratably in accordance with the
principal amount of Notes purchased by it, for any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may at any time
(including, without limitation, at any time following the payment of principal
of and/or interest on the Notes) be imposed on, incurred by or
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asserted against Collateral Agent in any way relating to or arising out of
this Agreement, any other Basic Document or any documents contemplated by or
referred to herein or therein or the transactions contemplated hereby or
thereby (including the costs and expenses which SGC or Company is obligated
to pay hereunder) or the enforcement of any of the terms hereof or thereof or
of any such other documents; PROVIDED that no Holder shall be liable for any
of the foregoing to the extent they arise from Collateral Agent's gross
negligence or wilful misconduct. Collateral Agent shall be fully justified
in refusing to take or to continue to take any action hereunder or under the
other Basic Documents unless it shall first be indemnified to its
satisfaction by Holders against any and all liability and expense which may
be incurred by it by reason of taking or continuing to take any such action.
8.6 NON-RELIANCE ON COLLATERAL AGENT AND OTHER HOLDERS. Each Holder
represents that it has, independently and without reliance on Collateral Agent
or any other Holder, and based on such documents and information as it has
deemed appropriate, made its own appraisal of the financial condition and
affairs of each Credit Party and their Affiliates and made its own decision to
purchase the Notes and agrees that it shall, independently and without reliance
upon Collateral Agent or any other Holder, continue to make its own appraisals
and decisions in taking or not taking action under this Agreement as it shall
deem appropriate at the time. Neither Collateral Agent nor any Holder shall be
required to keep informed as to the performance or observance by any Credit
Party or any of their Affiliates under this Agreement or any other document
referred to or provided for herein or to make inquiry of, or to inspect the
properties or books of, any Credit Party or any of their Affiliates. Neither
Collateral Agent nor any Holder shall have any duty or responsibility to provide
any Holder with any credit or other information concerning any Credit Party or
any of their Affiliates which may come into the possession of Collateral Agent
or such Holder or any of its or their Affiliates.
8.7 RESIGNATION OR REMOVAL OF COLLATERAL AGENT. Subject to the
appointment and acceptance of a successor Collateral Agent as provided below,
Collateral Agent may resign at any time by giving notice thereof to Holders, SGC
and Company, and Collateral Agent may be removed at any time with or without
cause by Requisite Holders. Upon any such resignation or removal, Requisite
Holders shall have the right to appoint a successor Collateral Agent. If no
successor Collateral Agent shall have been so appointed by Requisite Holders and
shall have accepted such appointment within 30 days after the retiring
Collateral Agent's giving of notice of resignation or Requisite Holders' removal
of the retiring Collateral Agent, then the retiring Collateral Agent may, on
behalf of Holders, appoint a successor Collateral Agent, which shall be a
financial institution with a combined capital and surplus of at least
$500,000,000. Upon the acceptance of any appointment as Collateral Agent
hereunder by a successor Collateral Agent, such successor Collateral Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Collateral Agent, and the retiring Collateral Agent
shall be discharged from its duties and obligations hereunder. Upon the
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acceptance of any appointment as Collateral Agent, the retiring or removed
Collateral Agent under this Agreement shall promptly (i) transfer to such
successor Collateral Agent all sums, securities and other items of Collateral
held under any Basic Document, together with all records and other documents
necessary or appropriate in connection with the performance of the duties of the
successor Collateral Agent under each Basic Document and this Agreement, and
(ii) execute and deliver to such successor Collateral Agent such amendments to
financing statements, and take such other actions, as may be necessary or
appropriate in connection with the assignment to such successor of the security
interests created under each of the Basic Documents. After any retiring
Collateral Agent's resignation or removal hereunder as Collateral Agent, the
provisions of this paragraph shall continue in effect for its benefit in respect
of any actions taken or omitted to be taken by it while it was acting as
Collateral Agent.
8.8 AUTHORIZATION. Collateral Agent is hereby authorized by Holders to
execute, deliver and perform in accordance with its terms each of the Basic
Documents to which Collateral Agent is or is intended to be a party, and each
Holder agrees to be bound by all of the agreements of Collateral Agent contained
in such Basic Documents.
SECTION 9. MISCELLANEOUS
9.1 AMENDMENTS AND WAIVERS.
A. No amendment, modification, termination or waiver of any
provision of this Agreement, the Notes or the other Basic Documents, or consent
to any departure by any Credit Party therefrom, shall in any event be effective
without the written concurrence of Requisite Holders or, to the extent expressly
provided herein, Holders of the percentage of and type of Notes expressly
provided herein; PROVIDED that any such amendment, modification, termination,
waiver or consent which: (i) reduces the requisite percentage of Holders or the
principal balance of the Notes that must consent to an amendment or waiver of an
Event of Default; (ii) reduces the rate of or changes the time for payment of
interest on any Notes; (iii) reduces the principal amount of or extends the
final maturity of any Note, or reduces the redemption price of the Notes;
(iv) changes the currency of payment for any payment on the Notes; (v) changes
the definition of or the requirements of SGC or Company or any of their
respective Subsidiaries upon the occurrence of a Change in Control; (vi) changes
in any manner the provisions contained in this subsection 9.1A; or (vii) reduces
the requisite percentage of Holders or the principal balance of the Notes
necessary to amend or modify the provisions as set forth in clauses (i) through
(vii) shall be effective only with respect to the applicable Holders consenting
thereto if evidenced by a writing signed by or on behalf of such Holders.
Holders of the requisite percentage of Notes considering any such proposed
amendment, modification, termination or waiver may elect to approve or
disapprove any such proposal in their sole discretion except as otherwise
expressly provided herein. Any waiver or consent shall be effective only in the
specific instance and for the specific purpose for
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which it was given. No notice to or demand on any Credit Party in any case
shall entitle any Credit Party to any other or further notice or demand in
similar or other circumstances. Any amendment, modification, termination,
waiver or consent effected in accordance with this subsection 9.1 shall be
binding upon each Holder at the time outstanding, and each future Holder, if
signed by SGC, on SGC and, if signed by Company, on Company.
B. Solely for the purpose of determining whether Holders of the
requisite percentage of the Notes then outstanding approved or consented to any
amendment, modification, termination or waiver to be given under this Agreement
or the Notes, or have directed the taking of any action provided herein or in
the Notes to be taken upon the direction of Holders of a specified percentage of
the aggregate amount of Notes then outstanding, Notes directly or indirectly
owned by any Credit Party or any of their respective Subsidiaries shall be
deemed not to be outstanding.
9.2 EXPENSES. Whether or not the transactions contemplated hereby shall
be consummated, SGC and Company jointly and severally agree to pay promptly
(i) all the actual reasonable costs and expenses of preparation of the Basic
Documents and of creating and perfecting Liens in favor of Collateral Agent,
SunAmerica and the other Holders or otherwise relating to the Collateral
pursuant to any Basic Document, including filing and recording fees and
expenses, title insurance, environmental studies and surveys; (ii) all the
reasonable costs of furnishing all opinions by counsel for each Credit Party
(including without limitation any opinions requested by Collateral Agent or any
other Holder as to any legal matters arising hereunder) and of each Credit
Party's performance of and compliance with all agreements and conditions on its
part to be performed or complied with under this Agreement and the other Basic
Documents including, without limitation, with respect to confirming compliance
with environmental and insurance requirements; (iii) the reasonable fees,
expenses and disbursements of counsel to Collateral Agent and any Holder holding
a majority in principal amount of the Notes (including allocated costs of
internal counsel) in connection with the negotiation, preparation, execution and
administration of the Basic Documents and any consents, amendments, waivers or
other modifications hereto or thereto and any other documents or matters
requested by any Credit Party; (iv) all other actual reasonable costs and
expenses incurred by Collateral Agent or any Holder holding a majority of the
principal amount of the Notes in connection with the negotiation, preparation
and execution of the Basic Documents and the transactions contemplated hereby
and thereby; and (v) after the occurrence of an Event of Default, all costs and
expenses, including reasonable attorneys' fees (including allocated costs of
internal counsel) and costs of settlement, incurred by Collateral Agent and any
Holder in enforcing any Obligations of or in collecting any payments due from
any Credit Party hereunder or under the other Basic Documents by reason of such
Event of Default or in connection with any refinancing or restructuring of the
credit arrangements provided under this Agreement in the nature of a "work-out"
or pursuant to any insolvency or bankruptcy proceedings.
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9.3 INDEMNITY. In addition to the payment of expenses pursuant to
subsection 9.2, whether or not the transactions contemplated hereby shall be
consummated, SGC and Company jointly and severally agree to defend, indemnify,
pay and hold harmless Collateral Agent, each Holder, and the officers,
directors, employees, agents and Affiliates of Collateral Agent and each Holder
(collectively called the "INDEMNITEES") from and against any and all other
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, expenses and disbursements of any kind or nature whatsoever
(including without limitation the reasonable fees and disbursements of counsel
for such Indemnitees) in connection with any investigative, administrative or
judicial proceeding commenced or threatened by any Person (whether or not any
such Indemnitee shall be designated as a party or a potential party thereto),
whether direct, indirect or consequential and whether based on any federal,
state or foreign laws, statutes, rules or regulations (including without
limitation securities and commercial laws, statutes, rules or regulations and
Environmental Laws), on common law or equitable cause or on contract or
otherwise, that may be imposed on, incurred by, or asserted against any such
Indemnitee, in any manner relating to or arising out of this Agreement or the
other Basic Documents or the transactions contemplated hereby or thereby
(including without limitation Holders' agreement to purchase any Notes or the
use or intended use of the proceeds of such purchase) or the statements
contained in any commitment letter delivered by any Holder to any Credit Party
with respect thereto (collectively called the "INDEMNIFIED LIABILITIES");
PROVIDED that SGC and Company shall not have any Obligation to any Indemnitee
hereunder with respect to any Indemnified Liabilities to the extent such
Indemnified Liabilities arise solely from the gross negligence or willful
misconduct of that Indemnitee as determined by a final judgment of a court of
competent jurisdiction. To the extent that the undertaking to defend,
indemnify, pay and hold harmless set forth in the preceding sentence may be
unenforceable because it is violative of any law or public policy, SGC and
Company shall contribute the maximum portion that it is permitted to pay and
satisfy under applicable law to the payment and satisfaction of all Indemnified
Liabilities incurred by the Indemnitees or any of them.
9.4 RATABLE SHARING.
A. Holders of Notes hereby agree among themselves that if any of
them shall, whether by voluntary payment, by realization upon security, through
the exercise of any right of set-off, by counterclaim or cross action or by the
enforcement of any right under any Basic Document or otherwise, or as adequate
protection of a deposit treated as cash collateral under the Bankruptcy Code,
receive payment or reduction of a proportion of the aggregate amount of
principal, interest, fees and other amounts then due and owing to such Holder
with respect to the Notes hereunder or under the other Basic Documents
(collectively, the "AGGREGATE AMOUNTS DUE" to such Holder) which is greater than
the proportion received by any other Holder of Notes in respect of the Aggregate
Amounts Due to such other Holder, then such Holder receiving such
proportionately greater payment shall (i) notify each other Holder of Notes of
the receipt of such payment and (ii) apply a portion of such payment to purchase
participations (which it
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shall be deemed to have purchased from each seller of a participation
simultaneously upon the receipt by such seller of its portion of such
payment) in the Aggregate Amounts Due to the other Holders of Notes so that
all such recoveries of Aggregate Amounts Due shall be shared by all Holders
of Notes in proportion to the Aggregate Amounts Due to them; PROVIDED that if
all or part of such proportionately greater payment received by such
purchasing Holder is thereafter recovered from such Holder upon the
bankruptcy or reorganization of any Credit Party or otherwise, those
purchases shall be rescinded and the purchase prices paid for such
participations shall be returned to such purchasing Holder ratably to the
extent of such recovery, but without interest. SGC and Company expressly
consent to the foregoing arrangement and agree that any Holder of a
participation so purchased may exercise any and all rights of set-off or
counterclaim with respect to any and all monies owing by SGC and Company to
such Holder with respect thereto as fully as if such Holder were owed the
amount of the participation held by such Holder.
B. Subject to subsection 9.4A above, and in addition to any other
rights Collateral Agent or any Holder may have under law or in equity, if any
amount shall at any time be due and owing by SGC or Company under this Agreement
or the other Basic Documents, Collateral Agent or such Holder, as the case may
be, is authorized at any time or from time to time, without notice (any such
notice being hereby expressly waived), to set-off and to appropriate and to
apply any and all deposits (general or special, including but not limited to
Indebtedness evidenced by certificates of deposit, whether matured or unmatured)
and any other Indebtedness of Collateral Agent or such Holder, as the case may
be, owing to SGC or Company or any other Credit Party and any other property of
SGC or Company or any other Credit Party held by Collateral Agent or such
Holder, as applicable, to or for the credit or the account of SGC or Company or
any other Credit Party against and on account of the Obligations and liabilities
of SGC or Company or such other Credit Party to Collateral Agent or any Holder,
as applicable.
9.5 INDEPENDENCE OF COVENANTS. All covenants hereunder shall be given
independent effect so that if a particular action or condition is not permitted
by any of such covenants, the fact that it would be permitted by an exception
to, or would otherwise be within the limitations of, another covenant shall not
avoid the occurrence of an Event of Default or Potential Event of Default if
such action is taken or condition exists.
9.6 NOTICES. Unless otherwise specifically provided herein, any notice or
other communication herein required or permitted to be given shall be in writing
and may be personally served, telexed or sent by telefacsimile or United States
mail or courier service and shall be deemed to have been given when delivered in
person or by courier service, upon receipt of telefacsimile or telex if sent
prior to 5:00 p.m. on a Business Day (and otherwise such facsimile or telex
shall be deemed received on the next Business Day), or three Business Days after
depositing it in the United States mail with postage prepaid and properly
addressed. For the purposes hereof, the address of each party hereto shall be
as set forth under such party's name on the signature pages hereof or such other
address as
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shall be designated by such Person in a written notice delivered to the other
parties hereto.
9.7 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
A. All representations, warranties and agreements made in or
pursuant to the Basic Documents shall survive the execution and delivery of this
Agreement and the purchase of the Notes hereunder.
B. Notwithstanding anything in this Agreement or implied by law to
the contrary, the agreements of SGC and Company set forth in subsections 3.13,
9.2, 9.3 and 9.4 and the agreements of Holders set forth in subsection 9.4 shall
survive the payment of the Notes and the termination of this Agreement.
9.8 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No failure or
delay on the part of any Holder in the exercise of any power, right or privilege
hereunder or under any other Basic Document shall impair such power, right or
privilege or be construed to be a waiver of any default or acquiescence therein,
nor shall any single or partial exercise of any such power, right or privilege
preclude other or further exercise thereof or of any other power, right or
privilege. All rights and remedies existing under this Agreement and the other
Basic Documents are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
9.9 MARSHALLING; PAYMENTS SET ASIDE. No Holder shall be under any
obligation to marshal any assets in favor of any Credit Party or any other party
or against or in payment of any or all of the Obligations. To the extent that
SGC or Company or any other Credit Party makes a payment or payments to any
Holder, any Holder enforces any security interests or exercises its rights of
set-off, and such payment or payments or the proceeds of such enforcement or
set-off or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside and/or required to be repaid to a trustee,
receiver or any other party under any bankruptcy law, any other state or federal
law, common law or any equitable cause, then, to the extent of such recovery,
the Obligation or part thereof originally intended to be satisfied, and all
Liens, rights and remedies therefor or related thereto, shall be revived and
continued in full force and effect as if such payment or payments had not been
made or such enforcement or set-off had not occurred.
9.10 SEVERABILITY. In case any provision in or obligation under this
Agreement or the other Basic Documents shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability of
the remaining provisions or obligations, or of such provision or obligation in
any other jurisdiction, shall not in any way be affected or impaired thereby.
9.11 OBLIGATIONS SEVERAL; INDEPENDENT NATURE OF HOLDERS' RIGHTS. The
obligations of Holders hereunder are several, and no Holder shall be responsible
for the
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obligations of any other Holder hereunder. Nothing contained herein or in
any other Basic Document, and no action taken by Holders pursuant hereto or
thereto, shall be deemed to constitute Holders as a partnership, an
association, a Joint Venture or any other kind of entity. The amounts payable
at any time hereunder to each Holder shall be a separate and independent
debt, and each Holder shall be entitled to protect and enforce its rights
arising out of this Agreement, and it shall not be necessary for any other
Holder to be joined as an additional party in any proceeding for such purpose.
9.12 HEADINGS. Section and subsection headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose or be given any substantive effect.
9.13 APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
NEVADA, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
9.14 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
parties hereto and their respective successors and assigns and shall inure to
the benefit of the parties hereto and the successors and assigns of Holders.
Subject to subsection 2.8, SunAmerica and any other Holder may assign the Notes
to its Affiliates or one or more entities, and upon such assignment, any such
Affiliate or entity shall become a Holder for all purposes of the Basic
Documents. Holders shall have the right to sell participations in their Notes;
PROVIDED that, if no Event of Default has occurred and is continuing, Company
shall have the right to consent (which consent shall not be unreasonably
withheld or delayed) to the sale of any participation in the Notes that causes
either Initial Holder to hold less than 51% of the principal amount of Notes
acquired by such Initial Holder on the date hereof. Neither SGC's, Company's or
any other Credit Party's rights or Obligations hereunder or under the other
Basic Documents nor any interest herein or therein may be assigned or delegated
by SGC, Company or such other Credit Party without the prior written consent of
all Holders.
9.15 CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL JUDICIAL
PROCEEDINGS BROUGHT AGAINST ANY CREDIT PARTY ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR ANY OTHER BASIC DOCUMENT OR ANY OBLIGATION MAY BE BROUGHT
IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF
NEVADA, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT COMPANY ACCEPTS FOR
ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY,
THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE
OF FORUM NON CONVENIENS AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT
RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, SUCH OTHER BASIC DOCUMENT
OR SUCH OBLIGATION. SGC and Company hereby agree that service of all process
in any such proceeding in any such court may be made by registered or
certified mail, return receipt requested, to SGC
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or Company, as applicable, at its address provided in subsection 9.6, such
service being hereby acknowledged by SGC and Company to be sufficient for
personal jurisdiction in any action against SGC or Company, as applicable, in
any such court and to be otherwise effective and binding service in every
respect. Nothing herein shall affect the right to serve process in any other
manner permitted by law or shall limit the right of any Holder to bring
proceedings against SGC or Company in the courts of any other jurisdiction.
9.16 WAIVER OF JURY TRIAL. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY
AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE OTHER BASIC
DOCUMENTS OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS
TRANSACTION OR THE RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of this
waiver is intended to be all-encompassing of any and all disputes that may be
filed in any court and that relate to the subject matter of this transaction,
including without limitation contract claims, tort claims, breach of duty claims
and all other common law and statutory claims. Each party hereto acknowledges
that this waiver is a material inducement to enter into a business relationship,
that each has already relied on this waiver in entering into this Agreement, and
that each shall continue to rely on this waiver in their related future
dealings. Each party hereto further warrants and represents that it has
reviewed this waiver with its legal counsel and that it knowingly and
voluntarily waives its jury trial rights following consultation with such legal
counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR ANY OF THE OTHER
BASIC DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE
SECURITIES MADE HEREUNDER. In the event of litigation, this Agreement may be
filed as a written consent to a trial by the court.
9.17 COUNTERPARTS; EFFECTIVENESS. This Agreement and any amendments,
waivers, consents or supplements hereto or in connection herewith may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed an original, but all such counterparts together shall constitute but one
and the same instrument; signature pages may be detached from multiple separate
counterparts and attached to a single counterpart so that all signature pages
are physically attached to the same document. This Agreement shall become
effective upon the execution of a counterpart hereof by each of the parties
hereto.
9.18 CONFLICTS WITH OTHER BASIC DOCUMENTS. To the fullest extent possible,
the terms and provisions of the other Basic Documents shall be read in
conjunction with the terms and provisions of this Agreement and shall supplement
the terms and provisions hereof. To the extent that any terms and provisions
hereunder conflict with the terms and provisions of any of the other Basic
Documents, the stricter provisions shall govern.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
SANTA FE GAMING CORPORATION (formerly named Sahara
Gaming Corporation),
a Nevada corporation
By: /s/ Thomas K. Land
Its: Senior Vice President and Chief Financial Officer
Notice Address:
Santa Fe Gaming Corporation
2535 Las Vegas Blvd., South
Las Vegas, Nevada 89109
Attention: Thomas Land
SANTA FE HOTEL INC.,
a Nevada corporation
By: /s/ Thomas K. Land
Its: Senior Vice President and Chief Financial Officer
Notice Address:
Santa Fe Hotel Inc.
2535 Las Vegas Blvd., South
Las Vegas, Nevada 89109
Attention: Thomas Land
S-1
<PAGE>
SUNAMERICA LIFE INSURANCE COMPANY
By /s/ Stephen Hanover
Its: Authorized Agent
Notice Address:
SunAmerica Life Insurance Company
1 SunAmerica Center
Century City
Los Angeles, California 90067-6022
Attention: Peter McMillan
Steven Hanover
CREDIT SUISSE FIRST BOSTON MORTGAGE
CAPITAL LLC
By:/s/ Richard Luftig
Its: Vice President
Notice Address:
Credit Suisse First Boston Mortgage
Capital LLC
11 Madison Avenue
New York, New York 10010
Attention: Richard Luftig
S-2
<PAGE>
SCHEDULE 2
INFORMATION RELATING TO HOLDERS
Principal Amount
Name and Address of Purchaser of Notes
- ----------------------------- ----------------
SunAmerica Life Insurance Company $7,000,000
One SunAmerica Center
Century City
Los Angeles, California 90067
(1) All payments by wire transfer of
immediately available funds to:
WIRE INSTRUCTIONS
CITIBANK
ABA # 021-001-089
A/C # 40573831
RE: SunAmerica Life Insurance Company/
Santa Fe Hotel Inc.
with sufficient information
to identify the source and
application of such funds.
(2) All notices of payments and written
confirmations of such wire transfers:
SunAmerica Investments, Inc.
c/o SunAmerica Center
Investment Accounting 36-05
Los Angeles, California 90067-6022
Schedule 2-1
<PAGE>
Credit Suisse First Boston Mortgage $7,000,000
Capital LLC
11 Madison Avenue
New York, New York 10010
(1) All payments by transfer of
immediately available funds to:
NEW WIRE INSTRUCTIONS
CITIBANK NYC
ABA # 021-0000-89
A/C # 09253506
Attn: STEWART HOCHBERG
with sufficient information
to identify the source and
application of such funds.
(2) All notices of payments and written
confirmations of such wire transfers:
Credit Suisse First Boston Mortgage
Capital LLC
11 Madison Avenue
New York, New York 10010
Attention: Richard Luftig
Schedule 2-2
<PAGE>
SANTA FE HOTEL INC.
PROMISSORY NOTE DUE DECEMBER 15, 2000
April 14, 1998
$7,000,000 Los Angeles, CA
THIS NOTE MAY NOT BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED,
EXCEPT AS PERMITTED BY THIS LEGEND. TRANSFERS OF THIS NOTE ARE SUBJECT TO
RESTRICTIONS AS PROVIDED IN THE NOTE PURCHASE AGREEMENT REFERENCED BELOW,
AND THIS NOTE IS ALSO SUBJECT TO THE SUBORDINATION AND INTERCREDITOR
AGREEMENT DATED AS OF APRIL 14, 1998 BY AND AMONG SANTA FE HOTEL INC.,
SUNAMERICA LIFE INSURANCE COMPANY AND IBJ SCHRODER BANK & TRUST COMPANY, AS
TRUSTEE, AS SUCH NOTE PURCHASE AGREEMENT AND SUBORDINATION AND
INTERCREDITOR AGREEMENT, AS THE CASE MAY BE, MAY BE AMENDED, SUPPLEMENTED
OR OTHERWISE MODIFIED FROM TIME TO TIME. THE HOLDER HEREOF, BY ITS
ACCEPTANCE OF THIS NOTE, REPRESENTS, ACKNOWLEDGES AND AGREES THAT IT WILL
NOT REOFFER, RESELL, PLEDGE OR OTHERWISE TRANSFER THIS NOTE EXCEPT IN
COMPLIANCE WITH SUCH NOTE PURCHASE AGREEMENT AND SUBORDINATION AND
INTERCREDITOR AGREEMENT.
FOR VALUE RECEIVED, the undersigned, SANTA FE HOTEL INC. (herein
called the "COMPANY"), a corporation organized and existing under the laws of
the State of Nevada, hereby promises to pay to CREDIT SUISSE FIRST BOSTON
MORTGAGE CAPITAL LLC or registered assigns ("HOLDER"), the principal sum of
SEVEN MILLION DOLLARS ($7,000,000) on December 15, 2000 with interest (computed
on the basis of a 360-day year of twelve 30-day months) on the unpaid balance
thereof at 9.50% per annum from the date hereof, payable quarterly on March 15,
June 15, September 15 and December 15, commencing on June 15, 1998 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.
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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 Note Purchase Agreement referred to below.
This Note is one of the Notes issued pursuant to the Note Purchase
Agreement, dated as of April 14, 1998 (as from time to time amended, modified or
otherwise supplemented, the "NOTE PURCHASE AGREEMENT"), among the Company, Santa
Fe 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 SUBSECTION 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 (as such
term is defined in the Note Purchase Agreement).
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 any
time 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.
SANTA FE HOTEL INC.
By: /s/ Thomas K. Land
Title: Senior Vice President and Chief
Financial Officer
S-1
<PAGE>
OPTION OF HOLDER TO ELECT REPURCHASE
If you want to elect to have this Note purchased by Company pursuant
to SUBSECTION 2.5C(II) 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 SUBSECTION 2.5C(II) 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>
WHEN RECORDED MAIL TO:
O'MELVENY & MYERS
1999 Avenue of the Stars, Suite 700
Los Angeles, California 90067
Attention: Dean Pappas, Esq.
File No.: 843,112-044
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Space above line is for Recorder's use)
DEED OF TRUST, FIXTURE FILING AND FINANCING STATEMENT
AND SECURITY AGREEMENT WITH ASSIGNMENT OF RENTS
THIS DEED OF TRUST, FIXTURE FILING AND FINANCING STATEMENT AND
SECURITY AGREEMENT WITH ASSIGNMENT OF RENTS (this "DEED OF TRUST"), made as
of the 14 day of April, 1998, by and among SANTA FE HOTEL INC., a Nevada
corporation, as debtor and trustor ("TRUSTOR"), UNITED TITLE OF NEVADA, as
trustee ("TRUSTEE"), and SUNAMERICA LIFE INSURANCE COMPANY, an Arizona
corporation, as Collateral Agent on behalf of itself and each of the Holders,
as secured party and beneficiary ("BENEFICIARY").
W I T N E S S E T H:
THAT TRUSTOR HEREBY:
GRANTS, bargains, sells, transfers, conveys and assigns the
following described real property and related collateral to Trustee, IN
TRUST, WITH POWER OF SALE, to have and to hold the same unto Trustee and its
successors in interest, for the benefit of and on behalf of Beneficiary, upon
the trusts, covenants and agreements herein expressed:
DESCRIPTION OF REAL PROPERTY COLLATERAL
All that certain real property, and the interests of Trustor
therein, situate in the County of Clark, State of Nevada, that is more
particularly described on that certain exhibit marked "EXHIBIT A", affixed
hereto and by this reference incorporated herein and made a part hereof (the
"LAND");
Together with all right, title and interest of Trustor, now owned
or hereafter acquired, in and to any land lying within the right-of-way of
any street, open or proposed, adjoining any of the Land and any and all
sidewalks, alleys and strips and gores of land adjacent to or used in
connection with any of the Land, with appurtenances ("ADJACENT INTERESTS");
Together with all right, title and interest of Trustor in and to
all buildings, structures and all other improvements and fixtures that are or
may hereafter be erected or placed on or in the Land and all rights and
interests of Trustor in and to all buildings, structures and other
improvements and fixtures that are or may hereafter be erected or placed on
or in Adjacent Interests (collectively, the "IMPROVEMENTS");
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Together with all right, title and interest of Trustor in and to
all and singular the tenements, hereditaments and appurtenances belonging or
in any wise appertaining to any of the Land, Adjacent Interests or
Improvements (collectively, the "APPURTENANCES");
Together with all rents, issues, products, earnings, revenues,
payments, profits, royalties, room fees and charges and other proceeds and
income of or from any of the foregoing or of or from any of the Leases, as
hereinafter defined (collectively, the "RENTS"), subject, however, in the
case of Rents, to the absolute assignment given to Beneficiary in SECTION 12
hereof, to which SECTION 12 this grant to the Trustee is subject and
subordinate;
Together with all leasehold estate, right, title and interest of
Trustor in and to all leases, subleases, licenses, concessions, franchises
and other use or occupancy agreements (including, without limitation, each
room occupancy agreement from time to time), as the same may be from time to
time amended, modified, extended or renewed (collectively, "LEASES"),
covering any of the Land, Adjacent Interests, Improvements (including the
hotel rooms) or Appurtenances, now or hereafter existing or entered into, and
all right, title and interest of Trustor thereunder, including, without
limitation, the right to all security deposits, advance rentals or room
fees/charges, other deposits, and all payments of similar nature, relating
thereto;
Together with all right, title and interest of Trustor in and to
all water rights and rights to the use of water now or hereafter appurtenant
to or used in connection with any of the Land, Adjacent Interests,
Improvements or Appurtenances ("WATER RIGHTS");
Together with any and all other estate, right, title, interest,
property, possession, claim or demand, in law or in equity, which Trustor now
has or may hereafter acquire in or to any of the Land, Adjacent Interests,
Improvements, Appurtenances, Rents, Leases and Water Rights, or pertaining or
appurtenant thereto, and all reversions and remainders thereof, and all
tenements, hereditaments and appurtenances thereunto belonging or in any wise
appertaining thereto ("OTHER INTERESTS") (said Land, Adjacent Interests,
Improvements, Appurtenances, Rents, Leases, Water Rights and Other Interests
may be referred to herein as the "REAL PROPERTY").
THAT TRUSTOR HEREBY:
GRANTS a security interest, pursuant to the Nevada Uniform
Commercial Code -- Secured Transactions, to Beneficiary on the terms and
provisions (by this reference incorporated herein with respect to the
security interest herein granted and the rights and obligations of the
parties with respect to the Personal Property, as hereinafter defined, but
for no other purpose) set forth in that certain Security Agreement dated as
of even date herewith by and between Trustor, as Grantor, and Beneficiary, as
Secured Party (the "COMPANY SECURITY AGREEMENT"), subject to all applicable
Gaming Laws, in all of Trustor's right, title and interest in and to the
following described personal property, whether now owned or hereafter
acquired (collectively, the "PERSONAL PROPERTY"):
DESCRIPTION OF PERSONAL PROPERTY COLLATERAL
(a) All present and future chattels, furniture, furnishings,
goods, equipment, fixtures and all other tangible personal property, of
whatever kind and nature, now or hereafter used in connection with or placed
or located in or on any part of the Real Property (including, without
limitation, any building or structure that is now or that may hereafter be
erected on the Real Property), including, but not limited to, machinery,
materials, goods and equipment now or hereafter used in any construction or
operation relating thereto (including, without limitation, air conditioning,
heating, electrical, lighting, fire fighting and fire prevention, food and
beverage service, laundry, plumbing, refrigeration, security, sound,
signaling,
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telephone, television, window washing and other equipment and fixtures, of
whatever kind or nature, including generators, transformers, switching gear,
boilers, burners, furnaces, piping, sprinklers, sinks, tubs, valves,
compressors, motors, carts, dumb waiters, elevators and other lifts, floor
coverings, hardware, keys, locks, organs, pianos, planters, railings, scales,
shelving, signs, tools, machinery, molds, dies, drills, presses, planers,
saws, furniture, business fixtures, trade fixtures, electric, gas and other
motor vehicles, uniforms, vacuum cleaners, hotel furniture, furnishings and
equipment, bathroom furniture and furnishings (including towels, bathmats,
hamperettes, shower curtains and other bath linen), beds and bedding
(including mattresses, springs, pillows, bed pads, sheets, blankets,
comforters, spreads and other bed linens and furnishings), bric-a-brac,
chairs, chests, vanities, secretaries, bureaus, chiffonniers, love seats,
benches, costumers, smoking stands, sand jars, desks, dressers, hangings,
paintings, pictures, frames, sculptures, lamps, light bulbs, mirrors, night
stands, ornaments, radios, stereo equipment, sofas, statuary, tables,
telephones, televisions, vases, window coverings, foodstuffs, beverages
(including beer, wine, liquor and other alcoholic beverages), and other
consumables (including soap, shampoo, cleaning supplies and paper goods),
cutlery, cooking, baking and other kitchen utensils and apparatus (including
crockery, fryers, grills, kettles, mixers, pots, pans, pails, racks, steamers
and toasters), china and other dishes, flatware, glassware, hollowware,
serving pieces, trays, table linens, washers, dryers, irons, ironing boards
and other ironing equipment, cables, outlets, plugs, wiring and related
apparatus and fixtures, card readers, cash registers, adding machines,
calculators, computers, keyboards, monitors, printers, printing equipment,
envelopes, stationary, posting machines, blank forms, typewriters, typewriter
stands, other office and accounting equipment and supplies, time stamps, time
recorders, bookkeeping machines, checking machines, payroll machines,
computer reservations systems, and all other goods, equipment, furnishings,
apparatus and fixtures which are now or may hereafter be located at or used
at or in connection with the Real Property) and all other tangible personal
property used or to be used at or in connection with, or placed or to be
placed in, rooms, halls, lounges, offices, lobbies, lavatories, basements,
cellars, vaults or other portions of the Real Property or any facilities on
the Real Property or of any other building or buildings hereafter constructed
or erected thereon, whether herein enumerated or not, and whether or not
contained in any such building, and which are used or to be used or useful in
the operation and maintenance thereof, or in any business conducted thereon,
together with all replacements and substitutions for any and all personal
property in which Trustor has an interest, including without limitation such
goods and equipment as shall from time to time be located, placed, installed
or used in or upon, or procured for use, or to be used or useful in
connection with the operation of the whole, or any part of, the Real Property
or any facilities on the Real Property and all parts thereof and all
accessions thereto; EXCLUDING, HOWEVER, any and all gaming equipment that is
subject to Gaming Laws and located within or used in connection with the Real
Property.
(b) All present and future inventory and merchandise in all of its
forms (including, but not limited to, (i) all goods held by Trustor for sale
or lease or to be furnished under contracts of service or so leased or
furnished, (ii) all raw materials, work in process, (iii) all goods in which
Trustor has an interest in mass or a joint or other interest or right of any
kind, (iv) all goods that are returned to or repossessed by Trustor, and (v)
all accessions thereto and products thereof);
(c) All present and future accounts, accounts receivable, rentals,
revenues, receipts, payments, and income of any nature whatsoever derived
from or received with respect to any facilities on the Real Property,
agreements and contracts, leases, contract rights, rights to payment,
instruments, documents, chattel paper, security agreements, guaranties,
undertakings, surety bonds, insurance policies, condemnation deposits and
awards, notes and drafts, securities, certificates of deposit and the right
to receive all payments thereon or in respect thereof (whether principal,
interest, fees or otherwise), contract rights (other than rights under
contracts or governmental permits that may not be transferred by law),
including, without limitation, rights to all deposits from tenants and other
users of the Real Property or any facilities on the Real Property, rights
under all contracts relating to the construction, renovation or restoration
of any of the improvements now or hereafter located on the Real Property or
the financing thereof and all rights under payment or performance bonds,
warranties, and guaranties, and all rights to payment from any
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credit/charge card organization or entity such as or similar to, and
including, without limitation, the organizations or entities that sponsor and
administer, respectively, the American Express Card, the Carte Blanche Card,
the Diners Club Card, the Discover Card, the MasterCard and the Visa Card,
books of account, and principal, interest and payments due on account of
goods sold, services rendered, loans made or credit extended, on or in
connection with the Real Property or any facilities on the Real Property and
all forms of obligations owing to and rights of Trustor or in which Trustor
may have any interest, however created or arising;
(d) All present and future right, title and interest of Trustor in
and to all leases, subleases, licenses, concessions, franchises and other use
or occupancy agreements (including room occupancy agreements), and any
amendments, modifications, extensions or renewals thereof, whether or not
specifically herein described, which now or may hereafter pertain to or
affect the Real Property or any portion thereof, and all amendments to the
same, including, but not limited to, the following: (i) all payments due and
to become due under such Leases, whether as rent, damages, insurance
payments, condemnation awards, or otherwise; (ii) all claims, rights, powers,
privileges and remedies under such Leases; and (iii) all rights of the
Trustor under such Leases to exercise any election or option, or to give or
receive any notice, consent, waiver or approval, or to accept any surrender
of the premises or any part thereof, together with full power and authority
in the name of the Trustor, or otherwise, to demand and receive, enforce,
collect, and receipt for any or all of the foregoing, to endorse or execute
any checks or any instruments or orders, to file any claims, and to take any
other action that Beneficiary may deem necessary or advisable in connection
therewith;
(e) All fees, income, rents, issues, profits, oil, gas and mineral
rights, royalties and leaseholds, all earnings, receipts, royalties and revenues
(including, without limitation, revenue from hotel guests) which accrue from any
of the Property (as hereinafter defined) or which may be received or receivable
by Trustor from any hiring, using, leasing, subhiring or subleasing therefor;
(f) All present and future deposit accounts of Trustor, any
demand, time, savings, passbook or like account maintained by Trustor with
any bank, savings and loan association, credit union or like organization,
and all money, cash and cash equivalents of Trustor, whether or not deposited
in any such deposit account;
(g) All present and future general intangibles (including but not
limited to all governmental permits relating to construction or other
activities on the Real Property), all tax refunds of every kind and nature to
which Trustor now or hereafter may become entitled, however arising, all
other refunds, and all deposits, goodwill, choses in action, rights to
payment or performance, judgments taken on any rights or claims included in
the Property (as hereinafter defined), trade secrets, computer programs,
software, customer lists, business names, trademarks, trade names and service
marks, patents, patent applications, licenses, copyrights, technology,
processes, proprietary information and insurance proceeds;
(h) All present and future books and records, including, without
limitation, books of account and ledgers of every kind and nature, ledger
cards, computer programs, tapes, disks and other information storage devices,
all related data processing software, and all electronically recorded data
relating to Trustor or its business or the Real Property, all receptacles and
containers for such records, and all files and correspondence;
(i) All present and future maps, plans, specifications, surveys,
studies, reports, data and drawings (including, without limitation,
architectural, structural, mechanical and engineering plans and
specifications, studies, data and drawings) prepared for or relating to the
Real Property or the construction, renovation or restoration of any
improvements on the Real Property or the extraction of minerals, sand,
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gravel or other valuable substances from the Real Property, together with all
amendments and modifications thereto;
(j) All present and future licenses, permits, variances, special
permits, franchises, certificates, rulings, certifications, validations,
exemptions, filings, registrations, authorizations, consents, approvals,
waivers, orders, rights and agreements (including options, option rights and
contract rights), other than those (including non-transferable gaming
permits) that may not be transferred by law, now or hereafter obtained by
Trustor from any governmental authority having or claiming jurisdiction over
the Real Property or any other element of the Property or providing access
thereto, or the operation of any business on, at, or from the Real Property;
(k) All present and future stocks, bonds, debentures, securities,
subscription rights, options, warrants, puts, calls, certificates,
partnership interests, joint venture interests, investments, brokerage
accounts and all rights, preferences, privileges, dividends, distributions,
redemption payments and liquidation payments received or receivable with
respect thereto;
(l) All present and future accessions, appurtenances, components,
repairs, repair parts, spare parts, replacements, substitutions, additions,
issue and improvements to or of or with respect to any of the foregoing;
(m) All other fixtures and storage and office facilities, and all
accessions thereto and products thereof and all water stock relating to the
Real Property;
(n) All other tangible and intangible personal property of Trustor;
(o) All rights, remedies, powers and privileges of Trustor with
respect to any of the foregoing; and
(p) Any and all fees, proceeds, products, rents, income, and
profits of any of the foregoing, including, without limitation, all money,
accounts, general intangibles, deposit accounts, documents, instruments,
chattel paper, goods, insurance proceeds (whether or not the Trustee or
Beneficiary is the loss payee), and any other tangible or intangible property
received upon the sale or disposition of any of the foregoing (it being
agreed, for purposes hereof, that the term "PROCEEDS" includes whatever is
receivable or received when any of the Personal Property is sold, collected,
exchanged or otherwise disposed of, whether such disposition is voluntary or
involuntary). Notwithstanding anything to the contrary contained herein,
Beneficiary acknowledges that it has no security interest in (x) any cash of
Trustor described in CLAUSES (d), (e), (f), (g) and (k) above, to the extent
such a security interest is prohibited by any Gaming Laws, or (y) any deposit
account described in CLAUSE (f) above, to the extent such a security interest
is not permitted by applicable law;
(The Real Property, the Personal Property and all of the other
collateral described above may hereinafter be collectively referred to as the
"PROPERTY");
FOR THE PURPOSE OF SECURING:
FIRST: Payment when due, whether at stated maturity, by required
prepayment, declaration, acceleration, demand or otherwise (including payment
of amounts that would become due but for the operation of the automatic stay
under Section 362(a) of the Bankruptcy Code, 11 U.S.C. Section 362(a)), of
all obligations and liabilities of every nature of Trustor, now, heretofore
or hereafter existing under or arising out of or in connection with that
certain Note Purchase Agreement of even date herewith, among Santa Fe Gaming
Corporation, a Nevada corporation ("SFG"), Trustor, Beneficiary and Credit
Suisse First Boston
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Mortgage Capital LLC, a Delaware limited liability company (the "NOTE
PURCHASE AGREEMENT") (it being acknowledged and agreed that all initially
capitalized terms used herein without definition shall have the meanings
given such terms in the Note Purchase Agreement), or the promissory notes
issued to the Beneficiary and the other Holders to evidence such obligations
and liabilities, together with any and all renewals, extensions, amendments,
modifications, rearrangements, replacements, restatements, substitutions and
addenda thereof or thereto (herein referred to as the "NOTES"), whether for
principal in the maximum principal amount of Fourteen Million Dollars
($14,000,000) in the aggregate or such principal amount as may be advanced
and remain unpaid or for interest (including, without limitation, interest
that, but for the filing of a petition in bankruptcy with respect to Trustor,
would accrue on such obligations), fees, expenses, indemnities or otherwise,
whether voluntary or involuntary, direct or indirect, absolute or contingent,
liquidated or unliquidated, whether or not jointly owed with others, and
whether or not from time to time decreased or extinguished and later
increased, created or incurred, and all or any portion of such obligations or
liabilities that are paid, to the extent all or any part of such payment is
avoided or recovered directly or indirectly from Beneficiary as a preference,
fraudulent transfer or otherwise.
SECOND: Payment and performance of every obligation, covenant,
promise and agreement of Trustor herein contained, or incorporated herein by
reference, including any sums paid or advanced by Beneficiary or Trustee
pursuant to the terms hereof.
THIRD: Payment of the expenses and costs incurred or paid by
Beneficiary in the preservation and enforcement of the rights and remedies of
Beneficiary and the duties and liabilities of Trustor hereunder, including,
but not by way of limitation, attorneys' fees, court costs, witness fees,
expert witness fees, collection costs, Trustee's fees and costs of a
Trustee's Sale Guarantee, and costs and expenses paid by Beneficiary in
performing for Trustor's account any obligation of Trustor.
FOURTH: Payment of additional sums and interest thereon which may
hereafter be loaned to Trustor by Beneficiary when evidenced by a promissory
note or notes or other writing that recites that this Deed of Trust is
security therefor.
FIFTH: Performance of every obligation, warranty,
representation, covenant, agreement and promise of Trustor contained in the
Note Purchase Agreement, Company Security Agreement and all other Basic
Documents, except the Company Environmental Indemnity.
The foregoing are described herein as the "OBLIGATIONS". All
persons who may have or acquire an interest in all or any part of the
Property will be considered to have notice of, and will be bound by, the
terms of the Obligations and each other agreement or instrument made or
entered into in connection with each of the Obligations. Such terms include
any provisions in the Notes or the Note Purchase Agreement which permit
borrowing, repayment and reborrowing, or which provide that the interest rate
on one or more of the Obligations may vary from time to time.
THIS DEED OF TRUST FURTHER WITNESSETH THAT, IN CONNECTION WITH AND
IN FURTHERANCE OF THE FOREGOING GRANTS, AND THE ENCUMBRANCES, LIENS AND
SECURITY INTERESTS CREATED THEREBY, TRUSTOR COVENANTS AND AGREES AS FOLLOWS:
1. CERTAIN REPRESENTATIONS AND WARRANTIES. Trustor represents,
warrants and covenants that, except as set forth in the Note Purchase
Agreement or as disclosed to Beneficiary, prior to the date hereof, in a
writing making reference to this SECTION 1 of this Deed of Trust:
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(a) Trustor lawfully possesses and holds fee simple title to all
of the Land and Improvements subject to the lien created by the Company
Indenture Deed of Trust and the permitted exceptions set forth on "EXHIBIT
B" attached hereto and incorporated herein by this reference (the
"PERMITTED EXCEPTIONS");
(b) Subject to the Permitted Exceptions, Trustor has or will
have good title to all Property other than the Land and Improvements;
(c) Trustor has the full and unlimited power, right and
authority to encumber the Property and assign the Rents as provided herein;
(d) Upon execution and recordation of the Subordination and
Intercreditor Agreement, this Deed of Trust will create a first priority
lien on the Property, subject to only the Permitted Exceptions;
(e) Subject to the Permitted Exceptions and Permitted Liens,
Trustor owns the Personal Property free and clear of any security
agreements, reservations of title or conditional sales contracts, and with
respect to Personal Property acquired after the date hereof Trustor will
own such Personal Property free and clear of any security agreements,
reservations of title or conditional sales contracts subject to the
Permitted Exceptions and nonrecourse Indebtedness incurred solely to
finance the purchase of furniture, fixtures or equipment for use in the
operations of Permitted Lines of Business secured by a Lien on such
furniture, fixtures or equipment (including gaming equipment) ("PERMITTED
FF&E LIENS");
(f) Other than the Permitted Exceptions and Permitted Liens,
there is no financing statement affecting the Personal Property on file in
any public office other than the security interest herein granted;
(g) Trustor's place of business, or its chief executive office
if it has more than one place of business, is located at the address
specified in SECTION 48(a) hereof;
(h) No part of the Property is in the hands of a receiver, no
application for a receiver is pending with respect to any portion of the
Property, and no part of the Property is subject to any foreclosure or
similar proceeding;
(i) There is no pending or, to the best of Trustor's knowledge,
threatened, litigation, action, proceeding or investigation, including,
without limitation, any condemnation proceeding, against Trustor or the
Property before any court, governmental or quasi-governmental, arbitrator
or other authority;
(j) Access to and egress from the Property are available and
provided by public streets, and Trustor has no knowledge of any federal,
state, county, municipal or other governmental plans to change the highway
or road system in the vicinity of the Property or to restrict or change
access from any such highway or road to the Property;
(k) Adequate utilities services exist for the current ownership,
use, occupancy, operation and maintenance of the Property, and, to the best
of Trustor's knowledge, Trustor is not in default of any obligation to any
utility service provider;
(l) The Property is located in a zoning district designated C2
of the City of Las Vegas, County of Clark, State of Nevada. Such
designation permits the development, use and
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operation of the Property as a hotel and casino and as it is currently
operated as a matter of right and not as a non-conforming use (except
that a conditional use permit may be required to permit non-restricted
casino operations that are included in a hotel). The Property complies
in all material respects with all requirements, conditions and
restrictions, including but not limited to deed restrictions and
restrictive covenants, applicable to the Property;
(m) Except for those that are Permitted Exceptions, there are no
special or other assessments for public improvements or otherwise now
affecting the Property, nor does Trustor know of any pending or threatened
special assessments affecting the Property or any contemplated improvements
affecting the Property that may result in special assessments. Except for
those that are Permitted Exceptions, there are no tax abatements or
exceptions affecting the Property;
(n) Trustor has not received any notice from any governmental
body having jurisdiction over the Property as to any violation of any
applicable law, or any notice from any insurance company or inspection or
rating bureau setting forth any requirements as a condition to the
continuation of any insurance coverage on or with respect to the Property
or the continuation thereof at premium rates existing at present which have
not been remedied or satisfied;
(o) Except for those that are Permitted Exceptions, there are no
occupancy rights (written or oral), reciprocal easement agreements, Leases
or tenancies presently affecting any part of the Property.
(p) Except for those that are Permitted Exceptions, there are no
options, purchase contracts or other similar agreements of any type
(written or oral) presently affecting any part of the Property;
(q) Except for those that are Permitted FF&E Liens or Permitted
Exceptions, and except as otherwise disclosed to Beneficiary in writing
prior to the date hereof, (i) there are no contracts presently affecting
the Property ("CONTRACTS") having a term in excess of one hundred eighty
(180) days or not terminable by Trustor (without penalty) on thirty (30)
days' notice; (ii) Trustor has heretofore delivered to Beneficiary true and
correct copies of each of the Contracts together with all amendments
thereto; (iii) to the best of Trustor's knowledge, Trustor is not in
default of any obligations under any of the Contracts; and (iv) the
Contracts represent the complete agreement between Trustor and such other
parties as to the services to be performed or materials to be provided
thereunder and the compensation to be paid for such services or materials,
as applicable, and except as otherwise disclosed herein, such other parties
possess no unsatisfied claims against Trustor. To the best of Trustor's
knowledge, Trustor is not in default under any of the Contracts and no
event has occurred which, with the passing of time or the giving of notice,
or both, would constitute a default under any of the Contracts;
(r) Trustor currently has all permits ("PERMITS") necessary or
desirable for the use, ownership, development, occupancy and maintenance of
the Property as used as of the date hereof. None of the Permits has been
suspended or revoked, and all of the Permits are in full force and effect,
are fully paid for, and Trustor has made or will make application for
renewals of any of the Permits prior to the expiration thereof; and
(s) All insurance policies held by Trustor relating to or
affecting the Property are in full force and effect and shall remain in
full force and effect (unless replaced with new policies that meet the
requirements set forth in SECTION 6 hereof) through the date of payment and
satisfaction in full of the Obligations. Trustor has not received any
notice of default or notice
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terminating or threatening to terminate any such insurance policy and
Trustor has made or will make application for renewals of any of such
insurance policies prior to the expiration thereof.
2. PAYMENT OF OBLIGATIONS. Trustor shall pay when due all
Obligations secured hereby, including, without limitation, the principal of
and interest on the indebtedness evidenced by the Notes, all charges, fees
and other sums as provided in the Basic Documents, and the principal of and
interest on any other indebtedness secured by this Deed of Trust.
3. COMPLIANCE WITH LAWS. Trustor shall not commit, suffer or
permit any act to be done, or condition to exist, on, or with respect to, the
Property which violates or is prohibited by any law, statute, code, act,
ordinance, order, judgment, decree, injunction, rule, regulation, permit,
license, authorization or direction of any government or subdivision thereof,
whether it be federal, state, county or municipal (collectively, "LEGAL
REQUIREMENTS"), which is applicable to the Property, or any part thereof, now
or at any time hereafter.
4. MAINTENANCE OF PROPERTY. Trustor agrees: (a) properly to care
for and keep said Property in good condition and repair; (b) not to remove,
demolish or substantially alter any building on the Real Property except (i)
in compliance with the terms of this Deed of Trust relating to the occurrence
of a casualty or condemnation, or (ii) upon the prior written consent of
Beneficiary; (c) to complete promptly and in a good and workmanlike manner
any building or other improvement which may be constructed thereon, to
restore promptly in like manner any portion of the Improvements (and any
other improvements located on the Real Property, whether or not such
improvements are owned by Trustor) which may be damaged or destroyed from any
cause whatsoever, and to pay when due all claims for labor performed and
materials furnished therefor; (d) to comply with all laws, ordinances,
regulations, covenants, conditions and restrictions now or hereafter
affecting the Property or any part thereof, including any which require
alteration or improvement thereof, and with all requirements of insurance
companies insuring the Property or any portion thereof and of any bureau or
agency which establishes standards of insurability; (e) not to commit or
permit any waste or deterioration of the Property; (f) to keep and maintain
abutting grounds, sidewalks, roads, parking and landscaped areas in good and
neat order and repair; (g) not to apply for, willingly suffer or permit any
change in zoning, subdivision, or land use regulations affecting the Property
without the prior written consent of Beneficiary (provided that Beneficiary's
consent shall not be unreasonably withheld or delayed with respect to any
proposed changes to zoning, subdivision or land use regulations required in
connection with the development of the Non-Gaming Hotel or the ground lease
described in SECTION 15(b)); (h) not to drill or extract or enter into any
lease for the drilling for or extraction of oil, gas or other hydrocarbon
substances or any mineral of any kind or character on or from the Property or
any part thereof without the prior written consent of Beneficiary; and (i) to
do all other acts, in a timely and proper manner, which, from the character
or use of the Property, may be reasonably necessary to maintain and preserve
its value, the specific enumerations herein not excluding the general.
5. ENVIRONMENTAL OBLIGATIONS.
(a) Trustor shall comply with, and shall use its best efforts to
cause each occupant of the Property to comply with, any and all Environmental
Laws (as hereinafter defined) regarding the presence or removal of Hazardous
Material (as hereinafter defined) on or in the Property, shall pay
immediately, when due, the costs of removal from the Property and disposal of
any Hazardous Material which is required to be removed pursuant to any
Environmental Laws and shall keep the Property free of any lien which may
arise pursuant to any such Environmental Laws. Trustor shall not, and shall
not permit any person or entity (including any tenant or other occupant of
the Property), to release, discharge, or dispose of any Hazardous Material on
the Real Property except in compliance with all Environmental Laws and, if
the same shall exist, Trustor shall immediately remove or cause to be removed
from the Real Property such Hazardous Material to the extent required to be
removed pursuant to any Environmental Laws.
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(b) As used herein, the term "HAZARDOUS MATERIAL" means: (i) any
chemical, material or substance at any time defined as or included in the
definition of "hazardous substances", "hazardous materials", hazardous
wastes", "extremely hazardous waste", "restricted hazardous waste",
"infectious waste", "toxic substances" or any other formulations intended to
define, list or classify substances by reason of deleterious properties such
as ignitability, corrosivity, reactivity, carcinogenicity, toxicity,
reproductive toxicity, "TCLP toxicity" or "EP toxicity" or words of similar
import under any applicable Environmental Law or publication promulgated
pursuant thereto; (ii) any oil, petroleum, petroleum fraction or petroleum
derived substance; (iii) any drilling fluid, produced water or other waste
associated with the exploration, development or production of crude oil,
natural gas or geothermal resources; (iv) any flammable substance or
explosive; (v) any radioactive material; (vi) asbestos in any form; (vii)
urea formaldehyde foam insulation; (viii) electrical equipment which contains
any oil or dielectric fluid containing poly-chlorinated biphenyls; (ix) any
pesticide; (x) all hazardous substances defined in Nevada Revised Statutes
40.504, and (xi) any other chemical, material or substance exposure to which
is prohibited, limited or regulated by any Federal, state, local or other
governmental authority or which may or could pose a hazard to human health or
safety or the environment if released into the workplace or the environment;
the term "ENVIRONMENTAL LAW" means any statute, ordinance, order, rule,
regulation, plan, policy, decree, permit, guidance document, or other
requirement of any Federal, state, local or other governmental authority
relating to: (aa) environmental matters, including, without limitation, those
relating to fines, injunctions, penalties, damages, contribution, cost
recovery compensation, losses or injuries resulting from the Release (as
hereinafter defined) or threatened Release of Hazardous Material, (bb) the
presence, generation, use, storage, transportation or disposal of Hazardous
Material, or (cc) occupational safety and health, industrial hygiene, land
use or the protection of human, plant or animal health or welfare, in any
manner applicable to any of the Property, including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act (42
U.S.C. Section 9601 ET SEQ.), the Hazardous Materials Transportation Act (49
U.S.C. Section 1801 ET SEQ.), the Resource Conservation and Recovery Act (42
U.S.C. Section 6901 ET SEQ.), the Federal Water Pollution Control Act (33
U.S.C. Section 1251 ET SEQ.), the Clean Air Act (42 U.S.C. Section 7401 ET
SEQ.), the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C.
Section 136 ET SEQ.), the Occupational Safety and Health Act (29 U.S.C.
Section 651 ET SEQ.) and the Emergency Planning and Community Right-to-Know
Act (42 U.S.C. Section 11001 ET SEQ.), each as amended and supplemented, and
any analogous future or present local, state and federal statutes, ordinances
and other laws, and rules and regulations promulgated pursuant thereto, each
as in effect as of the date of determination; and the term "RELEASE" means
any release, spill, emission, leaking, pumping, pouring, injection, escaping,
deposit, disposal, dispersal, dumping, leaching or migration of Hazardous
Material into the indoor or outdoor environment (including, without
limitation, the abandonment or disposal of any barrels, containers or other
closed receptacles containing any Hazardous Material), or into or out of any
of the Property, including the movement of any Hazardous Material through the
air, soil, surface, water, groundwater or property.
(c) Trustor hereby agrees to indemnify, hold harmless and defend
(by counsel of Beneficiary's or the Holders' choice) Beneficiary, the
Holders, their directors, officers, employees, agents, successors and assigns
from and against any and all claims, losses, damages, demands, liabilities,
fines, penalties, assessments, charges, administrative and judicial
proceedings and orders, judgments, remedial action requirements, enforcement
actions of any kind, and all costs and expenses incurred in connection
therewith (including but not limited to attorneys' and consultants' fees and
expenses), arising directly or indirectly, in whole or in part, out of (i)
the presence on or under the Property (including, but not limited to, the
surrounding streets and sidewalks) of any Hazardous Material, or any Release
of any Hazardous Material on, under or from the Property, or (ii) any
activity carried on or undertaken on or off the Property until the
Obligations have been fully and finally satisfied, and whether by Trustor or
any employees, agents, contractors or subcontractors of Trustor or any third
persons occupying or present on the Property, in connection with the use,
holding, handling, treatment, removal, storage, decontamination, cleanup,
transport, Release, generation, processing or abatement of any Hazardous
Material located or present in, on or under the Property (including, but not
limited to, the surrounding streets and sidewalks). The foregoing indemnity
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shall further apply to any residual contamination in, on or under the
Property (including, but not limited to, the surrounding streets and
sidewalks), or affecting any natural resources, and to any contamination of
any property or natural resources arising in connection with the generation,
use, holding, handling, treatment, removal, decontamination, cleanup,
storage, transport, disposal, Release, processing or abatement of any such
Hazardous Material, and irrespective of whether any of such activities are
undertaken in accordance with applicable Environmental Laws. Trustor hereby
acknowledges and agrees that, notwithstanding any other provision of this
Deed of Trust to the contrary, the obligations of Trustor under this SECTION
5(C) shall be unlimited personal obligations of Trustor, shall not be secured
by this Deed of Trust and shall survive any foreclosure under this Deed of
Trust, any transfer in lieu thereof, and any satisfaction of the Obligations.
6. INSURANCE.
(a) TYPES AND AMOUNTS REQUIRED. During the continuance of this
Deed of Trust, Trustor shall at all times provide, maintain and keep in
force, at no expense to Trustee or Beneficiary, for the benefit of Trustor
and Beneficiary, as their respective interests may appear, insurance with
responsible carriers against such risks and in such amounts as is customarily
carried by similar businesses with such deductibles, retentions, self insured
amounts and coinsurance provisions as are customarily carried by similar
businesses of similar size, including, without limitation, property and
casualty loss, protection and indemnity, and workers' compensation.
(b) UNIFORM POLICY REQUIREMENTS. All policies of insurance
required by the terms of this Deed of Trust:
(i) shall be issued by insurance companies licensed and admitted
to do business in the State of Nevada, and rated in the most recent edition
of A.M. Best's no lower than A VIII in the case of general liability
insurance carriers, A XII in the case of excess liability (umbrella)
insurance carriers, and A X in the case of real property insurance
carriers; or, if any such carrier is not rated by A.M. Best's, having the
financial stability and size deemed appropriate by Trustor after
consultation with a reputable insurance broker;
(ii) shall contain an endorsement or agreement by the insurer
that any loss shall be payable in accordance with the terms of such policy
notwithstanding any act, failure to act, negligence or breach of
representation or warranty of Trustor or any ground lessee or tenant of the
Property, or of any other party holding under Trustor, which might
otherwise result in forfeiture of said insurance;
(iii) shall contain a waiver by the insurer of all rights of
setoff, counterclaim and deduction against Trustor or any ground lessee or
tenant of the Property (as applicable);
(iv) shall contain a waiver of subrogation by the insurer in
favor of Beneficiary (and Beneficiary's officers, directors, employees,
agents and representatives) and a clause providing that the policy is
primary and that any other insurance of Beneficiary with respect to the
matters covered by such policy shall be excess and non-contributing;
(v) shall, in the case of policies affording liability insurance
coverage, name Beneficiary (and Beneficiary's officers, directors,
employees, agents and representatives) as additional insureds by an
endorsement satisfactory to Beneficiary and contain cross-liability and
severability of interest clauses satisfactory to Beneficiary, and, in the
case of other policies, shall name Beneficiary as a loss payee and have
attached thereto a lender's loss payable endorsement, for the benefit of
Beneficiary, in form satisfactory to Beneficiary (Form 438 BFU, unless
otherwise specified by Beneficiary); and
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(vi) shall contain a provision that, notwithstanding any
contrary agreement between Trustor (or any ground lessee or tenant of the
Property, as applicable) and insurance company, such policies will not be
canceled, failed to be renewed or materially amended (which term shall
include any reduction in the type, scope or limits of coverage) without at
least thirty (30) days prior written notice to Beneficiary.
(c) BLANKET POLICIES. Subject to SECTION 6(a) above, Trustor may
provide any of the required insurance through blanket policies carried by
Trustor and covering more than one location; provided, however, that the
amount of the total insurance allocated to the Real Property and available
with respect to the occurrences required to be insured against shall be such
as to furnish protection the equivalent of separate policies in the amounts
herein required, and provided further, that, in all other respects, any such
policy or policies shall comply with all of the other provisions of this Deed
of Trust.
(d) EVIDENCE OF INSURANCE. At Beneficiary's option, Trustor shall
furnish Beneficiary with a certified copy of all policies of insurance
required under this Section or with a certificate of insurance for each
required policy setting forth the coverage, the limits of liability, the
deductibles, if any, the name of the carrier, the policy number, and the
period of coverage, which certificates shall be executed by authorized
officials of the companies issuing such insurance, or by agents or
attorneys-in-fact authorized to issue said certificates (in which event each
such certificate shall be accompanied by a notarized affidavit, agency
agreement or power of attorney evidencing the authority of the signatory to
issue such certificate on behalf of the insurer named therein). Trustor
shall furnish to Beneficiary annually, within ten days after the date hereof,
or more often if Beneficiary shall so request, a certificate of Trustor
specifying all insurance policies with respect to the Property and all other
policies required hereby then outstanding and in force, and stating whether
or not such insurance complies with the requirements of this Section and, if
it does not, the manner in which it does not comply. At least thirty (30)
days prior to the expiration of each required policy, Trustor shall deliver
to Beneficiary evidence satisfactory to Beneficiary of the payment of premium
and the renewal or replacement of such policy continuing insurance in force
as required by this Deed of Trust.
(e) PROCUREMENT BY BENEFICIARY. If Trustor fails to provide,
maintain, keep in force or deliver to Beneficiary the policies of insurance
required by this Deed of Trust, Beneficiary may (but shall have no obligation
to) procure such insurance, or single interest insurance for such risks
covering Beneficiary's interests, and Trustor will pay all premiums therefor
promptly upon demand by Beneficiary; and until such payment is made by
Trustor, the amount of all such premiums, together with interest thereon at
an annual rate equal to the rate specified in Section 2.4C of the Note
Purchase Agreement (or if such provision is hereafter replaced or renumbered,
the equivalent section) (the "AGREED RATE"), shall be secured by this Deed of
Trust.
(f) RESERVE FUND. Upon request by Beneficiary following an Event
of Default (as defined in SECTION 23 hereof), Trustor shall pay to
Beneficiary an initial cash reserve in an amount adequate to pay all
insurance premiums due within the next succeeding twelve calendar months on
all policies of insurance required by this Deed of Trust (or such lesser
amount as may then be specified by Beneficiary), and shall thereafter deposit
with Beneficiary each month, commencing with the first month after such
request by Beneficiary and continuing until all sums secured hereby are paid
in full or Beneficiary notifies Trustor to cease making such deposits, an
amount equal to one-twelfth of the aggregate annual insurance premiums on all
policies of insurance required by this Deed of Trust, as reasonably estimated
by Beneficiary. In such event Trustor further agrees to cause all bills,
statements or other documents relating to the foregoing insurance premiums to
be sent or mailed directly to Beneficiary. Upon receipt of such bills,
statements or other documents evidencing that a premium for a required policy
is then payable, and providing Trustor has deposited sufficient funds with
Beneficiary pursuant to this Section, Beneficiary shall pay such amounts as
may be due thereunder out of the funds so deposited with Beneficiary. If at
any time and for any reason
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the funds deposited with Beneficiary are or will be insufficient to pay such
amounts as may be then or subsequently due, Beneficiary may notify Trustor
and Trustor shall immediately deposit an amount equal to such deficiency with
Beneficiary. Beneficiary may impound or reserve for future payment of
premiums such portion of such payments as Beneficiary may in its absolute
discretion deem proper, applying the balance upon any indebtedness or
obligation secured hereby in such order as Beneficiary may determine,
notwithstanding that said indebtedness or the performance of said obligation
may not yet be due according to the terms thereof. Notwithstanding the
foregoing, nothing contained herein shall cause Beneficiary to be deemed a
trustee of said funds or to be obligated to pay any amounts in excess of the
amount of funds deposited with Beneficiary pursuant to this Section, nor
shall anything contained herein modify the obligation of Trustor to maintain
and keep in force at all times such insurance as is required by this Deed of
Trust. Beneficiary may commingle said reserve with its own funds and Trustor
shall be entitled to no interest thereon.
(g) REPLACEMENT COST. If insurance with full replacement cost
protection is maintained pursuant to SECTION 6(a) above, such full
replacement cost shall be determined annually (except in the event of
substantial changes, alterations or additions to the Improvements or in the
event of new construction undertaken by the Trustor, in which event such full
replacement cost shall be determined from time to time as required to assure
full replacement cost coverage). Such determination of full replacement cost
shall be made by written agreement of the insurance carrier and Trustor,
subject to the approval of Beneficiary. If they cannot agree or the value
shall not be approved by Beneficiary within thirty (30) days after such
request, such full replacement cost shall be determined by an appraiser,
architect or contractor who shall be acceptable to Beneficiary. No omission
on the part of Beneficiary to request any such determination shall relieve
Trustor of its obligations hereunder, and any such determination to the
contrary notwithstanding, Beneficiary may require Trustor to obtain
additional insurance as provided in this Section.
(h) SEPARATE INSURANCE. Trustor shall not take out separate
insurance concurrent in form or contributing in the event of loss with that
required by this Section to be furnished by Trustor unless Beneficiary is a
named insured therein, with loss payable as provided herein. Trustor shall
immediately notify Beneficiary of the taking out of any such separate
insurance and shall cause the original policies in respect thereof or
certificates therefor to be delivered to Beneficiary.
(i) COMPLIANCE WITH INSURANCE REQUIREMENTS. Trustor shall observe
and comply with the requirements of all policies of insurance required to be
maintained in accordance with this Deed of Trust and shall cause the
requirements of the companies writing such policies to be so performed and
satisfied that at all times companies of good standing satisfactory to
Beneficiary shall be willing to write and to continue such insurance.
Notwithstanding any approval, disapproval, acceptance or acquiescence by
Beneficiary with respect to such insurance, or Beneficiary's obtaining or
failure to obtain any insurance, Beneficiary shall incur no liability as to
the form or legal sufficiency of insurance contracts, the solvency of any
insurer or the payment of any loss, and Trustor hereby expressly assumes full
responsibility therefor.
(j) ASSIGNMENT OF POLICIES UPON FORECLOSURE. In the event of
foreclosure of this Deed of Trust or other transfer of title or assignment of
any of the Property in extinguishment, in whole or in part, of the debt
secured hereby, all right, title and interest of Trustor in and to all
policies of insurance required by this Section with respect to such Property
and any unearned premiums paid thereon shall, without further act, be
assigned to and shall inure to the benefit of and pass to the successor in
interest to Trustor or the purchaser or grantee of the Property, and Trustor
hereby appoints Beneficiary its lawful attorney-in-fact to execute an
assignment thereof and any other document necessary to effect such transfer.
(k) WAIVER OF SUBROGATION. Trustor waives any and all right to
claim or recover against Beneficiary, its directors, officers, employees,
agents and representatives, for loss of or damage to Trustor, the Property,
any other property of Trustor, or any property of others under Trustor's
control, from
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any cause insured against or required to be insured against by the provisions
of this Deed of Trust; provided, however, that this waiver of subrogation
shall not be effective with respect to any policy of insurance permitted or
required by this Deed of Trust if (i) such policy prohibits, or if coverage
thereunder would be reduced as a result of, such waiver of subrogation and
(ii) Trustor is unable to obtain from a carrier issuing such insurance a
policy that, by special endorsement or otherwise, permits such a waiver of
subrogation.
(l) REQUIREMENTS SUPPLEMENTAL. The requirements of this Deed of
Trust with respect to insurance and maintenance of the Property shall be
supplemental to and not exclusive of the requirements of the Note Purchase
Agreement and the Company Security Agreement.
7. CASUALTIES; INSURANCE PROCEEDS.
(a) NOTICE OF CASUALTIES. Trustor shall give prompt written
notice thereof to Beneficiary after the happening of any material casualty to
or in connection with the Property or any part thereof, whether or not such
casualty is covered by insurance.
(b) PAYMENT OF PROCEEDS. All proceeds payable to Trustor in
connection with any casualty affecting all or any portion of the Property (i)
in the case of a loss equal to or in excess of Two Million Dollars
($2,000,000), shall be paid directly to Beneficiary; and (ii) in the case of
a loss of less than Two Million Dollars ($2,000,000) shall be paid directly
to Trustor and applied by Trustor to the cost of restoration of the Property.
Trustor shall not settle, adjust or compromise any claims for loss, damage
or destruction of the Property or any part thereof under any policy or
policies of insurance carried by Trustor in connection with a loss in an
amount equal to or greater than Two Million Dollars ($2,000,000) without the
prior written consent of Beneficiary to such settlement, adjustment or
compromise. Trustor is hereby authorized to settle all claims under all
policies of insurance and to execute and deliver all necessary proofs of
loss, receipts, vouchers and releases required by the insurers in connection
with a loss in an amount less than Two Million Dollars ($2,000,000). After
an Event of Default hereunder, Beneficiary shall have the sole and exclusive
right, and Trustor hereby authorizes and empowers Beneficiary, to settle,
adjust or compromise all such claims, including those in amounts less than
Two Million Dollars ($2,000,000). Each insurer is hereby authorized and
directed to make payment of any insurance proceeds under any policies of
insurance in connection with a loss (i) equal to or in excess of Two Million
Dollars ($2,000,000) directly to Beneficiary, and (ii) less than Two Million
Dollars ($2,000,000) directly to Trustor. If Trustor receives any proceeds
of insurance resulting from a casualty which, pursuant to this Deed of Trust,
are to be paid to Beneficiary, Trustor shall promptly pay over such proceeds
to Beneficiary. If, prior to the receipt by Trustor or Beneficiary, as the
case may be, of any insurance proceeds, the Property or any portion thereof
shall have been sold by Trustee pursuant to the power of sale provided
herein, subject to applicable law Beneficiary shall have the right to receive
the insurance proceeds to the extent of any deficiency found to be due upon
such sale, whether or not a deficiency judgment on this Deed of Trust shall
have been sought or recovered (unless sought and denied by final order of a
court of competent jurisdiction) together with interest thereon, and the
reasonable attorneys' fees, costs and disbursements incurred by Beneficiary
in connection with the collection of the insurance proceeds.
(c) USE IN RESTORATION. In the event of any damage to or
destruction of the Property or any improvements not owned by Trustor but
located on the Real Property, and provided that (i) at the time of such
damage or destruction or thereafter, an Event of Default does not exist, (ii)
the damage or destruction does not occur within six (6) months prior to the
maturity of the Notes or other Obligations, and (iii) application of
insurance proceeds to restoration of the Property (or such other
improvements) will not impair Beneficiary's security for the obligations
secured hereby, insurance proceeds payable to Trustor in connection with such
damage or destruction shall be applied, first, toward reimbursement of all of
Beneficiary's reasonable costs and expenses of recovering the proceeds,
including reasonable attorneys' fees; then, to payment of all sums advanced
by Beneficiary to protect the Property or such other improvements
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or the security of the Notes or other Obligations; then, to payment of
installments of principal and interest then due and payable under the Notes;
then, to restoration of the Property (or such other improvements, as
applicable), upon such conditions as Beneficiary shall determine (it being
expressly understood and agreed that if the cost of restoration as estimated
by Beneficiary will exceed the sum of Two Million Dollars ($2,000,000) (a
"MAJOR RESTORATION"), Beneficiary may condition disbursement of such proceeds
for restoration upon proof that an amount equal to the sum that Beneficiary
is requested to disburse has theretofore been paid by Trustor, or is then due
and payable, for materials theretofore installed or work theretofore
performed upon the Property and properly includable in the cost of repair,
reconstruction or restoration thereof; delivery to Beneficiary by Trustor of
detailed plans and specifications providing for restoration in accordance
with all applicable Legal Requirements of all governmental authorities having
jurisdiction over the Property, together with a detailed estimate of the cost
of the work and a schedule therefor and a construction contract satisfactory
to Beneficiary, with a contractor satisfactory to Beneficiary, for
performance of the work within the budgeted amount, and within the scheduled
time for completion; proof that the insurance required hereby is in force;
proof that, after repair or reconstruction, the Property (or such other
improvements) will be at least as valuable as it was (or they were)
immediately before the damage or destruction occurred; and proof that the
insurance proceeds available for repair or restoration are sufficient, in
Beneficiary's determination, to pay for the total cost of repair or
reconstruction, including all associated development costs and interest
projected to be payable on the Obligations until the repair or reconstruction
is complete, or Trustor must provide its own funds in an amount equal to the
difference between the proceeds available for repair or restoration and a
reasonable estimate, made by Trustor and found acceptable by Beneficiary, of
the total cost of repair or reconstruction); and, upon completion of the work
of restoration and payment of the cost thereof, any balance of such proceeds
shall be applied to the Obligations secured hereby, in such order as
Beneficiary, in its sole discretion, shall determine, notwithstanding that
said indebtedness or the performance of said Obligation may not be due
according to the terms thereof; and, if any then remains, it shall be paid
over to Trustor.
(d) APPLICATION BY BENEFICIARY. If (i) at the time of such damage
or destruction or thereafter, an Event of Default exists hereunder, or (ii)
the damage or destruction occurs within six (6) months prior to the maturity
of the Notes and other Obligations, or (iii) application of insurance
proceeds to restoration will impair Beneficiary's security for the
Obligations secured hereby, then Beneficiary shall have the option, in its
sole and absolute discretion, (1) to apply all or any portion of such
proceeds that are payable to Trustor to any indebtedness or other Obligation
secured hereby and in such order as Beneficiary may determine,
notwithstanding that said indebtedness or the performance of said Obligation
may not be due according to the terms thereof, or (2) to apply all or any
portion of such proceeds to the restoration of the Property, subject to such
conditions as Beneficiary shall determine, or (3) to deliver all or any
portion of such proceeds to Trustor or any ground lessee or tenant of the
Property, subject to such conditions as Beneficiary may determine.
(e) DUTY TO RESTORE. Except as otherwise provided hereinbelow, in
the event of any damage or destruction of the Property or any improvements
located on the Property, Trustor shall restore and repair (or cause to be
restored and repaired) the Property and such other improvements located on
the Real Property, and nothing in this Deed of Trust shall be deemed to
excuse Trustor from restoring, repairing and maintaining the Property and any
such other improvements located on the Real Property, as herein provided,
regardless of whether or not insurance proceeds are available for
restoration, whether or not any such proceeds are sufficient in amount, or
whether or not the Property (or such other improvements) can be restored to
the same condition and character as existed prior to such damage or
destruction.
8. TAXES AND IMPOSITIONS.
(a) PAYMENT BY TRUSTOR. Subject to SUBSECTION (d) below, Trustor
shall pay, or cause to be paid, at least ten (10) days prior to delinquency,
all real property taxes and assessments, general and
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special, and all other taxes and assessments of any kind or nature
whatsoever, including, without limitation, non-governmental levies or
assessments such as maintenance charges, owner association dues or charges or
fees, levies or charges resulting from covenants, conditions or restrictions
affecting the Property, which are assessed or imposed upon the Property, or
become due and payable, and which create, may create or appear to create a
lien upon the Property, or any part thereof, or upon any of the Personal
Property (all of which taxes, assessments and charges, together with any and
all other taxes, and charges of a similar kind or nature are collectively
referred to hereinafter as "IMPOSITIONS"); provided, however, that if, by
law, any such Imposition is payable, or may at the option of the taxpayer be
paid, in installments, Trustor may pay the same or cause it to be paid,
together with any accrued interest on the unpaid balance of such Imposition,
in installments as the same become due and before any fine, penalty, interest
or cost may be added thereto for the nonpayment of any such installment and
interest.
(b) NEW IMPOSITIONS. If at any time after the date hereof there
shall be assessed or imposed (i) a tax or assessment on the Property in lieu
of or in addition to the Impositions payable by Trustor pursuant to
SUBSECTION (a) of this Section, or (ii) a license fee, tax or assessment
imposed on Beneficiary and measured by or based in whole or in part upon the
amount of the Notes or the other Obligations secured hereby, then all such
taxes, assessments or fees shall be deemed to be included within the term
"IMPOSITIONS" as defined in SUBSECTION (a) of this Section, and Trustor shall
pay and discharge the same as herein provided with respect to the payment of
Impositions, if Trustor is permitted by law to pay the same. If Trustor is
prohibited by law from paying such Impositions, then, at the option of
Beneficiary, all obligations secured hereby, together with all accrued
interest thereon, shall immediately become due and payable. Anything to the
contrary herein notwithstanding, Trustor shall have no obligation to pay any
franchise, estate, inheritance, income, excess profits or similar tax levied
on Beneficiary or on the Obligations secured hereby, nor shall such taxes be
deemed to be Impositions.
(c) PROOF OF PAYMENT. Subject to the provisions of SUBSECTION (d)
of this Section, Trustor shall deliver to Beneficiary, within seven (7) days
after the date upon which any Imposition is due and payable by Trustor in
accordance with this Deed of Trust, official receipts of the appropriate
taxing authority, or other proof satisfactory to Beneficiary, evidencing the
payment thereof.
(d) CONTEST OF ASSESSMENTS. Trustor shall have the right before
any delinquency occurs to contest or object to the amount or validity of any
such Imposition by appropriate legal proceedings, but this shall not be
deemed or construed in any way as relieving, modifying or extending Trustor's
covenant to pay any such Imposition at the time and in the manner provided in
this Section unless Trustor has given prior written notice to Beneficiary of
Trustor's intent so to contest or object to an Imposition, and unless (i)
Trustor shall demonstrate to Beneficiary's satisfaction that the legal
proceedings shall conclusively operate to prevent the sale of the Property,
or any part thereof, to satisfy such Imposition prior to final determination
of such proceedings; or (ii) Trustor shall furnish a good and sufficient bond
or surety as requested by and satisfactory to Beneficiary; or (iii) Trustor
shall demonstrate to Beneficiary's satisfaction that Trustor has provided a
good and sufficient undertaking as required or permitted by law to accomplish
a stay of any such sale.
(e) RESERVE FUND. Upon request by Beneficiary following an Event
of Default, Trustor shall pay to Beneficiary an initial cash reserve in an
amount adequate to pay all Impositions for the ensuing tax fiscal year (or
such lesser amount as may then be specified by Beneficiary), and shall
thereafter deposit with Beneficiary each month, commencing with the first
month after such request by Beneficiary and continuing until all sums secured
hereby are paid in full or Beneficiary gives notice to Trustor to cease
making such deposits, an amount equal to one-twelfth of the sum of the annual
Impositions, as reasonably estimated by Beneficiary. In such event, Trustor
further agrees to cause all bills, statements or other documents relating to
Impositions to be sent or mailed directly to Beneficiary. Upon receipt of
such bills, statements or other documents evidencing that Impositions are
then payable, and providing Trustor has
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deposited sufficient funds with Beneficiary pursuant to this Section,
Beneficiary shall pay such amounts as may be due thereunder out of the funds
so deposited with Beneficiary. If at any time and for any reason the funds
deposited with Beneficiary are or will be insufficient to pay such amounts as
may then or subsequently be due, Beneficiary may notify Trustor and upon such
notice Trustor shall immediately deposit an amount equal to such deficiency
with Beneficiary. Notwithstanding the foregoing, nothing contained herein
shall cause Beneficiary to be deemed a trustee of said funds or to be
obligated to pay any amounts in excess of the amount of funds deposited with
Beneficiary pursuant to this Section, nor shall anything contained herein
modify the obligation of Trustor to pay, or cause to be paid, all
Impositions. Beneficiary may commingle said reserve with its own funds and
Trustor shall be entitled to no interest thereon. Beneficiary may impound or
reserve for future payment of Impositions such portion of such payments as
Beneficiary may deem proper, applying the balance upon any indebtedness or
Obligation secured hereby in such order as Beneficiary may determine,
notwithstanding that said indebtedness or the performance of said Obligation
may not yet be due according to the terms thereof. Should Trustor fail to
deposit with Beneficiary (exclusive of that portion of said payments which
has been applied by Beneficiary upon any indebtedness or Obligation secured
hereby) sums sufficient to fully pay such Impositions at least thirty (30)
days before delinquency thereof, Beneficiary may, at Beneficiary's election,
but without any obligation so to do, advance any amounts required to make up
the deficiency, which advances, if any, together with interest thereon at an
annual rate equal to the Agreed Rate, shall be secured hereby and shall be
repayable to Beneficiary upon demand; or, at the option of Beneficiary,
Beneficiary may, without making any advance whatever, apply any sums held by
it upon any indebtedness or Obligation secured hereby, in such order as
Beneficiary may determine, notwithstanding that said indebtedness or the
performance of said Obligation may not yet be due according to the terms
thereof.
(f) JOINT ASSESSMENT. Trustor shall not initiate, and, to the
maximum extent permitted by law, shall not suffer or permit the joint
assessment of any real and personal property which may constitute all or a
portion of the Property or any other procedure whereby the lien of real
property taxes and the lien of personal property taxes shall be assessed,
levied or charged to the Property as a single lien.
(g) TAX SERVICE. Trustor shall cause to be furnished to
Beneficiary a tax reporting service, covering the Property, of the type and
duration, and with a company, satisfactory to Beneficiary.
9. LIENS. Trustor shall pay and promptly discharge, at Trustor's
cost and expense, all liens, encumbrances and charges upon the Property, or
any part thereof or interest therein, senior to the lien of this Deed of
Trust other than Permitted Exceptions and Permitted FF&E Liens and shall pay
and promptly discharge, at Trustor's cost and expense, all liens,
encumbrances and charges upon the Property, or any part thereof or interest
therein, that are not Permitted Liens; provided that Trustor shall have the
right to contest in good faith the validity of any such lien, encumbrance or
charge in accordance with the provisions of the Note Purchase Agreement. If
Trustor shall fail to remove and discharge any such lien, encumbrance or
charge, then, in addition to any other right or remedy of Beneficiary,
Beneficiary may, but shall not be obligated to, discharge the same, either by
paying the amount claimed to be due, or by procuring the discharge of such
lien, encumbrance or charge by depositing in a court a bond or the amount
claimed or otherwise giving security for such claim, or by procuring such
discharge in such manner as is or may be prescribed by law. Trustor shall,
immediately upon demand therefor by Beneficiary, pay to Beneficiary an amount
equal to all costs and expenses incurred by Beneficiary in connection with
the exercise by Beneficiary of the foregoing right to discharge any such
lien, encumbrance or charge, together with interest thereon from the date of
such expenditure at an annual rate equal to the Agreed Rate.
10. EASEMENTS AND LEASEHOLDS. If a leasehold estate or an
easement or other incorporeal right constitutes a portion of the Real
Property or if all or any portion of the Real Property or Improvements is
leased or licensed by Trustor to another person, Trustor agrees not to amend,
change, terminate or modify such lease, license, leasehold estate, easement
or other right or interest, or any right
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thereto or interest therein, without the prior written consent of
Beneficiary, which consent shall not be unreasonably withheld or delayed.
NOTWITHSTANDING THE FOREGOING, TRUSTOR SHALL BE PERMITTED, WITHOUT
BENEFICIARY'S CONSENT, TO (i) ENTER INTO NEW LEASES FOR SPACE NOT TO EXCEED
5,000 SQUARE FEET IN THE AGGREGATE TO THE EXTENT SUCH NEW LEASES REPLACE ANY
OF THE EXISTING LEASES LISTED AS PERMITTED EXCEPTIONS ON EXHIBIT B ATTACHED
HERETO AND (ii) AMEND, CHANGE, TERMINATE OR MODIFY ANY LEASE, LICENSE OR
LEASEHOLD ESTATE FOR FIVE THOUSAND (5,000) SQUARE FEET OF SPACE IN THE
AGGREGATE OR LESS (EACH SUCH LEASE, LICENSE OR LEASEHOLD ESTATE BEING
REFERRED TO HEREIN AS AN "UNRESTRICTED LEASE"). Consent to one amendment,
change, agreement or modification shall not be deemed to be a waiver of the
right to require consent to other, future or successive amendments, changes,
agreements or modifications. Trustor agrees to perform all obligations and
agreements with respect to said lease, license, leasehold, easement or other
right or interest and shall not take any action or omit to take any action
which would effect or permit the termination thereof (EXCEPT WITH RESPECT TO
UNRESTRICTED LEASES). Trustor agrees to promptly notify Beneficiary in
writing with respect to any default or alleged default by any party to any
lease, license, leasehold estate, easement or other right or interest
(EXCEPTING UNRESTRICTED LEASES) and to deliver to Beneficiary copies of all
notices, demands, complaints or other communications received or given by
Trustor with respect to any such default or alleged default. Beneficiary
shall have the option to cure any such default and to perform any or all of
Trustor's obligations thereunder or with respect thereto. All sums expended
by Beneficiary in curing any such default shall be secured hereby and shall
be immediately due and payable without demand or notice and shall bear
interest from the date of expenditure at an annual rate equal to the Agreed
Rate.
11. FURTHER ACTS. Trustor shall do and perform all acts necessary
to keep valid and effective the charges and lien hereof, to carry into effect
its object and purposes, to protect the lawful owner(s) of the Notes and the
other Obligations secured hereby; shall execute and deliver to Beneficiary at
any time, upon request of Beneficiary, all other and further instruments in
writing necessary to vest in and secure to Trustee each and every part of the
Real Property and to Beneficiary the Rents therefrom and rights and interest
of Beneficiary therein or with respect thereto; and, upon request by the
Beneficiary, shall supply evidence of fulfillment of each of the covenants
herein contained concerning which a request for such evidence has been made.
12. ASSIGNMENT OF RENTS.
(a) Notwithstanding any language contained herein, or in any other
document, to the contrary, Trustor hereby irrevocably and absolutely assigns
and transfers to Beneficiary, without having to first take possession of the
Property, all Rents, including all present and future Leases and other rental
agreements, reserving unto Trustor a license to collect such Rents prior to
the occurrence of any Event of Default. Subsequent to the occurrence of an
Event of Default, such license reserved to Trustor shall be immediately
revoked without further demand or notice, and any Rents, including those past
due, unpaid or undetermined, may be collected by Beneficiary or its agent,
and any amount so collected shall be applied, less costs and expenses of
operation and collection, including attorneys' fees, to any indebtedness
and/or Obligations secured hereby, in such order as Beneficiary shall
determine. The collection of such Rents, and the application thereof as
aforesaid, shall not cure or constitute a waiver of any default or notice of
default hereunder or invalidate any act done pursuant to such notice.
Trustor and Beneficiary intend that this assignment shall be a present,
absolute and unconditional assignment, not an assignment for additional
security only, and shall, immediately upon the execution hereof, subject to
the license granted above, give Beneficiary, and its agent, the right to
collect the Rents and to apply them as aforesaid. Nothing contained herein,
nor any collection of Rents by Beneficiary, or its agent or a receiver, shall
be construed to make Beneficiary (i) a "Mortgagee-in-Possession" of the
Property so long as Beneficiary has not itself entered into actual possession
of the Property; (ii) responsible for performing any of the obligations of
the lessor under any Lease; (iii) responsible for any waste committed by
lessees or any other parties, any dangerous or defective condition of the
Property, or any negligence in the management, upkeep, repair or control of
the
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Property; or (iv) liable in any manner for the Property or the use,
occupancy, enjoyment or operation of all or any part of it.
(b) Trustor hereby represents to Beneficiary that, except for
Permitted Exceptions, there is no assignment or pledge of any Leases of, or
Rents from, the Property now in effect, and covenants that, until the Notes
are fully paid and the other Obligations are fully satisfied, Trustor will
not make any such assignment or pledge to anyone other than Beneficiary nor
will it accept any periodic payments which are to be made pursuant to such
Leases or Rents more than thirty (30) days in advance of the date on which
such payments are due.
13. ACTIONS AFFECTING PROPERTY. Trustor shall give Beneficiary
and Trustee prompt written notice of the assertion of any claim with respect
to, or the filing of any action or proceeding affecting or purporting to
affect, the Property, or title thereto or any right of possession thereof, or
this Deed of Trust or the security hereof or the rights or powers of
Beneficiary or Trustee hereunder. Trustor shall appear in and contest any
such action or proceeding at Trustor's sole expense; and shall pay all costs
and expenses, including cost of evidence of title and attorneys' fees, in any
such action or proceeding in which Beneficiary or Trustee may appear.
14. EMINENT DOMAIN. If any proceeding or action be commenced for
the taking of the Property, or any part thereof or interest therein, for
public or quasi-public use under the power of eminent domain, condemnation or
otherwise, or if the same be taken or damaged by reason of any public
improvement or condemnation proceeding, or in any other manner, or should
Trustor receive any notice or other information regarding such proceeding,
action, taking or damage (including, without limitation, a proposal to
purchase the Property or some portion thereof in lieu of condemnation),
Trustor shall give prompt written notice thereof to Beneficiary. Beneficiary
shall be entitled, at its option, without regard to the adequacy of its
security, to investigate and negotiate with the Trustor and the condemnor
concerning the proposed taking, to commence, appear in and prosecute in its
own name, with Trustor, any such action or proceeding, and, to join Trustor
in making any compromise or settlement in connection with such taking or
damage. Trustor shall not compromise or settle any such action or proceeding
or agree to any sale in lieu of condemnation without the prior written
consent of Beneficiary. If any compensation, awards, damages, rights of
action or proceeds (the "AWARD") awarded by reason of any such taking,
transfer or damage equals or exceeds Two Million Dollars ($2,000,000) (a
"MATERIAL CONDEMNATION"), then the entire Award shall be paid and is hereby
assigned to Beneficiary and Trustor agrees to execute such further
assignments of the Award as Beneficiary or Trustee may require. If the
entire Award is less than Two Million Dollars ($2,000,000), then the entire
Award shall be paid to Trustor; provided that Trustor shall apply the entire
Award toward the restoration or repair of the Property to the extent of any
damage thereto caused by the condemnation. With respect to any Material
Condemnation, after deducting therefrom all costs and expenses (regardless of
the particular nature thereof and whether incurred with or without suit),
including attorneys' fees, incurred by it in connection with any such
negotiations, action or proceeding (whether or not prosecuted to judgment),
Beneficiary shall, if (i) an Event of Default does not then exist hereunder,
(ii) the taking, transfer or damage does not occur within six (6) months
prior to the maturity of the Notes and other Obligations, and (iii)
application of the Award to restoration of the Property will not impair
Beneficiary's security for the Obligations secured hereby, apply the Award to
the restoration of the Property, subject to such conditions as Beneficiary
shall determine (it being expressly understood and agreed that Beneficiary
may condition disbursement of such proceeds for restoration upon proof that
an amount equal to the sum which Beneficiary is requested to disburse has
theretofore been paid by Trustor without reimbursement therefor, or is then
due and payable, for materials theretofore installed or work theretofore
performed upon the Property and properly includable in the cost of repair,
reconstruction or restoration thereof). With respect to any Material
Condemnation, if, at the time of receipt by Beneficiary of such proceeds, (i)
an Event of Default then exists hereunder, (ii) the taking, transfer or
damage occurs within six (6) months prior to the maturity of the Notes and
other Obligations, or (iii) application of the Award to restoration will
impair
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Beneficiary's security for the Obligations secured hereby, Beneficiary shall
have the option, in its sole and absolute discretion, (1) to apply all or any
portion of the Award upon any indebtedness or other Obligation secured hereby
and in such order as Beneficiary may determine, notwithstanding that said
indebtedness or the performance of said Obligation may not be due according
to the terms thereof, or (2) to apply all or any portion of the Award to the
restoration of the Property, subject to such conditions as Beneficiary may
determine, or (3) to deliver all or any portion of the Award, after such
deductions, to Trustor, subject to such conditions as Beneficiary may
determine (and, if the Award is not sufficient to satisfy the Obligations in
full, Trustor shall immediately pay any remaining balance, together with all
accrued interest thereon). Nothing herein contained shall be deemed to
excuse Trustor from restoring, repairing and maintaining the Property, as
herein provided, regardless of whether or not the Award is available for
restoration, whether or not any such Award is sufficient in amount, or
whether or not the Property can be restored to the same condition and
character as existed prior to such damage or partial taking. Trustor hereby
specifically, unconditionally and irrevocably waives all rights of a property
owner under all laws, including Nevada Revised Statutes 37.115, as amended or
recodified from time to time, which provide for allocation of condemnation
proceeds between a property owner and a lienholder to the fullest extent
permitted by law.
15. DUE ON SALE.
(a) Except as otherwise permitted in the Note Purchase Agreement,
SECTION 15(b) BELOW, or in any other provision of this Deed of Trust, if the
Trustor shall sell or convey, or create or permit to exist any mortgage,
pledge, security interest or other encumbrance on, or in any other manner
alienate or otherwise "transfer" the Real Property hereby encumbered or any
part thereof or any interest therein, or shall enter into any agreement for
the same, or shall be divested of its title in any manner or way, whether
voluntary or involuntary or by merger, without the written consent of
Beneficiary being first had and obtained, any indebtedness or Obligation
secured hereby, irrespective of the maturity dates expressed in the Notes or
any other notes evidencing the same, at the option of Beneficiary, and
without demand or notice, shall immediately become due and payable. Consent
to one such transaction shall not be deemed to be a waiver of the right to
require consent to future or successive transactions. Beneficiary may grant
or deny such consent in its sole discretion and, if consent should be given,
any such transfer shall be subject to this Deed of Trust, and any such
transferee shall assume all obligations hereunder and agree to be bound by
all provisions contained herein. Such assumption shall not, however, release
Trustor or any maker or guarantor of any Obligation from any liability with
respect thereto without the prior written consent of Beneficiary. As used
herein, "TRANSFER" includes the direct or indirect sale, agreement to sell,
transfer, conveyance, pledge, collateral assignment or hypothecation of the
Real Property, or any portion thereof or interest therein, whether voluntary,
involuntary, by operation of law or otherwise, the execution of any
installment land sale contract or similar instrument affecting all or a
portion of the Real Property, or the lease of all or substantially all of the
Property. The term "TRANSFER" shall also include the direct or indirect
transfer, assignment, hypothecation or conveyance of legal or beneficial
ownership of Trustor or any corporate shares of Trustor.
(b) Notwithstanding the foregoing, (i) upon Beneficiary's consent,
which consent shall not be unreasonably withheld in accordance with the
applicable terms and provisions of the Note Purchase Agreement, Trustor shall
be permitted to ground lease approximately three (3) acres of the Land to a
third party developer for the development of a non-gaming hotel containing up
to two hundred (200) rooms in the aggregate (the "NON-GAMING HOTEL");
PROVIDED THAT, such ground lease shall remain subordinate to the lien of this
Deed of Trust (except that Beneficiary shall provide a customary
non-disturbance agreement in favor of the ground lessee in exchange for the
ground lessee's express subordination of the ground lease to this Deed of
Trust), and (ii) upon Beneficiary's consent, which shall not be unreasonably
withheld in accordance with the applicable terms and provisions of the Note
Purchase Agreement, Trustor shall be permitted to grant Permitted Ground
Lease Encumbrances and Beneficiary will agree to subordinate the lien of this
Deed of
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Trust to such Permitted Ground Lease Encumbrances in accordance with the
applicable terms, provisions and conditions of the Note Purchase Agreement.
16. PARTIAL OR LATE PAYMENTS. By accepting payment of any
indebtedness secured hereby after its due date, Beneficiary does not waive its
right either to require prompt payment, when due, of all other indebtedness so
secured or to declare default, as herein provided, for failure to so pay.
17. RECONVEYANCE BY TRUSTEE. Upon receipt of written request from
Beneficiary reciting that all sums secured hereby have been paid and upon
surrender of this Deed of Trust and the Notes secured hereby to Trustee for
cancellation and retention, or such other disposition as Trustee, in its sole
discretion, may choose, and upon payment of its fees, the Trustee shall
reconvey, without warranty or recourse, the Property then held hereunder.
Beneficiary will give such written request and will surrender the Deed of Trust
and the Notes within a reasonable time after it and all of the Holders receive
payment in full of all sums secured hereby. The recitals in such reconveyance
of any matters of fact shall be conclusive proof of the truth thereof. The
grantee in such reconveyance may be described in general terms as "the person or
persons legally entitled thereto".
18. RIGHT OF BENEFICIARY AND TRUSTEE TO APPEAR. If, during the
existence of the trust created hereby, there be commenced or pending any suit or
action materially and adversely affecting the Property, or any part thereof, or
the title thereto, or if any adverse claim for or against the Property, or any
part thereof, be made or asserted, the Trustee or Beneficiary may appear or
intervene in the suit or action and retain counsel therein and, unless such suit
or action is being diligently contested in good faith by Trustor and Trustor
shall have established and maintained adequate reserves with Beneficiary for the
full payment and satisfaction of such suit or action if determined adversely to
Trustor, may defend same, or otherwise take such action therein as the Trustee
or Beneficiary may be advised and may, after providing Trustor with written
notice, pay and expend such sums of money as the Trustee or Beneficiary may deem
to be necessary and Trustor shall pay all reasonable costs and expenses of
Trustee and Beneficiary incurred in connection therewith.
19. PERFORMANCE BY TRUSTEE OR BENEFICIARY. If Trustor fails to make
any payment or perform any act as and in the manner provided in any of the Basic
Documents and such failure becomes an "Event of Default" thereunder, then the
Trustee or Beneficiary, at the election of either of them and without any
obligation to do so, after the giving of reasonable notice to the Trustor, or
any successor in interest of the Trustor, or any of them and without releasing
Trustor from any obligation hereunder, may make such payment or perform such act
and incur any liability, or expend whatever amounts, in its absolute discretion,
it may deem necessary therefor. In connection therewith (without limiting their
general and other powers, whether conferred herein, in another Basic Document or
by law), Beneficiary and Trustee, and each of them, shall have and are hereby
given the right, but not the obligation, (i) to enter upon and take possession
of the Property; (ii) to make additions, alterations, repairs and improvements
to the Property which they or either of them may consider necessary or proper to
keep the Property in good condition and repair; (iii) to appear and participate
in any action or proceeding affecting or which may affect the security hereof or
the rights or powers of Beneficiary or Trustee; (iv) to pay, purchase, contest
or compromise any encumbrance, claim, charge, lien or debt which in the judgment
of either may affect or appears to affect the security of this Deed of Trust or
to be prior or superior hereto; and (v) in exercising such powers, to pay
necessary expenses, including employment of counsel and other necessary or
desirable consultants. All sums incurred or expended by the Trustee or
Beneficiary, under the terms hereof (including, without limiting the generality
of the foregoing, costs of evidence of title, court costs, appraisals, surveys,
and receiver's, Trustee's and attorneys' fees, costs and expenses (including,
without limitation, the fees and expenses of attorneys for Trustee), whether or
not an action is actually commenced in connection therewith), shall become due
and payable by the Trustor to the Trustee on the next interest or payment date
under the Notes secured hereby and shall bear interest until paid at an annual
percentage rate equal to the Agreed Rate. In no event shall
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the payment or performance of any obligation by Trustee or Beneficiary be
construed as a waiver of the default occasioned by Trustor's failure to make
such payment or payments or to perform such obligation or obligations.
20. INSPECTIONS. Upon reasonable advance written notice,
Beneficiary, or its agents, representatives or workers, are authorized to enter
at any reasonable time upon or in any part of the Property for the purpose of
inspecting the same and for the purpose of performing any of the acts it is
authorized to perform hereunder or under the terms of any of the Basic
Documents; PROVIDED THAT, Beneficiary, its agents, representatives and workers
shall not unreasonably interfere with the Trustor's or its tenants' operations
on the Property.
21. INVALIDITY OF LIEN. If the lien of this Deed of Trust is invalid
or unenforceable as to any part of the Obligations, or if the lien is invalid or
unenforceable as to any part of the Property, the unsecured or partially secured
portion of the Obligations shall be completely paid prior to the payment of the
remaining and secured or partially secured portion of the Obligations, and all
payments made on the Obligations, whether voluntary or under foreclosure or
other enforcement action or procedure, shall be considered to have been first
paid on and applied to the full payment of that portion of the Obligations which
are not secured or are not fully secured by the lien of this Deed of Trust.
22. SUBROGATION. To the extent that proceeds of the Notes or other
sums advanced by Beneficiary are used to pay any outstanding lien, charge or
prior encumbrance against the Property, such proceeds shall be deemed to have
been advanced by Beneficiary at Trustor's request and Beneficiary shall be
subrogated to any and all rights and liens held by any owner or holder of such
outstanding liens, charges and prior encumbrances, regardless of whether said
liens, charges or encumbrances are released.
23. EVENTS OF DEFAULT. Trustor will be in default under this Deed of
Trust upon the occurrence of any one or more of the following events (some or
all collectively, "EVENTS OF DEFAULT"; any one singly, an "EVENT OF DEFAULT"):
(a) FAILURE TO PAY. Any installment of principal on any Note is
not paid when due, whether at stated maturity, by acceleration, by notice
of voluntary prepayment, by mandatory prepayment or otherwise; or any
installment of interest or any other amounts due and owing under the Note
Purchase Agreement, this Deed of Trust or any other Basic Document, or any
other amount the payment of which is secured hereby, is not paid within
fifteen (15) days after the date when due; or
(b) OTHER BREACHES HEREOF. A breach by Trustor of any
representation, warranty or covenant in this Deed of Trust which is not
cured within thirty (30) days after the earlier of (i) an officer of
Trustor or SFG (its parent) becoming aware of such default, and (ii)
receipt by Trustor of notice from Trustee, Beneficiary or any Holder of
such default; or
(c) DEFAULTS UNDER OTHER BASIC DOCUMENTS. The occurrence under
the Note Purchase Agreement or any of the other Basic Documents of an
"Event of Default" (as defined therein).
24. REMEDIES. At any time after an Event of Default, Beneficiary and
Trustee will be entitled to invoke any and all of the following rights and
remedies, all of which will be cumulative, and the exercise of any one or more
of which shall not constitute an election of remedies:
(a) ACCELERATION. Beneficiary may declare any or all of the
Obligations to be due and payable immediately, without presentment, demand,
protest or notice of any kind.
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(b) RECEIVER. Subject to applicable Gaming Laws, Beneficiary
may apply to any court of competent jurisdiction for, and obtain
appointment of, a receiver for the Property or any part thereof, without
notice to Trustor or anyone claiming under Trustor, and without regard to
the then value of the Property or the adequacy of any security for the
Obligations, and Trustor hereby irrevocably consents to such appointment
and waives notice of any application therefor to the fullest extent
permitted by law. Any such receiver or receivers shall have all the usual
powers and duties of receivers in like or similar cases and all the powers
and duties of Beneficiary in case of entry as provided herein and in the
Note Purchase Agreement and shall continue as such and exercise all such
powers until the later of (i) the date of confirmation of sale of all of
the Property; (ii) the disbursement of all proceeds of the Property
collected by such receiver and the payment of all expenses incurred in
connection therewith; or (iii) the termination of such receivership with
the consent of Beneficiary or pursuant to an order of a court of competent
jurisdiction.
(c) ENTRY. Beneficiary, in person, by agent or by
court-appointed receiver, may enter, take possession of, manage and operate
all or any part of the Property, subject to applicable Gaming Laws, and may
also do any and all other things in connection with those actions that
Beneficiary may, in its sole discretion, consider necessary and appropriate
to protect the security of this Deed of Trust. Such other things may
include, among other things, any of the following: taking and possessing
all of Trustor's or the then owner's books and records; entering into,
enforcing, modifying, or canceling Leases on such terms and conditions as
Beneficiary may consider proper; obtaining and evicting tenants; fixing or
modifying Rents; collecting and receiving any payment of money owing to
Trustor; completing any construction; and contracting for and making
repairs and alterations. If Beneficiary so requests, Trustor shall
assemble all of the Property that has been removed from the Real Property
and make all of it available to Beneficiary at the site of the Real
Property. Trustor hereby irrevocably constitutes and appoints Beneficiary
as Trustor's attorney-in-fact to perform such acts and execute such
documents as Beneficiary in its sole discretion may consider to be
appropriate in connection with taking these measures, including endorsement
of Trustor's name on any instruments. Regardless of any provision of this
Deed of Trust or the Note Purchase Agreement, Beneficiary shall not be
considered to have accepted any property other than cash or immediately
available funds in satisfaction of any Obligation of Trustor to
Beneficiary, unless Beneficiary has given express written notice of
Beneficiary's election of that remedy in accordance with the Nevada Uniform
Commercial Code, as it may be amended or recodified from time to time.
(d) CURE; PROTECTION OF SECURITY. Either Beneficiary or Trustee
may cure any breach or default of Trustor, and if it chooses to do so in
connection with any such cure, subject to applicable Gaming Laws,
Beneficiary or Trustee may also enter the Property and, whether or not
Beneficiary or Trustee enter the Property, do any and all other things
which it, in its sole discretion, may consider necessary and appropriate to
protect the security of this Deed of Trust, including, without limitation,
the right to complete any Improvements under construction thereon. Such
other things may include: appearing in and/or defending any action or
proceeding which purports to affect the security of, or the rights or
powers of Beneficiary or Trustee under, this Deed of Trust; paying,
purchasing, contesting or compromising any encumbrance, charge, lien or
claim of lien which in Beneficiary's or Trustee's sole judgment is or may
be senior in priority to this Deed of Trust, such judgment of Beneficiary
or Trustee to be conclusive as among the parties to this Deed of Trust;
obtaining insurance and/or paying any premiums or charges for insurance
required to be carried under this Deed of Trust; otherwise caring for and
protecting any and all of the Property; and employing counsel, accountants,
contractors and other appropriate persons to assist Beneficiary or Trustee.
Beneficiary and Trustee may take any of the actions permitted under this
Subsection either with or without giving notice to any person.
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(e) UNIFORM COMMERCIAL CODE REMEDIES. With respect to Personal
Property, Beneficiary may exercise any or all of the remedies granted to a
secured party under Nevada Revised Statutes Article 104.9101 et seq. (the
Nevada enactment of the Uniform Commercial Code), together with any and all
other rights and remedies provided in the Company Security Agreement.
(f) JUDICIAL ACTION. Beneficiary may bring an action in any
court of competent jurisdiction to foreclose this Deed of Trust or to
obtain specific enforcement of any of the covenants or agreements of this
Deed of Trust or for any other remedy provided herein, in the Note Purchase
Agreement, in any Basic Document or otherwise provided by law or in equity.
(g) POWER OF SALE. Under the power of sale herein granted,
Beneficiary shall have the discretionary right to cause some or all of the
Property, including any Property which constitutes Personal Property, to be
sold or otherwise disposed of in any combination and in any manner
permitted by applicable law.
(i) SALES OF PERSONAL PROPERTY.
(A) For purposes of the power of sale herein granted,
Beneficiary may elect to treat as Personal Property any Property which
is intangible or which can be severed from the Land or Improvements
without causing structural damage. If Beneficiary chooses to do so,
Beneficiary may dispose of any Personal Property separately from the
sale of real property, in any manner permitted by or under the Nevada
Revised Statutes, including any public or private sale, or in any
manner permitted by any other applicable law or the Company Security
Agreement.
(B) The following provision shall apply in the absence of
any specific statutory requirement which permits or requires a
different notice period: In connection with any sale or other
disposition of such Property, Trustor agrees that the following
procedures constitute a commercially reasonable sale: Beneficiary
shall mail written notice of the sale to Trustor not later than ten
(10) days prior to such sale. Upon receipt of any written request,
Beneficiary will, to the extent reasonably practicable, make the
Property available to any bona fide prospective purchaser for
inspection during reasonable business hours prior to the sale.
Notwithstanding any provision to the contrary, Beneficiary shall be
under no obligation to consummate a sale if, in its judgment, none of
the offers received by it equals the fair value of the Property
offered for sale. The foregoing procedures do not constitute the only
procedures that may be commercially reasonable.
(ii) TRUSTEE'S SALES OF REAL PROPERTY OR MIXED COLLATERAL.
(A) Beneficiary may choose to dispose of some or all of the
Property which consists solely of real property in any manner then
permitted by applicable law. In its discretion, Beneficiary may also
or alternatively choose to dispose of some or all of the Property, in
any combination consisting of both real and personal property,
together in one sale to be held in accordance with the law and
procedures applicable to real property. Trustor agrees that any sale
of personal property together with real property constitutes a
commercially reasonable sale of the personal property. For purposes
of this power of sale, either a sale of real property alone, or a sale
of both real and personal property together in accordance with law,
will sometimes be referred to as a "TRUSTEE'S SALE."
(B) Before any Trustee's Sale, Beneficiary or Trustee shall
give and record such notice of default and election to sell as may
then be required by law. When
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all time periods then legally mandated have expired, and after such
notice of sale as may then be legally required has been given,
Trustee shall sell the property being sold at a public auction to
be held at the time and place specified in the notice of sale.
Neither Trustee nor Beneficiary shall have any obligation to make
demand on Trustor before any Trustee's Sale. From time to time, in
accordance with then applicable law, Trustee may, and in any event
at Beneficiary's request shall, postpone any Trustee's sale by public
announcement at the time and place noticed for that sale, or may, in
its discretion, give a new notice of sale.
(C) At any Trustee's Sale, Trustee shall sell to the
highest bidder at public auction for cash in lawful money of the
United States. Trustee shall execute and deliver to the purchaser(s)
a deed or deeds conveying the property being sold without any covenant
or warranty whatsoever, express or implied. The recitals in any such
deed of any matters or facts, including any facts bearing upon the
regularity or validity of any Trustee's Sale, shall be conclusive
proof of their truthfulness. Any such deed shall be conclusive
against all persons as to the facts recited in it.
(h) SINGLE OR MULTIPLE FORECLOSURE SALES. If the Property at
the time of sale or other disposition consists of more than one lot, parcel
or item of property, Beneficiary may:
(i) Designate the order in which the lots, parcels or items
shall be sold or disposed of or offered for sale or disposition; and
(ii) Elect to dispose of the lots, parcels or items through
a single consolidated sale or disposition to be held or made under the
power of sale herein granted, or in connection with judicial
proceedings, or by virtue of a judgment and decree of foreclosure and
sale; or through two or more such sales or dispositions; or in any
other manner that Beneficiary may deem to be in its best interests
(any such sale or disposition, a "FORECLOSURE SALE;" any two or more,
"FORECLOSURE SALES").
If Beneficiary chooses to have more than one Foreclosure Sale, Beneficiary
at its option may cause the Foreclosure Sales to be held simultaneously or
successively, on the same day, or on such different days and at such
different times and in such order as Beneficiary may deem to be in its best
interests. No Foreclosure Sale shall terminate or affect the liens of this
Deed of Trust on any part of the Property which has not been sold, until
all of the Obligations have been paid and satisfied in full.
25. COSTS OF ENFORCEMENT. If an installment of principal or interest
on the Notes is not paid when due or if any other Event of Default occurs,
Beneficiary and Trustee, and each of them, may employ an attorney or attorneys
to protect their rights hereunder. Trustor promises to pay to Beneficiary, on
demand, the fees and expenses of such attorneys and all other costs of enforcing
the Obligations secured hereby, including but not limited to, recording fees,
the expense of a Trustee's Sale Guarantee, Trustee's fees and expenses,
receivers' fees and expenses, and all other expenses, of whatever kind or
nature, incurred by Beneficiary and Trustee, and each of them, in connection
with the enforcement of the Obligations secured hereby, whether or not such
enforcement includes the filing of a lawsuit. Until paid, such sums shall be
secured hereby and shall bear interest, from date of expenditure, at an annual
rate equal to the Agreed Rate.
26. REMEDIES CUMULATIVE AND NOT EXCLUSIVE. Trustee and Beneficiary,
and each of them, shall be entitled to enforce payment and performance of any
indebtedness or other Obligations secured hereby and to exercise all rights and
powers under this Deed of Trust or under any Basic Document or other agreement
or any laws now or hereafter in force, notwithstanding some or all of the said
indebtedness and other Obligations secured hereby may now or hereafter be
otherwise secured, whether by mortgage, deed
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of trust, pledge, lien, assignment or otherwise. Neither the acceptance of
this Deed of Trust nor its enforcement whether by court action or pursuant to
the power of sale or other powers herein contained, shall prejudice or in any
manner affect Trustee's or Beneficiary's right to realize upon or enforce any
other security now or hereafter held by Trustee or Beneficiary, it being
agreed that Trustee and Beneficiary, and each of them, shall be entitled to
enforce this Deed of Trust and any other security now or hereafter held by
Beneficiary or Trustee in such order and manner as they or either of them may
in their absolute discretion determine. No remedy herein conferred upon or
reserved to Trustee or Beneficiary is intended to be exclusive of any other
remedy herein or by law provided or permitted, but each shall be cumulative
and shall be in addition to every other remedy given hereunder or now or
hereafter existing at law or in equity or by statute. Every power or remedy
given by any of the Basic Documents to Trustee or Beneficiary or to which
either of them may be otherwise entitled, may be exercised, concurrently or
independently, from time to time and as often as may be deemed expedient by
Trustee or Beneficiary and either of them may pursue inconsistent remedies.
27. CREDIT BIDS. At any Foreclosure Sale, any person, including
Trustor, Trustee or Beneficiary, may bid for and acquire the Property or any
part thereof to the extent permitted by then applicable law. Instead of paying
cash for such property, Beneficiary may settle therefor by crediting such
portion of the following obligations against the sales price of the property as
is necessary to equal such price:
(a) First, the portion of the Obligations attributable to the
expenses of sale, costs of any action and any other sums for which Trustor
is obligated to pay or reimburse Beneficiary or Trustee hereunder or under
any other Basic Document; and
(b) Second, any of the other Obligations, in any order and
proportion as Beneficiary, in its sole discretion, may elect.
28. APPLICATION OF FORECLOSURE SALE PROCEEDS. Beneficiary and
Trustee shall apply the proceeds of any Foreclosure Sale in the following
manner:
(a) First, to pay the portion of the Obligations attributable to
the expenses of sale, costs of any action and any other sums for which
Trustor is obligated to reimburse Beneficiary or Trustee hereunder or under
any other Basic Document;
(b) Second, to pay the portion of the Obligations attributable
to any sums expended or advanced by Beneficiary or Trustee under the terms
of this Deed of Trust which then remain unpaid;
(c) Third, to pay any and all other Obligations, in any order
and proportion as Beneficiary, in its sole discretion, may elect; and
(d) Fourth, the remainder, if any, shall be remitted to the
person or persons entitled to it.
29. APPLICATION OF RENTS AND OTHER SUMS. Beneficiary shall apply any
and all Rents collected by it, and any and all sums, other than proceeds of a
Foreclosure Sale, which Beneficiary may receive or collect, in the following
manner:
(a) First, to pay the portion of the Obligations attributable to
the costs and expenses of operation and collection that may be incurred by
Trustee, Beneficiary or any receiver;
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(b) Second, to pay any and all other Obligations in any order
and proportion as Beneficiary, in its sole discretion, may elect; and
(c) Third, the remainder, if any, shall be remitted to the
person or persons entitled to it.
Beneficiary shall have no liability for any funds which it does not actually
receive.
30. INCORPORATION OF CERTAIN NEVADA COVENANTS. The following
covenants, Nos. 1, 3, 4 (at the Agreed Rate), 6, 7 (reasonable), 8 and 9 of
Nevada Revised Statutes 107.030, where not in conflict with the provisions of
the Basic Documents, are hereby adopted and made a part of this Deed of Trust.
Upon any Event of Default by Trustor hereunder, Beneficiary may (a) declare all
sums secured immediately due and payable without demand or notice or (b) subject
to any applicable Gaming Laws, have a receiver appointed as a matter of right
without regard to the sufficiency of said property or any other security or
guaranty and without any showing as required by Nevada Revised Statutes Section
107.100. All remedies provided in this Deed of Trust are distinct and
cumulative to any other right or remedy under this Deed of Trust or afforded by
law or equity and may be exercised concurrently, independently or successively.
The sale of said property conducted pursuant to Covenants Nos. 6, 7 and 8 of
Nevada Revised Statutes Section 107.030 may be conducted either as to the whole
of said property or in separate parcels and in such order as Trustee may
determine.
31. SUBSTITUTION OF TRUSTEE. Beneficiary or its assigns may, from
time to time, by a written instrument executed and acknowledged by Beneficiary,
recorded in the county in which the Real Property is located and otherwise
complying with applicable law, and delivered to Trustor, appoint a successor
trustee or trustees to any Trustee named herein or acting hereunder, to execute
the trust created by the Deed of Trust or other conveyance in trust. Upon the
recording of such instrument, the new trustee or trustees shall, without
conveyance from the predecessor trustee, be vested with all the title, estate,
interest, rights, powers, duties and trusts in the premises vested in or
conferred upon the predecessor trustee. If there be more than one trustee,
either may act alone and execute the trusts upon the request of the Beneficiary,
and all his acts thereunder shall be deemed to be the acts of all trustees, and
the recital in any conveyance executed by such sole trustee of such request
shall be conclusive evidence thereof, and of the authority of such sole trustee
to act.
32. BINDING NATURE. This Deed of Trust applies to, inures to the
benefit of and binds Trustor and the heirs, legatees, devisees,
administrators, personal representatives, executors and the successors and
assigns thereof, Trustee and Beneficiary. Trustee and Beneficiary will
provide to Trustor written notice of any assignment of Beneficiary's or
Trustee's interest hereunder. As used herein, the term "Beneficiary" shall
mean the owners and holders of the Notes and/or any other Obligations from
time to time, whether or not named as Beneficiary herein (it being expressly
agreed, however, that Beneficiary may act through an agent; that only the
signature of such agent is required on any amendment hereof or any consent,
approval or other action hereunder; and that SunAmerica Life Insurance
Company is the initial agent hereunder); the term "Trustee" shall mean the
trustee appointed hereunder from time to time, whether or not notice of such
appointment is given; and the term "Trustor" shall mean the Trustor named
herein and the permitted successors-in-interest, if any, of said named
Trustor, in and to the Property or any part thereof. If there be more than
one Trustor hereunder, their obligations hereunder shall be joint and
several. It is expressly agreed that the trust created hereby is irrevocable
by Trustor.
33. ACCEPTANCE OF TRUST; RESIGNATION BY TRUSTEE. Trustee accepts
this trust when this Deed of Trust, duly executed and acknowledged, is made a
public record as provided by law, reserving, however, unto the Trustee, the
right to resign from the duties and obligations imposed herein whenever
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Trustee, in its sole discretion, deems such resignation to be in the best
interest of the Trustee. Written notice of such resignation shall be given
to Trustor and Beneficiary.
34. FULL PERFORMANCE REQUIRED; SURVIVAL OF WARRANTIES. All
representations, warranties and covenants of Trustor contained in any loan
application or made to Beneficiary in connection with the Notes and other
Obligations secured hereby or contained in any of the Basic Documents or
incorporated by reference therein, shall survive the execution and delivery of
this Deed of Trust and shall remain continuing obligations, warranties and
representations of Trustor so long as any portion of the Obligations secured by
this Deed of Trust remains outstanding.
35. WAIVER OF CERTAIN RIGHTS BY TRUSTOR. Trustor waives, to the
extent permitted by law, (i) the benefit of all laws now existing or that may
hereafter be enacted providing for any appraisement before sale of any portion
of the Property, (ii) all rights of redemption, valuation, appraisement, stay of
execution, notice of election to mature or declare due the whole of the secured
indebtedness and marshalling in the event of foreclosure of the liens hereby
created, and (iii) all rights and remedies which Trustor may have or be able to
assert by reason of the laws of the State of Nevada pertaining to the rights and
remedies of sureties. Without limiting the generality of the foregoing, Trustor
waives, to the extent permitted by law, all rights (including any rights
provided by Nevada Revised Statutes 100.040 and 100.050) to direct the order in
which any of the Property shall be sold in the event of any sale or sales
pursuant hereto and to have any of the Property or any other property now or
hereafter constituting security for the indebtedness or other Obligations
secured hereby marshalled upon any foreclosure of this Deed of Trust or of any
other security for any of such indebtedness or other Obligations.
36. CONSTRUCTION. The language in all parts of this Deed of Trust
shall be in all cases construed simply according to its fair meaning and not
strictly for or against any of the parties hereto. Headings at the beginning
of Sections, Subsections, paragraphs and subparagraphs of this Deed of Trust are
solely for the convenience of the parties, are not a part hereof and shall not
be used in construing this Deed of Trust. The preamble, any recitals and all
exhibits and schedules to this Deed of Trust are part of this Deed of Trust and
are incorporated herein by this reference. When required by the context:
whenever the singular number is used in this Deed of Trust, the same shall
include the plural, and the plural shall include the singular; and the masculine
gender shall include the feminine and neuter genders and vice versa. Unless
otherwise required by the context (or otherwise provided herein): the words
"HEREIN", "HEREOF" and "HEREUNDER" and similar words shall refer to this Deed of
Trust generally and not merely to the provision in which such term is used; the
word "PERSON" shall include individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust, unincorporated
association, joint venture, governmental authority and other entity of whatever
nature; the words "INCLUDING", "INCLUDE" or "INCLUDES" shall be interpreted in
a non-exclusive manner as though the words "but not limited to" or "but without
limiting the generality of the foregoing" or "without limitation" immediately
followed the same; the word "MONTH" shall mean calendar month; and the term
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or legal holiday
under the laws of the State of California or Nevada. If the day on which
performance of any act or the occurrence of any event hereunder is due is not a
business day, the time when such performance or occurrence shall be due shall be
the first business day occurring after the day on which performance or
occurrence would otherwise be due hereunder. All times provided in this Deed of
Trust for the performance of any act will be strictly construed, time being of
the essence hereof.
37. PRIORITY. This Deed of Trust is intended to have, and retain,
priority over all other liens and encumbrances upon the Real Property, excepting
only: (i) such Impositions as, at the date hereof, have, or, by law, gain
priority over the lien created hereby; (ii) covenants, conditions, restrictions,
easements, rights of way and Leases which are of record and which, on the date
hereof, affect the Real Property and are superior in right or have priority over
this Deed of Trust; (iii) Leases, liens, encumbrances and other matters as to
which Beneficiary hereafter expressly subordinates the lien of this Deed of
Trust by
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written instrument in recordable form; (iv) Permitted FF&E Liens hereinafter
placed on any portion of the Property; and (v) to the extent not included
within CLAUSES (i) through (iv) above, the Permitted Exceptions. Under no
circumstances shall Beneficiary be obligated or required to subordinate the
lien hereof to any lien, encumbrance, covenant or other matter affecting the
Real Property or any portion thereof, except with respect to Permitted FF&E
Liens and except as otherwise expressly provided herein. Beneficiary may,
however, at Beneficiary's option, exercisable in its sole and absolute
discretion, subordinate the lien of this Deed of Trust, in whole or in part,
to any or all Leases, liens, encumbrances or other matters affecting all or
any portion of the Real Property, by executing and recording, in the Office
of the County Recorder of the county or counties in which the Real Property
is located, a unilateral declaration of such subordination specifying the
Lease, lien, encumbrance or other matter or matters to which this Deed of
Trust shall thereafter be subordinate.
38. AMENDMENTS. This Deed of Trust cannot be waived, changed,
discharged or terminated orally, but only by an instrument in writing signed by
the party against whom enforcement of any waiver, change, discharge or
termination is sought.
39. FIXTURE FILING AND FINANCING STATEMENT. Portions of the Personal
Property (and portions of the Real Property) are goods which are or are to
become fixtures on or relating to the Real Property. This Deed of Trust
constitutes a financing statement filed as a fixture filing in the Official
Records of the County Recorder of the County in which the Property is located
with respect to any and all fixtures included within the term "Property" as used
herein and with respect to any goods or other Personal Property that may now be
or hereafter become such fixtures. The address of Beneficiary, from which
information concerning the security interest granted hereunder may be obtained,
is:
SunAmerica Life Insurance Company
1 SunAmerica Center
Century City
Los Angeles, California 90067-6022
Attention: Director-Mortgage Lending and
Real Estate
40. ATTORNEY-IN-FACT. Subject to any applicable Gaming Laws, Trustor
hereby appoints Beneficiary the attorney-in-fact of Trustor to prepare, sign,
file and record one or more financing statements; any documents of title or
registration, or like papers, and to take any other action deemed necessary,
useful or desirable by Beneficiary to perfect and preserve Beneficiary's
security interest against the rights or interests of third persons.
41. RELEASES, EXTENSIONS, MODIFICATIONS AND ADDITIONAL SECURITY.
(a) From time to time, Beneficiary may perform any of the following
acts without incurring any liability or giving notice to any person, and without
affecting the personal liability of any person for the payment of the
Obligations (except as provided below), and without affecting the security
hereof for the full amount of the Obligations on all Property remaining subject
hereto, and without the necessity that any sum representing the value of any
portion of the Property affected by the Beneficiary's action be credited on the
Obligations:
(i) Release any person liable for payment of any Obligation;
(ii) Extend the time for payment, or otherwise alter the terms
of payment, of any Obligation;
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(iii) Accept additional real or personal property of any kind
as security for any Obligation, whether evidenced by deeds of trust,
mortgages, security agreements or any other instruments of security; or
(iv) Alter, substitute or release any property securing the
Obligations.
(b) From time to time when requested to do so by Beneficiary in
writing, Trustee may perform any of the following acts without incurring any
liability or giving notice to any person:
(i) Consent in writing to the making of any plat or map of the
Property or any part of it;
(ii) Join in granting any easement or creating any restriction
affecting the Property;
(iii) Join in any subordination or other agreement affecting
this Deed of Trust or the lien of it or other agreement or instrument
relating hereto or to the Property or any portion thereof; or
(iv) Reconvey the Property or any part of it without any
warranty.
42. EXCULPATION AND INDEMNIFICATION.
(a) Beneficiary shall not be directly or indirectly liable to Trustor
or any other person as a consequence of any of the following:
(i) Beneficiary's exercise of or failure to exercise any
rights, remedies or powers granted to Beneficiary in this Deed of Trust;
(ii) Beneficiary's failure or refusal to perform or discharge
any obligation or liability of Trustor under any agreement related to the
Property or under this Deed of Trust; or
(iii) Any loss sustained by Trustor or any third party
resulting from Beneficiary's failure to lease the Property, or from any
other act or omission of Beneficiary in managing the Property, after an
Event of Default, unless the loss is caused by the willful misconduct or
bad faith of Beneficiary.
To the extent permitted by applicable law, Trustor hereby expressly waives and
releases all liability of the types described above, and agrees that no such
liability shall be asserted against or imposed upon Beneficiary.
(b) Except for losses caused by the willful misconduct or bad faith
of Trustee or Beneficiary, Trustor agrees to indemnify Trustee and Beneficiary
against and hold them harmless from all losses, damages, liabilities, claims,
causes of action, judgments, court costs, attorneys' fees and other reasonable
legal expenses, cost of evidence of title, cost of evidence of value, and other
reasonable costs and expenses which either may suffer or incur:
(i) In performing any act required or permitted by this Deed of
Trust or any of the other Basic Documents or by law; or
(ii) Because of any failure of Trustor to perform any of
Trustor's Obligations.
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This agreement by Trustor to indemnify Trustee and Beneficiary shall survive the
release and cancellation of any or all of the Obligations and the full or
partial release and/or reconveyance of this Deed of Trust.
(c) Trustor shall pay all obligations to pay money arising under this
Deed of Trust immediately upon demand by Trustee or Beneficiary.
43. RELATIONSHIP TO NOTE PURCHASE AGREEMENT. This Deed of Trust has
been executed pursuant to and is subject to the terms of the Note Purchase
Agreement and Trustor agrees to observe and perform all provisions contained
therein, to the extent the same are applicable to Trustor. If and to the extent
of any conflict between the provisions of the Note Purchase Agreement applicable
to Trustor and the provisions of this Deed of Trust, the stricter provisions
shall control.
44. RELATIONSHIP TO COMPANY SECURITY AGREEMENT. Concurrently
herewith, Trustor is entering into the Company Security Agreement with
Beneficiary with respect to the Personal Property. As provided above, the terms
of said Agreement shall, with respect to the Personal Property and the security
interest granted hereby, supplement the terms of this Deed of Trust and, if and
to the extent of any conflict with the terms hereof applicable to said security
interest and Personal Property, shall, to the extent enforceable, control.
Nothing in this SECTION 44 shall be deemed or construed, however, to impair the
rights of Beneficiary to conduct one or more Trustee's Sales at which real and
personal property are sold together pursuant to the laws applicable to the sale
of real property.
45. RELATIONSHIP TO COMPANY ENVIRONMENTAL INDEMNITY AGREEMENT.
Concurrently herewith, Trustor has executed the Company Environmental Indemnity
for the benefit of the Beneficiary and certain other "Indemnitees" (as defined
therein) pertaining to the Property. Trustor hereby acknowledges and agrees
that, notwithstanding any other provision of this Deed of Trust to the contrary,
the obligations of Trustor under the Company Environmental Indemnity shall be
unlimited personal obligations of Trustor, the obligations of Trustor under such
instrument shall not be secured by this Deed of Trust and shall survive
foreclosure under this Deed of Trust, any transfer in lieu thereof, and any
satisfaction of the Obligations.
46. SEVERABILITY. If any provision in or obligation under this Deed
of Trust shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
47. LOAN STATEMENT FEES. Trustor shall pay the amount demanded by
Beneficiary or its authorized loan servicing agent for any statement regarding
the Obligations secured hereby; provided, however, that such amount may not
exceed the maximum amount allowed by law at the time request for the statement
is made.
48. NOTICES.
(a) METHODS; ADDRESSEES. All notices, requests and demands to be
made hereunder to the parties hereto shall be in writing and shall be given by
any of the following means: (i) personal service; (ii) electronic
communication, whether by telex, telegram or telecopying (if confirmed in
writing sent by registered or certified, first class mail, return receipt
requested); or (iii) registered or certified, first class mail, return receipt
requested. Such addresses may be changed by notice to the other parties given
in the same manner as provided above. Any notice, demand or request sent
pursuant to CLAUSE (i) of this Section shall be deemed received upon such
personal service, and if sent pursuant to CLAUSE (ii) of this Section shall be
deemed received upon receipt if sent prior to 5:00 p.m. on a Business Day, and
otherwise shall be deemed received on the next succeeding Business day, and, if
sent pursuant to CLAUSE (iii) of this Section shall be deemed received three (3)
days following deposit in the mail.
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TO BENEFICIARY: SunAmerica Life Insurance Company
1 SunAmerica Center
Century City
Los Angeles, California 90067-6022
Attention: Director-Mortgage Lending and Real Estate
Facsimile No.: (310) 772-6573
TO TRUSTOR: Santa Fe Hotel Inc.
4949 North Rancho Road
Las Vegas, Nevada 89130
Attention: Mr. Thomas Land
Facsimile No.: (702) 658-4303
TO TRUSTEE: United Title of Nevada
3980 Howard Hughes Parkway #100
Las Vegas, Nevada 89109
Attention: Wayne Gillins
Facsimile No.: (702) 836-8155
(b) RELIANCE OF FAXES. Each party hereto (a "RECIPIENT") who
receives from another party hereto (a "SENDER") by electronic facsimile
transmission (telecopier or fax) any writing which appears to be signed by an
authorized signatory of that Sender is authorized to rely and act upon that
writing in the same manner as if the original signed writing was in the
possession of the Recipient upon oral confirmation of that Sender to the
Recipient that the writing was signed by an authorized signatory of that Sender
and is intended by that Sender to be relied upon by the Recipient. Each party
transmitting any writing to any other party by electronic facsimile transmission
agrees to forward immediately to that Recipient, by expedited means (for next
day delivery, if possible), or by first class mail if the Recipient so agrees,
the signed hard copy of that writing, unless the Recipient expressly agrees to
some other disposition of the original by the Sender.
49. GOVERNING LAW. THIS DEED OF TRUST SHALL BE GOVERNED BY, AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF NEVADA, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
50. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL JUDICIAL
PROCEEDINGS BROUGHT AGAINST TRUSTOR ARISING OUT OF OR RELATING TO THIS DEED OF
TRUST MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN
THE STATE OF NEVADA, AND BY EXECUTION AND DELIVERY OF THIS DEED OF TRUST TRUSTOR
ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND
UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND
WAIVES ANY DEFENSE OF FORUM NON CONVENIENS AND IRREVOCABLY AGREES TO BE BOUND BY
ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS DEED OF TRUST. Trustor
hereby agrees that service of all process in any such proceeding in any such
court may be made by registered or certified mail, return receipt requested, to
Trustor at its address provided in SECTION 48 above, such service being hereby
acknowledged by Trustor to be sufficient for personal jurisdiction in any action
against Trustor in any such court and to be otherwise effective and binding
service in every respect. Nothing herein shall affect the right to serve
process in any other manner permitted by law or shall limit the right of
Beneficiary to bring proceedings against Trustor in the courts of any other
jurisdiction.
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51. WAIVER OF JURY TRIAL. TRUSTOR HEREBY AGREES TO WAIVE ITS RIGHTS
TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF
THIS DEED OF TRUST. The scope of this waiver is intended to be all-encompassing
of any and all disputes that may be filed in any court and that relate to the
subject matter of this transaction, including without limitation contract
claims, tort claims, breach of duty claims, and all other common law and
statutory claims. Trustor acknowledges that this waiver is a material
inducement for Beneficiary to enter into a business relationship, that
Beneficiary has already relied on this waiver in entering into this Deed of
Trust and that Beneficiary will continue to rely on this waiver in the parties'
related future dealings. Trustor further warrants and represents that Trustor
has reviewed this waiver with its legal counsel, and that it knowingly and
voluntarily waives its jury trial rights following consultation with legal
counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS DEED OF TRUST. In the event of
litigation, this Deed of Trust may be filed as a written consent to a trial by
the court.
52. NONFOREIGN ENTITY. Section 1445 of the Internal Revenue Code of
1986, as amended (the "CODE") provides that a transferee of a U.S. real property
interest must withhold tax if the transferor is a foreign person. To inform
Beneficiary that the withholding of tax will not be required in the event of the
disposition of the Property pursuant to the terms of this Deed of Trust, Trustor
hereby certifies, under penalty of perjury, that:
(a) Trustor is not a foreign corporation, foreign partnership,
foreign trust or foreign estate, as those terms are defined in the Code and the
regulations promulgated thereunder; and
(b) Trustor's U.S. employer identification number is 88-035356; and
(c) Trustor's principal place of business is 4949 North Rancho Road,
Las Vegas, Nevada 89130.
It is understood that Beneficiary may disclose the contents of this
certification to the Internal Revenue Service and that any false statement
contained herein could be punished by fine, imprisonment or both. Trustor
covenants and agrees to execute such further certificates, which shall be signed
under penalty of perjury, as Beneficiary shall reasonably require. The covenant
set forth herein shall survive the foreclosure of the lien of this Deed of Trust
or acceptance of a deed in lieu thereof.
53. SUBORDINATION AND INTERCREDITOR AGREEMENT. The parties hereto
hereby acknowledge and agree that the Subordination and Intercreditor Agreement
has been executed, delivered and recorded concurrently with the execution,
delivery and recordation of this Deed of Trust. Pursuant to the Subordination
and Intercreditor Agreement, the lien of this Deed of Trust on the Property is
made superior to the lien of the Company Indenture Deed of Trust on the
Property, and the lien of the Company Indenture Deed of Trust in and to the
Property is thereby subordinated to the lien of this Deed of Trust in and to the
Property.
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IN WITNESS WHEREOF, Trustor has executed this instrument as of the day
and year first above written.
TRUSTOR:
SANTA FE HOTEL INC.,
a Nevada corporation
By: /s/ Thomas K. Land
Its: Senior Vice President and
Chief Financial Officer
S-1
<PAGE>
STATE OF ______________________ )
) SS
COUNTY OF _____________________ )
On ___________, 1998 before me, the undersigned, a Notary Public in
and for said State, personally appeared ________________________________ and
________________________________ personally known to me or proved to me on the
basis of satisfactory evidence to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity upon
behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature ___________________________
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION
A-1
<PAGE>
EXHIBIT B
PERMITTED EXCEPTIONS
A-1
<PAGE>
SECURITY AGREEMENT
This SECURITY AGREEMENT (this "AGREEMENT") is dated as of April 14,
1998 and entered into by and between SANTA FE HOTEL INC., a Nevada corporation
("GRANTOR"), and SUNAMERICA LIFE INSURANCE COMPANY, an Arizona corporation, as
collateral agent for and representative of the Holders of the Notes from to time
to time (in such capacity herein called "SECURED PARTY").
PRELIMINARY STATEMENTS
A. Secured Party, Grantor, Santa Fe Gaming Corporation, a Nevada
corporation ("SFG"), and Credit Suisse First Boston Mortgage Capital LLC, a
Delaware limited liability company, have entered into a Note Purchase Agreement
of even date herewith (said Note Purchase Agreement, as it may hereafter be
amended, supplemented or otherwise modified from time to time, being the "NOTE
PURCHASE AGREEMENT", the terms defined therein and not otherwise defined herein
being used herein as therein defined), pursuant to which, among other things,
Grantor is issuing to Secured Party and/or to the other Holders certain secured
promissory notes in an aggregate principal amount of $14,000,000 (the "NOTES").
B. The Notes and the obligations of Grantor under the Note Purchase
Agreement and all other instruments and documents executed in connection
therewith are secured by certain real property (the "PREMISES") described in and
pursuant to the Deed of Trust, Fixture Filing and Financing Statement and
Security Agreement with Assignment of Rents of even date herewith, executed by
Grantor, as trustor, to United Title of Nevada, as trustee, for the benefit of
Secured Party, as collateral agent for the Holders, as beneficiary (the "COMPANY
DEED OF TRUST").
C. It is a condition precedent to the acquisition of the Notes that
Grantor shall have granted the security interests and undertaken the obligations
contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and in order to
induce Secured Party and the Holders to acquire the Notes, and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Grantor hereby agrees with Secured Party as follows:
SECTION 1. GRANT OF SECURITY. Grantor hereby assigns to Secured
Party, and hereby grants to Secured Party a security interest in, all of
Grantor's right, title and interest in and to the following, in each case
whether now or hereafter existing or in which Grantor now has or hereafter
acquires an interest and wherever the same may be located (the "COLLATERAL"):
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(a) all present and future chattels, furniture, furnishings, goods,
equipment, fixtures and all other tangible personal property, of whatever kind
and nature, now or hereafter used in connection with or placed or located in or
on any part of the Premises (including, without limitation, any building or
structure that is now or that may hereafter be erected on the Premises),
including, but not limited to, machinery, materials, goods and equipment now or
hereafter used in any construction or operation relating thereto (including,
without limitation, air conditioning, heating, electrical, lighting, fire
fighting and fire prevention, food and beverage service, laundry, plumbing,
refrigeration, security, sound, signaling, telephone, television, window washing
and other equipment and fixtures, of whatever kind or nature, including
generators, transformers, switching gear, boilers, burners, furnaces, piping,
sprinklers, sinks, tubs, valves, compressors, motors, carts, dumb waiters,
elevators and other lifts, floor coverings, hardware, keys, locks, organs,
pianos, planters, railings, scales, shelving, signs, tools, machinery, molds,
dies, drills, presses, planers, saws, furniture, business fixtures, trade
fixtures, electric, gas and other motor vehicles, uniforms, vacuum cleaners,
hotel furniture, furnishings and equipment, bathroom furniture and furnishings
(including towels, bathmats, hamperettes, shower curtains and other bath
linens), beds and bedding (including mattresses, springs, pillows, bed pads,
sheets, blankets, comforters, spreads and other bed linens and furnishings),
bric-a-brac, chairs, chests, vanities, secretaries, bureaus, chiffonniers, love
seats, benches, costumers, smoking stands, sand jars, desks, dressers, hangings,
paintings, pictures, frames, sculptures, lamps, light bulbs, mirrors, night
stands, ornaments, radios, stereo equipment, sofas, statuary, tables,
telephones, televisions, vases, window coverings, foodstuffs, beverages
(including beer, wine, liquor and other alcoholic beverages), and other
consumables (including soap, shampoo, cleaning supplies and paper goods),
cutlery, cooking, baking and other kitchen utensils and apparatus (including
crockery, fryers, grills, kettles, mixers, pots, pans, pails, racks, steamers
and toasters), china and other dishes, flatware, glassware, hollowware, serving
pieces, trays, table linens, washers, dryers, irons, ironing boards and other
ironing equipment, cables, outlets, plugs, wiring and related apparatus and
fixtures, card readers, cash registers, adding machines, calculators, computers,
keyboards, monitors, printers, printing equipment, envelopes, stationary,
posting machines, blank forms, typewriters, typewriter stands, other office and
accounting equipment and supplies, time stamps, time recorders, bookkeeping
machines, checking machines, payroll machines, computer reservations systems,
and all other goods, equipment, furnishings, apparatus and fixtures which are
now or may hereafter be located at or used at or in connection with the
Premises) and all other tangible personal property used or to be used at or in
connection with, or placed or to be placed in, rooms, halls, lounges, offices,
lobbies, lavatories, basements, cellars, vaults or other portions of the
Premises or any facilities on the Premises or of any other building or buildings
hereafter constructed or erected thereon, whether herein enumerated or not, and
whether or not contained in any such building, and which are used or to be used
or useful in the operation and maintenance thereof, or in any business conducted
thereon, together with all replacements and substitutions for any and all
personal property in which Grantor has an interest, including without limitation
such goods and equipment as shall from time to time be located, placed,
installed or used in or upon, or procured for use, or to be used or useful in
connection with the operation of the whole, or any part of, the Premises or any
facilities on the Premises and all parts thereof and all accessions thereto (any
and all
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such equipment, replacements, substitutions, parts and accessions being the
"EQUIPMENT"); excluding, however, any and all gaming equipment that is
subject to Gaming Laws and located within or used in connection with the
Premises;
(b) all present and future inventory and merchandise in all of its
forms (including, but not limited to, (i) all goods held by Grantor for sale or
lease or to be furnished under contracts of service or so leased or furnished,
(ii) all raw materials, work in process, (iii) all goods in which Grantor has an
interest in mass or a joint or other interest or right of any kind, (iv) all
goods that are returned to or repossessed by Grantor, and (v) all accessions
thereto and products thereof (all such inventory, accessions and products being
the "INVENTORY");
(c) all present and future accounts, accounts receivable, rentals,
revenues, receipts, payments, and income of any nature whatsoever derived from
or received with respect to any facilities on the Premises, agreements,
contracts, leases, contract rights, rights to payment, instruments, documents,
chattel paper, security agreements, guaranties, undertakings, surety bonds,
insurance policies, condemnation deposits and awards, notes and drafts,
securities, certificates of deposit and the right to receive all payments
thereon or in respect thereof (whether principal, interest, fees or otherwise),
contract rights (other than rights under contracts or governmental permits that
may not be transferred by law), including, without limitation, rights to all
deposits from tenants and other users of the Premises or any facilities on the
Premises, rights under all contracts relating to the construction, renovation or
restoration of any of the improvements now or hereafter located on the Premises
or the financing thereof and all rights under payment or performance bonds,
warranties, and guaranties, and all rights to payment from any credit/charge
card organization or entity such as or similar to, and including, without
limitation, the organizations or entities that sponsor and administer,
respectively, the American Express Card, the Carte Blanche Card, the Diners Club
Card, the Discover Card, the MasterCard and the Visa Card, books of account, and
principal, interest and payments due on account of goods sold, services
rendered, loans made or credit extended, on or in connection with the Premises
or any facilities on the Premises and all forms of obligations owing to and
rights of Grantor or in which Grantor may have any interest, however created or
arising (any and all such accounts, contract rights, chattel paper, documents,
instruments, general intangibles and other obligations being the "ACCOUNTS", and
any and all such security agreements, leases and other contracts being the
"RELATED CONTRACTS");
(d) all present and future right, title and interest of Grantor in
and to all leases, subleases, licenses, concessions, franchises and other use or
occupancy agreements (including room occupancy agreements), and any amendments,
modifications, extensions or renewals thereof (collectively, "LEASES"), whether
or not specifically herein described, that now or may hereafter pertain to or
affect the Premises or any portion thereof, and all amendments to the same,
including, but not limited to, the following: (i) all payments due and to
become due under such Leases, whether as rent, damages, insurance payments,
condemnation awards, or otherwise; (ii) all claims, rights, powers, privileges
and remedies under such Leases; and (iii) all rights of the Grantor under such
Leases to exercise any
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election or option, or to give or receive any notice, consent, waiver or
approval, or to accept any surrender of the premises or any part thereof,
together with full power and authority in the name of the Grantor, or
otherwise, to demand and receive, enforce, collect, and receipt for any or
all of the foregoing, to endorse or execute any checks or any instruments or
orders, to file any claims, and to take any other action that Secured Party
may deem necessary or advisable in connection therewith;
(e) all fees, income, rents, issues, profits, oil, gas and mineral
rights, royalties and leaseholds, all earnings, receipts, royalties and revenues
(including, without limitation, revenue from hotel guests) which accrue from any
of the Premises or which may be received or receivable by Grantor from any
hiring, using, leasing, subhiring or subleasing therefor;
(f) all present and future deposit accounts of Grantor, any demand,
time, savings, passbook or like account maintained by Grantor with any bank,
savings and loan association, credit union or like organization, and all money,
cash and cash equivalents of Grantor, whether or not deposited in any such
deposit account;
(g) all present and future general intangibles (including but not
limited to all governmental permits relating to construction or other activities
on the premises), all tax refunds of every kind and nature to which Grantor now
or hereafter may become entitled, however arising, all other refunds, and all
deposits, goodwill, chooses in action, rights to payment or performance,
judgments taken on any rights or claims included in the Collateral, trade
secrets, computer programs, software, customer lists, business names,
trademarks, trade names and service marks, patents, patent applications,
licenses, copyrights, technology, processes, proprietary information and
insurance proceeds;
(h) all present and future books and records, including, without
limitation, books of account and ledgers of every kind and nature, ledger cards,
computer programs, tapes, disks and other information storage devices, all
related data processing software, and all electronically recorded data relating
to Grantor or its business or the Premises, all receptacles and containers for
such records, and all files and correspondence;
(i) all present and future maps, plans, specifications, surveys,
studies, reports, data and drawings (including, without limitation,
architectural, structural, mechanical and engineering plans and specifications,
studies, data and drawings) prepared for or relating to the Premises or the
construction, renovation or restoration of any improvements on the Premises or
the extraction of minerals, sand, gravel or other valuable substances from the
Premises, together with all amendments and modifications thereto;
(j) all present and future licenses, permits, variances, special
permits, franchises, certificates, rulings, certifications, validations,
exemptions, filings, registrations, authorizations, consents, approvals,
waivers, orders, rights and agreements (including options, option rights and
contract rights), other than those (including non-transferable gaming permits)
that may not be transferred by law, now or hereafter obtained by Grantor
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from any governmental authority having or claiming jurisdiction over the
Premises or any other element of the Collateral or providing access thereto,
or the operation of any business on, at, or from the Premises;
(k) all present and future stocks, bonds, debentures, securities,
subscription rights, options, warrants, puts, calls, certificates, partnership
interests, joint venture interests, investments, brokerage accounts and all
rights, preferences, privileges, dividends, distributions, redemption payments
and liquidation payments received or receivable with respect thereto;
(l) all present and future accessions, appurtenances, components,
repairs, repair parts, spare parts, replacements, substitutions, additions,
issue and improvements to or of or with respect to any of the foregoing;
(m) all other fixtures and storage and office facilities, and all
accessions thereto and products thereof and all water stock relating to the
Premises;
(n) all other tangible and intangible personal property of Grantor;
(o) all rights, remedies, powers and privileges of Grantor with
respect to any of the foregoing; and
(p) any and all fees, proceeds, products, rents, income and profits
of any of the foregoing, including, without limitation, all money, accounts,
general intangibles, deposit accounts, documents, instruments, chattel paper,
goods, insurance proceeds (whether or not the Secured Party is the loss payee),
and any other tangible or intangible property received upon the sale or
disposition of any of the foregoing (it being agreed, for purposes hereof, that
the term "PROCEEDS" includes whatever is receivable or received when any of the
Collateral is sold, collected, exchanged or otherwise disposed of, whether such
disposition is voluntary or involuntary). Notwithstanding anything to the
contrary contained herein, Secured Party acknowledges that it has no security
interest in (x) any cash of Grantor described in CLAUSES (d), (e), (f), (g) and
(k) above, to the extent such a security interest is prohibited by any Gaming
Laws, or (y) any deposit account described in CLAUSE (f) above, to the extent
such a security interest is not permitted by applicable law.
SECTION 2. SECURITY FOR OBLIGATIONS. This Agreement secures, and the
Collateral is collateral security for, the prompt payment or performance in full
when due of all obligations and liabilities of every nature of Grantor, now or
hereafter existing, under or arising out of or in connection with the Notes, the
Note Purchase Agreement, the Company Deed of Trust and the other Basic Documents
(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.
Section 362(a)), and all extensions or renewals thereof, whether for principal,
interest (including without limitation interest that, but for the filing of a
petition in bankruptcy with respect to Grantor, would accrue on such
obligations), fees, expenses, indemnities or otherwise, whether voluntary or
involuntary, direct or indirect, absolute or
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contingent, liquidated or unliquidated, whether or not jointly owed with
others, and whether or not from time to time decreased or extinguished and
later increased, created or incurred, and all or any portion of such
obligations or liabilities that are paid, to the extent all or any part of
such payment is avoided or recovered directly or indirectly from Secured
Party or any Holder as a preference, fraudulent transfer or otherwise (all
such obligations and liabilities being the "UNDERLYING DEBT"), and all
obligations of every nature of Grantor now or hereafter existing under this
Agreement (all such obligations of Grantor, together with the Underlying
Debt, being the "SECURED OBLIGATIONS").
SECTION 3. GRANTOR REMAINS LIABLE. Anything contained herein to the
contrary notwithstanding, (a) Grantor shall remain liable under any contracts
and agreements included in the Collateral, to the extent set forth therein, to
perform all of its duties and obligations thereunder to the same extent as if
this Agreement had not been executed, (b) the exercise by Secured Party of any
of its rights hereunder shall not release Grantor from any of its duties or
obligations under the contracts and agreements included in the Collateral, and
(c) Secured Party shall not have any obligation or liability under any contracts
and agreements included in the Collateral by reason of this Agreement or
otherwise, nor shall Secured Party be obligated to perform any of the
obligations or duties of Grantor thereunder or to take any action to collect or
enforce any claim for payment assigned hereunder.
SECTION 4. REPRESENTATIONS AND WARRANTIES. Grantor represents and
warrants as follows:
(a) OWNERSHIP OF COLLATERAL. Except for the security interest
created by this Agreement and any Liens permitted pursuant to the Note Purchase
Agreement (including, without limitation, the Permitted Liens and Permitted
Additional Indebtedness described in the Note Purchase Agreement), Grantor owns
the Collateral free and clear of any Lien. Except such as may have been filed
to perfect Liens permitted pursuant to the Note Purchase Agreement, no effective
financing statement or other instrument similar in effect covering all or any
part of the Collateral is on file in any filing or recording office.
(b) LOCATION OF EQUIPMENT AND INVENTORY. All of the Equipment and
Inventory is, as of the date hereof, located at the Premises.
(c) OFFICE LOCATIONS; OTHER NAMES. The chief place of business, the
chief executive office and the office where Grantor keeps its records regarding
the Accounts and all originals of all chattel paper that evidence Accounts is,
and has been for the four month period preceding the date hereof, located at
2535 Las Vegas Boulevard South, Las Vegas, Nevada 89109. Grantor has not in the
past done, and does not now do, business under any other name (including any
trade-name or fictitious business name) except Santa Fe Hotel Inc.
(d) GOVERNMENTAL AUTHORIZATIONS. No authorization, approval or other
action by, and no notice to or filing with, any governmental authority or
regulatory body is required for either (i) the grant by Grantor of the security
interest granted hereby, (ii) the execution, delivery or performance of this
Agreement by Grantor, or (iii) the perfection of
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or the exercise by Secured Party of its rights and remedies hereunder (except
(i) the filing of Uniform Commercial Code financing statements with the
office of the Secretary of State of the State of Nevada and (ii) as has been
previously taken by or at the direction of Grantor).
(e) PERFECTION. Upon recordation of the Subordination and
Intercreditor Agreement, this Agreement, together with the filing of a UCC-1
financing statement describing the Collateral with the Secretary of State of
Nevada and the Company Deed of Trust with the Clark County Recorder creates a
valid, perfected, enforceable and first priority security interest in the
Collateral, securing the payment of the Secured Obligations, and all filings and
other actions necessary or desirable to perfect and protect such security
interest have been duly made or taken.
(f) OTHER INFORMATION. All information heretofore, herein or
hereafter supplied to Secured Party by or on behalf of Grantor with respect to
the Collateral is accurate and complete in all material respects.
SECTION 5. FURTHER ASSURANCES.
(a) Grantor agrees that from time to time, at the expense of Grantor,
Grantor will promptly execute and deliver all further instruments and documents,
and take all further action, that may be necessary or desirable, or that Secured
Party reasonably may request, in order to perfect and protect any security
interest granted or purported to be granted hereby or to enable Secured Party to
exercise and enforce its rights and remedies hereunder with respect to any
Collateral. Without limiting the generality of the foregoing, Grantor will:
(i) at the request of Secured Party mark conspicuously each item of chattel
paper included in the Accounts, each Related Contract and, at the request of
Secured Party, each of its records pertaining to the Collateral, with a legend,
in form and substance satisfactory to Secured Party, indicating that such
Collateral is subject to the security interest granted hereby, (ii) at the
request of Secured Party, deliver and pledge to Secured Party hereunder all
promissory notes and other instruments (including checks) and all original
counterparts of chattel paper constituting Collateral, duly endorsed and
accompanied by duly executed instruments of transfer or assignment, all in form
and substance satisfactory to Secured Party, (iii) 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, (iv) at any reasonable time, upon
request by Secured Party, exhibit the Collateral to and allow inspection of the
Collateral by Secured Party, or persons designated by Secured Party, and (v) at
Secured Party's reasonable request, appear in and defend any action or
proceeding that may affect Grantor's title to or Secured Party's security
interest in all or any significant part of the Collateral.
(b) Grantor hereby authorizes Secured Party to file one or more
financing or continuation statements, and amendments thereto, relative to all or
any part of the Collateral without the signature of Grantor. Grantor agrees
that a carbon, photographic or
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other reproduction of this Agreement or of a financing statement signed by
Grantor shall be sufficient as a financing statement and may be filed as a
financing statement in any and all jurisdictions.
(c) Grantor will furnish to Secured Party from time to time
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as Secured Party may
reasonably request, all in reasonable detail.
SECTION 6. CERTAIN COVENANTS OF GRANTOR. Grantor shall:
(a) not use or permit any Collateral to be used unlawfully or in
violation of any provision of this Agreement or any applicable statute,
regulation or ordinance or any policy of insurance covering the Collateral;
(b) notify Secured Party of any change in Grantor's name or identity
within 15 days of such change;
(c) give Secured Party 30 days' prior written notice of any change in
Grantor's chief place of business, chief executive office or residence or the
office where Grantor keeps its records regarding the Accounts and all originals
of all chattel paper that evidence Accounts;
(d) if Secured Party gives value to enable Grantor to acquire rights
in or the use of any Collateral, use such value for such purposes; and
(e) pay prior to delinquency due all property and other taxes,
assessments and governmental charges or levies imposed upon, and all claims
(including claims for labor, materials and supplies) against, the Collateral,
except to the extent the validity thereof is being contested in good faith and
for which adequate reserves have been established; PROVIDED that Grantor shall
in any event pay such taxes, assessments, charges, levies or claims not later
than five days prior to the date of any proposed sale under any judgement, writ
or warrant of attachment entered or filed against Grantor or any of the
Collateral as a result of the failure to make such payment.
SECTION 7. SPECIAL COVENANTS WITH RESPECT TO EQUIPMENT AND INVENTORY.
Grantor shall:
(a) keep the Equipment and Inventory at the Premises or, upon 30
days' prior written notice to Secured Party, at such other places in
jurisdictions where all action that may be necessary or desirable, or that
Secured Party may reasonably request, in order to perfect and protect any
security interest granted or purported to be granted hereby, or to enable
Secured Party to exercise and enforce its rights and remedies hereunder, with
respect to such Equipment and Inventory shall have been taken;
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(b) cause the Equipment to be maintained and preserved in the same
condition, repair and working order as when new, ordinary wear and tear
excepted, and shall forthwith make or cause to be made all repairs, replacements
and other improvements in connection therewith that are necessary or desirable
to such end. Grantor shall promptly furnish to Secured Party a statement
respecting any material loss or damage to any of the Equipment (the requirements
under this SUBSECTION 7(B) being supplemental to and not exclusive of the
requirements under the Note Purchase Agreement and the Company Deed of Trust
relating to maintenance of property);
(c) notify Secured Party of the establishment after the date hereof
of any deposit accounts in which Secured Party may take a security interest
pursuant to applicable law and take such steps as may be requested by Secured
Party to perfect Secured Party's lien therein; and
(d) perform all acts that are necessary or desirable to cause all
licenses, permits, variances, special permits, franchises, certificates,
rulings, certifications, validations, exemptions, filings, registrations,
authorizations, consents, approvals, waivers, orders, rights, and agreements in
which a security interest has been conveyed to Secured Party pursuant to
SUBSECTION 1(i) to remain in full force and effect.
SECTION 8. INSURANCE. Grantor shall, at its own expense, maintain
insurance with respect to the Equipment and Inventory in accordance with the
terms of the Note Purchase Agreement and the Company Deed of Trust.
SECTION 9. SPECIAL COVENANTS WITH RESPECT TO ACCOUNTS AND RELATED
CONTRACTS.
(a) Grantor shall keep its chief place of business and chief
executive office and the office where it keeps its records concerning the
Accounts and Related Contracts, and all originals of all chattel paper that
evidence Accounts, at the location therefor specified in SECTION 4 or, upon 30
days' prior written notice to Secured Party, at such other location in a
jurisdiction where all action that may be necessary or desirable, or that
Secured Party may reasonably request, in order to perfect and protect any
security interest granted or purported to be granted hereby, or to enable
Secured Party to exercise and enforce its rights and remedies hereunder, with
respect to such Accounts and Related Contracts shall have been taken. Grantor
will hold and preserve such records and chattel paper and will permit
representatives of Secured Party at any time during normal business hours and
upon reasonable notice from the Secured Party to inspect and make abstracts from
such records and chattel paper, and Grantor agrees to render to Secured Party,
at Grantor's cost and expense, such clerical and other assistance as may be
reasonably requested with regard thereto. Promptly upon the request of Secured
Party, Grantor shall deliver to Secured Party complete and correct copies of
each Related Contract.
(b) Grantor shall, for not less than 3 years from the date on which
such Account arose, maintain (i) complete records of each Account, including
records of all
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payments received, credits granted and merchandise returned, and (ii) all
documentation relating thereto.
(c) Except as otherwise provided in this SUBSECTION (c), Grantor
shall continue to collect, at its own expense, all amounts due or to become due
to Grantor under the Accounts (but, other than with respect to security
deposits, in no event more than one month in advance) and Related Contracts. In
connection with such collections, Grantor may take (and, at Secured Party's
direction, shall take) such action as Grantor or Secured Party may deem
necessary or advisable to enforce collection of amounts due or to become due
under the Accounts; PROVIDED, HOWEVER, that Secured Party shall have the right
at any time, upon the occurrence and during the continuation of an Event of
Default and upon written notice to Grantor of its intention to do so, to notify
the account debtors or obligors under any Accounts of the assignment of such
Accounts to Secured Party and to direct such account debtors or obligors to make
payment of all amounts due or to become due to Grantor thereunder directly to
Secured Party, to notify each Person maintaining a lockbox or similar
arrangement to which account debtors or obligors under any Accounts have been
directed to make payment to remit all amounts representing collections on checks
and other payment items from time to time sent to or deposited in such lockbox
or other arrangement directly to Secured Party and, upon such notification and
at the expense of Grantor, to enforce collection of any such Accounts and to
adjust, settle or compromise the amount or payment thereof, in the same manner
and to the same extent as Grantor might have done. After receipt by Grantor of
the notice from Secured Party referred to in the PROVISO to the preceding
sentence, (i) all amounts and proceeds (including checks and other instruments)
received by Grantor in respect of the Accounts and the Related Contracts shall
be received in trust for the benefit of Secured Party hereunder, shall be
segregated from other funds of Grantor and shall be forthwith paid over or
delivered to Secured Party in the same form as so received (with any necessary
endorsement) to be held as cash Collateral and applied as provided by SECTION
17, and (ii) Grantor shall not adjust, settle or compromise the amount or
payment of any Account, or release wholly or partly any account debtor or
obligor thereof, or allow any credit or discount thereon (other than settlements
in the ordinary course of business and substantially consistent with the
practice at other gaming institutions in connection with their gaming operations
in the State of Nevada with payors of such Accounts reached to facilitate
collection from such payors of such Accounts).
SECTION 10. DEPOSIT ACCOUNTS. Upon the occurrence and during the
continuation of an Event of Default or Potential Event of Default, Secured Party
may exercise dominion and control over, and refuse to permit further withdrawals
(whether of money, securities, instruments or other property) from any deposit
accounts maintained with Secured Party constituting part of the Collateral.
SECTION 11. LICENSE OF PATENTS, TRADEMARKS, COPYRIGHTS, ETC. Grantor
hereby assigns, transfers and conveys to Secured Party, effective upon the
occurrence of any Event of Default, the nonexclusive right and license to use
all trademarks, tradenames, copyrights, customers lists, patents or technical
processes owned or used by Grantor that relate to the Collateral and any other
collateral granted by Grantor as security for the Secured
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Obligations, together with any goodwill associated therewith, all to the
extent necessary to enable Secured Party to use, possess and realize on the
Collateral and to enable any successor or assign to enjoy the benefits of the
Collateral. This right and license shall inure to the benefit of all
successors, assigns and transferees of Secured Party and its successors,
assigns and transferees, whether by voluntary conveyance, operation of law,
assignment, transfer, foreclosure, deed in lieu of foreclosure or otherwise.
Such right and license is granted free of charge, without requirement that
any monetary payment whatsoever be made to Grantor.
SECTION 12. TRANSFERS AND OTHER LIENS. Grantor shall not:
(a) sell, assign (by operation of law or otherwise) or otherwise
dispose of any of the Collateral, except as permitted by the Note Purchase
Agreement or any senior Lien; or
(b) except for the security interest created by this Agreement or as
permitted by the Note Purchase Agreement, create or suffer to exist any Lien
upon or with respect to any of the Collateral to secure the indebtedness or
other obligations of any Person.
SECTION 13. INTENTIONALLY DELETED.
SECTION 14. SECURED PARTY APPOINTED ATTORNEY-IN-FACT. Grantor hereby
irrevocably appoints Secured Party as Grantor's attorney-in-fact, with full
authority in the place and stead of Grantor and in the name of Grantor, Secured
Party or otherwise, from time to time in Secured Party's discretion to take any
action and to execute any instrument that Secured Party may deem necessary or
advisable to accomplish the purposes of this Agreement, including without
limitation:
(a) to obtain and adjust insurance required to be maintained by
Grantor or paid to Secured Party pursuant to the Note Purchase Agreement and the
Company Deed of Trust;
(b) to ask for, demand, collect, sue for, recover, compound, receive
and give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral;
(c) to receive, endorse and collect any drafts or other instruments,
documents and chattel paper in connection with CLAUSES (a) and (b) above;
(d) to file any claims or take any action or institute any
proceedings (including, without limitation, any proceeding before any Gaming
Authority) that Secured Party may deem necessary or desirable for the collection
of any of the Collateral or otherwise to enforce the rights of Secured Party
with respect to any of the Collateral;
(e) to pay or discharge taxes or Liens (other than Liens permitted
under this Agreement or the Note Purchase Agreement) levied or placed upon or
threatened against the
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Collateral, the legality or validity thereof and the amounts necessary to
discharge the same to be determined by Secured Party in its sole discretion,
any such payments made by Secured Party to become obligations of Grantor to
Secured Party, due and payable immediately without demand;
(f) to sign and endorse any invoices, freight or express bills, bills
of lading, storage or warehouse receipts, drafts against debtors, assignments,
verifications and notices in connection with Accounts and other documents
relating to the Collateral; and
(g) upon the occurrence and during the continuation of an Event of
Default, generally to sell, transfer, pledge, make any agreement with respect to
or otherwise deal with any of the Collateral as fully and completely as though
Secured Party were the absolute owner thereof for all purposes, and to do, at
Secured Party's option and Grantor's expense, at any time or from time to time,
all acts and things that Secured Party deems necessary to protect, preserve or
realize upon the Collateral and Secured Party's security interest therein in
order to effect the intent of this Agreement, all as fully and effectively as
Grantor might do.
SECTION 15. SECURED PARTY MAY PERFORM. If Grantor fails to perform
any agreement contained herein, Secured Party may itself perform, or cause
performance of, such agreement, and the expenses of Secured Party incurred in
connection therewith shall be payable by Grantor under SECTION 18.
SECTION 16. STANDARD OF CARE. The powers conferred on Secured Party
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers. Except for the exercise of
reasonable care in the custody of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, Secured Party shall
have no duty as to any Collateral or as to the taking of any necessary steps to
preserve rights against prior parties or any other rights pertaining to any
Collateral, it being understood that Secured Party shall have no responsibility
for (a) ascertaining or taking action with respect to calls, conversions,
exchanges, maturities, tenders or other matters relating to any Collateral,
whether or not Secured Party has or is deemed to have knowledge of such matters,
(b) taking any necessary steps (other than steps taken in accordance with the
standard of care set forth above to maintain possession of the Collateral) to
preserve rights against any parties with respect to any Collateral, (c) taking
any necessary steps to collect or realize upon the Secured Obligations or any
guarantee therefor, or any part thereof, or any of the Collateral, or
(d) initiating any action to protect the Collateral against the possibility of a
decline in market value. Secured Party shall be deemed to have exercised
reasonable care in the custody and preservation of Collateral in its possession
if such Collateral is accorded treatment substantially equal to that which
Secured Party accords its own property.
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SECTION 17. REMEDIES.
(a) Notwithstanding any other provision hereof, if Secured Party
elects, upon any Event of Default, to sell real property and any of the
Collateral together under the Company Deed of Trust and applicable law,
then the terms of the Company Deed of Trust shall, with respect to such
sale and Collateral, control and supersede any terms in this Agreement with
respect to such sale and Collateral; PROVIDED that Secured Party's election
to exercise remedies under the Company Deed of Trust shall have no effect
on the terms contained in this Agreement with respect to any Collateral as
to which Secured Party has not so elected.
(b) If any Event of Default shall have occurred and be continuing,
Secured Party may exercise in respect of the Collateral, in addition to all
other rights and remedies provided for herein or otherwise available to it,
all the rights and remedies of a secured party on default under the Uniform
Commercial Code as in effect in any relevant jurisdiction (the "CODE")
(whether or not the Code applies to the affected Collateral), and also may
(i) require Grantor to, and Grantor hereby agrees that it will at its
expense and upon request of Secured Party forthwith, assemble all or part
of the Collateral as directed by Secured Party and make it available to
Secured Party at a place to be designated by Secured Party that is
reasonably convenient to both parties, (ii) enter onto the property where
any Collateral is located and take possession thereof with or without
judicial process, (iii) prior to the disposition of the Collateral, store,
process, repair or recondition the Collateral or otherwise prepare the
Collateral for disposition in any manner to the extent Secured Party deems
appropriate, (iv) take possession of Grantor's premises or place custodians
in exclusive control thereof, remain on such premises and use the same and
any of Grantor's equipment for the purpose of completing any work in
process, taking any actions described in the preceding clause, (v) collect
any Secured Obligation, and (vi) without notice except as specified below,
sell the Collateral or any part thereof in one or more parcels at public or
private sale(s), at any of Secured Party's offices or elsewhere, for cash,
on credit or for future delivery, at such time or times and at such price
or prices and upon such other terms as Secured Party may deem commercially
reasonable. Secured Party may be the purchaser of any or all of the
Collateral at any such sale and Secured Party shall be entitled, for the
purpose of bidding and making settlement or payment of the purchase price
for all or any portion of the Collateral sold at any such public sale, to
use and apply any of the Secured Obligations as a credit on account of the
purchase price for any Collateral payable by Secured Party at such sale.
Each purchaser at any such sale shall hold the property sold absolutely
free from any claim or right on the part of Grantor, and Grantor hereby
waives (to the extent permitted by applicable law) all rights of
redemption, stay and/or appraisal which it now has or may at any time in
the future have under any rule of law or statute now existing or hereafter
enacted. Grantor agrees that, to the extent notice of sale shall be
required by law, at least ten days' notice to Grantor of the time and place
of any public sale or the time after which any private sale is to be made
shall constitute reasonable notification. Secured Party shall not be
obligated to make any sale of Collateral
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regardless of notice of sale having been given. Secured Party may
adjourn any public or private sale from time to time by announcement at
the time and place fixed therefor, and such sale may, without further
notice, be made at the time and place to which it was so adjourned.
Grantor hereby waives any claims against Secured Party arising by reason
of the fact that the price at which any Collateral may have been sold at
such a private sale was less than the price which might have been
obtained at a public sale, even if Secured Party accepts the first offer
received and does not offer such Collateral to more than one offeree.
If the proceeds of any sale or other disposition of the Collateral are
insufficient to pay all the Secured Obligations, Grantor shall be liable
for the deficiency and the fees of any attorneys employed by Secured
Party to collect such deficiency.
(c) Grantor recognizes that, by reason of certain prohibitions
contained in the Securities Act of 1933, as from time to time amended (the
"SECURITIES ACT"), and applicable state securities laws, Secured Party may
be compelled, with respect to any sale of all or any part of the Collateral
conducted without prior registration or qualification of such Collateral
under the Securities Act and/or such state securities laws, to limit
purchasers to those who will agree, among other things, to acquire the
Collateral for their own account, for investment and not with a view to the
distribution or resale thereof. Grantor acknowledges that any such private
sales may be at prices and on terms less favorable than those obtainable
through a public sale without such restrictions (including, without
limitation, a public offering made pursuant to a registration statement
under the Securities Act) and, notwithstanding such circumstances, Grantor
agrees that any such private sale shall be deemed to have been made in a
commercially reasonable manner and that Secured Party shall have no
obligation to engage in public sales and no obligation to delay the sale of
any Collateral for the period of time necessary to permit the issuer
thereof to register it for a form of public sale requiring registration
under the Securities Act or under applicable state securities laws, even if
such issuer would, or should, agree to so register it.
SECTION 18. APPLICATION OF PROCEEDS. Except as expressly provided
elsewhere in this Agreement, all proceeds received by Secured Party in respect
of any sale of, collection from, or other realization upon all or any part of
the Collateral may, in the discretion of Secured Party, be held by Secured Party
as Collateral for, and/or then, or at any other time thereafter, applied in full
or in part by Secured Party against, the Secured Obligations in the following
order of priority:
FIRST: To the payment of all costs and expenses of such sale,
collection or other realization, including costs and expenses of Secured
Party and its agents and counsel, and all other expenses, liabilities and
advances made or incurred by Secured Party in connection therewith, and all
amounts for which Secured Party is entitled to indemnification hereunder
and all advances made by Secured Party hereunder for the account of
Grantor, and to the payment of all costs and expenses paid or incurred by
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Secured Party in connection with the exercise of any right or remedy
hereunder, all in accordance with SECTION 19;
SECOND: To the payment of all other Secured Obligations (for the
ratable benefit of the holders thereof) in such order as Secured Party
shall elect as provided in Section 2.5A of the Note Purchase Agreement; and
THIRD: To the payment to or upon the order of Grantor, or to
whomsoever may be lawfully entitled to receive the same or as a court of
competent jurisdiction may direct, of any surplus then remaining from such
proceeds.
SECTION 19. INDEMNITY AND EXPENSES.
(a) Grantor agrees to indemnify Secured Party from and against any
and all claims, losses and liabilities in any way relating to, growing out of or
resulting from this Agreement and the transactions contemplated hereby
(including, without limitation, enforcement of this Agreement), except to the
extent such claims, losses or liabilities result solely from Secured Party's
gross negligence or willful misconduct.
(b) Grantor shall pay to Secured Party upon demand the amount of any
and all costs and expenses, including the reasonable fees and expenses of its
counsel and of any experts and agents, that Secured Party may reasonably incur
in connection with (i) the administration of this Agreement, (ii) the custody,
preservation, use or operation of, or the sale of, collection from, or other
realization upon, any of the Collateral, (iii) the exercise or enforcement of
any of the rights of Secured Party hereunder, or (iv) the failure by Grantor to
perform or observe any of the provisions hereof.
SECTION 20. CONTINUING SECURITY INTEREST; TRANSFER OF NOTES. This
Agreement shall create a continuing security interest in the Collateral and
shall (a) remain in full force and effect until the indefeasible payment in full
of the Secured Obligations, (b) be binding upon Grantor, its successors and
assigns, and (c) inure, together with the rights and remedies of Secured Party
hereunder, to the benefit of Secured Party and its successors, transferees and
assigns. Without limiting the generality of the foregoing CLAUSE (c), any
Holder may assign or otherwise transfer any Notes held by it to any other Person
in accordance with the Note Purchase Agreement, and such other Person shall
thereupon become vested with all the benefits in respect thereof granted to
Secured Party herein or otherwise. Upon the indefeasible payment in full of all
Secured Obligations, the security interest granted hereby shall terminate and
all rights to the Collateral shall revert to Grantor. Upon any such termination
Secured Party will, at Grantor's expense, execute and deliver to Grantor such
documents as Grantor shall reasonably request to evidence such termination.
SECTION 21. SECURED PARTY AS COLLATERAL AGENT.
(a) Secured Party has been appointed to act as Secured Party
hereunder by Holders. Secured Party shall be obligated, and shall have the
right hereunder, to make
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demands, to give notices, to exercise or refrain from exercising any rights,
and to take or refrain from taking any action (including, without limitation,
the release or substitution of Collateral), solely in accordance with this
Agreement and the Note Purchase Agreement.
(b) Secured Party shall at all times be the same Person that is
Collateral Agent under the Note Purchase Agreement. Written notice of
resignation by Collateral Agent pursuant to subsection 8.7 of the Note Purchase
Agreement shall also constitute notice of resignation as Secured Party under
this Agreement; removal of Collateral Agent pursuant to subsection 8.7 of the
Note Purchase Agreement shall also constitute removal as Secured Party under
this Agreement; and appointment of a successor Collateral Agent pursuant to
subsection 8.7 of the Note Purchase Agreement shall also constitute appointment
of a successor Secured Party under this Agreement. Upon the acceptance of any
appointment as Collateral Agent under subsection 8.7 of the Note Purchase
Agreement by a successor Collateral Agent, that successor Collateral Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring or removed Secured Party under this Agreement, and
the retiring or removed Secured Party under this Agreement shall promptly
(i) transfer to such successor Secured Party all sums, securities and other
items of Collateral held hereunder, together with all records and other
documents necessary or appropriate in connection with the performance of the
duties of the successor Secured Party under this Agreement, and (ii) execute and
deliver to such successor Secured Party such amendments to financing statements,
and take such other actions, as may be necessary or appropriate in connection
with the assignment to such successor Secured Party of the security interests
created hereunder, whereupon such retiring or removed Secured Party shall be
discharged from its duties and obligations under this Agreement. After any
retiring or removed Collateral Agent's resignation or removal hereunder as
Secured Party, the provisions of this Agreement shall inure to its benefit as to
any actions taken or omitted to be taken by it under this Agreement while it was
Secured Party hereunder.
SECTION 22. AMENDMENTS; ETC. No amendment or waiver of any provision
of this Agreement, or consent to any departure by Grantor herefrom, shall in any
event be effective unless the same shall be in writing and signed by Secured
Party, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which it was given.
SECTION 23. NOTICES. Any notice or other communication herein
required or permitted to be given shall be in writing and may be personally
served, telexed or sent by telefacsimile or United States mail or courier
service and shall be deemed to have been given when delivered in person or by
courier service, upon receipt of telefacsimile or telex prior to 5:00 p.m. on a
Business Day, or three Business Days after depositing it in the United States
mail with postage prepaid and properly addressed; PROVIDED that notices to
Secured Party shall only be effective upon receipt. For the purposes hereof,
the address of each party hereto shall be as set forth under such party's name
on the signature pages hereof or, as to either party, such other address as
shall be designated by such party in a written notice delivered to the other
party hereto.
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SECTION 24. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE.
No failure or delay on the part of Secured Party in the exercise of any power,
right or privilege hereunder shall impair such power, right or privilege or be
construed to be a waiver of any default or acquiescence therein, nor shall any
single or partial exercise of any such power, right or privilege preclude any
other or further exercise thereof or of any other power, right or privilege.
All rights and remedies existing under this Agreement are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
SECTION 25. SEVERABILITY. In case any provision in or obligation
under this Agreement shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
SECTION 26. HEADINGS. Section and subsection headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose or be given any
substantive effect.
SECTION 27. GOVERNING LAW; TERMS. THIS AGREEMENT SHALL BE GOVERNED
BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF
THE STATE OF NEVADA, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES, EXCEPT TO
THE EXTENT THAT THE CODE PROVIDES THAT THE VALIDITY OR PERFECTION OF THE
SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR
COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF
NEVADA.
SECTION 28. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL
JUDICIAL PROCEEDINGS BROUGHT AGAINST GRANTOR ARISING OUT OF OR RELATING TO THIS
AGREEMENT MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION
IN THE STATE OF CALIFORNIA OR NEVADA, AND BY EXECUTION AND DELIVERY OF THIS
AGREEMENT GRANTOR ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES,
GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID
COURTS AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN
CONNECTION WITH THIS AGREEMENT. Grantor hereby agrees that service of all
process in any such proceeding in any such court may be made by registered or
certified mail, return receipt requested, to Grantor at its address as provided
in SECTION 23, such service being hereby acknowledged by Grantor to be
sufficient for personal jurisdiction in any action against Grantor in any such
court and to be otherwise effective and binding service in every respect.
Nothing herein shall affect the right to serve process in any other manner
permitted by law.
SECTION 29. WAIVER OF JURY TRIAL. GRANTOR AND SECURED PARTY HEREBY
AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY
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TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT. The scope of this waiver is intended to be all-encompassing of
any and all disputes that may be filed in any court and that relate to the
subject matter of this transaction, including without limitation contract
claims, tort claims, breach of duty claims, and all other common law and
statutory claims. Grantor and Secured Party each acknowledge that this
waiver is a material inducement for Grantor and Secured Party to enter into a
business relationship, that Grantor and Secured Party have already relied on
this waiver in entering into this Agreement and that each will continue to
rely on this waiver in their related future dealings. Grantor and Secured
Party further warrant and represent that each has reviewed this waiver with
its legal counsel, and that each knowingly and voluntarily waives its jury
trial rights following consultation with legal counsel. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING,
AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. In the event of litigation,
this Agreement may be filed as a written consent to a trial by the court.
SECTION 30. COUNTERPARTS. This Agreement may be executed in one or
more counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed an original, but all
such counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
SECTION 31. SUBORDINATION AND INTERCREDITOR AGREEMENT. The parties
hereto hereby acknowledge and agree that the Subordination and Intercreditor
Agreement has been executed, delivered and recorded concurrently with the
execution, delivery and recordation of this Agreement. Pursuant to the
Subordination and Intercreditor Agreement, the lien in the Collateral created in
favor of the Secured Party hereunder is senior to the lien in the Collateral
created by the Company Indenture Deed of Trust and other documents and
instruments evidencing or securing the Company Indenture (collectively, the
"COMPANY INDENTURE DOCUMENTS"), and the lien of the Company Indenture Documents
in and to the Collateral is thereby subordinated to the lien of this Agreement,
the Company Deed of Trust and the other Basic Documents.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, Grantor and Secured Party have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
SANTA FE HOTEL INC.,
a Nevada corporation
By: /s/ Thomas K. Land
Its: Senior Vice President and Chief Financial Officer
ADDRESS:
4949 North Rancho Road
Las Vegas, Nevada 89130
Attention: Thomas Land
SUNAMERICA LIFE INSURANCE COMPANY,
an Arizona corporation
By: /s/ Stephen Hanover
Its: Authorized Agent
ADDRESS:
SunAmerica Life Insurance Company
1 SunAmerica Center
Century City
Los Angeles, California 90067
Attention: Stephen P. Hanover
S-1
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ENVIRONMENTAL INDEMNITY AGREEMENT
THIS ENVIRONMENTAL INDEMNITY AGREEMENT (this "AGREEMENT"), dated as of
April 14, 1998, is made by SANTA FE HOTEL INC., a Nevada corporation (the
"COMPANY"), and SANTA FE GAMING CORPORATION, a Nevada corporation ("SFG" and
together with Company, collectively, the "INDEMNITOR"), for the benefit of
SUNAMERICA LIFE INSURANCE COMPANY, an Arizona corporation ("SUN LIFE"), as
Collateral Agent on behalf of itself and each of the Holders ("COLLATERAL
AGENT"), and the other Indemnitees (as hereinafter defined).
RECITALS
A. Company is issuing to the Holders certain 9.50% Notes in the
aggregate principal amount of $14,000,000 due December 15, 2000 (the "NOTES")
pursuant to that certain Note Purchase Agreement of even date herewith, by and
among SFG, Company, Sun Life and Credit Suisse First Boston Mortgage Capital
LLC, a Delaware limited liability company (the "NOTE PURCHASE AGREEMENT"). All
capitalized terms used herein without definition shall have the meanings given
such terms in the Note Purchase Agreement.
B. The obligations of Company under the Notes and Note Purchase
Agreement are secured by, among other things, (i) certain real property more
particularly described on EXHIBIT A attached hereto (the "REAL PROPERTY")
pursuant to that certain Deed of Trust, Fixture Filing and Financing Statement
and Security Agreement with Assignment of Rents of even date herewith (the
"COMPANY DEED OF TRUST"), and (ii) certain personal property (the "PERSONAL
PROPERTY") pursuant to that certain Security Agreement of even date herewith,
executed by Company to Collateral Agent for the benefit of Holders (the "COMPANY
SECURITY AGREEMENT"). The Notes are also guarantied by, among other things, a
Guaranty Agreement of even date by SFG to Collateral Agent for the benefit of
Holders (the "SFG GUARANTY"). The Real Property and the Personal Property shall
sometimes hereinafter be collectively referred to as the "PROPERTY".
C. Company is the owner of a fee simple estate in and to the Real
Property.
D. As a condition precedent to purchasing the Notes, the Holders
require that Indemnitor enter into this Agreement, whose covenants and
obligations are independent of and in addition to the obligations of Company
under the Company Deed of Trust, Company Security Agreement and the other
documents governing, evidencing and/or securing the Notes and/or the Note
Purchase Agreement, and SFG's obligations under the SFG Guaranty.
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NOW, THEREFORE, in consideration of the obligations set forth in the
Note Purchase Agreement and guarantied by the SFG Guaranty, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Indemnitor hereby represents, warrants and covenants to Collateral
Agent and each Holder and their respective officers, directors, employees,
agents, affiliates, successors and assigns (collectively, the "INDEMNITEES";
provided, however, that the term "Indemnitees" shall not include any third party
who is not an affiliate of Collateral Agent or any Holder and who acquires title
to the Property) as follows:
SECTION 1. REPRESENTATIONS AND WARRANTIES. Indemnitor represents and
warrants to the Indemnitees that:
(a) to Indemnitor's best knowledge, Hazardous Substances have not at
any time been generated, used, treated or stored on, or transported to or from,
the Property in any quantity or manner which violates any Environmental Law,
except as disclosed in writing to Collateral Agent prior to the date hereof;
(b) to Indemnitor's best knowledge, Hazardous Substances have not at
any time been Released or disposed of on the Property in any quantity or manner
which violates any Environmental Law, except as disclosed in writing to
Collateral Agent prior to the date hereof;
(c) Company is in compliance with all applicable Environmental Laws
applicable to it with respect to the Property and the requirements of any
permits issued under such Environmental Laws with respect to the Property,
except as disclosed in writing to Collateral Agent prior to the date hereof;
(d) there are no pending, or to Indemnitor's best knowledge
threatened, Environmental Claims against Indemnitor or the Property, except as
disclosed in writing to Collateral Agent prior to the date hereof;
(e) to Indemnitor's best knowledge, there is no condition or
occurrence at the Property that could reasonably be anticipated (i) to form the
basis of any Environmental Claim against Indemnitor or the Property, or (ii) to
cause the Property to be subject to any restrictions on the ownership,
occupancy, use or transferability thereof under any Environmental Law, except as
disclosed in writing to Collateral Agent prior to the date hereof;
(f) to Indemnitor's best knowledge, there are not now and never have
been any underground storage tanks located on the Property, except as disclosed
in writing to Collateral Agent prior to the date hereof;
(g) Company and SFG each (i) is a corporation, duly organized,
validly existing and in good standing under the laws of the State of Nevada,
(ii) has the power and authority to own its property and assets and to transact
the business in
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which it is engaged and (iii) is duly qualified as a foreign corporation and
is in good standing in each jurisdiction in which it owns or leases property
or in which failure to be duly qualified and in good standing would have an
adverse effect on its business, operations, property or financial condition;
(h) Company and SFG each has the power to execute, deliver and
perform the terms and provisions of this Agreement and has taken all necessary
action to authorize the execution, delivery and performance by it of this
Agreement;
(i) Company and SFG have each duly executed and delivered this
Agreement, and this Agreement constitutes such respective person's legal, valid
and binding obligation enforceable against such person in accordance with its
terms, except as such enforcement may be limited by bankruptcy, insolvency,
reorganization and other laws affecting creditors' rights generally and by
principles of equity;
(j) neither the execution, delivery or performance by Company or SFG
of this Agreement, nor compliance by such respective persons with the terms and
provisions hereof, will (i) contravene any provision of any law, statute, rule
or regulation or any order, writ, injunction or decree of any court or
governmental instrumentality, (ii) result in any breach of any of the terms,
covenants, conditions or provisions of, or constitute a default under, or result
in the creation or imposition of (or the obligation to create or impose) any
lien upon any of its property or assets pursuant to the terms of any indenture,
mortgage, deed of trust, credit agreement, loan agreement or any other
agreement, contract or instrument to which it is a party or by which it or any
of its property or assets is bound or to which it may be subject, or
(iii) violate any provision of its charter, bylaws or other organizational
documents;
(k) no order, consent, approval, license, authorization or validation
of, or filing, recording or registration with, or exemption by, any governmental
or public body or authority, or any subdivision thereof, is required to
authorize, or is required in connection with, the execution, delivery and
performance by Company or SFG of this Agreement or the legality, validity,
binding effect or enforceability of this Agreement; and
(l) Company and SFG is each in compliance with all applicable
statutes, regulations and orders of, and all applicable restrictions imposed by
all governmental bodies in respect of the conduct of its respective business and
the ownership of its property.
SECTION 2. COVENANTS. Indemnitor covenants and agrees as follows:
(a) Indemnitor will (i) comply with all Environmental Laws applicable
to the ownership or use of the Property, (ii) use its best efforts to cause all
tenants and other persons occupying the Property to comply with all
Environmental Laws, (iii) immediately pay or cause to be paid all costs and
expenses incurred in such
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compliance, and (iv) keep or cause the Property to be kept free and clear of
any liens imposed thereon pursuant to any Environmental Laws.
(b) Indemnitor will not generate, use, treat, store, Release or
dispose of, or permit the generation, use, treatment, storage, Release or
disposal of, any Hazardous Substances on the Property, or transport or permit
the transportation of any Hazardous Substances to or from the Property, in each
case in any quantity or manner which violates any Environmental Law.
(c) At Collateral Agent's written request, at any time and from time
to time if it determines that an environmental site assessment is necessary in
its reasonable business judgment to protect it or any other Indemnitee from a
potential Environmental Claim, Indemnitor will provide to Collateral Agent an
environmental site assessment report concerning the Property, prepared by an
environmental consulting firm approved by Collateral Agent, indicating the
presence or absence of Hazardous Substances and the potential cost of any
removal or remedial action in connection with any Hazardous Substances on the
Property. Any such environmental site assessment report shall be conducted at
Indemnitor's sole cost and expense. If Indemnitor fails to deliver to
Collateral Agent any such environmental site assessment report within thirty
(30) days after being requested to do so by Collateral Agent pursuant to this
Section, Collateral Agent may obtain the same, and Indemnitor hereby grants to
Collateral Agent and its agents access to the Property and specifically grants
to Collateral Agent an irrevocable nonexclusive license to undertake such an
assessment, and the cost of such assessment (together with interest thereon at
the Agreed Rate) will be payable by Indemnitor on demand.
(d) Collateral Agent may, at its option, at any time and from time to
time, perform at its sole cost and expense an environmental site assessment
report for the Property, and Indemnitor hereby grants to Collateral Agent and
its agents access to the Property and specifically grants to Collateral Agent an
irrevocable non-exclusive license to undertake such an assessment; PROVIDED
THAT, Collateral Agent shall not unreasonably interfere with the operations of
Indemnitor or any of its tenants during the preparation of such site assessment.
Collateral Agent agrees that, except as otherwise provided by law or unless
compelled by an order of a court, and except with respect to disclosures made to
the Holders, its and their lenders, attorneys, accountants and other
consultants, and its or their agents, assignees, partners, officers, directors
and employees, Collateral Agent shall use its reasonable efforts to keep the
contents of any environmental site assessments obtained under this SUBSECTION
(d) or under SUBSECTION (c) above confidential.
(e) Indemnitor will advise Collateral Agent in writing immediately
upon learning of any of the following: (i) any pending or threatened
Environmental Claim against Indemnitor or the Property; (ii) any condition or
occurrence on the Property that (A) results in noncompliance by Indemnitor with
any applicable Environmental Law, or (B) could reasonably be anticipated to form
the basis of an Environmental
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Claim against Indemnitor or the Property; (iii) any condition or occurrence
on the Property that could reasonably be anticipated to cause the Property to
be subject to any restrictions on the ownership, occupancy, use or
transferability of the Property under any Environmental Law; and (iv) the
taking of any removal or remedial action in response to the actual or alleged
presence, in any quantity or manner which violates any Environmental Law, of
any Hazardous Substances on the Property. Each such notice shall describe in
reasonable detail the nature of the claim, investigation, condition,
occurrence or removal or remedial action and Indemnitor's response thereto.
In addition, Indemnitor will provide Collateral Agent with copies of all
communications to or from Indemnitor and any governmental agency relating to
Environmental Laws, all communications to or from Indemnitor and any person
relating to Environmental Claims, and such detailed reports of any
Environmental Claim as may be requested by Collateral Agent.
(f) Collateral Agent shall have the right but not the obligation to
participate with Indemnitor in the defense of, or any action or proceeding
related to, any Environmental Claim. Without Collateral Agent's prior written
consent, Indemnitor shall not enter into any settlement, consent or compromise
with respect to any Environmental Claim that might impair the value of the
Property.
(g) At its sole expense, Indemnitor will conduct any investigation,
study, sampling and testing, and undertake any cleanup, removal, remedial or
other action necessary to remove and clean up all Hazardous Substances from the
Property which must be so removed or cleaned up in accordance with the
requirements of any applicable Environmental Laws, to the reasonable
satisfaction of a professional environmental consultant selected by Collateral
Agent and in accordance with all such requirements and with orders and
directives of all governmental authorities; PROVIDED THAT, Indemnitor shall have
the right to reasonably contest or object to such orders and directives by
appropriate proceedings so long as Indemnitor demonstrates to Collateral Agent's
satisfaction that the Property will not be foreclosed upon or sold pursuant to
any encumbrance attached thereto as a result of such orders or directives prior
to the resolution of Indemnitor's contest. If all or any portion of the
Obligations (as defined in the Company Deed of Trust) shall be outstanding,
Indemnitor may prepay such outstanding obligations in full, together with all
applicable prepayment penalties, in lieu of complying with the preceding
sentence.
SECTION 3. INDEMNITY.
(a) Indemnitor agrees to defend (with attorneys satisfactory to the
Indemnitees), protect, indemnify and hold harmless each of the Indemnitees and
their respective officers, directors, employees, attorneys and agents from and
against any and all liabilities, obligations (including removal and remedial
actions), losses, liens, damages (including foreseeable and unforeseeable
consequential damages and punitive damages), penalties, actions, judgments,
suits, claims, costs, expenses and disbursements (including reasonable
attorneys' and consultants' fees and
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disbursements) of any kind or nature whatsoever that may at any time be
incurred by, imposed on or asserted against any of them directly or
indirectly based on, or arising or resulting from (i) the actual or alleged
presence of Hazardous Substances on the Property in any quantity or manner
which violates Environmental Law, or the removal, handling, transportation,
disposal or storage of such Hazardous Substances, (ii) any Environmental
Claim with respect to Indemnitor or the Property, or (iii) the exercise of
any Indemnitee's rights under this Agreement (collectively, the "INDEMNIFIED
MATTERS"), regardless of when such Indemnified Matters arise, but excluding
any Indemnified Matter with respect to Hazardous Substances first placed or
Released on the Property after the later of (1) the date neither Indemnitor
nor any of its affiliates holds title to or any other interest in or lien on
the Property, or (2) the payment in full of the Obligations. To the extent
that this indemnity is unenforceable because it violates any law or public
policy, Indemnitor agrees to contribute the maximum portion that it is
permitted to contribute under applicable law to the payment and satisfaction
of all Indemnified Matters.
(b) Indemnitor agrees to reimburse each Indemnitee for all sums paid
and costs incurred by such Indemnitee with respect to any Indemnified Matter
within ten (10) days following written demand therefor, with interest thereon at
the Agreed Rate (as defined in the Company Deed of Trust) if not paid within
such ten (10) day period.
(c) Should any Indemnitee institute any action or proceeding at law
or in equity, or in arbitration, to enforce any provision of this Agreement
(including an action for declaratory relief or for damage by reason of any
alleged breach of any provision of this Agreement) or otherwise in connection
with this Agreement or any provision hereof, it shall be entitled to recover
from Indemnitor its reasonable attorneys' fees and disbursements incurred in
connection therewith if it is the prevailing party in such action or proceeding.
SECTION 4. EVENTS OF DEFAULT. Upon the occurrence of any of the
following specified events (each an "EVENT OF DEFAULT"):
(a) if any of the representations and warranties contained in Section
1 shall prove to be untrue in any material respect; or (b) if Indemnitor fails
to perform any of its obligations under this Agreement within fifteen (15) days
following notice thereof from Collateral Agent; provided that if such
nonperformance is incapable of cure within such 15-day period, no Event of
Default shall occur hereunder if Indemnitor has commenced a program to perform
such obligations, which program is reasonably satisfactory to Collateral Agent
and is in accordance with applicable law, and is diligently pursuing such
program to completion; and provided further that if a shorter cure period or
notice requirement for any particular failure to perform is provided by
applicable law or this Agreement, such specific provision shall control;
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then and in any such event, and at any time thereafter, if any Event of Default
shall then be continuing, Collateral Agent may do or cause to be done whatever
is necessary in its sole judgment to cause the Property to comply with
applicable Environmental Laws, and the cost thereof (together with interest
thereon at the Agreed Rate) shall become immediately due and payable by
Indemnitor without notice. Indemnitor shall and does hereby grant to Collateral
Agent and its agents access to the Property and hereby specifically grants to
Collateral Agent an irrevocable, non-exclusive license to do whatever is
necessary in Collateral Agent's judgment to cause the Property to so comply,
including, without limitation, to enter the Property and remove therefrom any
Hazardous Substances.
SECTION 5. RECOURSE OBLIGATIONS.
(a) Indemnitor agrees that notwithstanding any term or provision
contained in this Agreement or the other Basic Documents to the contrary, the
obligations of Indemnitor as set forth in this Agreement shall be exceptions to
any non-recourse or exculpatory provision relating to any of the Obligations,
and Indemnitor shall be fully liable for the performance of its obligations
under this Agreement.
(b) The liability of Indemnitor under this Agreement shall in no way
be limited to or impaired by any amendment or modification of the provisions of
the Basic Documents unless such amendment or modification expressly refers to
this Agreement. In addition, the liability of Indemnitor under this Agreement
shall in no way be limited or impaired by (i) any extensions of time for
performance required by any of the Basic Documents, (ii) any sale, assignment or
foreclosure of the Notes or SFG Guaranty or any sale or transfer of all or any
part of the Property, (iii) any exculpatory provision in any of the Basic
Documents limiting any Indemnitee's recourse to property encumbered by the
Company Deed of Trust or to any other security, or limiting the Indemnitees'
rights to a deficiency judgment against Indemnitor, (iv) the accuracy or
inaccuracy of the representations and warranties made by Indemnitor under any of
the Basic Documents, (v) the release of Indemnitor or any other person from
performance or observance of any of the agreements, covenants, terms or
conditions contained in any of the Basic Documents (other than this Agreement)
by operation of law, any Indemnitee's voluntary act, or otherwise, (vi) the
release or substitution in whole or in part of any security for the Notes or SFG
Guaranty, or (vii) Collateral Agent's or any Holder's failure to record the
Company Deed of Trust or file any Financing Statements (or Collateral Agent's
improper recording or filing of any thereof) or to otherwise perfect, protect,
secure or insure any security interest or lien given as security for the Notes;
and, in any such case, whether with or without notice to Indemnitor and with or
without consideration.
SECTION 6. INDEPENDENT OBLIGATIONS. This Agreement is intended to
create obligations that are separate and independent of Indemnitor's obligations
under the Notes, SFG Guaranty, Company Deed of Trust, Company Security Agreement
and
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other Basic Documents. Indemnitor's obligations are not secured by the
Company Deed of Trust, Company Security Agreement or any of the other Basic
Documents.
SECTION 7. SURVIVAL.
(a) Subject to the limitations set forth herein, the representations,
warranties, covenants and indemnities set forth in this Agreement shall survive
the repayment of the amounts evidenced by the Notes and guarantied by the SFG
Guaranty, the release of the lien of the Company Deed of Trust, any foreclosure
of the Company Deed of Trust or the delivery of a deed or assignment in lieu of
foreclosure or otherwise, and the transfer of any interest in and to the
Property.
(b) This Agreement shall be binding on and inure to the benefit of
Indemnitor, the Indemnitees, and their respective successors and assigns
(subject to the limitation on successors and assigns described in the definition
of "Indemnitees" above). Without limiting the generality of the foregoing, this
Agreement shall inure to the benefit of each assignee or holder of the Notes and
each of such assignee's or holder's officers, directors, employees, agents and
affiliates. Notwithstanding the foregoing, Indemnitor, without the prior
written consent of Collateral Agent in each instance, may not assign, transfer
or set over in whole or in part, all or any part of its benefits, rights, duties
and obligations hereunder.
SECTION 8. DEFINITIONS. As used in this Agreement, the following
terms shall have the following meanings:
"AFFILIATE" means, with respect to any Person, any Person that,
directly or indirectly, is in control of, is controlled by or is under common
control with, such Person, and any Person that has a direct or indirect
ownership interest in such Person, and any Person in which such Person has a
direct or indirect ownership interest.
"ENVIRONMENTAL CLAIMS" means any and all accusations, allegations,
notices of violation, claims, demands, abatement orders, cleanup orders, removal
orders, or other orders or directions (conditional or otherwise) by any
Governmental Authority or other Person for any injury, loss or damage,
including, without limitation, personal injury (including sickness, disease or
death), tangible or intangible property damage, contribution, indemnity,
indirect or consequential damages, damage to the environment, nuisance,
pollution, contamination or other adverse effects on the environment, or for
fines, penalties or restrictions or to compel cleanup or remediation, in each
case relating to, resulting from or in connection with any Hazardous Substances
and relating to the Property.
"ENVIRONMENTAL LAW" means any federal, state or local law, whether
common law, court or administrative decision, statute, rule, regulation,
ordinance, court order or decree, or administrative order or any administrative
policy or guidelines concerning action levels of a governmental authority
(federal, state or local) now or
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hereafter in effect relating to the environment, public health, occupational
safety, industrial hygiene, any Hazardous Substances (including, without
limitation, the disposal, generation, manufacture, presence, processing,
production, Release, storage, transportation, treatment or use thereof), or
the environmental conditions on, under or about the Property, as amended and
as in effect from time to time (including, without limitation, the following
statutes and all regulations thereunder as amended and in effect from time to
time: the Comprehensive Environmental Response, Compensation, and Liability
Act of 1980, as amended, 42 U.S.C. Sections 9601, ET SEQ.; the Superfund
Amendments and Reauthorization Act of 1986, Title III, 42 U.S.C. Sections
11001, ET SEQ.; the Clean Air Act, 42 U.S.C. Sections 7401 ET SEQ.; the Safe
Drinking Water Act, 42 U.S.C. Sections 300(f), ET SEQ.; the Solid Waste
Disposal Act, 42 U.S.C. Sections 3251, ET SEQ.; the Hazardous Materials
Transportation Act, as amended, 49 U.S.C. Sections 1801, ET SEQ.; the
Resource Conservation and Recovery Act, as amended, 42 U.S.C. Sections 6901,
ET SEQ.; the Federal Water Pollution Control Act, as amended, 33 U.S.C.
Sections 1251, ET SEQ.; the Toxic Substances Control Act of 1976, 25 U.S.C.
2601, ET SEQ.; the Occupational Safety and Health Act, 29 U.S.C. 651, ET
SEQ.; and any successor statutes and regulations to the foregoing).
"GOVERNMENTAL AUTHORITY" means any agency, authority, board, bureau,
commission, department, office or instrumentality of any nature whatsoever of
any governmental or quasi-governmental unit, whether federal, state, county,
district, city or other political subdivision or otherwise and whether now or
hereafter in existence, or any officer or official thereof.
"HAZARDOUS SUBSTANCES" means (a) any chemicals, materials or
substances defined as or included in the definition of "hazardous substances,"
"hazardous wastes," "hazardous materials," "extremely hazardous wastes,"
"restricted hazardous wastes," "toxic substances," "toxic pollutants,"
"contaminants" or "pollutants," or words of similar import, under any applicable
Environmental Law (including, without limitation, any hazardous substances
defined in NRS 40.504); and (b) any other chemical, material or substance,
exposure to which is prohibited, limited or regulated by any governmental
authority, including, without limitation, asbestos and asbestos-containing
materials in any form, lead-based paint, any radioactive materials and
polychlorinated biphenyls ("PCB's"), or substances or compounds containing
PCB'S.
"PERSON" means and includes natural persons, corporations, limited
liability companies, limited partnerships, general partnerships, joint stock
companies, joint ventures, associations, companies, trusts, banks and other
organizations, whether or not legal entities, and governments and agencies and
political subdivisions thereof.
"RELEASE" means disposing, discharging, injecting, spilling, leaking,
leaching, dumping, emitting, escaping, emptying, seeping, placing and the like,
into or upon any land or water or air, or otherwise entering into the
environment.
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SECTION 9. MISCELLANEOUS.
(a) If Indemnitor is more than one person or entity, then (i) all
persons or entities comprising Indemnitor are jointly and severally liable for
all of the Indemnitor's obligations hereunder; (ii) all representations,
warranties, and covenants made by Indemnitor shall be deemed representations,
warranties, and covenants of each of the persons or entities comprising
Indemnitor; (iii) any breach, Potential Event of Default or Event of Default by
any of the persons or entities comprising Indemnitor hereunder shall be deemed
to be a breach, Potential Event of Default, or Event of Default of Indemnitor;
and (iv) any reference herein contained to the knowledge or awareness of
Indemnitor shall mean the knowledge or awareness of any of the persons or
entities comprising Indemnitor.
(b) Indemnitor waives any right or claim of right to cause a
marshalling of its assets or to cause any Indemnitee to proceed against any of
the security for the loan evidenced by the Notes before proceeding under this
Agreement. Indemnitor expressly waives and relinquishes all present or future
rights, remedies, or circumstances which might constitute a legal or equitable
discharge of Indemnitor or which might otherwise impair the validity or
enforceability of this Agreement. Indemnitor hereby agrees to postpone the
exercise of any and all rights of subrogation to the rights of any Indemnitee
against Indemnitor hereunder and any rights of subrogation to any collateral
securing the Notes and other obligations relating thereto, until all obligations
of Indemnitor to the Indemnitees hereunder have been performed in full and all
principal, interest and other sums evidenced or secured by the Basic Documents
shall have been paid in full.
(c) Any party liable upon or in respect of this Agreement or the
Obligations may be released without affecting the liability of any party not so
released.
(d) No failure or delay on the part of any of the Indemnitees in
exercising any right, power or privilege hereunder or under any other Basic
Document and no course of dealing between Indemnitor and the Indemnitees (or any
of them) shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, power or privilege hereunder or under any other Basic
Document preclude any other or further exercise thereof or the exercise of any
other right, power or privilege hereunder or thereunder. The rights, powers and
remedies herein or in any other Basic Document expressly provided are cumulative
with and not exclusive of any rights, powers or remedies which the Indemnitees
or any of them would otherwise have. No notice to or demand on Indemnitor in
any case shall, IPSO FACTO, entitle Indemnitor to any other or further notice or
demand in similar or other circumstances or constitute a waiver of the rights of
the Indemnitees to any other or further action in any circumstances without
notice or demand where notice or demand is not otherwise required.
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(e) All notices hereunder shall be in writing and shall be delivered
in accordance with the provisions of the Note Purchase Agreement.
(f) Neither this Agreement nor any term hereof may be changed,
waived, discharged or terminated unless such change, waiver, discharge or
termination is in writing and signed by each of the parties hereto.
(g) INDEMNITOR KNOWINGLY, IRREVOCABLY, VOLUNTARILY AND INTENTIONALLY
WAIVES ANY RIGHT INDEMNITOR MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
ACTION, PROCEEDING OR COUNTERCLAIM BASED ON THIS AGREEMENT, OR ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENT (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY HERETO.
THIS PROVISION IS A MATERIAL INDUCEMENT FOR COLLATERAL AGENT AND EACH HOLDER TO
ENTER INTO THE TRANSACTION GOVERNED BY THE NOTE PURCHASE AGREEMENT AND OTHER
BASIC DOCUMENTS.
(h) This Agreement and the rights and obligations of the parties
hereunder shall be construed in accordance with and be governed by the law of
the State of Nevada.
(i) All pronouns and any variations of pronouns herein shall be
deemed to refer to the masculine, feminine, or neuter, singular or plural, as
the identity of the parties may require. Whenever the terms herein are
singular, the same shall be deemed to mean the plural, as the identity of the
parties or the context requires and vice versa.
(j) This Agreement may be executed in multiple counterparts, each of
which shall constitute a duplicate original, but all of which together shall
constitute one and the same instrument.
(k) As used herein, the term Holder shall include the owners and
holders of the Notes and other Obligations from time to time, whether or not
named as Holder herein (it being expressly agreed, however, that Holder may act
through an agent; that only the signature of such agent is required on any
amendment hereof or any consent, approval or other action hereunder; and that
Sun Life is the initial agent hereunder).
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IN WITNESS WHEREOF, Indemnitor has caused its duly authorized
representative to execute and deliver this Agreement as of the date first above
written.
SANTA FE HOTEL INC.,
a Nevada corporation
By: /s/ Thomas K. Land
Its: Senior Vice President and Chief Financial Officer
SANTA FE GAMING CORPORATION,
a Nevada corporation
By: /s/ Thomas K. Land
Its: Senior Vice President and Chief Financial Officer
S-1
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EXHIBIT A
LEGAL DESCRIPTION OF REAL PROPERTY
Exhibit A-1
<PAGE>
SGC GUARANTY
This GUARANTY is entered into as of April 14, 1998 by SANTA FE
GAMING CORPORATION (formerly Sahara Gaming Corporation), a Nevada corporation
("GUARANTOR"), in favor of and for the benefit of SUNAMERICA LIFE INSURANCE
COMPANY, as collateral agent for and representative of (in such capacity
herein called "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. Santa Fe Hotel Inc., a Nevada corporation ("COMPANY"), and
Guarantor have entered into that certain Note Purchase Agreement dated as of
April 14, 1998 with SunAmerica Life Insurance Company and Credit Suisse First
Boston Mortgage Capital LLC (said Note Purchase Agreement, as it may
hereafter be amended, supplemented or otherwise modified from time to time,
being the "NOTE PURCHASE AGREEMENT"; capitalized terms defined therein and
not otherwise defined herein being used herein as therein defined).
B. Guarantor owns all the capital stock of Company and will
benefit from the transactions contemplated by the Basic Documents.
C. It is a condition precedent to the acquisition of the Notes
under the Note Purchase Agreement that Company's obligations thereunder be
guarantied by Guarantor.
D. Guarantor is willing irrevocably and unconditionally to
guaranty such obligations of Company.
NOW, THEREFORE, based upon the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and in order to induce Holders and Representative to enter into
the Note Purchase Agreement and to acquire the Notes thereunder, Guarantor
hereby agrees as follows:
SECTION 1. DEFINITIONS
1.1 CERTAIN DEFINED TERMS. As used in this Guaranty, the following
terms shall have the following meanings unless the context otherwise requires:
"BENEFICIARIES" means Representative and Holders.
"GUARANTIED OBLIGATIONS" has the meaning assigned to that term in
subsection 2.1.
"GUARANTY" means this Guaranty dated as of April 14, 1998, as it
may be amended, supplemented or otherwise modified from time to time.
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"PAYMENT IN FULL," "PAID IN FULL" or any similar term means payment in
full of the Guarantied Obligations, including without limitation all
principal, interest, costs, fees and expenses (including, without
limitation, reasonable legal fees and expenses) of Beneficiaries as
required under the Basic Documents.
1.2 INTERPRETATION. References to "Sections" and "subsections" shall
be to Sections and subsections, respectively, of this Guaranty unless
otherwise specifically provided. In the event of any conflict or
inconsistency between the terms, conditions and provisions of this Guaranty
and the terms, conditions and provisions of the Note Purchase Agreement, the
terms, conditions and provisions of this Guaranty shall prevail.
SECTION 2. THE GUARANTY
2.1 GUARANTY OF THE GUARANTIED OBLIGATIONS. Guarantor hereby
irrevocably and unconditionally guaranties, as primary obligor and not merely
as surety, the due and punctual payment in full of all Guarantied Obligations
when the same shall become due, whether at stated maturity, by required
prepayment, declaration, acceleration, demand or otherwise (including amounts
that would become due but for the operation of the automatic stay under
Section 362(a) of the Bankruptcy Code, 11 U.S.C. Section 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 2.7 hereof.
2.2 PAYMENT BY GUARANTOR; APPLICATION OF PAYMENTS. Guarantor hereby
agrees, in furtherance of the foregoing and not in limitation of any other
right which any Beneficiary may have at law or in equity against Guarantor by
virtue hereof, that upon the failure of Company to pay any of the Guarantied
Obligations when and as the same shall become due, whether at stated
maturity, by required prepayment, declaration, acceleration, demand or
otherwise (including amounts that would become due but for the operation of
the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C.
Section 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
2
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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 2.5A(ii) of the
Note Purchase Agreement; and
THIRD, after payment in full of all Guarantied Obligations, to the
payment to Guarantor, or its successors or assigns, or to whomsoever may be
lawfully entitled to receive the same or as a court of competent
jurisdiction may direct, of any surplus then remaining from such payments.
2.3 LIABILITY OF GUARANTOR ABSOLUTE. Guarantor agrees that its
obligations hereunder are irrevocable, absolute, independent and
unconditional and shall not be affected by any circumstance which constitutes
a legal or equitable discharge of a guarantor or surety other than payment in
full of the Guarantied Obligations. In furtherance of the foregoing and
without limiting the generality thereof, Guarantor agrees as follows:
(a) This Guaranty is a guaranty of payment when due and not of
collectibility.
(b) 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,
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modify or abridge Guarantor's liability hereunder in respect of the
Guarantied Obligations.
(e) Any Beneficiary, upon such terms as it deems appropriate, without
notice or demand and without affecting the validity or enforceability of
this Guaranty or giving rise to any reduction, limitation, impairment,
discharge or termination of Guarantor's liability hereunder, from time to
time may (i) renew, extend, accelerate, increase the rate of interest on,
or otherwise change the time, place, manner or terms of payment of the
Guarantied Obligations; (ii) settle, compromise, release or discharge, or
accept or refuse any offer of performance with respect to, or substitutions
for, the Guarantied Obligations or any agreement relating thereto and/or
subordinate the payment of the same to the payment of any other
obligations; (iii) request and accept other guaranties of the Guarantied
Obligations and take and hold security for the payment of this Guaranty or
the Guarantied Obligations; (iv) release, surrender, exchange, substitute,
compromise, settle, rescind, waive, alter, subordinate or modify, with or
without consideration, any security for payment of the Guarantied
Obligations, any other guaranties of the Guarantied Obligations, or any
other obligation of any Person (including any other guarantor) with respect
to the Guarantied Obligations; (v) enforce and apply any security now or
hereafter held by or for the benefit of such Beneficiary in respect of this
Guaranty or the Guarantied Obligations and direct the order or manner of
sale thereof, or exercise any other right or remedy that such Beneficiary
may have against any such security, in each case as such Beneficiary in its
discretion may determine consistent with the Note Purchase Agreement and
any applicable security agreement, including foreclosure on any such
security pursuant to one or more judicial or nonjudicial sales, whether or
not every aspect of any such sale is commercially reasonable, and even
though such action operates to impair or extinguish any right of
reimbursement or subrogation or other right or remedy of Guarantor against
Company or any security for the Guarantied Obligations; and (vi) exercise
any other rights available to it under the Basic Documents.
(f) This Guaranty and the obligations of Guarantor hereunder shall be
valid and enforceable and shall not be subject to any reduction,
limitation, impairment, discharge or termination for any reason (other than
payment in full of the Guarantied Obligations), including without
limitation the occurrence of any of the following, whether or not Guarantor
shall have had notice or knowledge of any of them: (i) any failure or
omission to assert or enforce or agreement or election not to assert or
enforce, or the stay or enjoining, by order of court, by operation of law
or otherwise, of the exercise or enforcement of, any claim or demand or any
right, power or remedy (whether arising under the Basic Documents, at law,
in equity or otherwise) with respect to the Guarantied Obligations or any
agreement relating thereto, or with 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
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guaranty or security for the Guarantied Obligations or any agreement
relating to such other guaranty or security; (iii) the Guarantied
Obligations, or any agreement relating thereto, at any time being found
to be illegal, invalid or unenforceable in any respect; (iv) the
application of payments received from any source (other than payments
received pursuant to the other Basic Documents or from the proceeds of
any security for the Guarantied Obligations, except to the extent such
security also serves as collateral for Indebtedness other than the
Guarantied Obligations) to the payment of Indebtedness other than the
Guarantied Obligations, even though any Beneficiary might have elected
to apply such payment to any part or all of the Guarantied Obligations;
(v) any Beneficiary's consent to the change, reorganization or
termination of the corporate structure or existence of Company or any of
its Subsidiaries and to any corresponding restructuring of the
Guarantied Obligations; (vi) any failure to perfect or continue
perfection of a security interest in any collateral which secures any of
the Guarantied Obligations; (vii) any defenses, set-offs or
counterclaims which Company may allege or assert against any Beneficiary
in respect of the Guarantied Obligations, including but not limited to
failure of consideration, breach of warranty, payment, statute of
frauds, statute of limitations, accord and satisfaction and usury; and
(viii) any other act or thing or omission, or delay to do any other act
or thing, which may or might in any manner or to any extent vary the
risk of Guarantor as an obligor in respect of the Guarantied Obligations.
2.4 WAIVERS BY GUARANTOR. Guarantor hereby waives, for the benefit of
Beneficiaries:
(a) any right to require any Beneficiary, as a condition of payment
or performance by Guarantor, to (i) proceed against Company, any other
guarantor of the Guarantied Obligations or any other Person, (ii) proceed
against or exhaust any security held from Company, any such other guarantor
or any other Person, (iii) proceed against or have resort to any balance of
any deposit account or credit on the books of any Beneficiary in favor of
Company or any other Person, or (iv) pursue any other remedy in the power
of any Beneficiary whatsoever;
(b) any defense arising by reason of the incapacity, lack of
authority or any disability or other defense of Company including, without
limitation, any defense based on or arising out of the lack of validity or
the unenforceability of the Guarantied Obligations or any agreement or
instrument relating thereto or by reason of the cessation of the liability
of Company from any cause other than payment in full of the Guarantied
Obligations;
(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;
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(d) any defense based upon any Beneficiary's errors or omissions in
the administration of the Guarantied Obligations, except behavior which
amounts to bad faith;
(e) (i) any principles or provisions of law, statutory or otherwise,
which are or might be in conflict with the terms of this Guaranty and any
legal or equitable discharge of Guarantor's obligations hereunder, (ii) the
benefit of any statute of limitations affecting Guarantor's liability
hereunder or the enforcement hereof, (iii) any rights to set-offs,
recoupments and counterclaims, and (iv) promptness, diligence and any
requirement that any Beneficiary protect, secure, perfect or insure any
security interest or lien or any property subject thereto;
(f) notices, demands, presentments, protests, notices of protest,
notices of dishonor and notices of any action or inaction, including
acceptance of this Guaranty, notices of default under the Note Purchase
Agreement or any agreement or instrument related thereto, notices of any
renewal, extension or modification of the Guarantied Obligations or any
agreement related thereto, notices of any extension of credit to Company
and notices of any of the matters referred to in subsection 2.3 and any
right to consent to any thereof; and
(g) any defenses or benefits that may be derived from or afforded by
law which limit the liability of or exonerate guarantors or sureties, or
which may conflict with the terms of this Guaranty, including without
limitation the provisions of Nevada Revised Statutes Sections 40.430-
40.459, 40.475 and 40.485 as permitted by Nevada Revised Statutes Section
40.495, and any successor provisions.
2.5 CERTAIN CALIFORNIA LAW WAIVERS. As used in this subsection 2.5, any
reference to "the principal" includes Company, and any reference to "the
creditor" includes each Beneficiary. In accordance with Section 2856 of the
California Civil Code:
(a) Guarantor agrees to withhold the exercise of any and all rights
of subrogation, reimbursement and contribution against Company, against any
other guarantor of any of the Guarantied Obligations and against any
collateral or security granted by any such other guarantor for any of the
Guarantied Obligations until the Guarantied Obligations shall have been
paid in full, all as more fully set forth in subsection 2.6;
(b) Guarantor waives any and all other rights and defenses available
to Guarantor as against any Beneficiary by reason of Sections 2787 to 2855,
inclusive, 2899 and 3433 of the California Civil Code except to the extent
expressly provided herein, including without limitation any and all rights
or defenses Guarantor may have 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
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discharging the principal's indebtedness or such guarantor's obligations,
including without limitation Section 580a, 580b, 580d, or 726 of the
California Code of Civil Procedure; and
(c) Guarantor waives all rights and defenses arising out of an
election of remedies by the creditor, even though that election of
remedies, such as a nonjudicial foreclosure with respect to security for
any Guarantied Obligation, has destroyed Guarantor's rights of subrogation
and reimbursement against the principal by the operation of Section 580d of
the Code of Civil Procedure or otherwise; and even though that election of
remedies by the creditor, such as nonjudicial foreclosure with respect to
security for an obligation of any other guarantor of any of the Guarantied
Obligations, has destroyed Guarantor's rights of contribution against such
other guarantor.
No other provision of this Guaranty shall be construed as limiting the
generality of any of the covenants and waivers set forth in this subsection 2.5.
In accordance with subsection 3.6 below, this Guaranty shall be governed by, and
shall be construed and enforced in accordance with, the internal laws of the
State of Nevada, without regard to conflicts of laws principles. This
subsection 2.5 is included solely out of an abundance of caution, and shall not
be construed to mean that any of the above-referenced provisions of California
law are in any way applicable to this Guaranty or to any of the Guarantied
Obligations.
2.6 GUARANTOR'S RIGHTS OF SUBROGATION, CONTRIBUTION, ETC. Until the
Guarantied Obligations shall have been paid in full, Guarantor shall withhold
exercise of (a) any claim, right or remedy, direct or indirect, that Guarantor
now has or may hereafter have against Company or any of its assets in connection
with this Guaranty or the performance by Guarantor of its obligations hereunder,
in each case whether such claim, right or remedy arises in equity, under
contract, by statute, including without limitation under Nevada Revised Statutes
Section 40.475 or 40.485 as permitted by Nevada Revised Statutes Section 40.495
(1993), under common law or otherwise and including without limitation (i) any
right of subrogation, reimbursement or indemnification that Guarantor now has or
may hereafter have against Company, (ii) any right to enforce, or to participate
in, any claim, right or remedy that any Beneficiary now has or may hereafter
have against Company, and (iii) any benefit of, and any right to participate in,
any collateral or security now or hereafter held by any Beneficiary, and (b) any
right of contribution Guarantor may have against any other guarantor of any of
the Guarantied Obligations. Guarantor further agrees that, to the extent the
agreement to withhold the exercise of its rights of subrogation, reimbursement,
indemnification and contribution as set forth herein is found by a court of
competent jurisdiction to be void or voidable for any reason, any rights of
subrogation, reimbursement or indemnification Guarantor may have against Company
or against any collateral or security, and any rights of contribution Guarantor
may have against any such 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
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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.
2.7 EXPENSES. Guarantor agrees to pay, or cause to be paid, on demand,
and to save Beneficiaries harmless against liability for, any and all costs
and expenses (including reasonable fees and disbursements of counsel and
reasonable allocated costs of internal counsel) incurred or expended by any
Beneficiary in connection with the enforcement of or preservation of any
rights under this Guaranty.
2.8 CONTINUING GUARANTY. This Guaranty is a continuing guaranty and
shall remain in effect until all of the Guarantied Obligations shall have
been paid in full. Guarantor hereby irrevocably waives any right to revoke
this Guaranty as to future transactions giving rise to any Guarantied
Obligations.
2.9 AUTHORITY OF GUARANTOR OR COMPANY. It is not necessary for any
Beneficiary to inquire into the capacity or powers of Guarantor or Company or
the officers, directors or any agents acting or purporting to act on behalf
of any of them.
2.10 FINANCIAL CONDITION OF COMPANY. Any extensions of credit may be
granted to Company or continued from time to time without notice to or
authorization from Guarantor regardless of the financial or other condition
of Company at the time of any such grant or continuation. No Beneficiary
shall have any obligation to disclose or discuss with Guarantor its
assessment, or Guarantor's assessment, of the financial condition of Company.
Guarantor has adequate means to obtain information from Company on a
continuing basis concerning the financial condition of Company and its
ability to perform its obligations under the Basic Documents, and Guarantor
assumes the responsibility for being and keeping informed of the financial
condition of Company and of all circumstances bearing upon the risk of
nonpayment of the Guarantied Obligations. Guarantor hereby waives and
relinquishes any duty on the part of any Beneficiary to disclose any matter,
fact or thing relating to the business, operations or conditions of Company
now known or hereafter known by any Beneficiary.
2.11 RIGHTS CUMULATIVE. The rights, powers and remedies given to
Beneficiaries by this Guaranty are cumulative and shall be in addition to and
independent of all rights, powers and remedies given to Beneficiaries by
virtue of any statute or rule of law or in any 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.
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2.12 BANKRUPTCY; POST-PETITION INTEREST; REINSTATEMENT OF GUARANTY. (a)
So long as any Guarantied Obligations remain outstanding, Guarantor shall
not, without the prior written consent of 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 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.
2.13 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.
2.14 SET OFF. In addition to any other rights any Beneficiary may have
under law or in equity, if any amount shall at any time be due and owing by
Guarantor to any Beneficiary under this Guaranty, such Beneficiary is
authorized at any time or from time to time, without notice (any such notice
being hereby expressly waived), to set off and to appropriate and to apply
any and all deposits (general or special, including but not limited to
Indebtedness evidenced by certificates of deposit, whether matured or
unmatured) and any
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other Indebtedness of such Beneficiary owing to Guarantor and any other
property of Guarantor held by any Beneficiary to or for the credit or the
account of Guarantor against and on account of the Guarantied Obligations and
liabilities of Guarantor to any Beneficiary under this Guaranty.
SECTION 3. MISCELLANEOUS
3.1 SURVIVAL OF WARRANTIES. All agreements, representations and
warranties made herein shall survive the execution and delivery of this
Guaranty and the other Basic Documents and any increase in the amount of the
Notes or other Obligations under the Note Purchase Agreement.
3.2 NOTICES. Any communications between 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.
3.3 SEVERABILITY. In case any provision in or obligation under this
Guaranty shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction,
shall not in any way be affected or impaired thereby.
3.4 AMENDMENTS AND WAIVERS. No amendment, modification, termination or
waiver of any provision of this Guaranty, and no consent to any departure by
Guarantor therefrom, shall in any event be effective without the written
concurrence of 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.
3.5 HEADINGS. Section and subsection headings in this Guaranty are
included herein for convenience of reference only and shall not constitute a
part of this Guaranty for any other purpose or be given any substantive
effect.
3.6 APPLICABLE LAW. THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF
GUARANTOR AND BENEFICIARIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
NEVADA, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
3.7 SUCCESSORS AND ASSIGNS. This Guaranty is a continuing guaranty and
shall be binding upon Guarantor and its respective successors and assigns.
This Guaranty shall inure to the benefit of Beneficiaries and their
respective successors and assigns. Guarantor shall not assign this Guaranty
or any of the rights or obligations of Guarantor hereunder without the
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prior written consent of all Holders. Any Beneficiary may, without notice or
consent, assign its interest in this Guaranty in whole or in part, in
accordance with Section 9.14 of the Note Purchase Agreement with respect to
an assignment by any Holder and in accordance with Section 8.7 of the Note
Purchase Agreement with respect to an assignment by the Collateral Agent.
The terms and provisions of this Guaranty shall inure to the benefit of any
transferee or assignee of any Note, and in the event of such transfer or
assignment the rights and privileges herein conferred upon such Beneficiary
shall automatically extend to and be vested in such transferee or assignee,
all subject to the terms and conditions hereof.
3.8 CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL JUDICIAL
PROCEEDINGS BROUGHT AGAINST GUARANTOR ARISING OUT OF OR RELATING TO THIS
GUARANTY, OR ANY OBLIGATIONS HEREUNDER, MAY BE BROUGHT IN ANY STATE OR
FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF NEVADA. BY EXECUTING
AND DELIVERING THIS AGREEMENT, GUARANTOR, FOR ITSELF AND IN CONNECTION WITH
ITS PROPERTIES, IRREVOCABLY
(I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE
JURISDICTION AND VENUE OF SUCH COURTS;
(II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS;
(III)AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN
ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, TO GUARANTOR AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH
SUBSECTION 3.2;
(IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS
SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER GUARANTOR IN ANY SUCH
PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND
BINDING SERVICE IN EVERY RESPECT;
(V) AGREES THAT BENEFICIARIES RETAIN THE RIGHT TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST GUARANTOR
IN THE COURTS OF ANY OTHER JURISDICTION; AND
(VI) AGREES THAT THE PROVISIONS OF THIS SUBSECTION 3.8 RELATING TO
JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST
EXTENT PERMISSIBLE.
3.9 WAIVER OF TRIAL BY JURY. GUARANTOR AND, BY ITS ACCEPTANCE OF THE
BENEFITS HEREOF, EACH BENEFICIARY EACH HEREBY AGREES TO WAIVE ITS RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR
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CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS GUARANTY. The scope of
this waiver is intended to be all encompassing of any and all disputes that
may be filed in any court and that relate to the subject matter of this
transaction, including without limitation contract claims, tort claims,
breach of duty claims and all other common law and statutory claims.
Guarantor and, by its acceptance of the benefits hereof, each Beneficiary
each (i) acknowledges that this waiver is a material inducement for Guarantor
and Beneficiaries to enter into a business relationship, that Guarantor and
Beneficiaries have already relied on this waiver in entering into this
Guaranty or accepting the benefits thereof, as the case may be, and that each
will continue to rely on this waiver in their related future dealings and
(ii) further warrants and represents that each has reviewed this waiver with
its legal counsel, and that each knowingly and voluntarily waives its jury
trial rights following consultation with legal counsel. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING
(OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS
SUBSECTION 3.9 AND EXECUTED BY 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.
3.10 NO OTHER WRITING. This writing is intended by Guarantor and
Beneficiaries as the final expression of this Guaranty and is also intended
as a complete and exclusive statement of the terms of their agreement with
respect to the matters covered hereby. No course of dealing, course of
performance or trade usage, and no parol evidence of any nature, shall be
used to supplement or modify any terms of this Guaranty. There are no
conditions to the full effectiveness of this Guaranty.
3.11 FURTHER ASSURANCES. At any time or from time to time, upon the
request of 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.
3.12 COUNTERPARTS; EFFECTIVENESS. This Guaranty may be executed in any
number of counterparts and by the different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to
be an original for all purposes; but all such counterparts together shall
constitute but one and the same instrument. This Guaranty shall become
effective as to Guarantor upon the execution of a counterpart hereof by
Guarantor and receipt by Representative of written or telephonic notification
of such execution and authorization of delivery thereof.
3.13 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
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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.
SANTA FE GAMING CORPORATION
By /s/ Thomas K. Land
Title Senior Vice President and
Chief Financial Officer
S-1
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WHEN RECORDED MAIL TO:
O'MELVENY & MYERS LLP
1999 Avenue of the Stars
Suite 700
Los Angeles, California 90067
Attention: Dean Pappas, Esq.
File No.: 843,112-044
______________________________________________________________________________
NOTICE: THIS SUBORDINATION AND INTERCREDITOR AGREEMENT RESULTS IN YOUR SECURITY
INTEREST IN THE PROPERTY DESCRIBED HEREIN BECOMING SUBJECT TO AND OF LOWER
PRIORITY THAN THE LIEN OF SOME OTHER OR LATER SECURITY INTEREST.
SUBORDINATION
AND INTERCREDITOR AGREEMENT
THIS SUBORDINATION AND INTERCREDITOR AGREEMENT (this "AGREEMENT") is
made as of April 14, 1998, by and among SANTA FE HOTEL INC., a Nevada
corporation ("OBLIGOR"), SUNAMERICA LIFE INSURANCE COMPANY, an Arizona
corporation ("COLLATERAL AGENT"), as Collateral Agent on behalf of itself and
each of the "Holders" described in the Note Purchase Agreement defined below
(individually each a "SENIOR OBLIGEE" and collectively the "SENIOR OBLIGEES"),
and IBJ SCHRODER BANK & TRUST COMPANY, a New York banking corporation
("TRUSTEE"), as Trustee for the "Noteholders" under the Indenture defined below
(individually each a "JUNIOR OBLIGEE" and collectively the "JUNIOR OBLIGEES").
R E C I T A L S
A. Obligor has executed that certain Deed of Trust and Security
Agreement with Assignment of Rents and Fixture Filing dated as of December 29,
1993 and recorded in the Official Records of Clark County, Nevada on December
29, 1993 in Book 931229, Document No. 00300, to United Title of Nevada, as
trustee, for the benefit of Trustee, as trustee for the Junior Obligees, as
beneficiary (as amended, modified, renewed or extended, the "JUNIOR DEED OF
TRUST"). The Junior Deed of Trust secures the Junior Obligations (defined in
this Agreement below).
B. Obligor has also executed that certain Deed of Trust, Fixture
Filing and Financing Statement and Security Agreement with Assignment of Rents
of even date herewith and recorded in the Official Records of Clark County,
Nevada immediately prior to the recordation of this Agreement, to United Title
of Nevada, as trustee, for the benefit of Collateral Agent as collateral agent
for the Senior Obligees, as beneficiary (as amended, modified, renewed or
extended, the "SENIOR DEED OF TRUST"), and has also executed that
<PAGE>
certain Security Agreement dated as of the date hereof between the Obligor
and the Collateral Agent (as amended, modified, renewed or extended, the
"SENIOR SECURITY AGREEMENT"). The Senior Deed of Trust and the Senior
Security Agreement secure the Senior Obligations (defined in this Agreement
below).
C. The Junior Deed of Trust, Senior Deed of Trust and the Senior
Security Agreement each cover that certain real property located in Clark
County, Nevada, more particularly described on EXHIBIT A attached hereto and
incorporated herein by this reference and commonly known as the "Santa Fe Hotel
& Casino" and certain other property (such real property, together with all
improvements, fixtures, rents, issues, profits, personalty and other property
located thereon or used by Obligor in connection therewith and all proceeds of
every nature relating thereto and covered by the Junior Deed of Trust, Senior
Deed of Trust or the Senior Security Agreement shall herein be referred to
collectively as the "PROPERTY").
D. The Senior Obligees require as a condition to acquiring the
promissory notes under and pursuant to the Note Purchase Agreement that the
Senior Deed of Trust, the Senior Security Agreement and other Senior Basic
Documents (as defined below) shall unconditionally be and remain at all times a
lien and charge upon the Property prior and superior to the lien or charge of
the Junior Deed of Trust and Junior Basic Documents (as defined below).
E. Trustee and the Junior Obligees are willing to subordinate the
lien and charge of the Junior Deed of Trust and Junior Basic Documents to the
Senior Deed of Trust, the Senior Security Agreement and other Senior Basic
Documents on the terms and conditions set forth in this Agreement below.
NOW, THEREFORE, with reference to the above recitals and in reliance
thereon and in consideration of the mutual benefits accruing to the parties
hereto and other valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, and in order to induce the Senior Obligees to acquire
the promissory notes under and pursuant to the Note Purchase Agreement, it is
hereby declared, understood, and agreed as follows:
1. CERTAIN DEFINED TERMS.
(a) "INDENTURE" shall mean that certain Indenture dated as of
December 29, 1993, as amended by the First Supplemental Indenture, dated as of
April 14, 1998, by and among Obligor, Sahara Gaming Corporation, a Nevada
corporation, and Trustee, as trustee for the Junior Obligees, as amended,
modified or supplemented from time to time.
(b) "JUNIOR BASIC DOCUMENTS" shall mean the Indenture, Junior Deed
of Trust and all other documents and instruments executed in connection
therewith or evidencing or securing the Junior Obligations, as the same may
be amended, modified or supplemented from time to time.
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(c) "JUNIOR OBLIGATIONS" shall mean all of the Obligor's
"Obligations" under and as defined in the Indenture and the other Junior Basic
Documents, including, without limitation, the principal amount of any and all
claims, obligations and liabilities of any nature matured or unmatured, absolute
or contingent, secured or unsecured, joint or several, due or not due, and
whether now existing or hereafter incurred and all judgments, decrees, and liens
therefor together with all interest on the foregoing. The Junior Obligations
shall include, without limitation, Obligor's obligation to (i) pay the principal
of, and interest on, any and all notes issued pursuant to the Indenture in
accordance with the terms thereof and to satisfy all of its other liabilities to
the Trustee and the Junior Obligees, whether under the Junior Basic Documents or
otherwise, whether now existing or hereafter incurred, matured or unmatured,
direct or contingent, joint or several including any extensions, modifications,
renewals thereof, and substitutions therefor; (ii) repay to the Trustee and the
Junior Obligees all amounts advanced by the Trustee or any of the Junior
Obligees under any of the Junior Basic Documents or otherwise on behalf of the
Obligor, including, without limitation, advances for principal or interest
payments to prior secured parties, mortgagees, or lienors, or for taxes, levies,
insurance, rent, or repairs to, or maintenance or storage of, any of the
Property serving as collateral for the Junior Obligations; and (iii) reimburse
the Trustee and the Junior Obligees, on demand, for all of the Trustee's and
Junior Obligees' expenses and costs, including the reasonable fees and expenses
of their counsel, in connection with the preparation, administration, amendment,
modification, or enforcement of any of the Junior Basic Documents.
(d) "NOTE PURCHASE AGREEMENT" shall mean that certain Note Purchase
Agreement of even date herewith, by and among Obligor, Collateral Agent and
Credit Suisse First Boston Mortgage Capital LLC, a Delaware limited liability
company, as amended, modified or supplemented from time to time.
(e) "SENIOR BASIC DOCUMENTS" shall mean the Note Purchase Agreement,
Senior Deed of Trust, the Senior Security Agreement and all other documents and
instruments executed in connection therewith or evidencing or securing the
Senior Obligations, as the same may be amended, modified or supplemented from
time to time.
(f) "SENIOR OBLIGATIONS" shall mean all of the Obligor's
"Obligations" under and as defined in the Note Purchase Agreement and other
Senior Basic Documents, whether matured or unmatured, absolute or contingent,
secured or unsecured, joint or several, due or not due, and whether now existing
or hereafter incurred and all interest now accrued or hereafter accruing
thereon. The Senior Obligations shall include, without limitation, Obligor's
obligation to (i) pay the principal of, and interest on, any and all notes
issued pursuant to the Note Purchase Agreement in accordance with the terms
thereof and to satisfy all of its other liabilities to the Collateral Agent and
the Senior Obligees, whether under the Note Purchase Agreement or otherwise,
whether now existing or hereafter incurred, matured or unmatured, direct or
contingent, joint or several including any extensions, modifications, renewals
thereof, and substitutions therefor; (ii) repay to the Collateral Agent and the
Senior Obligees all amounts advanced by the Collateral Agent or any of the
Senior Obligees under any of the Senior Basic Documents or otherwise on behalf
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of the Obligor, including, without limitation, advances for principal or
interest payments to prior secured parties, mortgagees, or lienors, or for
taxes, levies, insurance, rent, or repairs to, or maintenance or storage of, any
of the Property serving as collateral for the Senior Obligations; and (iii)
reimburse the Collateral Agent and the Senior Obligees, on demand, for all of
the Collateral Agent's and Senior Obligees' expenses and costs, including the
reasonable fees and expenses of their counsel, in connection with the
preparation, administration, amendment, modification, or enforcement of any of
the Senior Basic Documents.
2. SUBORDINATION.
(a) The Senior Deed of Trust and the other Senior Basic Documents
securing the Senior Obligations in favor of Collateral Agent and the Senior
Obligees, and any and all modifications, amendments, renewals or extensions
thereof, are hereby made and shall unconditionally continue to be a lien or
charge on the Property, prior and superior to the lien or charge of the Junior
Deed of Trust and any other Junior Basic Document. Trustee and the Junior
Obligees each hereby intentionally and unconditionally subordinate the lien or
charge of the Junior Deed of Trust and each other Junior Basic Document
encumbering the Property in favor of the lien or charge of the Senior Deed of
Trust and the other Senior Basic Documents and each understands that in reliance
upon, and in consideration of, this subordination, the Senior Obligees will
purchase the Senior Obligations, future advances will be made, and, as part and
parcel thereof, specific monetary and other obligations are being and will be
entered into which could not be made or entered into but for said reliance upon
such subordination.
(b) The provisions set forth above shall apply, notwithstanding the
availability of other collateral to the Collateral Agent or the Senior Obligees
or the actual date and time of execution, delivery, recordation, filing or
perfection of the Senior Deed of Trust or any of the other Senior Basic
Documents, or the lien(s) thereof, and notwithstanding the fact that the Senior
Obligations or any claim for the Senior Obligations is subordinated, avoided or
disallowed, in whole or in part, under the United States Bankruptcy Code or
other applicable federal or state law. In the event of a proceeding, whether
voluntary or involuntary, for insolvency, liquidation, reorganization,
dissolution, bankruptcy or other similar proceeding pursuant to the United
States Bankruptcy Code or other applicable federal or state law, the amounts due
under the Senior Obligations shall include all interest accrued on the Senior
Obligations, in accordance with and at the rates specified in the Senior Basic
Documents, both for periods before and for periods after commencement of any
such proceedings, even if the claim for such interest is not allowed pursuant to
applicable law.
(c) If the Trustee or any Junior Obligee shall acquire by
indemnification, subrogation or otherwise, any lien, estate, right or other
interest in the Property or any portions thereof, that lien, estate, right or
other interest shall be subordinate to the lien of the Senior Deed of Trust and
the other Senior Basic Documents as provided herein.
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(d) In no event shall any rents, issues or profits issuing from the
Property, or from any lease or occupancy agreement (including any room occupancy
agreement) of all or any part thereof, be collected by Trustee or any Junior
Obligee except through a receiver appointed by a court after notice of
application for such appointment has been given to the Collateral Agent.
3. STANDSTILL; REMEDIES BLOCKAGE.
(a) Anything to the contrary provided in the Junior Basic Documents
notwithstanding, so long as any of the Senior Obligations remain outstanding,
neither Trustee nor any Junior Obligee shall demand, commence or undertake any
Enforcement Action (as defined below) unless:
(i) Collateral Agent commences a judicial or non-judicial
foreclosure action or proceeding following the occurrence of a default by
the Obligor under any of the Senior Basic Documents (a "DEFAULT");
(ii) six (6) months shall have elapsed from the occurrence of an
"Event of Default" under the Senior Basic Documents and the Collateral
Agent shall have failed to commence an Enforcement Action; or
(iii) the maturity date of the Junior Obligations shall have
passed,
in any of which events the Trustee (on behalf of the Junior Obligees) may
declare an event of default under the Junior Basic Documents, accelerate and
commence a foreclosure of the Junior Obligations or, in the case of the events
described in CLAUSE (i) above, join or become a party to the foreclosure action
commenced by Collateral Agent or take such other actions as may be required by
Nevada law to enable the Junior Obligees to receive any excess proceeds from the
sale of the Property pursuant to the foreclosure of the Senior Deed of Trust and
Senior Security Agreement and after the payment of all amounts due thereunder.
As used herein, the term "ENFORCEMENT ACTION" shall mean any legal action
(including, without limitation, any judicial or non-judicial foreclosure action
or proceeding) or other proceedings or transactions (including, without
limitation, any deed-in-lieu of foreclosure transaction) with respect to the
Property taken by any of the Collateral Agent, Trustee, Senior Obligees or
Junior Obligees.
(b) With respect to any Enforcement Action brought by any of Trustee,
Collateral Agent, any Junior Obligee or any Senior Obligee:
(i) If any action or proceeding shall be brought to foreclose
the Senior Deed of Trust or any other Senior Basic Document or the Junior
Deed of Trust or any other Junior Basic Document, then Collateral Agent or
Trustee, as the case may be, shall promptly send written notice of the
commencement of such action to the other, and true copies of all papers
served or entered in such foreclosure action shall be delivered to such
other party when so served or entered.
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(ii) Trustee (on behalf of itself and the Junior Obligees)
agrees, to the fullest extent permitted by law, that neither Trustee nor
any Junior Obligee nor anyone claiming through or under any such person
shall or will set up, seek, claim or seek the advantage of, any
appraisement, valuation, stay, extensions, or redemption laws now or
hereafter in effect, and Trustee, for itself and all Junior Obligees and
all who may at any time claim through or under any of them, hereby waives
to the fullest extent that they may lawfully do so, the benefit of all such
laws, and any and all rights to have the assets comprising the Property
marshalled upon any foreclosure of the Senior Deed of Trust or any other
Senior Basic Document.
(c) In the event (i) the Senior Obligations become due or are
declared due and payable prior to their stated maturity, or (ii) of any
distribution, division or application, partial or complete, voluntary or
involuntary, by operation of law or otherwise, of all or any part of any
Property (including, without limitation, any proceeds of any sale or other
disposition of any of the Property), in whatever form, to any creditor or
creditors of Obligor or to any holder of indebtedness of Obligor by reason of
any liquidation, dissolution or other winding up of Obligor or its business, or
of any receivership or custodianship for Obligor of all or substantially all of
its property, or of any insolvency or bankruptcy proceedings or assignment for
the benefit of creditors or any proceeding by or against Obligor for any relief
under any bankruptcy, reorganization or insolvency law or laws, federal or
state, or any law, federal or state, relating to the relief of debtors,
readjustment of indebtedness, reorganization, composition or extension, then any
payment or distribution of any kind or character of any Property (including,
without limitation, any proceeds of any sale or other disposition of any of the
Property), whether in cash, property or securities which shall be payable or
deliverable with respect to any or all of the Junior Obligations or which shall
be received by Trustee or any of the Junior Obligees shall be held in trust by
Trustee or such Junior Obligee, as applicable, for the benefit of the Collateral
Agent and Senior Obligees and shall forthwith be paid or delivered directly to
the Collateral Agent (on behalf of the Senior Obligees) for application to the
payment of any amounts outstanding under the Senior Obligations to the extent
necessary to make payments in full in cash of all sums due under the Senior
Basic Documents remaining unpaid. In any such event, the Collateral Agent
and/or any of the Senior Obligees may, but shall not be obligated to, demand,
claim and collect any such payment or distribution that would, but for these
subordination provisions, be payable or deliverable with respect to the Junior
Obligations.
(d) To the extent any payment under the Senior Basic Documents
(whether by or on behalf of Obligor, as proceeds of security or enforcement of
any right of set-off or otherwise) is declared to be fraudulent or preferential,
set aside or required to be paid to a trustee, receiver or other similar party
under any bankruptcy, insolvency, receivership or similar law, then if such
payment is recovered by, or paid over to such trustee, receiver or similar
party, the Senior Obligations or part thereof originally intended to be
satisfied shall be deemed to be reinstated and outstanding as if such payment
had not occurred.
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4. NOTICES OF DEFAULT.
(a) Collateral Agent (on behalf of the Senior Obligees) shall give to
Trustee (on behalf of the Junior Obligees) a copy of any notice of default
delivered by Collateral Agent or any Senior Obligee to the Obligor concurrently
with the delivery of such notice to Obligor. Such notice shall be given in
accordance with SECTION 11 hereof.
(b) Trustee (on behalf of the Junior Obligees) shall give to
Collateral Agent (on behalf of the Senior Obligees) a copy of any notice of
default delivered by Trustee or any Junior Obligee to the Obligor concurrently
with the delivery of such notice to Obligor. Such notice shall be given in
accordance with SECTION 11 hereof.
5. CASUALTY/CONDEMNATION PROCEEDS/IMPOUNDS. Notwithstanding
anything to the contrary stated in the Junior Deed of Trust or other Junior
Basic Documents, all casualty and condemnation proceeds payable or paid in
connection with any fire or other casualty to the Property or condemnation of
the Property shall be paid to the Collateral Agent (on behalf of the Senior
Obligees) in accordance with the terms and provisions of the Senior Deed of
Trust and shall be thereafter used for the restoration of the Property or
disbursed in accordance with the terms and provisions of said Senior Deed of
Trust. If, pursuant to the Senior Basic Documents, the Obligor is ever required
to deposit with the Collateral Agent or Senior Obligees amounts into impound
accounts for the payment of taxes, insurance or other Property expenses, then
the actual deposit of any amounts into such impound accounts in accordance with
the terms of the Senior Basic Documents shall satisfy any corresponding
obligation of Obligor to make the same deposits into impound accounts for the
same expense item(s) under the Junior Basic Documents, and the Obligor shall be
relieved of the obligation to make such corresponding deposits on account of
such impound accounts under the Junior Basic Documents so long as such deposits
are being made into impound accounts created pursuant to the Senior Basic
Documents.
6. TRUSTEE'S AND JUNIOR OBLIGEES' APPROVALS. Trustee and the Junior
Obligees each hereby consent to and approve all provisions of the Note Purchase
Agreement, Senior Deed of Trust and other Senior Basic Documents, and all
agreements now or hereafter entered into between and among Obligor, Collateral
Agent and/or any Senior Obligee.
7. OBLIGOR'S COVENANTS. Obligor hereby agrees to notify Collateral
Agent in writing of any legal proceedings taken by Trustee or any Junior Obligee
against the Obligor promptly after learning of the same and, at Collateral
Agent's request, to defend such proceedings to the best of its ability.
8. ASSIGNMENT. The Senior Obligees will not (a) assign, sell,
transfer or otherwise dispose of any claim to repayment of the Senior
Obligations or performance of the Senior Basic Documents, or any Senior
Obligee's interest in any of the foregoing, or (b) allow any future obligee to
enjoy the benefits of the Property or to become a party to the
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Senior Basic Documents, unless in the case of both CLAUSES (a) and (b) above,
such purchaser, assignee, transferee or lender shall agree, in writing, to be
bound by the terms of this Agreement. The Junior Obligees will not (x)
assign, sell, transfer or otherwise dispose of any claim to repayment of the
Junior Obligations or performance of the Junior Basic Documents, or any
Junior Obligee's interest in any of the foregoing, or (y) allow any future
obligee to enjoy the benefits of the Property or to become a party to the
Junior Basic Documents, unless in the case of both CLAUSES (x) and (y) above,
such purchaser, assignee, transferee or lender shall agree, in writing, to be
bound by the terms of this Agreement. Any party making such a transfer shall
deliver to each party hereto a copy of such agreement promptly after the
subject assignment. Each party hereto shall be entitled to assume that the
other parties have not made any such assignment, sale, transfer, disposition
or refinancing until receipt of such agreement or acknowledgment.
9. GENERAL REPRESENTATIONS AND WARRANTIES. Each party hereto
represents and warrants to the other as follows:
(i) It is duly organized and is validly existing under the laws of
the jurisdiction under which it was organized with full power to execute,
deliver and perform this Agreement and consummate the transactions contemplated
hereby;
(ii) All actions necessary to authorize the execution, delivery and
performance of this Agreement on behalf of such party have been duly taken, and
all such actions continue in full force and effect as of the date hereof;
(iii) It has duly executed and delivered this Agreement and this
Agreement constitutes the legal, valid and binding agreement of such party
enforceable in accordance with its terms subject to (A) applicable bankruptcy,
reorganization, insolvency and moratorium laws, and (B) principles of equity,
which may apply regardless of whether a proceeding is brought in law or in
equity;
(iv) To the best of its knowledge, no consent of any other party and
no consent, license, approval, or authorization of, or exemption by, or
registration or declaration or filing with, any governmental authority, bureau
or agency is required in connection with the execution, delivery, or performance
by such party of this Agreement or consummation by such party of the
transactions contemplated by this Agreement;
(v) None of the execution, delivery, and performance of this
Agreement nor the consummation of the transactions contemplated by this
Agreement will (A) violate or conflict with any provision of the organizational
or governing documents, if any, of such party, (B) to the best of its knowledge,
violate, conflict with, or result in the breach or termination of, or otherwise
give any other contracting party the right to terminate, or constitute (or with
notice or lapse of time, or both, would constitute) a default under the terms of
any contract, mortgage, lease, bond, indenture, agreement, or other instrument
to which such party is a party or to which any of its properties are subject,
(C) to the best of its knowledge, result in the creation of any lien, charge,
encumbrance, mortgage, lease,
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claim, security interest, or other right or interest upon the properties or
assets of such party pursuant to the terms of any such contract, mortgage,
lease, bond, indenture, agreement, franchise, or other instrument, (D)
violate any judgment, order, injunction, decree, or award of any court,
arbitrator, administrative agency, or governmental or regulatory body of
which it has knowledge against, or binding upon, such party or upon any of
the securities, properties, assets or business of such party, or (E) to the
best of its knowledge, constitute a violation by such party of any statute,
law, or regulation that is applicable to such party.
10. NOTICES. All notices, requests and demands to be made hereunder
to the parties hereto shall be in writing and shall be given by any of the
following means: (i) personal service; (ii) electronic communication, whether by
telex, telegram or telecopying (if confirmed in writing sent by registered or
certified, first class mail, return receipt requested); or (iii) registered or
certified, first class mail, return receipt requested. The addresses of the
parties set forth below may be changed by notice to the other parties given in
the same manner as provided above. Any notice, demand or request sent pursuant
to CLAUSE (i) above shall be deemed received upon such personal service, and if
sent pursuant to CLAUSE (ii) above shall be deemed received upon dispatch if
sent prior to 5:00 p.m. on a business day, and otherwise shall be deemed
received on the next succeeding business day, and, if sent pursuant to CLAUSE
(iii) above shall be deemed received three (3) days following deposit in the
mail.
To Obligor: Santa Fe Hotel Inc.
4949 N. Rancho Road
Las Vegas, Nevada 89130
Attention: Mr. Thomas Land
Facsimile No.: (702) 658-4303
To Collateral Agent and
Senior Obligees: SunAmerica Life Insurance Company
1 SunAmerica Center
Century City
Los Angeles, California 90067-6022
Attention: Director- Mortgage Lending
and Real Estate
Facsimile No.: (310) 772-6573
To Trustee and
Junior Obligees: IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
Attention: Corporate Trust & Agencies
Administration
Facsimile No.: (212) 858-2952
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11. NO WAIVER; MODIFICATION. Neither the Collateral Agent's nor any
Senior Obligee's delay in or failure to exercise any right or remedy hereunder
or under any of the Senior Basic Documents shall be deemed a waiver of any
obligation of the Trustee or any Junior Obligee hereunder or of any right of the
Collateral Agent or any Senior Obligee hereunder. This Agreement may be amended
or modified, and any of Collateral Agent's or any Senior Obligee's rights
hereunder may be waived, only upon the written agreement of the Collateral Agent
(on behalf of the Senior Obligees).
12. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of the Collateral Agent's and each Senior Obligee's respective
successors and assigns and shall bind the heirs, legatees, representatives,
successors and assigns of Trustee and each Junior Obligee.
13. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HERETO AND ALL OTHER ASPECTS HEREOF SHALL BE DEEMED TO BE MADE
UNDER, 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.
14. WHOLE AGREEMENT. This Agreement shall be the whole and only
agreement with regard to the subordination of the lien or charge of the Junior
Deed of Trust to the lien or charge of the Senior Deed of Trust and all other
matters set forth herein, and shall supersede and cancel, but only insofar as
would affect the priority between the deeds of trust and the other matters
hereinbefore specifically described, any prior agreements as to such matters,
including, but not limited to, those provisions, if any, contained in the Junior
Deed of Trust, which provide for the subordination of the lien or charge thereof
to another deed or deeds of trust or to another mortgage or mortgages.
15. COUNTERPARTS. This Agreement 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 Agreement attached
thereto.
16. CUMULATIVE RIGHTS. Except as specifically limited herein, the
rights, duties and remedies provided for hereunder shall be cumulative and in
addition to those provided by applicable law.
17. INCONSISTENCIES. In the event of any conflicts between the terms
and provisions of this Agreement and the terms and provisions of the Senior
Basic Documents
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or the Junior Basic Documents, the terms and provisions of this Agreement
shall govern and prevail.
18. NO JOINT VENTURE. Nothing provided herein is intended to create
a joint venture, partnership, tenancy-in-common or joint tenancy relationship
between or among any of the parties hereto.
19. FURTHER ASSURANCES. Each party shall cooperate fully with the
others in order to promptly and fully carry out the terms and provisions of this
Agreement. Each party hereto shall from time to time execute and deliver such
other agreements, documents, or instruments and take such other actions as may
be reasonable or desirable to effectuate the terms of this Agreement.
20. NO THIRD PARTY BENEFICIARY. The parties do not intend the
benefits of this Agreement to inure to any third party, nor shall the Agreement
be construed to make or render any party hereto liable to any such third party
for its performance or its obligations under this Agreement.
21. MODIFICATIONS TO SENIOR OBLIGATIONS. This Agreement shall
constitute a continuing agreement of subordination, and any Senior Obligee may,
without notice to Trustee or the Junior Obligees, lend monies, extend credit,
and make other financial accommodations to or for the account of Obligor on the
faith hereof. Collateral Agent and/or any Senior Obligee is hereby authorized
in its sole discretion to (i) change the manner, place or terms of payments or
extend the time of payment, or alter the terms (including the interest rate) or
extend the maturity of any portion of the Senior Obligations, (ii) sell,
exchange, release or otherwise deal with any security or other property pledged
or mortgaged for the Senior Obligations, (iii) release any person liable in any
manner for the collection or payment of any of the Senior Obligations, and
accept any renewal note or notes, from time to time, from the Obligor, and (iv)
exercise or refrain from exercising any rights against the Obligor and/or any
other person, all without notice to, or approval or consent by, Trustee or the
Junior Obligees, and without any impairment of the obligations of Trustee and
the Junior Obligees hereunder. Upon demand by Collateral Agent, Trustee and the
Junior Obligees will further confirm the subordination of the lien of the Junior
Deed of Trust to the lien of the Senior Deed of Trust and all other Senior Basic
Documents, as thereafter extended, renewed, modified, replaced or consolidated.
22. EFFECT UPON SENIOR BASIC DOCUMENTS AND JUNIOR BASIC DOCUMENTS.
(a) By executing this Agreement, Obligor agrees to be bound by the
provisions hereof as they relate to the relative rights of the Senior Obligees
and Junior Obligees. Obligor acknowledges that the provisions of this Agreement
shall not give Obligor any substantive rights as against any of the Collateral
Agent, Senior Obligees, Trustee or Junior Obligees, and that, except as
expressly set forth herein, nothing in this Agreement shall amend, modify,
change or supersede any of the terms and provisions of (i) the Senior Basic
Documents as between Obligor, on the one hand, and Collateral Agent and the
Senior
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Obligees, on the other hand, and (ii) the Junior Basic Documents as between
Obligor, on the one hand, and Trustee and the Junior Obligees, on the other
hand.
(b) Except as otherwise expressly provided in SUBSECTION (c) below,
the agreements contained herein are for the sole and exclusive benefit of
Collateral Agent, Trustee, the Senior Obligees and the Junior Obligees and their
respective successors and assigns and do not otherwise create, and shall not be
construed as creating, any rights, enforceable by Obligor or any other person.
Except as otherwise expressly provided in SUBSECTION (c) below, if any of
Collateral Agent, Trustee, any Senior Obligee or any Junior Obligee shall
enforce its rights or remedies in violation of the terms of this Agreement,
Obligor, by its acknowledgment hereof, agrees that it shall not use such
violation as a defense to the enforcement by Collateral Agent or any Senior
Obligee of its rights and remedies under the Senior Basic Documents or at law or
in equity, or the enforcement by Trustee or any Junior Obligee of its rights and
remedies under the Junior Basic Documents or at law or in equity, nor assert
such violation as a counterclaim or basis for set-off or recoupment against any
of Collateral Agent, Trustee, any Senior Obligee or any Junior Obligee.
(c) Notwithstanding anything to the contrary stated in this
SECTION 22, Obligor shall be entitled to rely upon the terms and provisions of
SECTION 5 hereof providing for the distribution of casualty and condemnation
proceeds and collection of moneys for impound accounts. The Obligor's
compliance with the terms and provisions of SECTION 5 hereof shall constitute a
defense to the failure of Obligor to comply with the casualty, condemnation and
impound account provisions of the Junior Basic Documents.
23. TERMINATION. This Agreement shall terminate and be of no further
force or effect upon the earlier of the satisfaction and full discharge and
release of all obligations of Obligor under the Senior Basic Documents and the
release of the Senior Deed of Trust of record and the satisfaction and full
discharge of all obligations of Obligor under the Junior Basic Documents and the
release of the Junior Deed of Trust of record.
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IN WITNESS WHEREOF, the parties hereto have executed, or caused their
duly authorized representatives to execute, this Agreement as of the day and
year first written above.
"OBLIGOR"
SANTA FE HOTEL INC.,
a Nevada corporation
By: /s/ Thomas K. Land
Name: Thomas K. Land
Title: Senior Vice President and Chief Financial
Officer
"SENIOR OBLIGEE"
SUNAMERICA LIFE INSURANCE COMPANY,
an Arizona corporation
By: /s/ Stephen P. Hanover
Name: Stephen P. Hanover
Title: Authorized Agent
"JUNIOR OBLIGEE"
IBJ SCHRODER BANK & TRUST COMPANY,
a New York banking corporation
By: /s/ Terence Rawlins
Name: Terence Rawlins
Title: Assistant Vice President
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ACKNOWLEDGMENTS
STATE OF _______________ )
)
COUNTY OF ______________ )
On ______________, 1998 before me, the undersigned, a Notary Public in
and for said State, personally appeared _________________________ and
________________________ personally known to me or proved to me on the basis of
satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the
within instrument and acknowledged to me that he/she/they executed the same in
his/her/their authorized capacity(ies), and that by his/her/their signature(s)
on the instrument the person(s), or the entity upon behalf of which the
person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature ___________________________
STATE OF _______________ )
)
COUNTY OF ______________ )
On ______________, 1998 before me, the undersigned, a Notary Public in
and for said State, personally appeared
_________________________________________________ personally known to me or
proved to me on the basis of satisfactory evidence to be the person(s) whose
name(s) is/are subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their authorized capacity(ies), and
that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature ___________________________
<PAGE>
STATE OF _______________ )
)
COUNTY OF ______________ )
On ______________, 1998 before me, the undersigned, a Notary Public in
and for said State, personally appeared
_________________________________________________ personally known to me or
proved to me on the basis of satisfactory evidence to be the person(s) whose
name(s) is/are subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their authorized capacity(ies), and
that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature ___________________________
<PAGE>
EXHIBIT A
DESCRIPTION OF PROPERTY
A-1
<PAGE>
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 periods ended March 31, 1998
and 1997, as indicated in our report dated May 13, 1998; 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 March 31, 1998 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
May 14, 1998
29
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 25,225,743
<SECURITIES> 0
<RECEIVABLES> 1,076,572
<ALLOWANCES> 0
<INVENTORY> 1,240,640
<CURRENT-ASSETS> 33,125,097
<PP&E> 204,408,344
<DEPRECIATION> 54,199,912
<TOTAL-ASSETS> 237,780,083
<CURRENT-LIABILITIES> 92,761,919
<BONDS> 0
0
21,227,621
<COMMON> 61,954
<OTHER-SE> (60,212,172)
<TOTAL-LIABILITY-AND-EQUITY> 237,780,083
<SALES> 0
<TOTAL-REVENUES> 56,030,166
<CGS> 0
<TOTAL-COSTS> 32,008,687
<OTHER-EXPENSES> 20,306,669
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,070,114
<INCOME-PRETAX> (8,365,304)
<INCOME-TAX> 0
<INCOME-CONTINUING> (8,365,304)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,365,304)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
