<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
Commission File No.: 0-20508
MTR GAMING GROUP, INC.
----------------------
(exact name of registrant as specified in its charter)
DELAWARE 84-1103135
-------- ----------
(State or other jurisdiction (IRS Employer
of incorporation) Identification Number)
STATE ROUTE 2 SOUTH, P.O. Box 358, CHESTER, WEST VIRGINIA 26034
----------------------------------------------------------------
(Address of principal executive offices)
(304) 387-5712
--------------
(Registrant's telephone number, including area code
Indicate by check mark whether the Company: (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
Company was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------- -------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $.00001 par value
-------------------------------
Class
20,021,049
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Outstanding at May 11, 1998
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MTR GAMING GROUP, INC.
INDEX FOR FORM 10-Q
SECTION PAGE
PART 1 -- FINANCIAL INFORMATION
Item 1 - Financial Statements
Condensed and Consolidated Balance Sheets
at March 31, 1998 and December 31, 1997 1
Condensed and Consolidated Statements of Operations
for the Three Months Ended March 31, 1998 and 1997 3
Condensed and Consolidated Statements of Cash Flow
for the Three Months Ended March 31, 1998 and 1997 4
Notes to Condensed and Consolidated Financial Statements 5
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Part II -- Other Information
Item 6 - Exhibits and Reports on Form 8-K 23
Signature Page
<PAGE>
PART 1
FINANCIAL INFORMATION
ITEM 1 -- FINANCIAL STATEMENTS
MTR GAMING GROUP, INC.
CONDENSED AND CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
------------ ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 8,747,000 $ 7,715,000
Restricted cash 185,000 188,000
Accounts receivable, net of
allowance for doubtful accounts
of $125,000 451,000 431,000
Deferred financing costs 1,502,000 1,617,000
Deferred income taxes 2,550,000 2,550,000
Other current assets 379,000 516,000
------------ -----------
Total current assets 13,814,000 13,017,000
------------ -----------
Property:
Land 641,000 371,000
Buildings 19,014,000 19,014,000
Equipment and automobiles 6,518,000 6,388,000
Furniture and fixtures 3,145,000 3,131,000
Construction in progress 474,000 258,000
------------ -----------
29,792,000 29,162,000
Less accumulated depreciation (7,031,000) (6,363,000)
------------ -----------
22,761,000 22,799,000
------------ -----------
Net assets of discontinued oil and
gas activities 2,616,000 2,616,000
------------ -----------
Other assets:
Excess of cost of investments over net
assets acquired, net of accumulated
amortization of $1,337,000 and
$1,274,000 2,437,000 2,500,000
Deposits and other 202,000 102,000
------------ -----------
2,639,000 2,602,000
------------ -----------
$ 41,830,000 $41,034,000
------------ -----------
------------ -----------
</TABLE>
1
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MTR GAMING GROUP, INC.
CONDENSED AND CONSOLIDATED BALANCE SHEETS
(Continued)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
------------ ----------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 936,000 $ 594,000
Other accrued liabilities 1,677,000 2,465,000
Current portion of long-term debt 29,000 40,000
Current portion of deferred income taxes 133,000 133,000
------------ -----------
Total current liabilities 2,775,000 3,232,000
------------ -----------
Deferred income taxes, less current portion 1,097,000 1,130,000
------------ -----------
Long-term debt, less current portion 21,570,000 21,559,000
------------ -----------
Shareholders' equity:
Common stock 2,000 2,000
Paid-in capital 35,326,000 35,326,000
Accumulated deficit (18,940,000) (20,215,000)
------------ -----------
Total shareholders' equity 16,388,000 15,113,000
------------ -----------
$ 41,830,000 $ 41,034,000
------------ -----------
------------ -----------
</TABLE>
2
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MTR GAMING GROUP, INC.
CONDENSED AND CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended
---------------------------
March 31, March 31,
1998 1997
----------- -----------
<S> <C> <C>
Revenues:
Video lottery terminals $13,968,000 $10,053,000
Parimutuel commissions 1,162,000 1,049,000
Food, beverage and lodging 1,338,000 943,000
Other 222,000 197,000
----------- -----------
Total revenues 16,690,000 12,242,000
----------- -----------
Costs of revenues:
Cost of video lottery terminals 8,812,000 6,398,000
Cost of parimutuel commissions 1,437,000 1,282,000
Cost of food, beverage and lodging 1,251,000 837,000
Cost of other revenues 180,000 283,000
----------- -----------
Total cost of revenues 11,680,000 8,800,000
----------- -----------
Gross profit 5,010,000 3,442,000
----------- -----------
Selling, general and administrative expenses:
Marketing and promotions 683,000 578,000
General and administrative 1,635,000 1,079,000
Depreciation and amortization 731,000 451,000
----------- -----------
Total selling, general and
administrative expenses 3,049,000 2,108,000
----------- -----------
Operating income 1,961,000 1,334,000
----------- -----------
Interest income 85,000 28,000
Interest expense (813,000) (1,094,000)
----------- -----------
(728,000) (1,066,000)
----------- -----------
Income before benefit for income taxes 1,233,000 268,000
Benefit for income taxes 42,000 33,000
----------- -----------
Net income $ 1,275,000 $ 301,000
----------- -----------
----------- -----------
Net income per share $ 0.06 $ 0.02
----------- -----------
----------- -----------
Net income per share assuming dilution $ 0.05 $ 0.01
----------- -----------
----------- -----------
Weighted average number of shares outstanding:
Basic 19,941,000 19,291,000
----------- -----------
----------- -----------
Diluted 23,690,000 21,068,000
----------- -----------
----------- -----------
</TABLE>
3
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MTR GAMING GROUP, INC.
CONDENSED AND CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
---------------------------
March 31, March 31,
1998 1997
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,275,000 $ 301,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Deferred financing costs amortization 115,000 533,000
Depreciation and amortization 731,000 451,000
Deferred income taxes (33,000) (33,000)
Changes in operating assets and liabilities:
Other current assets 117,000 (150,000)
Accounts payable and accrued liabilities (446,000) (677,000)
----------- -----------
Net cash provided by operating activities 1,759,000 425,000
----------- -----------
Cash flows from investing activities:
Restricted cash 3,000 -
Settlement of prior acquisition costs - (105,000)
Deposits and other (100,000) 22,000
Capital expenditures (630,000) (1,631,000)
----------- -----------
Net cash used in investing activities (727,000) (1,714,000)
----------- -----------
Cash flows used in financing activities:
Principal payments - (69,000)
----------- -----------
Net change in cash 1,032,000 (1,358,000)
Cash, beginning of period 7,715,000 4,226,000
----------- -----------
Cash, end of period $ 8,747,000 $ 2,868,000
----------- -----------
----------- -----------
</TABLE>
4
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MTR GAMING GROUP, INC.
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed and consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and notes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of only normal recurring accruals) considered necessary for a fair presentation
have been included herein. Operating results for the three months ended March
31, 1998 are not necessarily indicative of the results that may be expected for
the year ended December 31, 1998. For further information, refer to the
consolidated financial statements and notes thereto included in the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1997.
NOTE 2 - EQUITY TRANSACTIONS
SETTLEMENT OF MOUNTAINEER PARK ACQUISITION PRICE GUARANTEE. In connection with
the December 1992 acquisition of Mountaineer Park, Inc., the Company issued
certain shares of the Company's common stock which bore registration rights and
were guaranteed at $6.00 per share. In January 1997, the Company reached a
settlement with the holders of 118,948 shares which bore the $6.00 per share
price guarantee. In exchange for a cancellation of the price guarantee, the
Company paid a cash settlement of $102,000 and issued 100,000 additional shares
of the Company's common stock in January 1997.
During January 1998, the Company granted 800,000 options pursuant to its 1998
Stock Incentive Plan to employees. The options were granted at an exercise
price of $2.15625, the estimated fair market value of the Company's common stock
at the date of grant and vested immediately.
During January 1998, the Company granted 50,000 and 10,000 options outside of
the Company's stock option plans to employees and to a non-employee,
respectively. The options were granted at an exercise price of $2.15625, the
estimated fair market value of the Company's common stock at the date of grant
and vested immediately.
During March 1998, the Company granted 950,000 options pursuant to its 1992
Employee Stock Option Plan to employees. The options were granted at an exercise
price of $2.41, the estimated fair market value of the Company's common stock at
the date of grant and vested immediately.
5
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MTR GAMING GROUP, INC.
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 3 - INCOME TAXES
The benefit for income taxes recorded in the accompanying statements of
operations for the three months ended March 31, 1998 and 1997 results from
non-tax deductible depreciation expense attributable to the purchase method of
accounting for the investment in Mountaineer Park, Inc. At March 31, 1997, the
Registrant recorded a valuation allowance of approximately $4.2 million against
its primary deferred tax assets (net operating loss carryforwards for federal
and state income tax purposes). At March 31, 1997, the Registrant has
approximately $18.3 million in federal net operating loss carryforwards and
approximately $4.6 million in state net operating loss carryforwards; the use of
such net operating loss carryforwards earned from 1992 through 1995 are subject
to certain limitations as a result of common stock issuances. Due to
limitations under the Alternative Minimum Tax rules of the Tax Reform Act of
1986, the Registrant expects to make quarterly federal income tax payments.
NOTE 4 - ACQUISITIONS
ACQUISITIONS - The Company, through its newly formed, wholly owned subsidiaries,
Speakeasy Gaming of Las Vegas, Inc. and Speakeasy Gaming of Reno, Inc.,
consummated the purchase on May 5, 1998, of two hotel/gaming properties in
Nevada: the Cheyenne Hotel & Casino in North Las Vegas for $5.5 million and the
Reno Ramada in Reno for $8 million, respectively. Both transactions were asset
purchases for cash, and both properties are qualified for unrestricted casino
gaming upon licensing of a casino operator pursuant to "grandfather" provisions
of applicable state and municipal laws. The Company expects to apply for gaming
approval and intends to lease the gaming area to a licensed casino operator.
The Company also plans to pursue franchise agreements for both properties with
Ramada Franchise Systems, Inc.
THE CHEYENNE HOTEL & CASINO, NORTH LAS VEGAS, NEVADA - The Company purchased the
Cheyenne Hotel & Casino from Banter, Inc. for $5.5 million. The Cheyenne is a
131-room hotel consisting of one two-story building and one three-story building
located at 3227 Civic Center Drive in North Las Vegas at the intersection of
Cheyenne Avenue and Interstate 15. I-15 is a major interstate freeway, which
extends north into Utah and south into the Los Angeles Basin. The Property is
approximately five miles from the Las Vegas Motor Speedway and three miles from
Nellis Air Force Base. The hotel has a bar, restaurant, and a swimming pool as
well as parking for approximately 172 cars. The prior owners had operated 25
slot machines at the hotel's bar and had commenced construction of an 18,000
square foot addition including a 10,000 square foot casino, which the Company
intends to complete. The Company's plan for the casino calls for 350 slot
machines, three blackjack tables, one roulette wheel, and one craps table.
6
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MTR GAMING GROUP, INC.
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 4 - ACQUISITIONS, CONTINUED
The Company plans to implement a motor racing theme for the casino in an effort
to accommodate patrons of the nearby Las Vegas Motor Speedway. The Company
estimates that the cost of the construction of the casino and renovation of some
of the hotel rooms will be approximately $2 million. The Company expects to
complete construction within the next 120 days and will rename the project the
"Speedway Hotel & Casino".
THE RENO RAMADA HOTEL, RENO, NEVADA - The Company purchased the Reno Ramada
Hotel from Reno Hotel, LLC, an affiliate of the Company's lender, for $8
million. The Reno property has a total of 262 hotel rooms, 236 of which are
located in an eleven story tower and 26 of which are in a separate three-story
structure. The property is located at 6th and Lake Streets in Reno and has
parking for approximately 238 cars. The tower also has a restaurant, a deli and
two bars. The Reno property has an 8,000 square foot casino area and a small
convention facility. The property recently underwent renovations of
approximately $4 million. The Company's development plans for the casino at the
Reno property likewise will call for 350 slot machines, three blackjack tables,
a roulette wheel, and a craps table. The Reno casino's theme will be similar to
the Speakeasy concept in place at the Company's Mountaineer Racetrack & Gaming
Resort in West Virginia. The Company also plans to spend approximately $500,000
on renovations of the hotel and expansion of the capacity of the convention
facility and will rename the project the "Speakeasy Hotel & Casino".
FINANCING OF THE ACQUISITIONS - The Company financed the acquisitions through
its cash on hand and additional borrowings from its existing lender, Madeleine
LLC. Pursuant to a Third Amended and Restated Term Loan Agreement entered as of
April 30, 1998 by Mountaineer Park, Inc., Speakeasy Gaming of Las Vegas, Inc.
and Speakeasy Gaming of Reno, Inc. jointly and severally as borrowers, the
Company as guarantor, and Madeleine LLC as lender, the Company increased its
borrowings (previously the principal sum of $21,476,500) by (i) $8 million,
representing the full purchase price of the Reno Ramada Hotel; (ii) $3,765,000
toward the purchase of the Cheyenne Hotel & Casino; and (iii) $150,000 in
lender's fees. The Company expended approximately $2 million of its cash
reserves for the balance of the purchase price of the Cheyenne property and
closing costs and expenses of the transactions. The loan amendment also
provides a construction line of credit of up to $1.7 million for the Cheyenne
property and increase Mountaineer's line of credit by $5 million (up to $1.5
million of which may be used for improvements at the Nevada properties). The
loans, as well as draws against the lines of credit, continue to be for a term
ending July 2, 2001 with monthly payments of interest only at the rate of 13%
per year with all principal becoming due at the end of the term. The loans
likewise remain secured by substantially all of the assets of Mountaineer and
now Speakeasy Vegas and
7
<PAGE>
MTR GAMING GROUP, INC.
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 4 - ACQUISITIONS, CONTINUED
Speakeasy Reno and are unconditionally guaranteed by the Company. The call
premium applicable to prepayment of the loans (5% until July 2, 1998, 3% between
July 3, 1998 and July 2, 1999, 2% from July 3, 1999 until July 2, 2000, and 1%
from July 3, 2000 until the end of the term), however, does not apply to the
$11.8 million borrowed for the acquisitions or draws on the $1.7 million
Cheyenne construction line of credit.
8
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION:
This document includes "forward looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements other than
statements of historical fact included in this document, including, without
limitation, the statements under "Management's Discussion and Analysis of
Financial Condition and Results of Operations", "Liquidity and Sources of
Capital" and "Recent Developments" regarding the Company's strategies, plans,
objectives, expectations, and future operating results are forward-looking
statements. Although the Company believes that the expectations reflected in
such forward-looking statements are reasonable at this time, it can give no
assurance that such expectations will prove to have been correct. Actual results
could differ materially based upon a number of factors including, but not
limited to, history of losses, leverage and debt service, gaming regulation,
dependence on key personnel, competition, no dividends, continued losses from
horse racing, road improvements, costs associated with maintenance and expansion
of Mountaineer Park's infrastructure to meet the demands attending increased
patronage, failure to liquidate discontinued operations, cyclical nature of
business, limited public market and liquidity, lack of public market, shares
eligible for future sale, impact of anti-takeover measures, the Company's common
stock being subject to penny stock regulation, construction of improvements as
well as its estimates of the time and expense involved in such construction at
its recently acquired hotel properties; the entering of franchise agreements;
licensing, operation, and configuration of gaming facilities at the Nevada
properties; and the long-term prospects for the successful operation of acquired
properties and other risks detailed in the Company's Securities and Exchange
Commission filings.
RESULTS OF OPERATIONS - Three Months Ended March 31, 1998 Compared to Three
Months Ended March 31, 1997.
The Company earned revenues for the respective three month periods in 1998
and 1997 as shown below:
<TABLE>
<CAPTION>
Three Months Ended March 31
---------------------------
1998 1997
---- ----
<S> <C> <C>
Operating Revenues
Video lottery operations $ 13,968,000 $ 10,053,000
Parimutuel commissions 1,162,000 1,049,000
Lodging, food and beverage 1,338,000 943,000
Other revenues 222,000 197,000
------------ -----------
Total Revenues $16,690,000 $ 12,242,000
------------ -----------
------------ -----------
</TABLE>
Mountaineer Park has exhibited steady, pronounced revenue growth under its
expansion plan begun in September 1994. The emergence of video lottery as
Mountaineer Park's dominant profit center and the 1996 amendment of the West
Virginia video lottery law (the "Lottery Law") to
9
<PAGE>
permit the addition of video game themes depicting symbols on reels commonly
referred to as "line games" or "slot games" ("Slot Terminals") have allowed
the Company to generate increased revenues. Primarily as a result of this
significant increase in gaming revenues, the Company earned a $1,275,000
million profit from continuing operations in the first quarter of 1998. In
March 1998, the Lottery law was further amended with respect to the permitted
number and location of video lottery terminals pursuant to which Mountaineer
Park is entitled, effective June 13, 1998, to change the ratio of Video
Lottery Terminals ("VLTs") located in its lodge facility versus the racetrack
building from 1:1 to 2:1. See "Liquidity and Sources of Capital - Capital
Improvements".
Total revenues increased from $12.2 million in the first quarter of 1997 to
$16,690,000 million in 1998, an increase of 36.8%. Approximately $3.9 million of
the increase was produced by video lottery operations, while the parimutuel
commissions and lodging, food, beverage and other operations at Mountaineer Park
contributed approximately $500,000 of additional revenues. Management believes
the increase resulted primarily from increased patronage resulting from the
Company's expanded advertising activities, the increase in revenue generated by
having 800 Slot Terminals for the entire quarter (compared to only 400 Slot
Terminals in the first quarter of 1997 until March 1997 when Mountaineer Park
purchased additional Slot Terminals), greater familiarity of customers with the
Company's gaming machines and other enhanced facilities.
VIDEO LOTTERY OPERATIONS. Mountaineer has operated VLTs in West Virginia
since December 1992; operations were conducted under a provisional license until
September 1994. The West Virginia Racetrack Video Lottery Act, signed in March
1994, allowed the uninterrupted continuation of video lottery games at
Mountaineer and permitted the Company to increase its number of VLTs from 165 to
400 on September 4, 1994. In July 1995, the Company placed into operation an
additional 400 VLTs, bringing the total number of VLTs in operation to 800. The
800 VLTs then in operation offered only card games and keno ("Card Terminals").
Upon the enactment of an amendment of the video lottery law permitting Slot
Terminals, in July of 1996 Mountaineer converted 350 Card Terminals into Slot
Terminals. In October of 1996, Mountaineer converted an additional 50 Card
Terminals to Slot Terminals. In March of 1997, Mountaineer purchased and
installed 400 new Slot Terminals and removed 200 previously leased Card
Terminals, bringing the total number of VLTs to 1,000 as of March 13, 1997,
consisting of 800 Slot Terminals and 200 Card Terminals. In March 1998, the
Lottery law was further amended with respect to the permitted number and
location of video lottery terminals pursuant to which Mountaineer Park is
entitled to change the ratio of VLTs located in its lodge facility versus the
racetrack building from 1:1 to 2:1. See "Liquidity and Sources of Capital -
Capital Improvements".
The results of video lottery operations reflect a four-year trend of
significantly increasing aggregate net win, coupled with an increase in average
daily net win per terminal since the inception of Slot Terminals. The Company
plans to pursue additional growth in its video lottery operations. The
aggressive newspaper marketing campaign begun in July 1996 continued through
March 31, 1998 and is still continuing coupled with an extensive direct mail
campaign. In January of 1997, Mountaineer also began broadcasting a 30 minute
"infomercial" advertisement on television affiliates within a two hour driving
radius.
The Company has completed a large scale redecoration of its video lottery
facilities, including expansion of ancillary dining and bar areas at the lodge
and racetrack. The Company has spent $18 million on this expansion and
redecoration. For the three months ended March 31, 1998,
10
<PAGE>
average daily net win on the VLTs placed at the racetrack was $66 (including
$0 for days when there was no live racing), compared to $244 on the
Lodge-based terminals for a facility-wide average of $155 per VLT per day.
Although management believes that revenues will increase at the racetrack,
the Company's primary focus is to expand its lodge operations. See
"Parimutuel Commissions" and "Liquidity and Sources of Capital - Capital
Improvements."
A summary of the video lottery gross winnings less patron payouts ("net
win") for the three months ended March 31, 1998 and 1997 is as follows:
<TABLE>
<CAPTION>
Three Months Ended March 31
---------------------------
1998 1997
---- ----
<S> <C> <C>
Total gross wagers $ 49,588,000 $ 34,762,000
Less patron payouts (35,620,000) (24,709,000)
------------- --------------
Revenue -video lottery operations 13,968,000 10,053,000
------------- --------------
Average daily net win per terminal $ 155 $ 132
------------- --------------
------------- --------------
</TABLE>
Revenues from video lottery operations increased by 39% from $10.1
million in the first quarter of 1997 to $14 million in 1998. Management
believes the increase resulted primarily from increased patronage resulting
from the Company's expanded advertising activities, the increase to 800 Slot
Terminals in March 1997, greater familiarity of customers with the Company's
gaming machines and other enhanced facilities. In March of 1997, Mountaineer
purchased and installed 400 new Slot Terminals and removed 200 previously
leased Card Terminals, bringing the total number of VLTs to 1,000 as of March
13, 1997, consisting of 800 Slot Terminals and 200 Card Terminals.
PARIMUTUEL COMMISSIONS. Parimutuel commissions revenue is a function of
wagering handle, which means the total amount wagered without regard to
predetermined deductions, with a higher commission earned on a more exotic
wager, such as a trifecta, than on a single horse wager, such as a win, place,
or show bet. In parimutuel wagering, patrons bet against each other rather than
against the operator of the facility or with pre-set odds. The total wagering
handle is composed of the amounts wagered by each individual according to the
wagering activity. The total amounts wagered from a pool of funds from which
winnings are paid based on odds determined solely by the wagering activity. The
racetrack acts as a stakeholder for the wagering patrons and deducts from the
amounts wagered a "take-out" or gross commission, from which the racetrack pays
state and county taxes and racing purses. The Company's parimutuel commission
rates are fixed as a percentage of the total wagering handle or total amounts
wagered. Mountaineer's parimutuel commissions for the three months ended March
31, 1998 and 1997 are summarized below:
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<PAGE>
<TABLE>
<CAPTION>
Three Months Ended March 31
------------------------------
1998 1997
----------- -----------
<S> <C> <C>
Simulcast racing parimutuel handle $ 5,686,000 $ 5,435,000
Live racing parimutuel handle 4,906,000 4,161,000
Less patrons' winning tickets (8,375,000) (7,594,000)
----------- -----------
2,217,000 2,002,000
Less:
State and county parimutuel tax (125,000) (119,000)
Purses and Horsemen's Association (930,000) (834,000)
----------- -----------
Revenues - parimutuel commissions $ 1,162,000 $ 1,049,000
----------- -----------
----------- -----------
</TABLE>
For the three months ended March 31, 1998, simulcast handle rose by
$250,000, an increase of approximately 5% compared to the same period in
1997. Live racing handle for the three months ended March 31, 1998 was $4.9
million, an increase of 18% from the corresponding period in 1997. Management
believes these increases resulted primarily from increased video lottery
attendance, cross-marketing from such activity and completing 52 days of the
annually required 210 day racing requirement in the first quarter of 1998
compared to 50 days in the same period in 1997. Mountaineer Park paid
average daily live purses of $52,900 in the three months ended March 31,
1998, a 32% increase over the $40,000 average daily live purses in the
corresponding period of 1997, and sponsored stakes races of up to $25,000 in
the three months ended March 31, 1998 as compared with $20,000 in the
corresponding period in 1997. Management believes that periodic increases in
average daily purses and purses for stakes races will attract higher quality
race horses. Management believes that over time such increases and
improvements should lead to increased live racing handle, or alternatively
smaller decreases. Management also believes that the enhanced quality of race
horses should improve the Company's prospects in export simulcasting.
Commencement of export simulcasting activity would not only create a new
source of revenue but the anticipated related increase in gross dollars
wagered on the Company's live races should also generate increases in live
handle (as a greater and more diverse wagering pool lessens the impact a
particular wager will have on the pay-off odds). Management intends to
continue its policy of increasing average daily purses in the remainder of
fiscal year 1998 as well as sponsor substantially increased stakes races
attempting to develop an export simulcast business. No assurance can be
given, however, that the Company will successfully commence export
simulcasting or that the anticipated results will be realized. See "Costs and
Expenses" and "Parimutuel Commission Operating Costs".
In 1997 the West Virginia legislature passed a bill which Management
believes will help the Company's live racing operations. Pursuant to the
bill, as of the beginning of 1998, the two thoroughbred tracks in West
Virginia are required to schedule 210 days of live racing annually, down from
the previous 220 day minimum. Additionally, the bill specified procedures
which allow further reductions in the required number of live race days if
certain conditions exist, subject to approval by the State Racing Commission.
FOOD, BEVERAGE AND LODGING OPERATIONS. Food, beverage and lodging
revenues accounted for a combined increase of 42% to $1.3 million for the
three months ended March 31, 1998.
12
<PAGE>
Restaurant, bar and concession facilities produced $315,000 of the revenue
increase, while lodge revenues increased $80,000 Food and beverage operations
accounted for approximately 75% and 73% of the revenues earned by this profit
center in the first quarters of 1998 and 1997, respectively. Management
believes that increased revenues from lodging, food and beverage resulted
primarily from enhanced video lottery facilities and related advertising,
which in turn led to increased consumption of food and beverages by the
Company's customers. The ratio of revenue from food and beverage to revenue
from lodging has generally remained constant, reflecting that Mountaineer
Park has historically drawn more day traffic than overnight stays.
OTHER OPERATING REVENUES. Other sources of revenues consist primarily of
non-core businesses such as admission, programs, golf, tennis and swimming.
While these lines of business are not the Company's most profitable, the
Company believes they are necessary for it to continue to attract gaming
patrons. Other revenues increased by $25,000, or 13% to $222,000 for the
three month period ended March 31, 1998 compared to the same period in 1997.
COSTS AND EXPENSES. Operating costs and gross profit earned from
operations for the three month periods ended March 31, 1998 and 1997 are as
follows:
<TABLE>
<CAPTION>
Three Months Ended March 31
------------------------------
1998 1997
----------- -----------
<S> <C> <C>
Operating Costs:
Video lottery operations $ 8,812,000 $ 6,398,000
Parimutuel commissions 1,437,000 1,282,000
Lodging, food and beverage 1,251,000 837,000
Other revenues 180,000 283,000
----------- -----------
Total Operating $11,680,000 $ 8,800,000
----------- -----------
----------- -----------
Costs
Gross Profit (Loss):
Video lottery operations $ 5,156,000 $ 3,655,000
Parimutuel commissions (275,000) (233,000)
Lodging, food and beverage 87,000 106,000
Other revenues 42,000 (86,000)
----------- -----------
Total Gross Profit $ 5,010,000 $ 3,442,000
----------- -----------
----------- -----------
</TABLE>
Mountaineer's 36.3% increase in revenues resulting from the expanded
scope of entertainment offerings resulted in higher total costs, as expenses
increased by 33% to $11.7 million in the first quarter of 1998. Approximately
$2.4 million of the increase was attributable to the cost of operating video
lottery terminals, which includes applicable state taxes and fees and related
advertising. The Company's increase in revenues in the three months ended
March 31, 1998 resulted in a 33% increase in cost of revenues, an 18%
increase in marketing and promotions expense, a 52% increase in general and
administrative expenses, and a 62.1% increase in depreciation and
amortization. The increased marketing and promotion expenses were due
primarily to the Company's "Hancock County: The Action's Closer Than You
Think" infomercial, increases in direct mail, print, radio and television
advertising and increased prize giveaways. The
13
<PAGE>
increase in general and administrative expenses was due primarily to (1)
additional personnel engaged in video lottery, housekeeping and security to
accommodate Mountaineer Park's larger crowds; (2) additional marketing and
promotional personnel, both to implement the Company's marketing plan and to
analyze the effectiveness of the Company's marketing efforts to obtain the
maximum long-term benefits of such efforts; and (3) professional fees related
to financing activity. The Company is attempting to expand the video lottery
business, while attempting to reduce the losses of the parimutuel business,
by increasing productivity, expanding marketing efforts, increasing purse
sizes and attracting higher quality jockeys and horses to increase parimutuel
wagering. See "Parimutuel Commissions". Gross profit from the Company's four
profit centers increased from $3.4 million for the first quarter of 1997 to
$5.5 million for the same period in 1998.
Video Lottery Terminals Operating Costs. Costs of video lottery
revenue increased by $2.4 million or 38% from $6.4 million for the three
months ended March 31, 1997, to $8.8 million for the three months ended March
31, 1998, primarily reflecting an increase in statutory expenses. Such
expenses accounted for $2.2 million of the total cost increase. Additional
expenses were incurred in connection with video lottery, housekeeping and
security personnel.
Under the March 17, 1994, Racetrack Video Lottery Act, the following
statutory rates paid to certain entities are in effect.
<TABLE>
<S> <C>
State of West Virginia............................................. 30.0%
Hancock County..................................................... 2.0%
Horseman's Association (racing purses)............................. 15.5%
Other.............................................................. 5.5%
------
Total Statutory Payments........................................... 53.0%
------
------
</TABLE>
____________
(1) Excludes up to a 4% administrative fee charged by the State of West
Virginia based on revenues. In addition, rates are applied to revenues net
of this 4% administrative fee.
Statutory costs and assessments, including the State Administrative Fee,
for the respective three month periods are as follows:
14
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended March 31
------------------------------
1998 1997
----------- -----------
<S> <C> <C>
Employee Pension Fund $ 68,000 $ 48,000
Horsemen's Purse Fund 2,078,000 1,496,000
----------- -----------
Subtotal $ 2,146,000 $ 1,554,000
State of West Virginia $ 4,582,000 $ 3,296,000
Tourism Promotion Fund 402,000 290,000
Hancock County 268,000 193,000
Stakes Races 134,000 97,000
Veteran's Memorial 134,000 97,000
----------- -----------
Total $ 7,666,000 $ 5,517,000
----------- -----------
----------- -----------
</TABLE>
The remaining significant expenses incurred by video lottery operations
consist of VLT lease expense ($355,000 in the first quarter of 1998 compared
to $320,000 in the first quarter of 1997), direct and indirect wages and
employee benefits ($480,000 in the first quarter of 1998, compared to
$391,000 in the first quarter of 1997), and utilities, property tax, waste
and sewage disposal and insurance ($217,700 in the first quarter of 1998
versus $158,200 in the first quarter of 1997). This $59,500 increase resulted
primarily from an increase in the cost of utilities and waste and sewage
disposal related to VLT operations in the first quarter of 1998 as compared
with the first quarter of 1997. The Company's total waste disposal costs are
currently estimated by management to be approximately $200,000 per quarter,
substantially as a result of the increase in patron attendance at
Mountaineer. The State of West Virginia has authorized Hancock County to
build an expanded sewage system that would serve the Chester area, which is
scheduled to be completed in approximately October 1999.
Wages and benefits expense increased from the first quarter of 1997 to
the first quarter of 1998 in response to higher levels of patron play.
Management believes these costs experienced a moderate increase in the first
quarter of 1998 from the levels experienced in the first quarter of 1997 due
to the increase from 800 VLTs to 1,000 VLTs in March, 1997 and growth in
patron volume.
PARIMUTUEL COMMISSIONS OPERATING COSTS. Costs (the individual components
of which are detailed below) of parimutuel commission revenue attributable to
live racing increased by $155,000, or 12%, from $1.3 million in the first
quarter of 1997, to $1.4 million in the first quarter of 1998. Purse expense
(consisting of statutorily determined percentages of live racing handle) rose
19% to $482,000 in the first quarter of 1998, which is consistent with the
increase in live handle. In connection with simulcasting race operations,
contractual fees paid to host tracks and additional statutorily determined
percentages of simulcast commissions contributed to the purse fund for live
racing increased $21,000 to $448,000 in the first quarter of 1998 consistent
with the 4.6% increase in simulcasting wagers. Parimutuel commissions revenue
is reported net of these expenses in the Consolidated Statement of
Operations.
15
<PAGE>
Totalisator and other lease expenses remained stable at approximately
$120,000 in the first quarters of 1998 and 1997. Direct and indirect wages
and employee benefits attributable to racing operations decreased slightly
($12,000 or 2%) to $637,000 in the three months ended March 1998. The number
of live race performances increased by 2 days in 1998 to 52 days as compared
to the same period in 1997.
Other costs of parimutuel commission revenue increased in the aggregate
by approximately $167,000 in the first quarter of 1998 from $513,000 in the
first quarter of 1997 primarily as a result of allocation of overhead items
including advertising, personnel and professional fees as determined by
management.
Mountaineer's labor agreement with approximately 50 mutuel and 9 video
lottery employees has been extended to November 30, 2002. The Company's
agreement with HBPA has been extended until January 1, 2001.
FOOD, BEVERAGE AND LODGING OPERATING COSTS. Operating costs of the
Company's lodging, food and beverage operations increased by $414,000 from
$837,000 in the first quarter of 1997 to $1,251,000 in the first three months
of 1998. Direct expenses of the Company's food and beverage operations
increased by 40% from $580,000 in 1997 to $811,000 for the same period in
1998. The food and beverage operation earned a gross profit of $193,000, an
increase of 87%, in the first three months of 1998 compared to $103,000 in
1997.
Lodging direct costs totaled $440,000 for the first three months of 1998
as opposed to $257,000 in 1997. This increase resulted primarily from an
increase in the cost of the lodge's waste and sewage disposal of $90,000 in
1998. Also lodge wages and employee benefits increased by $24,000 in 1998.
This increase was caused by an increase in service personnel in these areas.
Amenities and linens in the rooms were upgraded in the first quarter causing
a $35,000 increase in the cost of supplies. See "Video Lottery Terminals
Operating Costs".
COST OF OTHER OPERATING REVENUES. Costs of other revenues consisting
primarily of non-core businesses such as racing programs, golf, tennis and
swimming decreased by $103,000 from $283,000 in the first quarter of 1997 to
$180,000 in the first quarter of 1998.
MARKETING AND PROMOTIONS EXPENSE. Marketing expenses at the Company's
Mountaineer operation increased by 18% from $578,000 for the first quarter of
1997 to $683,000 for the same period in 1998. Management has started an
aggressive regional marketing campaign centered on its 30-minute infomercial
broadcasts throughout portions of a two hour driving radius of Mountaineer.
In 1997, Mountaineer's marketing and promotion costs were defrayed by a state
grant in the amount of $330,000 from a convention and visitors bureau of
which Mountaineer is a member. The Company has been granted an additional
$320,000 to be received in 1998 and expects to apply for a grant, also in
1998, of an additional $320,000.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES, AND INTEREST EXPENSE. The
Company's general and administrative expense increased by $556,000 to $1.6
million, from $1.1 million for the three months ended March 31, 1998 as
compared to the three months ended March 31, 1997. Such increase resulted
primarily from an increase in acquisition costs, service personnel and
professional fees.
16
<PAGE>
In the first quarter of 1998, the Company incurred $800,000 of interest
expense as compared with $1.1 million of interest expense in the first quarter
of 1997. Interest expense in 1997 included a $1.8 million one-time cash fee paid
over the first year of the extended loan term pursuant to the July 2, 1997
Seconded Amended and Restated Term Loan Agreement the Company and Mountaineer
Park entered with Madeleine LLC. Approximately $287,434 of such fees remain to
be expensed prior to July 1998. See "Recent Developments."
Depreciation and amortization costs increased 62% from $451,000 in the
first quarter of 1997 to $731,000 in the first quarter of 1998, reflecting
increased capitalization of improvements completed at Mountaineer Park's
facilities and the allocation of $3.1 million for the purchase of 400 VLTs in
March of 1997 and $1.2 million for the paving of the Company's parking lots
subsequent to the first quarter in 1997.
CASH FLOWS
The Company's operations produced $1,759,000 of cash flow in the three
months ended March 31, 1998, compared to $425,000 produced in the first three
months of 1997. Current year noncash expenses include $731,000 for depreciation
and amortization and $115,000 for the amortization of deferred financing costs.
The Company invested $630,000 for continued expansion and development of
its properties at Mountaineer in the first three months of 1998, compared to a
$1.6 million investment in the first three months of 1997.
LIQUIDITY AND SOURCES OF CAPITAL
The Company's working capital balance stood at $11,039,000 at March 31,
1998, and its unrestricted cash balance amounted to $8,747,000. Racing purses
are paid from funds contributed by the Company to bank accounts owned by the
horse owners who race at Mountaineer Park. At March 31, 1998, the balances in
these accounts exceeded the purse payment obligations by $874,000; this amount
is available for payment of future purse obligations at the discretion of the
Company and in accordance with the terms of its agreement with the HBPA.
LONG-TERM DEBT AND LINE OF CREDIT REFINANCING. Effective July 2, 1997,
Mountaineer and the Company amended and restated the July 2, 1996 Term Loan
Agreement, which had been previously amended and restated as of December 10,
1996. The December 10, 1996 Amended Term Loan Agreement reflected an increase in
the amount borrowed from $5 million to $16.1 million, established a $5,376,500
revolving line of credit, and converted the lender's position from second to
first trust holder.
The July 2, 1997 Second Amended Term Loan Agreement (i) extended the term
of the loan to July 2, 2001 (compared to July 2, 1999); (ii) increased the total
amount borrowed to $21,476,500 (by virtue of Mountaineer Park drawing down the
line of credit); (iii) eliminated from the Amended Term Loan Agreement annual
fees of cash in the amount of 8% of the outstanding principal balance of the
loan that would have been due each November 15 while the loan is outstanding;
(iv) called for payments of interest only with the principal due at the end of
the four year term;
17
<PAGE>
(v) eliminated annual warrants to purchase 250,000 shares of the Company's
common stock at $1.06 per share which would have been issued on November 15,
1997, 1998 and 1999; and (vi) eliminated annual warrants to purchase
additional shares in a number to be calculated under a formula defined in the
Amended Term Loan Agreement, which would have been issued on November 15,
1997, 1998 and 1999. The lender's rights pursuant to the Amended Term Loan
Agreement with respect to the 550,000 shares of the Company's stock and
warrants to purchase 1,632,140 additional shares issued thereunder were
unaffected by the Second Amended Agreement. The Company continues to
guarantee the loan. In addition, as a result of the Second Amended Term Loan
Agreement the Company had excess funds available for investment (subject to
negative covenants contained in the Second Amended Term Loan Agreement) and
further expansion at Mountaineer Park.
As consideration for the lender's entering into the Second Amended Term
Loan Agreement, Mountaineer Park agreed (i) to pay a one time fee of
approximately $1.8 million or 8.5% of the total amount borrowed, which may be
paid over the first year of the term (as of March 31, 1998, the Company paid
approximately 1,513,350 and is obligated to pay the remaining $287,434 in equal
payments over the following three months); (ii) to pay interest at the rate of
13% (compared to 12% on the $16.1 million term loan and 15% on the $5.4 million
line of credit under the Amended Term Loan Agreement); and (iii) to pay a call
premium equal to 5% in the event of prepayment during the first year of the
term, declining to 3% during the second year, 2% in the third year and 1% in the
final year.
The Company, as guarantor, entered into the Third Amended and Restated
Term Loan Agreement, dated as of April 30, 1998, by and among Mountaineer
Park, Inc., Speakeasy Gaming of Las Vegas, Inc., Speakeasy Gaming of Reno,
Inc. and Madeleine LLC in order to finance certain acquisitions by
subsidiaries of the Company which were consummated on May 5, 1998. See
"Recent Developments".
CAPITAL IMPROVEMENTS. The Company is contemplating significant further
expansion of its Mountaineer Park facility including approximately doubling its
hotel room capacity and constructing a regional convention center, most likely
to occur in 1998 and 1999. The Company began to invest in significant
infrastructure improvements beginning with extensive paving in the fourth
quarter of 1997. The Company may separately finance any construction activities
that it executes of this magnitude. Capital improvements of a near-term nature
include numerous smaller renovations, including a new entrance to the racetrack
clubhouse.
On March 14, 1998, the West Virginia State Legislature passed House Bill
4632, which, among other things, amended Section 29-22A-12(b)(5) of the
Racetrack Video Lottery Act of 1994 (regarding number and location of video
lottery terminals). The amendment, which became effective in April 1998,
permits Mountaineer Park to change the ratio of VLTs located in the Lodge versus
the racetrack building from 1:1 to 2:1. As a result of the amendment,
Mountaineer Park has applied to the Lottery Commission for permission to
increase the number of VLTs from 1,000 to 1,200 and to install 200 new Slot
Terminals (which the Company will purchase or lease) and move 100 VLTs from the
track to the lodge. Mountaineer Park has commenced construction of a second
addition of approximately 8,000 square feet to the Speakeasy Gaming Saloon to
house the 300 additional VLTs. Pending Lottery Commission Approval of the
increase and relocation of VLTs, management anticipates that the Speakeasy
addition will be completed during the third quarter of
18
<PAGE>
1998, at which time Mountaineer Park will operate 800 VLTs at the Lodge and
400 at the racetrack to maximize the success of the Company's lodge-based
video lottery operations. See "Video Lottery Operations".
On October 7, 1997, Mountaineer entered into an agreement by which it
obtained an exclusive option to purchase 349 acres of real property located
adjacent to its Hancock County, West Virginia operation. Mountaineer paid
$100,000 in exchange for an irrevocable option to purchase the property for
$600,000 before October 1, 1998, with payment to be made in the form of a
$200,000 cash payment at closing and a $400,000 term note bearing interest at 9%
payable over five years.
In February 1998, Mountaineer Park purchased from Realm, Inc. 350
acres in Chester, West Virginia for a purchase price of $240,000, exclusive
of brokerage fees and closing costs of approximately $30,000. The Company has
no current plans to develop this unimproved property.
ROAD IMPROVEMENTS. During the third quarter of 1997, construction
projects were completed affecting West Virginia State Route 2 (the road
Mountaineer Park fronts) both in Weirton (approximately 18 miles to the
south) and in Chester (approximately 8 miles to the north), and Ohio State
Routes 7 and 11. The Route 2 construction in Weirton was completed in April
1998 and the Route 2 construction in Chester and Route 7 in Ohio are
scheduled to be completed in the next 45 days. The Company has experienced
no discernible impact on patronage since such construction commenced.
OUTSTANDING OPTIONS AND WARRANTS. As of March 31, 1998, there were
outstanding options and warrants to purchase 8,597,247 shares of the Company's
common stock below market price. Of this amount, options to purchase 4,738,914
shares are held by consultants, employees, former employees or directors of the
Company, and warrants to purchase 2,471,874 shares are held by the Company's
lender whose exercise rights are subject to a statutory ownership limitation not
to exceed 5% of the Company's outstanding voting shares without prior approval
of the West Virginia Lottery Commission. All but 70,000 of such shares are
either subject to registration rights or the Company's intention to effect
registration and will be included in a registration statement which the Company
intends to file with the Securities and Exchange Commission.
See Note 2 to the Condensed and Consolidated Financial Statements for the three
months ended March 31, 1998 and 1997. If all such options and warrants were
exercised, the Company would receive proceeds of approximately $12.3 million.
DEFERRED INCOME TAX BENEFIT. Management believes that the substantial
and steady revenue increases earned in the past three years will continue,
and ultimately occur in amounts which will allow the Company to utilize its
18.3 million federal net operating loss tax carry forwards, although there
are no assurances that sufficient income will be earned in future years to do
so. The utilization of federal net operating losses may be subject to certain
limitations.
COMMITMENTS AND CONTINGENCIES. The Company has various commitments
including those under various consulting agreements, operating leases, and the
Company's pension plan and union contract. The Company has also entered into new
employment agreements with certain employees for periods ranging from one to
three years. Compensation under the employment agreements consists of both cash
payments and stock option commitments. The Company
19
<PAGE>
anticipates cash payments in the amount of approximately $809,000 over the
next three years under the employment agreements. The Company believes that
it has the ability to meet all of its obligations under the employment
agreements. Although there can be no assurance, the Company believes that
cash generated from operations will be sufficient to meet all of the
Company's currently anticipated commitments and contingencies. (See "Recent
Developments").
The Company also has commitments with respect to common stock
registration rights, some of which include substantial cash penalties if the
Company does not timely meet its obligations.
The Company has analyzed Year 2000 issues with its computer and software
advisors and has assessed the impact of Year 2000 issues on the Company's
operations. The Company has come to the determination that there are no Year
2000 issues to be disclosed which would have a material adverse effect on the
financial condition of the Company.
RESULTS OF DISCONTINUED OPERATIONS
On March 31, 1993, the Company's Board approved a formal plan to
divest the Company of certain oil and gas operations the Company owns in
Michigan through a plan of orderly liquidation. This decision was based upon
several factors including (i) the anticipated potential of the Company's
gaming operations and the anticipated time to be devoted to it by management,
(ii) the expiration of "Section 29" credits, a credit against federal income
taxes derived from gas produced from Devonian Shale and "tight sands"
formations from wells commenced before January 1993, (iii) the impact of
delays in connection with the West Virginia Supreme Court litigation and
subsequent passage of enabling legislation for video lottery during 1994
which caused management to focus the Company's efforts and financial
resources on Mountaineer Park, and (iv) the Company's desire to continue to
place its primary emphasis on its gaming and recreational businesses. That
plan of orderly liquidation provided for certain rework, remediation and
development costs to address environmental matters, increased production and
enhancement of the value of such properties for sale.
Although the Company has prepared a plan of liquidation with respect to
these properties, it has thus far been unable to effect a liquidation of its
Michigan properties. The Company has valued such properties at $2,616,000 as of
March 31, 1998, net of $252,000 of accrued rework costs, which it believes
represents net realizable value for the properties. Nonetheless, given the
Company's difficulty in finding a buyer for the properties, it may be required
to sell the properties at a loss and on terms substantially less favorable to
the Company than initially foreseen or, alternatively, to write down the value
of such assets on its consolidated balance sheet. For the quarters ending March
31, 1997 and 1998, the Company had no revenues or expenses for discontinued
operations. Currently, the Company is negotiating a sale of its remaining oil
and gas interests to Fleur-David Corporation. There can be no assurance,
however, that such sale will be concluded.
20
<PAGE>
RECENT DEVELOPMENTS
PURCHASE OF TWO NEVADA GAMING PROPERTIES
The Company, through its newly formed, wholly owned subsidiaries,
Speakeasy Gaming of Las Vegas, Inc. and Speakeasy Gaming of Reno, Inc.,
consummated the purchase on May 5, 1998, of two hotel/gaming properties in
Nevada: the Cheyenne Hotel & Casino in North Las Vegas for $5.5 million and
the Reno Ramada in Reno for $8 million, respectively. Both transactions were
asset purchases for cash, and both properties are qualified for unrestricted
casino gaming upon licensing of a casino operator pursuant to "grandfather"
provisions of applicable state and municipal laws. The Company expects to
apply for gaming approval and intends to lease the gaming area to a licensed
casino operator. The Company also plans to pursue franchise agreements for
both properties with Ramada Franchise Systems, Inc.
THE CHEYENNE HOTEL & CASINO, NORTH LAS VEGAS, NEVADA. The Company
purchased the Cheyenne Hotel & Casino from Banter, Inc. for $5.5 million.
The Cheyenne is a 131-room hotel consisting of one two-story building and one
three-story building located at 3227 Civic Center Drive in North Las Vegas at
the intersection of Cheyenne Avenue and Interstate 15. I-15 is a major
interstate freeway, which extends north into Utah and south into the Los
Angeles Basin. The Property is approximately five miles from the Las Vegas
Motor Speedway and three miles from Nellis Air Force Base. The hotel has a
bar, restaurant, and swimming pool as well as parking for approximately 172
cars. The prior owners had operated 25 slot machines at the hotel's bar and
had commenced construction of an 18,000 square foot addition including a
10,000 square foot casino, which the Company intends to complete. The
Company's plan for the casino calls for 350 slot machines, three blackjack
tables, one roulette wheel, and one craps table. The Company plans to
implement a motor racing theme for the casino in an effort to accommodate
patrons of the nearby Las Vegas Motor Speedway. The Company estimates that
the cost of construction of the casino and renovation of some of the hotel
rooms will be approximately $2 million. The Company expects to complete
construction within the next 120 days and will rename the project the
"Speedway Hotel & Casino".
THE RENO RAMADA HOTEL, RENO, NEVADA. The Company purchased the Reno
Ramada Hotel from Reno Hotel LLC, an affiliate of the Company's lender, for $8
million. The Reno property has a total of 262 hotel rooms, 236 of which are
located in an eleven story tower and 26 of which are in a separate three-story
structure. The property is located at 6th and Lake Streets in Reno and has
parking for approximately 238 cars. The tower also has a restaurant, a deli and
two bars. The Reno property has an 8000 square foot casino area and a small
convention facility. The property recently underwent renovations of
approximately $4 million. The Company's development plans for the casino at the
Reno property likewise call for 350 slot machines, three blackjack tables, a
roulette wheel, and a craps table. The Reno casino's theme will be similar to
the Speakeasy concept in place at the Company's Mountaineer Racetrack & Gaming
Resort in West Virginia. The Company also plans to spend approximately $500,000
on renovations of the hotel and expansion of the capacity of the convention
facility and will rename the project the "Speakeasy Hotel & Casino".
OPERATION OF THE PROPERTIES/GAMING LICENSING. The Company and its newly
formed subsidiaries intend to apply as soon as practicable to the authorities in
the State of Nevada for all
21
<PAGE>
necessary permits and licenses required for the Company to operate casinos at
the two properties. The Company is advised, however, that the licensing
process may take approximately one year to complete and that there can be no
assurances that the Company will obtain the necessary approvals. Until the
Company obtains these approvals, it will not be permitted to conduct gaming
or participate in any gaming revenues generated at the properties. In the
interim, the Company will operate the hotels and restaurants and lease the
casino area to an independent, licensed casino operator as permitted by
Nevada law.
The Company anticipates that Speakeasy Vegas will immediately hire
approximately twenty-five new employees at the Cheyenne property and that
Speakeasy Reno will hire approximately forty new employees at the Reno property.
The Company has engaged Bruce E. Dewing to oversee the operation of the two
Nevada properties as well as to assist the Company in the licensing process.
Mr. Dewing has more than twenty years experience in upper level management of
hotels and casinos and holds a non-restricted gaming license in the State of
Nevada. Most recently, Mr. Dewing was President and CEO of the Ormsby House
Hotel/Casino, a 200-room hotel with three restaurants and full service casino
with entertainment in Carson City, Nevada. From 1981-1994, Mr. Dewing served
variously as Vice President/Operations, General Manager/Chief Marketing
Officer/Director of the Sands Regency Hotel & Casino in Reno, Nevada. He was
responsible for management of the Sands Regency's 1,000 hotel rooms and
supervised 950 employees and twenty-five departments.
FINANCING OF THE ACQUISITIONS. The Company financed the acquisitions
through its cash on hand and additional borrowings from its existing lender,
Madeleine LLC. Pursuant to a Third Amended and Restated Term Loan Agreement
entered as of April 30, 1998 by Mountaineer Park, Inc., Speakeasy Gaming of Las
Vegas, Inc., and Speakeasy Gaming of Reno, Inc. jointly and severally as
borrowers, the Company as guarantor, and Madeleine LLC as lender, the Company
increased its borrowings (previously the principal sum of $21,476,500) by (i) $8
million, representing the full purchase price of the Reno Ramada Hotel; (ii)
$3,765,000 toward the purchase of the Cheyenne Hotel & Casino; and (iii)
$150,000 in lender's fees. The Company expended approximately $2 million of its
cash reserves for the balance of the purchase price of the Cheyenne property and
closing costs and expenses of the transactions. The loan amendment also
provides a construction line of credit of up to $1.7 million for the Cheyenne
property and increases Mountaineer's line of credit by $5 million (up to $1.5
million of which may be used for improvements at the Nevada properties). The
loans, as well as any draws against the lines of credit, continue to be for a
term ending July 2, 2001 with monthly payments of interest only at the rate of
13% per year with all principal becoming due at the end of the term. The loans
likewise remain secured by substantially all of the assets of Mountaineer and
now Speakeasy Vegas and Speakeasy Reno and are unconditionally guaranteed by the
Company. The call premium applicable to prepayment of the loans (5% until July
2, 1998, 3% between July 3, 1998 and July 2, 1999, 2% from July 3, 1999 until
July 2, 2000, and 1% from July 3, 2000 until the end of the term), however, does
not apply to the $11.8 million borrowed for the acquisitions or draws on the
$1.7 million Cheyenne construction line of credit.
22
<PAGE>
PART II
OTHER INFORMATION
ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Articles of Incorporation, as amended (1)
3.2 Certificate of Amended of restated Certificate of
Incorporation, filed as of October 18, 1996 (2)
3.3 Amended Bylaws of the Company (3)
10.1 Letter Agreement by and between the Company and James
V. Stanton dated February 18, 1998 (3).
10.2 Letter Agreement by and between the Company and William
D. Fugazy, Jr. dated February 18, 1998 (3).
10.3 Amendment of Employment Agreement by and between the
Company and Thomas K. Russell dated February 16,
1998 (3).
10.4 Purchase Agreement by and between Mountaineer Park , Inc.
and Realm, Inc., an Ohio corporation, dated February 12,
1998 (3).
10.5 Deed dated February 13, 1998, executed by Realm, Inc.(3)
10.6 Purchase Agreement by and between Speakeasy Gaming of
Nevada, Inc., and Banter, Inc. dated as of May 5, 1998.
10.7 Purchase Agreement by and between Speakeasy Gaming of
Reno, Inc. and Reno Hotel, LLC dated April 30, 1998.
23
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10.8 First Amendment to Purchase Agreement by and between
Speakeasy Gaming of Las Vegas, Inc. and Banter, Inc. dated
May 5, 1998.
10.9 Second Amendment First Amendment to Purchase Agreement by
and among Speakeasy Gaming of Las Vegas, Inc., Banter,
Inc. and Southwest Exchange Corporation dated May 5, 1998.
10.10 Deed of Trust, Assignment of Leases and Rents, Security
Agreement and Fixture Filing by Speakeasy of Las Vegas,
Inc. as Trustor, Nevada Title Company, as Trustee for the
benefit of Madeleine LLC, as Beneficiary dated April 30,
1998.
10.11 Deed of Trust, Assignment of Leases and Rents, Security
Agreement and Fixture Filing by Speakeasy Gaming of Reno,
Inc. as Trustor, United Title of Nevada, as Trustee for
the benefit of Madeleine LLC, as Beneficiary dated April
30, 1998.
10.12 Third Amended and Restated Term Loan Agreement amended and
restated as of April 30, 1998 by and among Mountaineer
Park, Inc., Speakeasy Gaming of Las Vegas, Inc.,
Speakeasy Gaming of Reno, Inc., MTR Gaming Group, Inc. and
Madeleine LLC.
10.13 Pledge and Security Agreement by and between MTR Gaming
Group, Inc. and Madeleine LLC dated as of April 30, 1998.
10.14 General Security Agreement by and between Speakeasy Gaming
of Reno, Inc. and Madeleine LLC dated as of April 30,
1998.
10.15 General Security Agreement by and between Speakeasy Gaming
of Las Vegas, Inc. and Madeleine LLC dated as of May 5,
1998.
10.16 1998 Stock Incentive Plan
27.1 Financial Data Schedule.
99.1 Press Release dated May 7, 1998.
FOOTNOTES
(1) Incorporated by reference from the Company's Annual Report on Form 10-K
for the year ended December 31, 1994.
(2) Incorporated by reference from the Company's Current Report on Form 8-K
dated October 18, 1996, filed November 1, 1996.
(3) Incorporated by reference from the Company's Current Report on Form 8-K
dated and filed on February 20, 1998.
(b) Reports on Form 8-K.
The Company filed the following Current Reports on Form 8-K during the
first quarter of 1998 and thereafter:
Reports on Form 8-K
The Company filed the following current reports on Form 8-K during the
first quarter of 1998 and thereafter:
24
<PAGE>
(1) A current report on Form 8-K was filed by the Company on February 20, 1998,
(with the earliest event reported dated January 27, 1998) reporting the
following items:
(i) compliance with new corporate governance standards of NASDAQ's
continued listing requirements;
(ii) resignation of Thomas K. Russell;
(iii) appointment of Officers;
(iv) purchase of 350 acre property in Hancock County, West Virginia.
25
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
and Exchange Act of 1933, the Company has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
MTR GAMING GROUP, INC.
May 15, 1998
By: /s/ Edson R. Arneault
-----------------------------------
Edson R. Arneault, CHAIRMAN,
CHIEF EXECUTIVE OFFICER, PRESIDENT,
CHIEF FINANCIAL OFFICER
26
<PAGE>
EXHIBIT 10.6
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement") is made and entered into this
5th day of May, 1998, by and between Speakeasy Gaming of Nevada, Inc, a Nevada
corporation ("Buyer"), and Banter, Inc., a Nevada corporation ("Banter"), and
Cheyenne Hotel & Casino, Inc., a Nevada corporation ("Cheyenne") Banter together
with Cheyenne being individually and collectively referred to from time to time
as the "Seller").
RECITALS
A. Banter is the owner of improved real property consisting of
approximately 5.51 commonly known as the Cheyenne Hotel located at 3227 Civic
Center Drive, North Las Vegas, in the County of Clark, State of Nevada more
particularly described in EXHIBIT A attached hereto and incorporated herein by
this reference including: (i) all right, title and interest of Banter in and to
any easements, covenants and other rights appurtenance to such land; and (ii)
all right, title and interest of Banter in and to any land lying in the bed of
any existing dedicated street, road, avenue or alley, open or closed, in front
of or adjoining such land (the "Real Property") together with buildings
consisting of approximately 131 guest rooms, a restaurant, bar, and ancillary
improvements (collectively the "Improvements").
B. A hotel, restaurant, bar and related businesses (collectively, the
"Business") are operated on the Real Property. The Real Property is furnished
and equipped with certain furniture, furnishings, fixtures, kitchen, televisions
and other equipment and non-consumable items (collectively "FFE") and an
assortment of operating supplies consisting of housekeeping and laundry
supplies, food and beverage inventories, paper and accounting supplies and
similar consumable items (collectively, the "Operating Supplies").
C. Seller is the sole owner of the Real Property, the Improvements, the
FFE and the Operating Supplies. The FFE and the Operating Supplies are
collectively called the "Personal Property." Attached hereto and incorporated
herein, as Exhibit B-1 is Seller's inventory of the Personal Property. Attached
hereto and incorporated herein, as Exhibit B-2 is Seller's inventory of any
items of personal property leased by Seller from third parties and not owned by
Seller (the "Contract Equipment"). No representation is given, express or
implied, under this Agreement or any Exhibit or schedule attached or to be
attached hereto that Seller is the owner of the Contract Equipment. Seller
acknowledges that the Personal Property consists of those items set forth in
Exhibit B-1 and that Exhibits B-1 and B-2 set forth all items of personal
property used at the Real Property for the operation of the Real Property and
Improvements and the operation of the Business and specifically excludes any
gaming device as defined in Nevada Revised Statutes Section 463.0155 ("Gaming
Device").
D. Desert Gaming, Inc., a Nevada corporation ("DGI"), a corporate
affiliate of Seller, holds a nonrestricted gaming license from all applicable
state, county and municipal governmental authorities with jurisdiction and
regulatory control over gaming activities (the "Nevada Gaming Authorities").
American International Trade and Development, Inc., a Nevada corporation
("AITD"), a corporate affiliate of Seller, holds a liquor license issued by the
City of
<PAGE>
North Las Vegas, Nevada. Notwithstanding anything contained in this
Agreement to the contrary, Seller is not transferring, by sale or otherwise,
any liquor or gaming license and this sale is not conditional upon Buyer
obtaining any such licenses.
E. The "Name" consists only of such rights as Seller may possess to the
name "Cheyenne Hotel." Seller has not taken any steps, including, without
limitation, any local, state or federal registration or other filing, to create
any right on the part of Seller in or to the aforementioned name. Although
Seller will assign rights of Seller in or to the aforementioned name to Buyer at
the Closing, Seller expressly disclaims any representation or warranty, either
express or implied, relating to Seller's right to exclusive use of such name.
F. The Real Property, Improvements, Personal Property and Name are
collectively referred to as the "Property." The operation of the Business is
sometimes called the "Hotel" in this Agreement. The Property does not include
any of the following items: Gaming Devices; cash; coins (including coins in slot
and vending machines); bank accounts; accounts receivable; utility, or other
deposits; choses in action; rights under insurance policies; or rights to any
refund of insurance premiums.
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth, and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. DEFINITIONS
(a) For all purposes of this Agreement, the following terms shall have
the respective meanings set forth below:
"Business Day" means any day other than a Saturday, Sunday, or other day on
which commercial banks are authorized or required to close under the laws of the
State of Nevada.
"Closing" shall mean the closing of the purchase and sale of the Property
in accordance with Section 13 hereof.
"Closing Date" shall mean the date of Closing provided for in Section
13(a).
"Contracts" means (i) all contracts, leases, agreements and obligations
currently in force relating to the Property, including, without limitation, all
sale, management, construction, leasing, commission, architectural, engineering,
operating, employment, service, supply and maintenance agreements excluding any
contracts relating to Gaming Devices; and (ii) all leases or other agreements
for the use of any equipment, machines or related materials necessary for the
Business on or about the Property, including all amendments and exhibits thereto
and assignments thereof.
"Escrow Agent" shall mean Nevada Title Company.
"Existing Exceptions" means those matters affecting title to the Property
as are set forth on Exhibit C attached hereto.
2
<PAGE>
"Federal Tax Law" means the Federal Foreign Investment in Real Property Tax
Act of 1980 and the 1986 Tax Reform Act, as amended.
"Governmental Authorities" shall mean any governmental or
quasi-governmental body or agency having jurisdiction over the Property
and/or Seller, including, without limitation, the State of Nevada.
"Governmental Regulation" shall mean any laws, ordinances, rules,
requirements, resolutions, policy statements and regulations (including, without
limitation, those relating to gaming, land use, subdivision, zoning,
environmental, toxic or hazardous waste, occupational health and safety, water,
earthquake hazard reduction, and building and fire codes) of the Governmental
Authorities bearing on the construction, alteration, rehabilitation,
maintenance, use, operation or sale of the Property.
"Hazardous Materials" means toxic materials, hazardous waste, hazardous
substances [as these terms are defined in the Resource Conservation and
Recovery Act of 1976, as amended (42 U.S.C. 6901, et seq.) or in the
Comprehensive Environmental Response Compensation and Liability Act of 1980,
as amended (42 U.S.C. 9601, et seq.)], asbestos or asbestos-related
products, oils, petroleum-derived compounds, radon, PCB'S, gas or oil storage
tanks, or other such hazardous materials or pesticides as from time to time
identified in any laws or regulations or from time to time applicable to the
Property.
"Permits" means all evidence in the possession of Seller that the present
structure, use, operation and maintenance of the Property is authorized by, and
in compliance with, Governmental Regulations including, but not limited to, true
and correct legible copies of any or all gaming permits and licenses, zoning
variances, certificates of occupancy (or the equivalent), any or all permits,
licenses and other authorizations issued with respect to the Property, and each
portion of space in the Property occupied by individual tenants.
"Permitted Exceptions" shall mean those matters affecting title to the
Property set forth on Exhibit D.
"Person" means an individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated association,
joint venture, governmental authority, or other entity of whatever nature.
"Personal Property" means all personal property owned or used by Seller in
connection with the operation and maintenance of the Hotel excluding any Gaming
Device and alcoholic beverages.
"Property" means the Real Property, the Improvements, the unimproved pad
sites, the parking areas, the Personal Property, the condemnation, as defined in
Section 6(bb), below, and all Leases, warranties and Contracts (but only to the
extent accepted by Buyer) relating to the ownership and operation of the
Property.
"Property Documents" means the items specified in Section 2 (b) below that
are in the
3
<PAGE>
possession or under the control of Seller.
"Purchase Price" shall have the same meaning as set forth in Section 5(a)
below.
"Studies" means title examinations, surveys, architecture, economic,
marketing, engineering, and other tests, including test borings, inspections,
investigations, reviews, and/or other similar studies.
(b) Whenever required by the context of this Agreement, the singular shall
include the plural and the masculine shall include the feminine and vice versa.
2. PROPERTY DOCUMENTS
(a) [INTENTIONALLY DELETED].
(b) The Property Documents, to the extent such Property Documents are in
the possession, custody and control of Seller of the Property's Property Manager
which shall be attached as Exhibit E, constitute the following items:
(i) The latest ALTA survey showing all improvements, rights
of way, easements, dedications, etc.; plats; site plans; and certified
as-built building plans, all relating to the Property.
(ii) All architectural drawings and specifications, appraisals,
zoning, and access documents relating to the Property.
(iii) The Permits.
(iv) Copies of all casualty, liability and other insurance
policies presently in effect with respect to the Property.
(v) Operating statements of income, operating expense and
capital expense for the Property as prepared by the Property's hotel manager
(affiliated or third party) which have been prepared in the normal course of
business for the preceding twelve (12) months, substantially in accordance
with generally accepted accounting standards.
(vi) All assessments and bills for real estate, personal property
and any other taxes affecting the Property and for special assessments for the
preceding fiscal year, and a summary of any contested tax assessments.
(vii) True, correct and complete copies of the written Contracts
and a schedule of the Contracts to be attached hereto as Exhibit E, including
without limitation any and all leases and all amendments, formal or informal,
side agreements, concession arrangements or other matters related thereto.
(viii) Seller's existing title insurance policy for the Property
and all amendments, endorsements and exhibits thereto.
4
<PAGE>
(ix) A list of all threatened, pending or ongoing claims or
lawsuits and all outstanding judgments relating to the Property.
(x) Copies of all promissory notes, loan agreements, mortgages
and deeds of trust encumbering the Property.
(xi) Copies of all engineering and physical inspection reports
related to the Property, including but not limited to, those for Hazardous
Materials.
(xii) Copies of all employment agreements with any employees at
the Property.
(xiii) Copies of all correspondence with any of the Nevada Gaming
Authorities.
(xiv) A list of all part-time and full-time employees at the
Property.
(xv) A complete list of Personal Property (including copies of
all warranties and guaranties related thereto) used by or on behalf of Seller
in connection with operation and maintenance of the Property, plus a copy of
any roof warranty or other warranty in effect with respect to any part of
the Property.
3. FEASIBILITY PERIOD
[INTENTIONALLY DELETED].
4. PURCHASE AND SALE OF PROPERTY
(a) On the Closing Date, and subject to the terms and conditions of this
Agreement, Seller agrees to sell and convey, Seller's title to the Property and
Buyer agrees to acquire the Property. It is a condition to Buyer's obligation
to purchase the Property that title to the Property shall be free and clear of
all liens, encumbrances, easements, covenants, conditions and other matters
affecting title, except for the Permitted Exceptions, and shall be good of
record and in fact merchantable and insurable at standard rates.
(b) Seller agrees that it will, at any time and from time-to-time after
the Closing Date, upon request of Buyer, do, execute, acknowledge or deliver,
all such further acts, deeds, assignments, conveyances and assurances as may
reasonably be required for the better conveying, transferring, assigning,
assuring and confirming the Property to Buyer.
5. PURCHASE PRICE AND TERMS OF PAYMENT
(a) Subject to any Closing adjustment, the Purchase Price for the Property
shall be Five Million Three Hundred Forty Six Thousand Five Dollars
($5,346,500.00) payable at Closing as follows: (i) payment by Buyer to Seller of
$1,581,500 in immediately available funds; and (ii) funding by Madeleine, LLC
("Lender") of an acquisition of a facility in the amount of $3,765,000.
(b) On the Closing Date, Buyer will cause a federal wire transfer of
funds to be made
5
<PAGE>
to the Insurance Company, as applicable, in the amount indicated on the
Settlement Statement approved by Buyer and Seller, which amount shall be
disbursed in accordance with the joint instructions of Buyer and Seller.
6. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
(a) Banter is the record owner of fee simple title to the Property. To
the best of Seller's knowledge, Banter's title is subject only to the Existing
Exceptions, Contracts, and other matters referred to in this Agreement, and
except as set forth in Schedule G to this Agreement, Seller is not in default
under or in violation of the terms of any Existing Exceptions or Contracts.
(b) Seller has not made, and prior to the Closing will not make, any
commitments to any Governmental Authorities, utility company, school board,
church or other religious body, or any homeowner or homeowners' association, or
to any other organization, group or individual, relating to the Property which
would impose any obligation on Buyer, or its successors or assigns, after the
Closing to make any contributions of money, dedications of land or grant of
easements or right-of-way, or to construct, install or maintain any improvements
of a public or private nature on or off the Property.
(c) DGI is presently licensed by the State of Nevada Gaming Authorities
and is not aware of any pending proceeding or act of DGI or its principal Shawn
A. Scott, which could cause the revocation, suspension or other penalties
against DGI or its gaming license.
(d) The Property is suitable for a nonrestricted gaming operation (as
defined in Nevada Revised Statutes Section 463.0177) in every regard.
(e) On the Closing Date, there will be no contract or agreement in effect
for the Property which can not be terminated on 30 days notice, other than the
Contracts.
(f) Except as set forth in Schedule G to this Agreement, all bills and
claims for labor performed and materials furnished to or for the benefit of the
Property for all periods prior to the Closing Date have been (or prior to the
Closing Date will be) paid in full or will be adequately bonded off, and there
are no mechanics' liens or materialmen's liens (whether or not perfected) on or
affecting the Property.
(g) Seller has not received any notice that there are any wetlands of any
nature located on the Property and, to the best of its knowledge, there are
none.
(h) Seller has not received any notice that there are any special
assessments pending, noted or levied against the Property, and, to the best of
its knowledge, there are none, nor is there any proposed increase in the
assessed value of the Property in its condition as of the date of this
Agreement.
(i) To the best of Seller's knowledge, information and belief, no
Hazardous Materials are located on or in the Property, including the surface,
soil or subsurface of the Property. Seller
6
<PAGE>
has received no notice that Hazardous Materials contaminate or otherwise
affect the Property; and to its best knowledge, no Hazardous Materials are
present on any adjacent property. To the best of Seller's knowledge,
information and belief, the Property has not been previously used for the
storage, manufacture, repair or disposal of Hazardous Materials, or machinery
containing such Hazardous Materials other than in accordance with applicable
law. To the best of Seller's knowledge, information and belief, no
complaint, order, citation or notice with regard to air emissions, water
discharges, noise emissions, Hazardous Materials, or any other environmental,
health, or safety matters affecting the Property, or any portion thereof,
from any person, government or entity, has been received by Seller. To the
best of Seller's knowledge, information and belief, all federal, state and
local environmental laws and regulations affecting the Property and Hazardous
Materials have been fully complied with, and no heating equipment,
incinerator or other burning equipment installed or located in or on the
Property violates any law, ordinance, order or regulation of any Governmental
Authority.
(j) Seller is a "United States person" within the meaning of Sections
1445(f)(3) and 7701(a)(3) of the Internal Revenue Code of 1986, as amended.
(k) Neither Seller nor any entity under common ownership, operation or
control (an "affiliate") of Seller having any interest in the Property,
specifically including but not limited to DGI, is a party to any Collective
Bargaining Agreements, union contracts, union letters or similar agreements for
the Property and its employees.
(l) Exhibit E attached hereto represents a true and complete schedule of
the Contracts, all of which shall be terminated by the Closing except as
otherwise directed in writing by Buyer. There shall not be any continuing
obligations of any nature whatsoever imposed on Buyer following Closing under
any agreements existing prior to the Closing (other than obligations arising
after Closing pursuant to those Contracts assumed by Buyer). Except for the
sums required to discharge obligations of Seller under the Young Electric Sign
Company Lease dated June 17, 1996 (the YESCO Lease"), which shall be paid by
Buyer at the Closing (such amount not to exceed $43,025,50), to the extent any
payments may be due and payable in connection with the termination of any
agreements other than the Contracts set forth in Exhibit E, Seller shall make
such payments.
(m) To the best of Seller's knowledge, information and belief, there are
no material structural defects with respect to the Property and the Buildings,
and its roofs, machinery, electrical, heating, air conditioning, plumbing,
ventilating and related operating equipment are in good working order.
(n) No attachment, execution proceedings, assignments for the benefit of
creditors, insolvency, bankruptcy, reorganization, or other similar proceedings
are pending against Seller, its affiliates or principals.
(o) Seller (and where applicable DGI) has paid or caused to be paid all
real estate taxes, income taxes, special assessments and other taxes, that are
due and payable on or before the Closing Date and, if not paid, could result in
a lien or charge against the Property and/or Seller.
7
<PAGE>
(p) No franchise, licensing and related software agreements with any hotel
"flags", are in full force and effect according to the terms set forth therein
and there are uncured defaults by Seller thereunder.
(q) Seller has the legal power, right and authority to enter into this
Agreement and the instruments referenced herein and to consummate the
transactions contemplated hereby.
(r) All requisite action (corporate) has been taken by Seller in
connection with entering into this Agreement, the instruments referenced herein
and the consummation of the transactions contemplated hereby, and no consent of
any partner, shareholder, creditor, investor, judicial or administrative body,
Governmental Authority or other party is required by Seller which has not been
obtained other that the consent of the Days Inn of America, Inc.
(s) This Agreement and all documents required hereby to be executed by
Seller are and shall be valid, legal, binding obligations of, and enforceable
against, Seller in accordance with their terms, subject only to applicable
bankruptcy, insolvency, reorganization, moratorium, or similar laws, or
equitable principles affecting or limiting the rights of contracting parties
generally.
(t) Neither the execution and delivery of this Agreement and the documents
referenced herein nor the consummation of the transactions contemplated herein
nor compliance with the terms of this Agreement and the documents referenced
herein conflict or result in the material breach of any terms, conditions or
provisions of, or constitute a default under, any bond, note or other evidence
of indebtedness or any contract, indenture, mortgage, deed of trust, loan,
partnership agreement, lease or other agreements or instruments to which Seller
or any of its affiliates is a party or affecting the Property or by which Seller
or any of its affiliates may be bound other that the contracts with Days Inn of
America, Inc.
(u) Except for any right, title or interest of third parties under the
Existing Exceptions and the Contracts, to the best of Seller's knowledge, no
person other than Seller and the hotel guests, has any right, title or interest
in or to the Property.
(v) Seller has not received notice of any pending or threatened
condemnation of all or of any portion of the Property, or notice of any
violation of zoning restrictions in respect of the Property from any
governmental authority or agency.
(w) Neither Seller, its principals, nor DGI, where applicable, have
received notice of any litigation, governmental or administrative proceedings or
arbitrations pending or threatened with respect to any of the Property.
(x) Seller has not entered into and does not know of any unrecorded rights
of first offer to purchase, rights of first refusal to purchase, purchase
options or similar rights or contractually required consents to transfer
pertaining to the Property which would be breached by this Agreement or the
consummation of the transaction provided for herein other that the consent of
the Days Inn of America, Inc..
(y) Seller has not received from any insurance company which carries
insurance on
8
<PAGE>
the Property, or any Board of Fire Underwriters, any notice of any defect or
inadequacy in connection with the Property or its operation which has not
been cured.
(z) Exhibit H contains a substantially complete and accurate list of the
names of all employees of Seller and Banter employed in connection with the
operation of the Business and their job classifications and wage rates,
including any fringe benefits, vacation pay and bonuses.
(aa) Neither Seller nor DGI maintains or contributes to any plan or
arrangement which constitutes an "employee pension benefit plan" as defined
in section 3(2) of the Employee Retirement Income Security Act of 1974
(ERISA) as amended, and is not obligated to contribute to or accrue or pay
benefits under any deferred compensation, profit sharing, bonus, pensions or
retirement funding agreement with respect to any persons employed in
connection with the Business or any component thereof.
(bb) Seller is not entitled to any further award, payment or
compensation by virtue of that certain action styled, The State of Nevada on
Relation of its Department of Transportation v. Banter, Inc., a Nevada Title
Company, Inc., a Nevada corporation, et al. Case No. A 378187 (the
"Condemnation").
7 REPRESENTATIONS AND WARRANTIES OF BUYER.
(a) Buyer represents, warrants and covenants to and with Seller that
Buyer has the right, power, legal capacity and authority to execute, deliver
and perform this Agreement. This Agreement constitutes the legal, valid and
binding obligation of Buyer.
8. RIGHT OF INSPECTION
[INTENTIONALLY DELETED].
9. ADDITIONAL UNDERTAKINGS OF SELLER
Seller shall perform the following undertakings:
(a) On the Closing Date, Banter shall execute, acknowledge and deliver to
Buyer a good and sufficient Grant, Bargain and Sale Deed (the "Deed") in proper
form for recording, conveying Seller's title to the Real Property to Buyer, free
and clear of all liens, leases encumbrances, covenants, conditions and other
matters affecting title created by Seller or its affiliates, except for the
Permitted Exceptions, and shall execute and acknowledge (as appropriate) and
deliver originals of all the Permits, Contracts, Property Documents, warranty
agreements and similar records relating to the Property and, as required by
Buyer, assignments of and/or bills of sale for each of the foregoing (including
appropriate indemnification to the extent provided for in this Agreement), and
all keys to the Property in Seller's possession.
(b) Seller shall give possession and occupancy of the Property to Buyer on
the Closing Date, subject only to the Contracts and the rights of any short term
guests or occupants of the Hotel, and in the event Seller shall fail to do so
and Buyer nonetheless elects in its sole discretion to purchase the Property,
Seller shall become and thereafter be a tenant by sufferance
9
<PAGE>
of Buyer.
(c) If requested to do so by Buyer, on the Closing Date Banter, and
if applicable any affiliate of Banter, shall execute and deliver to the Buyer,
or any title insurance company designated by it, an owner's affidavit, in the
customary form, with respect to the absence of claims which would give rise to
mechanics' liens and the absence of parties in possession of the Property other
than Seller's hotel guests and tenants pursuant to the terms of Contracts or
shall provide such other assurances as shall be reasonably required to enable
Buyer to obtain the title insurance policy to be issued pursuant to the title
commitment referred to herein.
(d) Banter shall deliver to Buyer an IRC Affidavit under Section 1445 of
the United States Internal Revenue Code, duly authorized and executed by Banter
("IRC Affidavit").
(e) Banter, DGI, AITD, and any other affiliate of Banter having an
interest in or at the Property shall deliver to Buyer an Assignment of
Intangible Property and Contract Obligations duly executed and acknowledged
in recordable form by Seller (the "Assignment").
(f) Seller shall deliver to Buyer such other instruments or documents
as may be reasonably required by Buyer or the Escrow Agent in order to
consummate the transactions contemplated hereby.
(g) Seller shall certify at Closing that all representations and
warranties set forth at Paragraph 6 are true and correct in all material
respects as of the Closing Date.
Escrow Agent shall deliver a conformed copy of the Deed and the original
IRC Affidavit and each of the other documents and instruments delivered into
Escrow by Seller as set forth above to Buyer simultaneously with the recordation
of the Deed. The Deed shall provide that it is to be returned to Escrow Agent
or Buyer following recordation. If the original Deed is returned to Escrow
Agent, Escrow Agent shall deliver the original Deed to Buyer, with a copy
showing all recording information to Seller at the address noted in Paragraph
15, below.
10. UNDERTAKINGS OF BUYER.
Buyer shall deliver or cause to be delivered to Escrow Agent on or before
the Closing Date the Closing Funds as required under Paragraph 4, above, and
such other instruments or documents as may reasonably be required by Seller or
the Escrow Agent in order to consummate the transactions contemplated hereby.
11. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER
The obligation of Buyer to purchase the Property shall be subject to the
following conditions (all or any of which may be waived, in whole or in part, by
Buyer):
(a) The representations and warranties made by Seller in Section 6 above
shall be certified true and correct in all material respects on and as of the
Closing Date.
(b) Seller shall have performed all covenants and obligations required by
this
10
<PAGE>
Agreement to be performed or complied with by Seller on or before the Closing
Date.
(c) On the Closing Date, (i) Seller's title to the Property shall be
merchantable, insurable, marketable, good of record and in fact, and
free-and-clear of all liens, mortgages, deeds of trust, encumbrances,
easements, leases, conditions and other matters affecting title other than
the Permitted Exceptions, and (ii) Buyer's title insurance company shall have
committed unconditionally to issue to Buyer or its designee, at standard
rates, an Extended ALTA Owner's Title insurance policy covering the Property,
including such endorsements as Buyer may reasonably require, in an amount at
least equal to the Purchase Price, insuring title to the Property subject
only to:
(i) The printed exceptions contained in the title company's owner's
policy of title insurance;
(ii) General and special taxes not then delinquent;
(iii) The Permitted Exceptions; and
(iv) Any matters created by or with the written consent of Buyer.
(d) On the Closing Date, Madeleine, LLC shall: (i) have consented to
provide acquisition financing to Buyer in the original principal amount of
$3,765,000; and (ii) have agreed to provide construction financing in the amount
of $1,700,000 under such terms as agreed upon by and between Buyer and
Madeleine, LLC ("Madeleine").
(e) On the Closing Date, the Property shall be zoned under the
applicable zoning ordinances of the State of Nevada as it is on the date of
this Agreement, and such zoning shall permit as a matter of right the present
and contemplated improvements and renovations and uses specifically including
an unlimited, unconditional nonrestricted gaming operating (as defined in
Nevada Revised Statutes Section 463.0177) of the Property.
(f) Seller shall deliver to Buyer written evidence of the termination
by Seller of the License Agreement by and between Cheyenne, as one party and
Days Inn of America, Inc. ("Days Inn"), as the other party, and all
amendments thereto and ancillary agreement in connection therewith
(collectively the "Franchise Agreement").
(g) Buyer shall have received from Ramada Franchise Systems, Inc.
("Ramada") a comfort letter, in a form acceptable to Buyer in its sole
discretion, such that Buyer and Madeleine shall have reasonable assurances as
to the award to Buyer of a franchise from Ramada under such terms as are
acceptable to Buyer and an estoppel as to any defaults, claims, causes of
action or damage existing or which may exist to the benefit of Days Inn
against Seller.
(g) Representatives of both Purchaser and Seller shall have completed a
walk through of the Property and jointly executed Schedule B-1 of all
Personal Property to be delivered by Seller to Purchaser in "as is" condition
as of the Closing Date.
(h) Except as set forth in Exhibit G, Seller shall have delivered to
Purchaser evidence
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of termination of the Contracts, including but not limited to that certain
management agreement for the Property.
(i) Except as set forth in Exhibit G, both Seller and the Manager of
the Property, each on their respective behalf, shall have delivered to
Purchaser a certification as to the unavailability of such Property Documents
which were not delivered to Purchaser.
(j) As of the Closing Date, Seller, at its sole cost and expense, shall
have delivered to Purchaser, for inspection, review and photocopying, true,
correct and complete copies of all of the Property Documents. In the event a
document identified as a Property Document is not in possession of Seller or the
Property's manager then both Seller, to the best of its knowledge, and the
Property Manager each on their respective behalf shall certify to Purchaser of
the unavailability of such documents.
12. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER.
Seller's obligation to consummate the transactions contemplated hereby is
subject to the satisfaction or waiver by Seller of the conditions set forth
below before the dates specified below. The following conditions are for the
benefit of Seller and can be waived only by Seller:
(a) Buyer has timely delivered into Escrow the Closing Funds.
(b) Buyer shall have performed all obligations and covenants required
hereunder to be performed by Buyer on or before the Closing Date.
(c) Buyer's representations and warranties contained herein and in any
other documents furnished to Seller are true and correct as of the Closing Date.
If any of the above conditions are not satisfied at or prior to the Closing
for a reason other than a default by Seller under this Agreement, Seller may
terminate this Agreement by written notice to Buyer and Escrow Agent, whereupon
Escrow shall be canceled.
13 CLOSING
(a) The Closing shall take place on or before April 30, 1998 (the "Closing
Date"). Closing shall take place at the office of the Escrow Agent or at such
other location as Buyer and Seller shall designate jointly. The Escrow Agent
shall conduct the Closing.
(b) The delivery to the Escrow Agent of the Purchase Price, the executed
deed of conveyance, bill of sale, assignments and all other documents and
instruments required to be delivered by either party by the terms of this
Agreement shall be deemed to be a good and sufficient tender of performance of
the terms hereof. Upon receipt of all referenced Closing Documents and the cash
portion of the Purchase Price, the Escrow Agent shall be authorized to proceed
to record the documents evidencing this transaction. The date of recordation of
this transaction shall be the "Recordation Date".
(c) The following items of income and expense shall be adjusted as of 6:00
o'clock
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a.m. on the Recordation Date:
(i) Real estate and personal property taxes with respect to the
Property.
(ii) Fuel, water and sewer service charges and charges for oil,
electricity, telephone and all other public utilities.
(iii) Rental income from hotel guests.
(iv) All charges payable pursuant to the Contracts.
(v) Buyer and Seller shall diligently attempt to agree upon
all such amounts no later than one (1) business day prior to the Closing
Date. If meters measure the consumption of water, gas and/or electric
current at the Property by Seller, Seller shall attempt to cause such meters
to be read on the day immediately preceding the Recordation Date and shall
pay all utility bills resulting therefrom promptly upon receipt thereof. In
making the adjustments required by this sub-section, Seller shall receive
credit for all prepaid deposits made by Seller and expenses and similar items
that are due on or after the Recordation Date, and Seller shall be charged
with any unpaid accrued charges for the period prior to the Recordation Date.
No adjustment shall be made for short term hotel guest room charges and
other charges that are past due as of the Recordation Date. In the event
that amounts are collected by Buyer from a hotel guest whose obligations are
past due as of the Recordation Date, Buyer shall first apply such sum(s)
against the amount then currently due Buyer, and then pay to Seller, from
such collected funds, the balance owed Seller for the period prior to the
Recordation Date.
(vi) Buyer shall receive a transfer of funds or credit against
the Purchase Price for the amount of the Advanced Guest Deposits as set forth
on Exhibit "I" attached hereto and incorporated herein, held by Seller as of
the date which is one (1) day prior to the Closing Date.
(vii) Seller shall receive a credit at Closing from Buyer not
to exceed $100,000 for those amounts actually advanced by Seller and properly
documented by invoices marked paid, cancelled checks and lien releases
(conditioned upon receipt of payment where applicable) for labor, materials
and building permits issued in connection with those certain pending
improvements at the Real Property (the "Building Expenditures") solely to the
extent, however, that those Building Expenditures, all of which are more
fully set forth on Exhibit F, attached hereto and incorporated herein, are
capitalizable in accordance with Generally Accepted Accounting Principles.
(d) CLOSING COSTS.
(i) Seller shall pay:
a. One-half (1/2) of the Escrow fees;
b. The cost of documentary transfer taxes;
c. The cost of issuing Buyer's title policy in CLTA Standard
Form;
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and
d. The cost of any other obligations of Seller hereunder.
(ii) Buyer shall pay:
a. One-half (1/2) of the Escrow fees;
b. The cost to record the Deed;
c. Any additional premium charged for issuance of an ALTA
Extended Form and any endorsements to Buyer's title policy;
and
d. The cost of any other obligations of Buyer hereunder.
14. TERMINATION
(a) If (i) any of the representations and warranties made by the Seller in
Section 6 be materially inaccurate or incorrect, (ii) the Seller shall fail to
perform any of the covenants or agreements to be performed by the Seller under
this Agreement, or (iii) the Buyer shall be relieved of its obligation to
purchase the Property by operation of Section 11, then, in any such event, the
Buyer, in its sole and absolute discretion, shall have the right either (A) to
extend the Closing Date for a period of not more than one week to allow Seller
to satisfy conditions specified in Section 11; (B) to terminate this Agreement
by giving written notice to the Seller and the Escrow Agent; (C) in lieu of
terminating this Agreement, to seek specific performance of this Agreement. In
the event of (A) - (C) above, Buyer reserves all rights it may have to seek
damages incurred by it.
(b) (i) If all conditions precedent to the Buyer's obligation to
purchase the Property have been satisfied and the Buyer defaults in purchasing
the Property on the Closing Date as required by this Agreement, Seller's
obligations to sell this Property under this Agreement shall terminate and
Seller shall have the right to pursue all legal and equitable remedies to
recover actual and direct damages but not special, indirect, punitive,
consequential or lost profits that may be available to Seller as a result of
Buyer's default.
(ii) In the event, however, Buyer and Seller each discharge their
obligations hereunder and the Settlement Agent does not break escrow within
seven (7) business days from the Closing Date, either party may terminate this
Agreement, the parties returned to their position status quo ante and neither
party shall have any further liability or rights against each other for damages
of any kind, all such claims being expressly waived.
15. CONDEMNATION AND DAMAGE BY FIRE OR OTHER CASUALTY
[INTENTIONALLY DELETED].
16. BROKERS.
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Buyer and Seller each represent to the other that they have not dealt with any
real estate broker, agent or person who may be entitled to a commission or fee
or account of this Agreement, and Buyer and Seller each indemnifies and agrees
to defend and hold the other party harmless from and against any loss, costs,
liability and expense, including reasonable attorneys' fees, which may be
incurred in the event its representations herein prove incorrect.
17. FOREIGN PERSON.
If Seller is not a "foreign person," as defined in the Federal Tax Law,
then at the Closing, Seller will deliver to Buyer a certificate so stating, in a
form complying with the Federal Tax Law. If Seller is a "foreign person" or if
Seller fails to deliver the required certificate at the Closing, then in either
such event the funding to Seller at the Closing will be adjusted-to the extent
required to comply with the withholding provisions of the Federal Tax Law; and
although the amount withheld will still be paid at the Closing by Buyer, it will
be retained by the Escrow Agent for delivery to the Internal Revenue Service,
together with the appropriate Federal Tax Law forwarding forms (and with copies
being provided both to Seller and to Buyer).
18. ENTIRE AGREEMENT.
No change or modification of this Agreement shall be valid unless the same
is in writing and signed by the parties hereto. No waiver of any of the
provisions of this Agreement shall be valid unless in writing and signed by the
party against whom it is sought to be enforced. This Agreement contains the
entire agreement between the parties relating to the purchase and sale of the
Property, all prior negotiations between the parties are merged in this
Agreement and there are no promises, agreements, conditions, undertakings,
warranties or representations, oral or written, express or implied, between them
other than as set forth in this Agreement.
19. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
The representations, warranties, covenants, agreements and indemnities set
forth in or made pursuant to this Agreement shall remain operative and shall
survive the Closing under this Agreement and the execution and delivery of the
deed and other documents hereunder and shall not be merged therein, regardless
of any investigation made by or on behalf of any party.
20. BENEFIT AND BURDEN.
Seller may not assign its rights and obligations under this Agreement prior to
the Closing Date without first obtaining the prior written consent of Buyer.
All terms of this Agreement shall be binding upon, and inure to the benefit of,
the parties hereto and their respective legal representatives, successors and
assigns. If Buyer assigns its rights under this Agreement, Buyer shall promptly
deliver an executed copy of the instrument of assignment to Seller.
21. GOVERNING LAW.
This Agreement concerns property located in the County of Clark, State of
Nevada, and shall be construed and enforced in accordance with the laws of the
State of Nevada.
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<PAGE>
22. NOTICES.
All notices, requests, demands and other communications hereunder shall be
in writing and shall be deemed to have been duly given if delivered personally
or if deposited in the United States mail, properly addressed and postage
prepaid or if delivered to Federal Express or other recognized overnight
delivery service, (i) if to Seller, c/o Banter, Inc., 1055 East Tropicana
Avenue, Suite 200, Las Vegas, Nevada 89119, with a copy to Philip Murphy,
Esquire, 3900 Paradise Road, Suite 283, Las Vegas, Nevada 89109; (ii) if to
Buyer, c/o MTR Gaming Group, Inc., Attn: Edson R. Arneault, Route 2, South, P.O.
Box 358. Chester, West Virginia, with a copy to James S. Mace, Esquire, Gordon &
Silver, Ltd. 3800 Howard Hughes Parkway, 14th Floor, Las Vegas, Nevada 89109 and
Louis M. Aronson, Esquire, Ruben & Aronson, LLP, 3299 K Street, N.W., Suite 403,
Washington, D.C. 20007; or (iii) if to Escrow Agent: Nevada Title Company, 3320
West Sahara Avenue, Suite 200, Las Vegas, Nevada 89102; or (iv) at such other
address as may be given by either party to the other party by notice in writing
pursuant to provisions of this Section.
23. COLLECTION OF ACCOUNTS RECEIVABLE.
(a) Seller will retain all accounts receivable relating to the Hotel
accrued as of the Closing (including past due amounts), and shall have the right
to collect the same. The accounts receivable shall include, without limitation,
unpaid room, food and beverage charges, unpaid telephone charges; unpaid valet
charges, unpaid charges for other services or merchandise; amounts owed to
Seller from credit cards receipts, whether or not such credit card receipts have
been delivered by Seller to the credit card companies; and refunds, prepayments,
and like returns attributable to the period prior to the Closing Date.
(b) All accounts receivable so retained by Seller are referred to as
"Seller's Accounts Receivable." If any instruments representing payment of any
Seller's Accounts Receivable come into the possession of Buyer, Buyer shall
immediately deliver such instruments to Seller. All moneys collected by Buyer
from Seller's Accounts Receivable shall be accounted for and be transmitted to
Seller on or before the first (1st) and fifteenth (15th) days of each month with
a statement showing the respective collections. All moneys collected by Buyer
from Seller's Accounts Receivable shall be accounted for and be transmitted to
Seller on or before the first (1st) and fifteenth (15th) days of each month with
a statement showing the respective collections. All moneys collected from each
payor of Seller's Accounts Receivable shall be applied in the reverse order of
the age of the outstanding accounts receivable of that payor from the first to
new order of the age of the outstanding accounts receivable of that payor from
the most recent to the oldest, except where, due to a dispute, a particular
payment is designated by the payor to be applied otherwise, in which case such
specified application shall control. Buyer shall be accountable only from
amounts actually received, and shall have no responsibility for, or duty to
inquire into, any amounts deducted by the respective payers from amounts due
Seller as service charges, offsets or otherwise. Buyer shall not be required to
take any action to enforce the collection of Seller's Accounts Receivable. A
charge of fifteen percent (15%) of the amount collected shall be made by Buyer
to Seller for handling the collection of any Seller's Accounts Receivable
requested by Seller. Buyer shall use reasonable efforts to keep proper records
showing the results of collection of Seller's Accounts Receivable, which records
shall be open to inspection by Seller or its agents at all reasonable times.
Buyer shall not collect or be authorized
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<PAGE>
to collect any Accounts Receivable of Seller unless buyer is specifically
requested to do so by Seller. Seller may not institute any action to enforce
collection in any court of law to collect any unpaid Seller's Accounts
Receivable absent the prior written consent of Buyer which may be withheld in
Buyer's sole and absolute discretion. The provisions of this subparagraph
shall survive the Closing.
24. INDEMNIFICATION.
(a) Each party shall indemnify and hold the other party harmless from and,
at the indemnifying party's expense, defend the other party against any and all
claims, demands, causes of action, liabilities, damages, losses, costs and
expenses, including, without limitation, reasonable attorneys' fees of the
indemnified party's choice (collectively, "Claims") which (whether insured
against or not) may be asserted against, incurred or suffered by the indemnified
party from time to time by reason of or in connection with:
(i) The inaccuracy or breach of any of the representations,
warranties or covenants made by the indemnifying party herein; or
(ii) Any transaction, contract, act, activity, occurrence, or event
relating to the Property, the Franchise Agreement or the Business, or the use
and operation of the Property, which transaction, contract, act, activity,
occurrence or event occurred with respect to Seller as the indemnifying party
prior to the Closing (except to the extent such liabilities were charged to
Seller through the Section concerning prorations and except to the extent
arising under any of the Contracts), or with respect to Buyer as the
indemnifying party after the Closing.
(b) Seller shall indemnify, defend, and hold harmless Buyer from and
against all claims against Buyer relating to labor or employment claims of, or
liabilities or obligations to, present and former employees of Seller
(collectively, "Employee Claims") provided, however, that nothing herein is
intended or shall construed as an indemnity for any liabilities or obligations
arising out of Buyer's employment or discharge of any persons on or after the
Closing Date. By way of illustration but not limitation, Employee Claims shall
include claims, liabilities, or obligations relating to salaries, wages, minimum
wages, compensation, overtime pay, holiday pay, vacation pay, raises, bonuses,
employee benefits, severance pay, grievances under the union contracts, unfair
labor practice charges before the National Labor Relations Board workers'
compensation, WARN Act, FICA, ERISA obligations, disability, unemployment
insurance, breach of employment contracts, whether sounding in contract or tort,
wrongful discharge, safety and health, and employment discrimination, including,
without limitation, claims before the Equal Opportunity Commission, Office of
Federal Contract Compliance Program and the Department of Labor.
(c) Seller shall indemnify, defend and hold harmless Buyer from and
against all claims against Buyer arising from or relating to any contract or
commitment of Seller.
(d) The indemnity agreements under this Section shall survive the Closing.
(e) Each of the parties shall promptly notify the other of the existence
of any loss, claim, demand or other matter to which the foregoing
indemnification obligations may apply and
17
<PAGE>
give the indemnifying party a reasonable opportunity to defend the same at
the indemnifying party's own expense and with counsel of the indemnifying
party's own selection; provided that the indemnified party or parties shall
at all times also have the right to fully participate in the defense at its
or their own expense. If the indemnifying party shall fail to defend within
a reasonable time, the indemnified party shall have the right, but not the
obligation, to undertake the defense of, and to compromise and settle
(exercising reasonable business judgment), the claim or other matter on
behalf, for the account and at the risk of the indemnifying party, provided
the indemnifies party obtains a release for the benefit of the indemnifying
party. If the claim is one that cannot by its nature be defended solely by
one party, the other parties shall make available all information and
cooperation that any party may reasonably request. Unless an indemnifying
party fails or refuses to defend a claim or action, an indemnified party
shall not be entitled to any attorney's fees for services of the indemnified
party's counsel in connection with the matter.
25. ATTORNEY'S FEES.
If it shall be necessary for either Buyer or Seller to employ an attorney
to enforce or defend its rights under this Agreement, the non-prevailing party
shall reimburse the prevailing party for its reasonable attorneys' fees and
costs of suit.
26. COUNTERPARTS.
This Agreement may be executed simultaneously in one or more counterparts,
each of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument. The parties further acknowledge that
facsimile signatures may be accepted in lieu of originals on the signature pages
of this Agreement and any related documents necessary for closing and agree that
each such facsimile signature shall be replaced promptly with the original as
soon as practicable following Closing, time being of the essence.
27. BENEFIT AND BURDEN
The Seller may not assign its rights and obligations under this Agreement
prior to the Closing Date without first obtaining the prior written consent of
the Buyer. All terms of this Agreement shall be binding upon, and inure to the
benefit of, the parties hereto and their respective legal representatives,
successors and assigns. If the Buyer assigns its rights under this Agreement,
the Buyer shall promptly deliver an executed copy of the instrument of
assignment to the Seller.
28. RISK OF LOSS
Except as otherwise expressly provided in Section 15 above, the risk of
loss or damage to the property by fire or other casualty shall be borne by
Seller until recordation of the deed of conveyance to Buyer.
29. GOVERNING LAW
This Agreement concerns property located in the State of Nevada, and shall
be construed
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<PAGE>
and enforced in accordance with the laws of the State of Nevada.
30. MISCELLANEOUS
(a) Time is of the essence with respect to all provisions of this
Agreement. If the date on which either Buyer or Seller is required to take
action under this Agreement is not a Business Day, the action shall be taken on
the next succeeding Business Day.
(b) The captions of the various sections and paragraphs of this Agreement
have been inserted only for the purpose of convenience; such captions are not a
part of this Agreement and shall not be deemed in any manner to modify, explain,
enlarge or restrict any of the provisions of this Agreement.
(c) Each party to this Agreement has been afforded an opportunity to have
this Agreement reviewed by his respective counsel. The normal rule of
construction to the effect that any ambiguities are to be resolved against the
drafting party shall not be employed in the interpretation of this Agreement or
of any amendments or exhibits to this Agreement.
(d) Seller shall not have any liability under this Agreement for use or
depletion of Operating Supplies in the normal course of business or for
reasonable wear and tear to the Improvements or Personal Property subsequent to
Seller's execution of this Agreement.
(e) Each party's representations and warranties made herein are material
to the other party's decision to enter into this Agreement and are being relied
upon by the other party in undertaking its obligations hereunder. Except to the
extent set forth in writing prior to the Closing the representations of each
party made herein shall be deemed made again as of the Closing without the
necessity of further documentation. The representations and warranties of each
of the parties set forth above shall survive the Closing and the delivery of the
Deed. Seller shall not have any liability to Buyer if a representation of
Seller which was true as of the date of this Agreement is not true as of the
Closing Date as a result of: (i) acts or omissions of Buyer or third parties
after the execution of this Agreement by Seller, or (ii) circumstances beyond
the reasonable control of Seller, so long as Seller notifies Buyer of the
circumstances identified in (i) and (ii) herein prior to the Closing.
(f) Seller does not warrant that any consent required as a condition to
Seller's authority to execute, deliver or perform this Agreement will be
obtained at or prior to the Closing, it being understood that the conditions to
the respective obligations of Buyer and Seller speak for themselves and that
neither Buyer or Seller is purporting hereunder to warrant or represent that any
condition beyond its control will be satisfied. The representations and
warranties of Seller set forth herein are hereby qualified by reference to the
right of the Lender to refuse to consent to the transfer of the Property to
Buyer.
(g) Except for the matters set forth in Section 6 hereof, Buyer
acknowledges that the Seller is not making and has not made any express or
implied representation or warranty concerning the Property or any part or
component thereof, including, without limitation, any
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<PAGE>
representation or warranty concerning the past, present or prospective
revenues, expenses, income or results of operation thereof; the past or
present uses thereof or the prospective uses which can be made thereof; the
past, present or prospective value or profitability thereof; the past,
present or prospective zoning, subdivision, building or other governmental
regulations or controls relating thereto; or any other past, present or
prospective matter whatsoever with respect thereto.
IN WITNESS WHEREOF, Buyer and Seller have signed this Agreement on the
day and year first above written.
BUYER:
SPEAKEASY GAMING OF NEVADA, INC.
By: /s/ Edson R. Arneault
--------------------------
Name: Edson R. Arneault
Its: President
SELLERS:
BANTER, INC.
By: /s/ Christopher S. Conboy
----------------------------
Christopher S. Conboy
Assistant Vice President
20
<PAGE>
DGI and AITD hereby acknowledge receipt and delivery of the foregoing
Agreement and are executing this Agreement below for the limited purpose of
joining in the representations and warranties set forth in Sections:
(a) 5(c), 5(g), 5(m), 5(v), 5(y), and
(b) _________________________________
DESERT GAMING, INC., A NEVADA CORPORATION
By: /s/ Christopher S. Conboy
----------------------------
Christopher S. Conboy
Assistant Vice President
AMERICAN INTERNATIONAL TRADE AND
DEVELOPMENT, INC., A NEVADA CORPORATION
By: /s/ Christopher S. Conboy
----------------------------
Christopher S. Conboy
Assistant Vice President
<PAGE>
EXHIBIT 10.7
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT ("Agreement") is made and entered into this 30th
day of April, 1998 by and between SPEAKEASY GAMING OF RENO, INC., a Nevada
corporation ("Purchaser"), and RENO HOTEL, LLC, a Delaware limited liability
company ("Seller").
RECITALS
A. Seller is the owner of improved real property commonly known as the
Reno Hotel located at 200 East 6th Street, at Lake Reno, in the City of Reno,
County of Washoe, State of Nevada more particularly described in EXHIBIT A
attached hereto and incorporated herein including: (i) all right, title and
interest of Seller in and to any easements, covenants and other rights
appurtenance to such land; and (ii) all right, title and interest of Seller in
and to any land lying in the bed of any existing dedicated street, road, avenue
or alley, open or closed, in front of or adjoining such land (the "Real
Property") together with buildings containing 250 guest rooms, a restaurant,
bar, banquet rooms and all other improvements situated on the Real Property
including all existing parking spaces (collectively the "Improvements").
B. A hotel, restaurant, bar and related businesses (collectively, the
"Business") are operated on the Real Property. The Real Property is furnished
and equipped with certain furniture, furnishings, fixtures, kitchen, televisions
and other equipment and non-consumable items (collectively "FFE") and an
assortment of operating supplies consisting of housekeeping and laundry
supplies, food and beverage inventories, paper and accounting supplies and
similar consumable items (collectively, the "Operating Supplies").
C. Seller is the sole owner of the Real Property, the Improvements, the
FFE and the Operating Supplies. The FFE and the Operating Supplies are
collectively called the "Personal Property." Attached hereto and incorporated
herein, as Exhibit B-1 is Seller's inventory of the Personal Property. Attached
hereto and incorporated herein, as Exhibit B-2 is Seller's inventory of any
items of personal property leased by Seller from third parties and not owned by
Seller (the "Contract Equipment"). No representation is given, express or
implied, under this Agreement or any Exhibit or schedule attached or to be
attached hereto that Seller is the owner of the Contract Equipment. Seller
acknowledges that the Personal Property consists of those items set forth in
Exhibit B-1 and that Exhibits B-1 and B-2 set forth all items of personal
property used at the Real Property for the operation of the Real Property and
Improvements and the operation of the Business and specifically excludes any
gaming device as defined in Nevada Revised Statutes Section 463.0155 ("Gaming
Device").
D. The "Intellectual Property" consists only of such rights, if any, as
Seller may possess to the name "Reno Hotel." Seller will assign rights of
Seller in or to the Intellectual Property to Purchaser at the Closing.
E. The Real Property, Improvements, Personal Property and Intellectual
Property, Tenants Security Deposits (as defined below), Contracts (as defined
below), Leases (as defined below), Permits (as defined below), and all utility
and other deposits including the advanced
<PAGE>
payments set forth on Exhibit F attached hereto and incorporated herein (the
"Advanced Deposits") and warranties relating to the ownership and operation
of the Business are collectively referred to as the "Property." The operation
of the Business is sometimes called the "Hotel" in this Agreement. The
Property does not include any of the following items: Gaming Devices; cash;
coins (including coins in slot and vending machines); bank accounts or
accounts receivable.
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth, and of other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties agree as follows:
1. DEFINITIONS
(a) For all purposes of this Agreement, the following terms shall have the
respective meanings set forth below:
"Americans With Disabilities Act" means 42 USC Section 12101, et seq. and
all laws or regulations from time to time applicable to the Property governing
use, access and accommodations.
"Business Day" means any day other than a Saturday, Sunday, or other day on
which commercial banks are authorized or required to close under the laws of the
State of Nevada.
"Closing" shall mean the closing of the purchase and sale of the Property
in accordance with Section 11(a) hereof.
"Closing Date" shall mean the date of Closing provided for in Section 11.
"Contracts" means all contracts, agreements and obligations currently in
force relating to the Property, including, without limitation, all sale,
management, construction, leasing, insurance, commission, architectural,
engineering, operating, employment, service, supply and maintenance agreements.
"Effective Date" means the date on which both Seller and Purchaser have
executed this Agreement.
"Existing Exceptions" means a lien against the Property for real estate
taxes not yet due and payable and those other matters affecting title to the
Property as are set forth on Exhibit D attached hereto.
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"Federal Tax Law" means the Federal Foreign Investment in Real Property Tax
Act of 1980 and the 1986 Tax Reform Act, as amended.
"Governmental Authorities" shall mean any governmental or
quasi-governmental body or agency having jurisdiction over the Property
and/or Seller, including, without limitation, the State of Nevada, City of
Reno, Nevada and Washoe County, Nevada.
"Governmental Regulation" shall mean any laws, ordinances, rules,
requirements, resolutions, policy statements and regulations (including,
without limitation, those relating to land use, subdivision, zoning,
environmental, toxic or hazardous waste, occupational health and safety,
water, earthquake hazard reduction, and building and fire codes) of the
Governmental Authorities bearing on the construction, alteration,
rehabilitation, maintenance, use, operation or sale of the Property.
"Hazardous Materials" means toxic materials, hazardous waste, hazardous
substances [as these terms are defined in the Resource Conservation and Recovery
Act of 1976, as amended (42 U.S.C. 6901, et seq.), in the Hazardous Materials
Transportation Act, 49 U.S.C. 1802 and/or in the Comprehensive Environmental
Response Compensation and Liability Act of 1980, as amended (42 U.S.C. 9601, et
seq.)], asbestos or asbestos-related products, oils, petroleum-derived
compounds, radon, PCB'S, gas or oil storage tanks, or other hazardous materials
or pesticides as from time to time identified in any laws or regulations from
time to time applicable to the Property.
"Insurance Company" shall mean United Title of Nevada.
"Leases" means all leases or other agreements permitting the use or
occupancy of space on, under, over or about the Property, including all
amendments and exhibits thereto and assignments thereof.
"Permits" means all evidence in the possession of Seller that the present
structure, use, operation and maintenance of the Property is authorized by, and
in compliance with, Governmental Regulations including, but not limited to, true
and correct legible copies of any or all certificates of occupancy (or the
equivalent), any or all permits, licenses and other authorizations issued with
respect to the Property and gaming activities conducted on or permitted thereon,
and each portion of space in the Property occupied by individual Tenants or
hotel guests.
"Permitted Exceptions" shall mean those matters affecting title to the
Property set forth
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on Exhibit E attached hereto and incorporated herein.
"Person" means an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture, limited
liability company, limited liability partnership, governmental authority, or
other entity of whatever nature.
"Personal Property" means all personal property owned or used by Seller in
connection with the operation or maintenance of the Hotel excluding any gaming
device and alcoholic beverages.
"Property Documents" means the items specified in Section 2 (b) below.
"Rent Roll" means a rent roll dated not earlier than one month before the
date hereof listing for each Tenant, hotel guest and rents (including, without
limitation, minimum rents and additional rents, pass-through obligations, room
charges, movie charges and long distance phone charges).
"Studies" means title examinations; surveys; architecture, financial,
financing, economic, marketing, engineering, and other tests, including test
borings, inspections, investigations, reviews, and/or other similar studies.
"Tenant" means any Person or hotel guest (short or long term) entitled to
occupy or use any portion of the Property pursuant to a Lease, or any similar
written agreement.
(b) Whenever required by the context of this Agreement, the singular shall
include the plural and the masculine shall include the feminine and vice versa.
2. PROPERTY DOCUMENTS
(a) [INTENTIONALLY DELETED]
(b) The Property Documents constitute the following items to the extent
in Seller's or its Property Manager's possession:
(i) The latest ALTA survey, if any, prepared on behalf of
Purchaser, showing all improvements, rights of way, easements, dedications;
plats; site plans; and certified as-built building plans, all relating to the
Property.
(ii) All architectural drawings, plans and specifications,
appraisals, zoning,
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and access documents relating to the Property.
(iii) The Permits.
(iv) Copies of all casualty, liability and other insurance
policies presently in effect with respect to the Property.
(v) Cash operating statements of income, operating expense and
capital expense for the Property which have been prepared in the normal course
of business for the preceding calendar year (1997) and the months of January,
1998, February, 1998 and March, 1998 and substantially in accordance with
generally accepted accounting principles.
(vi) All assessments and bills for real estate, personal property
and any other taxes affecting the Property and for special assessments for the
current and the preceding calendar years, and a summary of any contested tax
assessments.
(vii) True, correct and complete copies of the Leases, including
all amendments, formal or informal, side agreements, concession arrangements or
other matters related thereto, all financial/credit information available for
the Tenants including statements for Tenant deposit accounts, and the Rent Roll.
(viii) True, correct and complete copies of the Contracts and a
schedule of such Contracts, which schedule, upon receipt, shall be attached
hereto as Exhibit G, and incorporated herein.
(ix) Seller's existing title insurance policy for the Property,
all amendments, endorsements and exhibits thereto.
(x) A list of all threatened, pending or ongoing claims or
lawsuits and all outstanding judgments against Seller, or to the best of
Seller's knowledge, relating to the Property.
(xi) Copies of all engineering and physical inspection reports
related to the Property, including, but not limited to, any roof or
structural inspection reports or environmental inspection/impact reports,
soil reports or reports relating to Hazardous Materials and the Americans
with Disabilities Act.
(xii) A copy of all business and professional license/tax returns
filed by Seller for the last fiscal year and copies of any correspondence
from Governmental Authorities related
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to such returns, and a summary of any contested tax assessments.
(xiii) As more fully set forth in Exhibit B-1, a list of Personal
Property (including, to the extent in Seller's possession, copies of all
warranties and guarantees related thereto) used by or on behalf of Seller
in-connection with the operation and maintenance of the Property, plus a copy
of any roof warranty or other warranty in effect with respect to any part of
the Property.
(xiv) Copies of any and all insurance certificates pertaining to the
Property.
(xvi) Copies of all operational and correspondence files.
(xvii) A list of all employees presently employed in the conduct of
the Business, including all supporting immigration and naturalization
information as may be required by Governmental authorities, which, upon
receipt, shall be attached hereto as Exhibit H.
3. FEASIBILITY PERIOD [INTENTIONALLY DELETED].
4. PURCHASE AND SALE OF PROPERTY
(a) On the Closing Date, and subject to the terms and conditions of this
Agreement, Seller agrees to sell and convey, and Purchaser agrees to acquire the
Property. As a condition to Purchaser's obligation to close, title to the
Property shall be free and clear of all liens, encumbrances, easements,
covenants, conditions and other matters affecting title, except for the
Permitted Exceptions, and shall be good of record and in fact merchantable and
insurable at standard rates.
(b) Seller agrees that it will, at any time and from time-to-time after
the Closing Date, upon and at the expense of the Purchaser, do, execute,
acknowledge or deliver, all such further acts, deeds, assignments, conveyances
and assurances as may reasonably be required for the better conveying,
transferring, assigning, assuring and confirming the Property to Purchaser.
5. PURCHASE PRICE AND TERMS OF PAYMENT
(a) Subject to any Closing adjustments, the Purchase Price shall be Eight
Million Dollars ($8,000,000.00), payable at Closing.
(b) On the Closing Date, Purchaser will cause a federal wire transfer of
funds to be
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made to the Insurance Company, as applicable, in the amount indicated on the
Settlement Statement approved by Purchaser and Seller, which amount shall be
disbursed in accordance with the joint instructions of Purchaser and Seller.
6. RIGHT OF INSPECTION
Purchaser shall indemnify, defend and hold harmless Seller and Seller's
members, principals, agents and representatives in connection with Purchaser's
due diligence activities and Studies at or around the Property occurring prior
to the Closing Date and as a condition of Seller's obligation to close,
Purchaser shall have delivered to Seller evidence of comprehensive general
liability insurance from a reputable insurance company in an amount not less
than $2,000,000 per occurrence which covers Purchaser's due diligence activities
prior to Closing.
7. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser as follows:
(a) To Seller's knowledge: (i) Seller is the record owner of fee simple
title to the Property subject only to the Existing Exceptions; and (ii)
Seller is not in default under or in violation of the terms of any such
Existing Exception.
(b) Seller has not made, and prior to the Closing will not make, any
material commitments to any Governmental Authorities, utility company, school
board, church or other religious body, or any homeowner or homeowners'
association, or to any other organization, group or individual, relating to
the Property which would impose any obligation on Purchaser, or its
successors or assigns, after the Closing to make any contributions of money,
dedications of land or grant of easements or right-of-way, or to construct,
install or maintain any improvements of a public or private nature on or off
the Property.
(c) Seller has received no written notice of violations of law or
municipal ordinances, orders or requirements now existing with respect to the
Property.
(d) Pursuant to written notification by Purchaser to be attached hereto as
Exhibit G-1 and incorporated herein by reference and except as otherwise
provided in Exhibit G and G-1 (which shall collectively be referred to as
Exhibit G), on the Closing Date, there will be no contract or agreement in
effect for the management or leasing of the Property, or for other services,
which cannot be terminated on 30 days notice.
(e) All bills and claims for labor performed and materials furnished to or
for the
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benefit of the Property for all periods prior to the Closing Date have been
(or prior to the Closing Date will be) paid in full or will be adequately
bonded off or Seller will make arrangements to pay such bills and claims in
such a manner that Purchaser shall be provided adequate evidence that no such
claims will survive Closing and be enforceable against Purchaser or the
Property, and there are no actual or potential mechanics' liens or
materialmen's liens (whether or not perfected) on or affecting the Property.
(f) Seller has not received any written notice that there are any wetlands
of any nature located on the Property.
(g) Seller has not received any written notice from any governmental
authority that the Property is in violation of any Governmental Regulation
including without limitation the Americans with Disabilities Act.
(h) Seller has not received any notice that there are any special
assessments pending, noted or levied against the Property, and, to the best of
its knowledge, there are none, nor is there any proposed increase in the
assessed value of the Property.
(i) Except as set forth in that certain Phase I Environmental Report of
Broadbent & Associates, Inc. dated March 6, 1998, Seller has received no notice
that there are any Hazardous Materials located on or in the Property, including
the surface, soil or subsurface of the Property in violation of any
Environmental law. Seller has received no written notice from a Governmental
Authority of any violation of any law, ordinance, order or regulation of any
Governmental Authority having jurisdiction over Hazardous Materials.
(j) Seller is a "United States person" within the meaning of Sections
1445(f)(3) and 7701(a)(3) of the Internal Revenue Code of 1986, as amended.
(k) Exhibit G attached hereto, which represents a true and complete
schedule of the Contracts, all of which shall be terminated by the Closing,
except as set forth in Exhibit G. There shall not be any continuing
obligations of any nature whatsoever imposed on Purchaser following Closing
under any agreements existing prior to the Closing (other than obligations
arising after Closing pursuant to the Leases and those Contracts that
Purchaser accepts). To the extent any payments may be due and payable in
connection with the termination of any such agreements, Seller either shall
make such payments at or prior to Closing or shall escrow an amount equal to
such obligations with the Escrow Agent at Closing, except as set forth in
Exhibit G.
(l) The operating statements for the Hotel delivered by Seller to
Purchaser pursuant
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to Section 2(b)(v) hereof are true and correct copies of those delivered to
Seller.
(m) No attachment, execution proceedings, assignments for the benefit of
creditors, insolvency, bankruptcy, reorganization, or other proceedings are
pending or threatened against Seller or its managing member.
(n) Seller has paid or caused to be paid or will arrange at Closing to pay
all real estate taxes, income taxes, special assessments and other taxes, that
are due on or before the Closing Date which, if not paid, could result in a lien
or charge against the Property.
(o) Seller has the legal power, right and authority to enter into this
Agreement and the instruments referenced herein and to consummate the
transactions contemplated hereby.
(p) All requisite action (corporate, partnership or otherwise) has been
taken by Seller and its managing member or managers in connection with entering
into this Agreement, the instruments referenced herein and the consummation of
the transactions contemplated hereby, and no consent of any member, manager,
judicial or administrative body, Governmental Authority or third party is
required which has not been obtained.
(q) This Agreement and all documents required hereby to be executed by
Seller are and shall be valid, legal, binding obligations of, and enforceable
against, Seller in accordance with their terms, subject only to applicable
bankruptcy, insolvency, reorganization, moratorium, or similar laws, or
equitable principles affecting or limiting the rights of contracting parties
generally.
(r) Neither the execution and delivery of this Agreement and the documents
referenced herein nor the consummation of the transactions contemplated herein
nor compliance with the terms of this Agreement and the documents referenced
herein conflict or result in the material breach of any terms, conditions or
provisions of, or constitute a default under, any bond, note or other evidence
of indebtedness or any contract, indenture, mortgage, deed of trust, loan,
operating agreement, partnership agreement, lease or other agreements or
instruments to which Seller or any of its members or managers is a party or
affecting the Property or by which Seller or any of its partners may be bound.
(s) Seller is not insolvent or the debtor in any bankruptcy, receivership
or similar proceeding; and no party of the Property is currently subject to the
jurisdiction or supervision of any court in any such proceeding.
(t) Seller is not a party to any collective bargaining agreements,
union contracts, union
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letters or similar agreements for the Property and its employees.
(u) Seller has not received notice of any pending or threatened
condemnation of all or of any portion of the Property, or written notice of
any violation of zoning restrictions in respect of the Property from any
governmental authority or agency.
(v) Seller has not received notice of any litigation governmental or
administrative proceedings or arbitrations pending or threatened with respect
to any of the Property.
(w) Seller has not entered into and has received no written notice of and
unrecorded rights of first offer to purchase, rights of first refusal to
purchase, purchase options or similar rights or contractually required consents
to transfer pertaining to the Property which would be breached by this Agreement
or the consummation of the transaction provided for herein.
(y) Seller has not received from any insurance company which carries
insurance on the Property, or any Board of Fire Underwriters, any notice of any
defect or inadequacy in connection with the Property or its operation which has
not been cured.
(z) Exhibit I attached hereto and incorporated herein a substantially
complete and accurate list of the names of all employees of Seller employed in
connection with the operation of the Business and their job classifications and
wage rates, including any fringe benefits, vacation pay and bonuses.
(aa) Seller does not maintain or contribute to any plan or arrangement
which constitutes an "employee pension benefit plan" as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974 (ERISA) as
amended, and is not obligated to contribute to or accrue or pay benefits
under any deferred compensation, profit sharing, bonus, pensions or
retirement funding agreement with respect to any persons employed in
connection with the Property or any component thereof.
8. AS IS; PURCHASER'S REPRESENTATIONS.
(a) (i) Subject to the Permitted Exceptions and Existing Exceptions,
Purchaser expressly acknowledges and agrees to accept the Property on an
"as-is-where-is and with all faults" basis, except as otherwise provided in
this Agreement.
(ii) This Agreement, as written, contains all the terms of the
agreement entered into between the parties as of the date hereof, and Purchaser
acknowledges that neither Seller nor any person controlling, controlled by or
under common control with Seller
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(collectively, "Seller's Affiliates"), nor any of their agents or
representatives, has made any representations or warranties or held out any
inducements to Purchaser, and Seller hereby specifically disclaim any
representation or warranty, oral or written, past, present or future, other
than those specifically set forth in Paragraph 7 and Paragraph 14. Without
limiting the generality of the foregoing, neither Seller nor any of Seller's
Affiliates, nor any of their agent or representatives has or is willing to
make any representations or warranties, express or implied, other than as may
be expressly set forth herein, as to: (a) the current or future real estate
tax liability, assessment or valuation of the Property; (b) the potential
qualification of the Property for any and all benefits conferred by any laws
whether for subsidies, special real estate tax treatment, insurance,
mortgages (except to the extent granted to an affiliate of Seller) or any
other benefits, whether similar or dissimilar to those enumerated; (c) the
compliance of the Property in its current or any future state with applicable
laws or any violations thereof, including, without limitations, those
relating to access for the handicapped, environmental or zoning matters, and
the ability to obtain a change in the zoning or a variance in respect to the
Property's non-compliance, if any, with zoning laws; (d) the nature and
extent of any right-or-way, lease, possession, lien, encumbrance, license,
reservation, condition or otherwise; (e) the current or future use of the
Property; (f) the future condition and operational state of any personal
property and the present or future structural and physical condition of the
Buildings, their suitability for rehabilitation or renovation, or the need
for expenditures for capital improvements, repairs or replacements thereto;
(g) the viability or financial condition of any tenant; (h) the status of the
market in which the Property is located; or (i) the actual or projected
income or operating expenses of the Property.
(iii) Purchaser acknowledges that Seller has afforded Purchaser
the opportunity for full and complete investigations, examinations and
inspections of the Property and all pertinent information. Purchaser
acknowledges and agrees that: (a) the information delivered or made available to
Purchaser and Purchaser's representatives by Seller of Seller's Affiliates, or
any of their agents or representatives may have been prepared by third parties
and may not be the work product of Seller and/or any of Seller's Affiliates; (b)
neither Seller or any of Seller's Affiliates has made any independent
investigation or verification of, or has any knowledge of, the accuracy or
completeness of, the information furnished to Purchaser; (c) the information
delivered or made available to Purchaser and Purchaser's representatives is
furnished to each of them at the request, and for the convenience of Purchaser;
(d) Purchaser is relying solely on its own investigations, examinations and
inspections of the Property and those of Purchaser's representatives; and (e)
Seller expressly disclaims any representations or warranties with respect to the
accuracy or completeness of the information furnished to Purchaser, and
Purchaser releases Seller and Seller's Affiliates, and their agents and
representatives, from any and all liability with respect to information prepared
by or on behalf of Purchaser.
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(iv) Purchaser or anyone claiming by, through or under Purchaser,
hereby fully and irrevocably releases Seller and Seller's Affiliates, and
their agents and representatives, from any and all claims that it may now
have or hereafter acquire against Seller or Seller's Affiliates, or their
agents or representatives of any cost, loss, liability, damage, expense,
action or cause of action, whether foreseen or unforeseen, arising from or
related to any construction defects, errors, or omission on or in the
Property, except to the extent created by Seller or its Affiliates, except
for claims against Seller based upon any obligations and liabilities of
Seller expressly provided in this Agreement. Purchaser further acknowledges
and agrees that this release shall be given full force and effect according
to each of its expressed terms and provisions, including, but not limited to,
those relating to unknown and suspected claims, damages and causes of action.
(v) The provisions of this paragraph shall survive the Closing or
the earlier termination of this Agreement.
(vi) To the extent that the Property Documents or other
information obtained by Purchaser at or prior to the Closing contain
provisions or information that are inconsistent with the representations and
warranties of Seller contained in this Agreement, such representations and
warranties shall be deemed modified to the extent necessary to eliminate such
inconsistency and to conform such representations and warranties to such
provisions or information discovered by Purchaser. Purchaser acknowledges
that notwithstanding anything contained in the Property Documents or
representations and warranties of Seller contained in Paragraph 7 above
(collectively a "Seller Representation"), that to the extent a Study
conducted by Purchaser or the Property Documents disclose a fact or condition
which is different from a Seller Representation, then said Seller
Representation shall be deemed modified and or amended by said the results
and findings of that Study or the Property Documents.
(b) Purchaser hereby represents and warrants to Seller as follows: (i)
No attachment, execution proceedings, assignments for the benefit of
creditors, insolvency, bankruptcy, reorganization, or other proceedings are
pending or threatened against Purchaser or its managing member.
(ii) Purchaser has the legal power, right and authority to enter
into this Agreement and the instruments referenced herein and to consummate
the transactions contemplated hereby.
(iii) All requisite action (corporate, partnership or otherwise)
has been taken by Purchaser in connection with entering into this Agreement,
the instruments referenced herein and the consummation of the transactions
contemplated hereby, and no consent of officer, director, shareholder,
judicial or administrative body, Governmental Authority or third party is
required
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which has not been obtained.
(iv) This Agreement and all documents required hereby to be
executed by Purchaser are and shall be valid, legal, binding obligations of,
and enforceable against, Purchaser in accordance with their terms, subject
only to applicable bankruptcy, insolvency, reorganization, moratorium, or
similar laws, or equitable principles affecting or limiting the rights of
contracting parties generally.
(v) Neither the execution and delivery of this Agreement and the
documents referenced herein nor the consummation of the transactions
contemplated herein nor compliance with the terms of this Agreement and the
documents referenced herein conflict or result in the material breach of any
terms, conditions or provisions of, or constitute a default under, any bond,
note or other evidence of indebtedness or any contract, indenture, mortgage,
deed of trust, loan, lease or other agreements or instruments to which
Purchaser is a party or by which Purchaser may be bound.
(b) Purchaser is not insolvent or the debtor in any bankruptcy,
receivership or similar proceeding.
9. ADDITIONAL UNDERTAKINGS OF SELLER
Seller shall perform the following undertakings:
(a) On the Closing Date, Seller shall execute, acknowledge and deliver to
Purchaser a good and sufficient grant bargain and sale deed in proper form for
recording, conveying the Real Property to Purchaser or Purchaser's designee,
free and clear of all liens, leases encumbrances, covenants, conditions and
other matters affecting title, except for the Permitted Exceptions, and shall
execute and acknowledge (as appropriate), deliver to Purchaser the Security
Deposits and deliver originals of all the Leases, the Rent Roll, Permits,
Contracts, Property Documents, warranty agreements and similar records relating
to the Property and, as required by Purchaser, assignments of and/or bills of
sale and the Intellectual Property for each of the foregoing (including
appropriate indemnification), and all keys to the Property in Seller's
possession.
(b) Seller shall give possession and occupancy of the Property to
Purchaser on the Closing Date, subject to the Leases and the rights of Tenants
thereunder.
(c) If requested to do so by Purchaser, on the Closing Date Seller shall
execute and deliver to Purchaser, or any title insurance company designated by
it, an owner's Affidavit, in the customary form, with respect to the absence of
claims which would give rise to mechanics' liens
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and the absence of parties in possession of the Property other than Seller
and Tenants pursuant to the terms of Leases or shall provide such other
assurances as shall be reasonably required to enable Purchaser to obtain the
title insurance policy to be issued pursuant to the title commitment referred
to in Section 10(d).
(d) [INTENTIONALLY DELETED]
(e) Seller shall deliver an IRC Affidavit.
(f) Seller shall deliver to Purchaser such other instruments or documents
as may be reasonably required by Purchaser or the Insurance Company in order to
consummate the transactions contemplated hereby.
(g) Insurance Company shall deliver a conformed copy of the Deed and the
original IRC Affidavit and each of the other documents and instruments delivered
into Escrow by Seller as set forth above to Purchaser simultaneously with the
recordation of the Deed. The Deed shall provide that it is to be returned to
Insurance Company or Purchaser following recordation. If the original Deed is
returned to Insurance Company, Insurance Company shall deliver the original Deed
to Purchaser, with a copy showing all recording information to Seller at the
address noted in Paragraph 21, below.
10. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PURCHASER
The obligation of Purchaser to purchase the Property shall be subject to
the following conditions (all or any of which may be waived, in whole or in
part, by Purchaser):
(a) The representations and warranties made by Seller in Section 7 shall
be true and correct in all material respects on and as of the Closing Date with
the same force and effect as though such representations and warranties had been
made on and as of such date, and Seller shall have executed and delivered to
Purchaser a certificate dated as of the Closing Date to the foregoing effect.
(b) Seller shall have performed all covenants and obligations required by
this Agreement to be performed or complied with by Seller on or before the
Closing Date, including but not limited to those set forth in Section 9 hereof.
(c) The results of all environmental surveys or studies conducted on the
Property are satisfactory to Purchaser.
(d) On the Closing Date, (i) Seller's title to the Property shall be
marketable, good of
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record and in fact, and free-and-clear of all liens, mortgages, deeds of
trust, encumbrances, easements, leases, conditions and other matters
affecting title other than the Permitted Exceptions, and (ii) the Title
Insurance Company shall have committed unconditionally to issue to Purchaser,
or its designee, at standard rates, an ALTA Form B owner's title insurance
policy covering the Property, including such endorsements as Purchaser may
reasonably require, in an amount at least equal to the Purchase Price,
insuring title to the Property in the condition required by clause (i)
Section 9(a) hereof. In the event Seller is unable to deliver title as
specified by this Paragraph 10(d), then Purchaser may either waive such
defect and proceed to Closing, or cancel the Contract. In the event of such
election by Purchaser, the parties shall each bear their respective costs and
fees incurred in this transaction.
(e) On the Closing Date, Madeleine, LLC ("Madeleine") shall have
committed to fund and will fund the entire Purchase Price under such terms as
are acceptable to Purchaser and Madeleine.
(f) On the Closing Date, Purchaser shall have received from Ramada
Franchising System, Inc. either a comfort letter, tri-party agreement or
conditional assignment of the new franchise agreement in a form reasonably
satisfactory to Purchaser and Madeleine.
(g) Representatives of both Purchaser and Seller shall have completed a
walk through of the Property and jointly executed Schedule B-1 of all
Personal Property to be delivered by Seller to Purchaser in "as is" condition
as of the Closing Date.
(h) Except as set forth in Exhibit G, Seller shall have delivered to
Purchaser evidence of termination of the Contracts, including but not limited
to that certain Management Agreement with Northwest Hospitality, Inc.
(i) Except as set forth in Exhibit G, both Seller and the Manager of
the Property, Northwest Hospitality Inc, each on their respective behalf,
shall have delivered to Purchaser a certification as to the unavailability of
such Property Documents which were not delivered to Purchaser.
(j) As of the Closing Date, Seller, at its sole cost and expense, shall
have delivered to Purchaser, for inspection, review and photocopying, true,
correct and complete copies of all of the Property Documents. In the event a
document identified as a Property Document is not in possession of Seller or the
Property's manager then both Seller, to the best of its knowledge, and the
Property Manager each on their respective behalf shall certify to Purchaser of
the unavailability of such documents.
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11. CLOSING
(a) Closing shall take place on April 30, 1998 (the "Closing Date").
Closing shall take place at the office of the Insurance Company or at such
other location as Purchaser and Seller shall designate jointly.
(b) The delivery to the Insurance Company of the Purchase Price, the
executed deed of conveyance, bill of sale, assignments and all other
documents and instruments required to be delivered by either party by the
terms of this Agreement shall be deemed to be a good and sufficient tender of
performance of the terms hereof. Upon receipt of all referenced Closing
Documents and the cash portion of the Purchase Price, the Insurance Company
shall be authorized to proceed to record the documents evidencing this
transaction. The date of recordation of this transaction shall be the
"Recordation Date".
(c) The following items of income and expense shall be adjusted as of
6:00 o'clock a.m. on the Recordation Date:
(i) Real estate and personal property taxes with respect to the
Property.
(ii) Fuel, water and sewer service charges and charges for oil,
electricity, telephone and all other public utilities.
(iii) Rental income from hotel guests.
(iv) All charges payable pursuant to the Contracts.
(v) Purchaser and Seller shall diligently attempt to agree upon
all such amounts no later than one (1) business day prior to the Closing
Date. If meters measure the consumption of water, gas and/or electric
current at the Property by Seller, Seller shall attempt to cause such meters
to be read on the day immediately preceding the Recordation Date and shall
pay all utility bills resulting therefrom promptly upon receipt thereof. In
making the adjustments required by this sub-section, Seller shall receive
credit for all prepaid deposits and Advanced Deposits made by Seller and
expenses and similar items that are due on or after the Recordation Date, and
Seller shall be charged with any unpaid accrued charges for the period prior
to the Recordation Date. No adjustment shall be made for short term hotel
guest room charges and other charges that are past due as of the Recordation
Date. In the event that amounts are collected by Purchaser from a hotel
guest whose obligations are past due as of the Recordation Date, Purchaser
shall first apply such sum(s) against the amount then currently due
Purchaser, and then pay to Seller, from such collected funds, the balance
owed Seller for the period prior to
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the Recordation Date.
(vi) Purchaser shall receive either a transfer of funds or credit
against the Purchase Price in the amount of Advanced Deposits.
(d) CLOSING COSTS.
(i) Seller shall pay:
a. One-half (1/2) of the Escrow fees;
b. The cost of documentary transfer taxes;
c. The cost of issuing Purchaser's title policy in CALTA
Standard Form; and
d. The cost of any other obligations of Seller hereunder.
e. All charges owed under the contracts through the Recordation
Date.
(ii) Purchaser shall pay:
a. One-half (1/2) of the Escrow fees;
b. The cost to record the Deed;
c. Any additional premium charged for issuance of an ALTA
Extended Form and any endorsements to Purchaser's title
policy; and
d. The cost of any other obligations of Purchaser hereunder.
(e) All other costs and expenses attendant to settlement, including title
company charges, shall be at the cost of the party that incurred same. If clear
title cannot be tendered by Seller and no settlement occurs, then Seller shall
pay all title company charges.
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12. TERMINATION
(a) If (i) any of the representations and warranties made by Seller in
Section 8 shall be materially inaccurate or incorrect, (ii) Seller shall fail
to perform any of the covenants or agreements to be performed by Seller under
this Agreement, or (iii) Purchaser shall be relieved of its obligation to
purchase the Property by operation of Section 10, then, in any such event,
Purchaser, in its sole and absolute discretion, shall have the right either
(A) to extend the Closing Date for a sufficient period to allow Seller to
satisfy conditions specified in Section 10; (B) to terminate this Agreement
by giving written notice to Seller and the Escrow Agent; (C) waive such
defects and elect to proceed to Closing; or (D) if Seller's default is
willful, in lieu of terminating this Agreement, to seek specific performance
of this Agreement.
13. CONDEMNATION AND DAMAGE BY FIRE OR OTHER CASUALTY. [INTENTIONALLY
DELETED]
14. BROKERS
Seller and Purchaser each represent and warrant to the other than no
broker has been involved in this transaction on behalf of Seller or
Purchaser, respectively. Seller, at its cost and expense, shall pay any
commissions due these brokers and indemnify and hold harmless Purchaser and
its partners from any claims, damages or expenses, including reasonable
attorneys fees, incurred in connection with or arising from these brokers'
activities in this transaction. Seller and Purchaser shall indemnify and
hold the other, its partners, agents and employees, harmless against any and
all claims, damages and expenses, including reasonable attorneys fees,
incurred by the other party due to a claim by any other broker or agent
alleging to be entitled to a fee or commission due to work on this
transaction on behalf of Seller or Purchaser, respectively.
15. FOREIGN PERSON
Seller represents and warrants that it is not a "foreign person," as
defined in the Federal Tax Law, then at the Closing, Seller will deliver to
Purchaser a certificate so stating, in a form complying with the Federal Tax
Law. If Seller is a "foreign person" or if Seller fails to deliver the
required certificate at the Closing, then in either such event the funding to
Seller at the Closing will be adjusted-to the extent required to comply with
the withholding provisions of the Federal Tax Law; and although the amount
withheld will still be paid at the Closing by Purchaser, it will be retained
by the Escrow Agent for delivery to the Internal Revenue Service, together
with the appropriate Federal Tax Law forwarding forms (and with copies being
provided both to Seller and to Purchaser).
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16. ENTIRE AGREEMENT
No change or modification of this Agreement shall be valid unless the
same is in writing and signed by the parties hereto. No waiver of any of the
provisions of this Agreement shall be valid unless in writing and signed by
the party against whom it is sought to be enforced. This Agreement contains
the entire agreement between the parties relating to the purchase and sale of
the Property, all prior negotiations between the parties are merged in this
Agreement and there are no promises, agreements, conditions, undertakings,
warranties or representations, oral or written, express or implied, between
them other than as set forth in this Agreement.
17. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS
The representations, warranties, covenants, agreements and indemnities
set forth in or made pursuant to Section 23 shall survive for one (1) year;
Section 14 shall survive indefinitely; and Sections 7 and 8(b) and elsewhere
in this Agreement shall survive for ninety (90) days, each date calculated
from the Closing Date.
18. BENEFIT AND BURDEN
Seller may not assign its rights and obligations under this Agreement
prior to the Closing Date without first obtaining the prior written consent
of Purchaser. All terms of this Agreement shall be binding upon, and inure
to the benefit of, the parties hereto and their respective legal
representatives, successors and assigns. If Purchaser assigns its rights
under this Agreement, Purchaser shall promptly deliver an executed copy of
the instrument of assignment to Seller.
19. COLLECTION OF ACCOUNTS RECEIVABLE.
(a) Seller will retain all accounts receivable relating to the Hotel
accrued as of the Closing (including past due amounts), and shall have the
right to collect the same. The accounts receivable shall include, without
limitation, unpaid room, food and beverage charges, unpaid telephone charges;
unpaid valet charges, unpaid charges for other services or merchandise;
amounts owed to Seller from credit cards receipts, whether or not such credit
card receipts have been delivered by Seller to the credit card companies; and
refunds, prepayments, and like returns attributable to the period prior to
the Closing Date.
(b) All accounts receivable so retained by Seller are referred to as
"Seller's Accounts Receivable." If any instruments representing payment of any
Seller's Accounts Receivable come into the possession of Purchaser, Purchaser
shall immediately deliver such instruments to Seller. All moneys collected by
Purchaser from Seller's Accounts Receivable shall be accounted for and
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be transmitted to Seller on or before the fifteenth (15th) day of each month
with a statement showing the respective collections. All moneys collected
from each payor of Seller's Accounts Receivable shall be applied in the
reverse order of the age of the outstanding accounts receivable of that payor
from the most recent to the oldest. Purchaser shall be accountable only from
amounts actually received, and shall have no responsibility for, or duty to
inquire into, any amounts deducted by the respective payers from amounts due
Seller as service charges, offsets or otherwise. Purchaser shall not be
required to take any action to enforce the collection of Seller's Accounts
Receivable. A charge of "actual costs of collection" of the amount collected
shall be made by Purchaser to Seller for handling the collection of any
Seller's Accounts Receivable requested by Seller. Purchaser shall use
reasonable efforts to keep proper records showing the results of collection
of Seller's Accounts Receivable, which records shall be open to inspection by
Seller or its agents at all reasonable times. Purchaser shall not collect or
be authorized to collect any Accounts Receivable of Seller unless Purchaser
is specifically requested to do so by Seller. Seller may not institute any
action to enforce collection in any court of law to collect any unpaid
Seller's Accounts Receivable absent the prior written consent of Purchaser
which may be withheld in Purchaser's sole and absolute discretion. The
provisions of this subparagraph shall survive the Closing.
20. RISK OF LOSS
[INTENTIONALLY DELETED]
21. GOVERNING LAW
This Agreement concerns property located in the State of Nevada, and shall
be construed and enforced in accordance with the laws of the State of Nevada.
22. NOTICES
All notices, requests, demands and other communications hereunder shall
be in writing and shall be deemed to have been duly given if delivered
personally or if deposited in the United States mail, properly addressed and
postage prepaid or if delivered to Federal Express or other recognized
overnight delivery service, (i) if to Seller, Reno Hotel LLC c/o Blackacre
Capital Group, 450 Park Avenue, New York, New York 10022. Attention: Stephen
A. Enquist, with a copy to Schulte, Roth & Zabel, 900 Third Avenue, New York,
NY 10022, Attention: Michael Feinman, Esquire and Philip Murphy, Jr.,
Esquire, 3900 Paradise Road, Suite 283, Las Vegas, Nevada 89109; (ii) if to
Purchaser, c/o MTR, Inc. Route 2 South, Chester, West Virginia 26034,
Attention: Edson R. Arneault, with a copy to Louis M. Aronson, Esquire, Ruben
& Aronson, LLP., 3299 K Street, N.W., Suite 403, Washington, D.C. 20007 and
James S. Mace, Esquire,
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Gordon & Silver, Ltd. 3800 Howard Hughes Parkway, 14th Floor, Las Vegas,
Nevada 89109; or (iii) at such other address as may be given by either party
to the other party by notice in writing pursuant to provisions of this
Section.
23. INDEMNIFICATION.
(a) Seller shall indemnify, defend, and hold harmless Purchaser from and
against all claims against Purchaser relating to labor or employment claims of,
or liabilities or obligations to, present and former employees of Seller to the
extent accruing prior to the Closing Date (collectively, "Employee Claims")
provided, however, that nothing herein is intended or shall construed as an
indemnity for any liabilities or obligations arising out of Purchaser's
employment of any persons on or after the Closing Date. By way of illustration
but not limitation, Employee Claims shall include claims, liabilities, or
obligations relating to salaries, wages, minimum wages, compensation, overtime
pay, holiday pay, vacation pay, raises, bonuses, employee benefits, severance
pay, grievances under the union contracts, unfair labor practice charges before
the National Labor Relations Board workers' compensation, WARN Act, FICA, ERISA
obligations, disability, unemployment insurance, breach of employment contracts,
whether sounding in contract or tort, wrongful discharge, safety and health, and
employment discrimination, including, without limitation, claims before the
Equal Opportunity Commission, Office of Federal Contract Compliance Program and
the Department of Labor.
(b) Seller shall indemnify, defend and hold harmless Purchaser from and
against all claims against Purchaser arising from or relating to any contract
or commitment of Seller undertaken by Seller prior to the Closing Date absent
the written consent of Purchaser; except with respect to any claim, cause of
action, damage or penalty arising from the Franchise Agreement by and between
Seller and Ramada Franchise System, Inc.
(c) The indemnity agreements under this Section shall survive the
Closing for the period of the statute of limitations governing the claims
asserted hereunder.
(e) Each of the parties shall promptly notify the other of the
existence of any loss, claim, demand or other matter to which the foregoing
indemnification obligations may apply and give the indemnifying party a
reasonable opportunity to defend the same at the indemnifying party's own
expense and with counsel of the indemnifying party's own selection; provided
that the indemnified party or parties shall at all times also have the right
to fully participate in the defense at its or their own expense. If the
indemnifying party shall fail to defend within a reasonable time, the
indemnified party shall have the right, but not the obligation, to undertake
the defense of, and to compromise and settle (exercising reasonable business
judgment), the claim or other matter on behalf, for the account and at the
risk of the indemnifying party,
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provided the indemnifies party obtains a release for the benefit of the
indemnifying party. If the claim is one that cannot by its nature be
defended solely by one party, the other parties shall make available all
information and cooperation that any party may reasonably request. Unless an
indemnifying party fails or refuses to defend a claim or action, an
indemnified party shall not be entitled to any attorney's fees for services
of the indemnified party's counsel in connection with the matter.
(f) Purchaser shall indemnify, defend, and hold harmless Seller from
and against all claims against Seller relating to labor or employment claims
of, or liabilities or obligations to, present and former employees of Seller
to the extent accruing from and after the Closing Date (collectively,
"Employee Claims") provided, however, that nothing herein is intended or
shall be construed as an indemnity for any liabilities or obligations arising
out of Seller's employment of any persons prior to the Closing Date. By way
of illustration but not limitation, Employee Claims shall include claims,
liabilities, or obligations relating to salaries, wages, minimum wages,
compensation, overtime pay, holiday pay, vacation pay, raises, bonuses,
employee benefits, severance pay, grievances under the union contracts,
unfair labor practice charges before the National Labor Relations Board
workers' compensation, WARN Act, FICA, ERISA obligations, disability,
unemployment insurance, breach of employment contracts, whether sounding in
contract or tort, wrongful discharge, safety and health, and employment
discrimination, including, without limitation, claims before the Equal
Opportunity Commission, Office of Federal Contract Compliance Program and the
Department of Labor.
24. COUNTERPARTS
This Agreement may be executed simultaneously in one or more counterparts,
each of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
25. MISCELLANEOUS
(a) If the date on which either Purchaser or Seller is required to take
action under this Agreement is not a Business Day, the action shall be taken on
the next succeeding Business Day.
(b) The captions of the various sections and paragraphs of this Agreement
have been inserted only for the purpose of convenience; such captions are not a
part of this Agreement and shall not be deemed in any manner to modify, explain,
enlarge or restrict any of the provisions of this Agreement.
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(c) Seller and Purchaser agree that the proposed terms and conditions,
and all information (other than information which is a matter of public
record or is provided by other sources readily available to the public)
shared or developed in the context of this transaction shall be kept strictly
confidential, except that Seller acknowledges that Purchaser's parent company
may describe the terms hereof (as well as provide copies of this Agreement)
in reports that the parent is required to file with Governmental Authorities,
the United States Securities and Exchange Commission, and Purchaser's
financiers. Any disclosures, press releases, or announcements concerning this
agreement and the sale contemplated herein shall be approved unanimously by
the parties in writing in the exercise of each parties reasonably discretion.
IN WITNESS WHEREOF, Purchaser and Seller have signed this Agreement on the
day and year first above written.
PURCHASER:
SPEAKEASY GAMING OF RENO, INC., a Nevada corporation
By: /s/ Edson R. Arneault
-------------------------------------
Name: Edson R. Arneault
Title: President, Chief Executive Officer
SELLER:
RENO HOTEL, LLC, a Delaware limited liability company
By: BLACKACRE RENO, L.L.C., a Delaware limited
liability company
Its: Manager
/s/ Stephen P. Enquist
------------------------------
By: Stephen P. Enquist
Its: Secretary
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EXHIBIT 10.8
5/4/98
FIRST AMENDMENT TO PURCHASE AGREEMENT
THIS FIRST AMENDMENT TO PURCHASE AGREEMENT (this "Agreement") is made
and entered into this 5 day of May, 1998, by and between SPEAKEASY GAMING OF
LAS VEGAS, INC. a Nevada corporation ("Buyer"), and BANTER, INC., a Nevada
corporation ("Banter").
RECITALS
Buyer and Banter entered into a Purchase Agreement (the "Original
Purchase Agreement") dated on or prior to the date of this Agreement relating
to the purchase and sale of, among other things, land and improvements located
in Clark County, Nevada commonly known as the Cheyenne Hotel. Buyer and
Banter wish to amend and supplement the Original Purchase Agreement. Unless
otherwise defined herein, capitalized terms in this Agreement have the
meanings ascribed to them in the Original Purchase Agreement.
NOW, THEREFORE, in consideration of the mutual promises hereinafter
set forth, and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. To the extent of any conflict or inconsistency between the
provisions of this Agreement and the provisions of the Original Purchase
Agreement, the provisions of this Agreement shall control.
2. Cheyenne Hotel & Casino, Inc., a Nevada corporation ("Cheyenne"),
is hereby eliminated as a party to the Original Purchase Agreement, as
amended by this Agreement. All references to the party "Cheyenne" shall be
deemed to refer only to Banter. All references to the Seller shall be deemed
to refer only to Banter. All references in the Original Purchase Agreement to
Speakeasy Gaming of Nevada, Inc., a Nevada corporation, as the Buyer are
hereby amended to refer to Speakeasy Gaming of Las Vegas, Inc. All references
to the Buyer shall be deemed to refer only to Speakeasy Gaming of Las Vegas,
Inc., a Nevada corporation.
3. The first sentence of Paragraph D of the Recitals to the Original
Purchase Agreement is hereby deleted in its entirety. The parties understand
that the gaming license formerly held by Desert Gaming, Inc. has expired and
was not renewed.
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4. In Paragraph F of the Recitals, the following parenthetical
comment is hereby added immediately after the phrase "chases in action":
"(with the sole exception of the fifty percent (50%) interest in certain
future net proceeds of the Condemnation Action, as hereinafter defined)."
5. In the definition of the term "Property" in Section 1 of the
Original Purchase Agreement: (i) the phrase "the condemnation, as defined in
Section 6(bb), below" is hereby deleted; and (ii) the following sentence is
hereby added at the end of the definition: "The Property also includes a
fifty percent (50%) interest in the "net proceeds" (as hereinafter defined)
in excess of $50,000 realized by Banter on or after April 28, 1998 in the
action commenced in the District Court by the State of Nevada, on relation of
its Department of Transportation, on or about September 9, 1997 as Case
Number A 378187 (the "Condemnation Action")."
6. The phrase "of the Property's Property Manager" in Section 2(b)
of the Original Purchase Agreement is hereby deleted.
7. All references to Exhibit E-1 in the Original Purchase Agreement
are hereby amended to be references to Exhibit "E."
8. Section 5(a) of the Original Purchase Agreement is hereby amended
and restated in its entirety to read as follows: "The Purchase Price for the
Property shall be the sum of $5,349,449 payable at Closing. This statement of
the Purchase Price is not intended and shall not be construed to affect the
rights of Seller or Buyer to the prorations and any other monetary
adjustments specifically provided in the Original Purchase Agreement, as
amended by this Agreement."
9. Section 5(b) of the Original Purchase Agreement is hereby amended
and restated in its entirety to read as follows: "(b) On the Closing Date,
Buyer shall cause a wire transfer to be made to Nevada Title Company, as
Escrow Agent, of immediately available federal funds in an amount equal to
the cash required to close (the "Closing Funds"). The Closing Funds shall be
increased or decreased as appropriate to reflect Buyer's share of prorations
and expenses. The Closing Funds shall include, in addition to the Purchase
Price, all sums payable by Buyer pursuant to Section 13(c)(vii) of the
Original Purchase Agreement. The Closing Funds shall not be reduced or set
off against any sums payable by Banter to any third party, including, without
limitation, sums payable to Madeleine, LLC, without the express written
consent of Banter to the set off or reduction. Banter's execution or approval
of escrow
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instructions or a settlement statement indicating that sums are due or
payable to a third party out of the proceeds of the Closing shall not be
construed as an authorization by Banter for the Buyer to make payment
arrangements directly with the third party or to set off any payments made by
Buyer pursuant to any "side" payment arrangements against Closing Funds.
10. The phrase "fee simple title to" in Section 6(a) is hereby
deleted.
11. Section 6(c) of the Original Purchase Agreement is hereby
deleted in its entirety.
12. The word "legally" is hereby inserted immediately before the
word "suitable" in Section 6(b) of the Original Purchase Agreement. The Buyer
acknowledges, in connection with this representation and warranty, Buyer's
understanding that the eligibility of the Real Property for a non-restricted
gaming operation will not remain in effect unless a non-restricted gaming
license is issued to Buyer or Buyer's successors or assigns within a
specified "grandfather" period.
13. Section 6(l) is hereby amended and restated in its entirety to
read as follows: "Exhibit E attached hereto represents a true and complete
schedule of all Contracts but not any agreements with Day's Inn of America,
Inc. or any affiliates of Day's Inn of America, Inc. (all of which affiliates
together with Day's Inn of America, Inc. are hereinafter collectively
referred to as "Day's Inn"). On or prior to the Recordation Date, Seller
shall notify all parties to the Contracts that the Property is being or has
been sold and that the relevant Contract is being terminated. Notwithstanding
such notice of termination, Buyer agrees to permit the thirty to ninety day
notice periods required for the Contracts identified in Exhibit E-1 attached
hereto to commence on the Recordation Date and to pay any sums accruing at
regular rates (as distinguished from any termination charge or other sanction
imposed as a result of termination of a Contract) during the thirty to ninety
day periods to the third parties identified in Exhibit E-1. To the extent any
payments are due and payable as a result of the termination of any of the
Contracts identified in Exhibit E other than continuing payments during the
notice periods referred to in the preceding sentence, Seller shall make such
payments. Sums payable during the thirty to ninety day periods referred to
above shall be subject to proration.
14. Buyer acknowledges Buyer's understanding that road widening
and/or realignments in the neighborhood of the Property have resulted in the
prior expropriation of one
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or more areas of land that were formerly part of the Real Property.
15. Section 6(bb) of the Original Purchase Agreement is hereby
deleted in its entirety.
16. The reference to "Paragraph 6" in Section 9(g) of the Original
Purchase Agreement is hereby amended to refer to "Section 7."
17. The reference to "Paragraph 4" in Section 10 of the Original
Purchase Agreement is hereby amended to refer to "Section 5."
18. Section 10 of the Original Purchase Agreement is hereby
supplemented by adding the following paragraphs:
"At the Closing, Buyer shall pay the sum of $35,683.48
to Young Electric Sign Company ("YESCO") in payment of all
sums due and to become due under the agreement with
YESCO dated June 16, 1996.
"All sums payable by Buyer pursuant to Section 10 of the
Original Purchase Agreement, as amended hereby, and all sums
payable by Buyer pursuant to Section 13(c)(vii) of the
Original Purchase Agreement, shall be in addition to the
Purchase Price.
"Buyer shall extend reasonable cooperation, offer access to
the Property on reasonable terms and offer a reasonable
opportunity to remove their property on and after the
Recordation Date to parties whose Contracts are being
terminated in connection with the Closing and who have
items of personal property on the Real Property."
"Buyer shall extend reasonable cooperation, offer access to
the Property on reasonable terms and offer a reasonable
opportunity to remove its property to Day's Inn. In addition,
Buyer agrees that Buyer will not operate the Property as a
"Day's Inn," use any trademarks or other proprietary rights
or materials owned or controlled by Day's Inn, or hold itself
or the Property out as part of any Day's Inn "System" or as
having any affiliation or contractual arrangement with Day's
Inn. In addition, Buyer will remove or cause to be removed
all signs and other items
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on the Property that refer to "Day's Inn" or contain any
trademarks or service marks owned or controlled by Day's
Inn and/or its licensees. Finally, Buyer will undertake
commercially reasonable efforts to promptly paint over or
remove any distinctive trade dress, color schemes and
architectural features that are distinctive to members of
the Day's Inn "System." As between Seller and Buyer, Buyer
shall not have an obligation to take an action or refrain
from taking an action that would otherwise be required
under this subparagraph if and to the extent Day's Inn
waives the requirement and the waiver applies to Seller
and Cheyenne Hotel & Casino, Inc. as well as to Buyer.
19. Section 11(f) of the Original Purchase Agreement is hereby
deleted in its entirety.
20. Section 12 of the Original Purchase Agreement is hereby
supplemented by adding the following:
"(d) Buyer shall have approved Building Expenditures (as
defined in Section 13(c)(vii) of the Original Purchase
Agreement) in the aggregate amount of $100,000.
"(e) Seller shall have approved the form and substance
of any settlement statement and any joint instructions
to be provided to Nevada Title Company.
21. The "April 29, 1998" date in Section 13(a) is hereby amended to
read "May 4, 1998." No party shall have any right or obligation to proceed if
the Recordation Date does not occur on or before May 5, 1998. Time is of the
essence in the provisions of Section 13(a) and in the provisions of this
Paragraph 21.
22. The phrase "the Franchise Agreement" is hereby deleted in
Section 24(a)(ii) of the Original Purchase Agreement.
23. Section 24(c) of the Original Purchase Agreement is hereby
supplemented by adding, before the period at the end thereof, the following:
"other than the Contracts."
24. Section 24 of the Original Purchase Agreement is hereby
supplemented by adding a new subsection (f) at the end thereof reading as
follows:
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"(f) Notwithstanding any other provision of the Original Purchase
Agreement or this Agreement to the contrary, Seller is not
indemnifying Buyer against any Claims of or arising from Day's
Inn."
25. Buyer understands that Seller intends to exchange the Property
for other property or properties under Section 1031 of the Internal Revenue
Code of 1986, as amended (the "1031 Exchange"). Buyer shall not have any
obligation to take any administrative action in connection with the 1031
Exchange following the Closing under the Original Purchase Agreement, as
amended, unless Buyer is specifically requested to do so by Seller. In the
event Seller makes any such post closing requests, Seller shall pay or
reimburse Buyer for all reasonable costs and expenses incurred by Buyer in
accommodating Seller's requests including, without limitation, reasonable
attorney's fees and disbursements incurred by Buyer in connection with such
requests and the accommodation thereof.
26. The text following the signature blank for Seller and preceding
the signature blanks for Desert Gaming, Inc. and American International Trade
and Development, Inc. is hereby amended and restated in its entirety to read
as follows:
"DGI and AITD hereby acknowledge receipt and delivery of the
foregoing Agreement and are executing this Agreement below for
the limited purpose of joining in the representations and
warranties set for in Section 6(g), 6(k), 6(m), 6(v) and 6(y)."
27. Except as modified and supplemented by this Agreement, all of
the provisions of the Original Purchase Agreement shall remain in full force
and effect.
28. This First Amendment may be executed in counterparts, each of
which when executed shall, irrespective of the date of its execution and
delivery, be deemed an original, and said counterparts together shall
constitute one and the same Agreement.
29. This Agreement may be executed by one or more facsimile
signatures and delivered by facsimile transmission. Facsimile transmission of
a copy of this Agreement that has been signed by an authorized officer or
agent of a party shall have the same force and effect as physical delivery to
the recipient of a manually signed copy of this Agreement.
IN WITNESS WHEREOF, Buyer and Seller have signed
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this Agreement on the day and year first above written.
BUYER:
SPEAKEASY GAMING OF LAS VEGAS, INC.
a Nevada corporation
By:
--------------------------------
Edson R. Arneault, President
SELLER:
BANTER, INC.,
a Nevada corporation
By: /s/ Christopher S. Conboy
----------------------------------
Its: Assistant Vice President
---------------------------------
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EXHIBIT 10.9
SECOND AMENDMENT TO PURCHASE AGREEMENT
THIS SECOND AMENDMENT TO PURCHASE AGREEMENT (this "Agreement") is made and
entered into this 5 day of May, 1998, by and among SPEAKEASY GAMING OF LAS
VEGAS, INC., a Nevada corporation ("Buyer"); BANTER, INC., a Nevada
corporation ("Banter"); and SOUTHWEST EXCHANGE CORPORATION, a Nevada
corporation ("Exchange Party").
RECITALS
Buyer and Banter entered into a Purchase Agreement (the "Original Purchase
Agreement") dated on or prior to the date of this Agreement relating to the
purchase and sale of, among other things, land and improvements located in
Clark County, Nevada commonly known as the Cheyenne Hotel. Buyer and Banter
entered into a First Amendment to Purchase Agreement (the "First Amendment")
dated on or prior to the date of this Agreement. Buyer and Banter wish to
further amend and supplement the Original Purchase Agreement, as amended by
the First Amendment. The Original Purchase Agreement, as amended by the First
Amendment, is hereinafter sometimes referred to as the "Amended Purchase
Agreement." Unless otherwise defined herein, capitalized terms in this
Agreement have the meanings ascribed to them in the Original Purchase
Agreement, as amended by the First Amendment.
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth, and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. EXCHANGE. Notwithstanding any provisions in the Amended Purchase
Agreement to the contrary, it is the overriding intent of Banter not to sell
but instead to exchange the Property (the "Relinquished Property") for other
property or properties (the "Replacement Property") so as to qualify such
exchange under Section 1031 of the Internal Revenue Code of 1986, as amended
(the "Code").
2. TAX CONSEQUENCES. Banter understands that the provisions of Section
1031 of the Code are complex and Banter's attempt to qualify the series of
transactions as a tax deferred exchange under Section 1031 of the Code
requires advice of competent tax counsel. Banter hereby acknowledges that
Banter is not relying on any representations that may be made by Exchange
Party or Buyer regarding the tax consequences of the transactions
contemplated by the parties to this Rider and Banter shall hold harmless
Exchange Party and Buyer from any adverse tax consequences to Banter
resulting from any and all provisions of this Second Amendment.
3. BUYER'S CONSENT. Buyer consents to Banter's assignment to Exchange
Party of Banter's rights under the
<PAGE>
Agreement, but not the delegation of duties and such assignment in no way
relieves Banter of any of its obligations, covenants or warranties set forth
in the Amended Purchase Agreement. Furthermore, Buyer is entering into this
Second Amendment as an accommodation to Banter and shall not incur any costs
or expense as a result thereof.
4. ADDITIONAL DOCUMENTS. Banter, Buyer and Exchange Party shall execute
such additional documents and instructions to escrow not inconsistent with
the provisions of the Amended Purchase Agreement as may be reasonably
required to complete the exchange.
5. USE OF FUNDS. It is understood by Banter and Buyer that all funds
which Exchange Party obtains from Buyer upon or before its transfer of the
Relinquished Property to Buyer will be paid (through the closing escrow) to
and held by Exchange Party in accordance with that certain Exchange Agreement
between Banter and Exchange Party. Exchange Party hereby agrees to deposit
for Banter all sums it obtains from Buyer upon or before the transfer of the
Relinquished Property to Buyer in one or more financial institutions whose
accounts are insured by the Federal Deposit Insurance Corporation or as
otherwise directed by Banter.
6. FIRPTA WITHHOLDING ON BANTER. Exchange Party may choose, but shall
not be obligated, to comply with the provisions of Section 1445 of the Code
by withholding 10% of the value of the Relinquished Property and reporting
and paying over such amount to the Internal Revenue Service unless it
receives (i) a certification of non-foreign status from Banter in
substantially the form provided in Exhibit "A," or (ii) a qualifying
statement or withholding certificate from the Internal Revenue Service
stating that Banter's maximum tax liability is zero or a reduced amount.
7. EXCHANGE PARTY INDEMNIFICATION. Banter agrees to indemnify, defend
and hold Exchange Party harmless from any and all loss, claims, liabilities,
damages, fees, attorney's fees, or costs, including any taxes, interest and
penalties hereon, arising under or from the transactions contemplated hereby;
provided, however, that the indemnification and hold harmless covenant shall
not extend to any claims, liabilities, costs, etc., which result from
Exchange Party's gross negligence or willful misconduct. Banter further
agrees to indemnify, defend and hold Exchange Party harmless from any
federal, state, local or other taxes including interest and ownership or
transfer of any property pursuant to this Agreement.
8. DIRECT DEEDING. Notwithstanding anything contained herein to the
contrary, Exchange Party shall in-
2
<PAGE>
struct closing agents for both the Relinquished Property and the Replacement
Property, to prepare and record a deed or deeds transferring title from
Banter directly to the Buyer in the case of the Relinquished Property, or
from the seller thereof directly to Banter in the case of the Replacement
Property. Said Direct Deeding shall be accomplished for convenience only and
shall in no way be construed as a circumvention of Exchange Party's interest
in and to either the Relinquished Property or the Replacement Property.
9. INDEMNIFICATION. Banter agrees to indemnify, defend and hold Buyer
harmless from any and all loss, claims, liabilities, damages, fees,
attorney's fees or costs, including any taxes, interest and penalties
thereon, arising under or from this Second Amendment; provided that the
foregoing indemnification and hold harmless covenant shall not extend to any
claims, liabilities, costs, etc., which result from Buyer's acts or
omissions. The indemnity provisions of this Section 9 of this Second
Amendment are limited to loss, claims, liabilities, damages, fees, attorney's
fees or costs that: (i) arise from claims or allegations against Buyer; and
(ii) would not have been incurred by Buyer but for the provisions of this
Second Amendment. Without limiting the generality of the preceding sentence,
the indemnity provisions of this Section 9 of this Second Amendment are not
intended and shall not be construed to cover any loss, claims, liabilities,
damages, fees, attorney's fees or costs that the Buyer would have suffered or
incurred if this Second Amendment had never been entered into and if Buyer
acquired the Property under the Original Purchase Agreement, as amended by
the First Amendment. Nothing in this Section 9 is intended or shall be
construed to abrogate or otherwise impair any of Buyer's rights to
indemnification for various matters under the Original Purchase Agreement, as
amended by the First Amendment.
10. SURVIVAL. The provisions of this Second Amendment relating to the
acquisition of property and all representations, warranties, covenants,
agreements and indemnities made and all other obligations to be performed
hereunder, to the extent not performed at or before the closing of any
escrow, shall survive the closing of such escrow and shall not be deemed to
merge with the deed to the Relinquished Property or the Replacement Property
upon delivery or acceptance thereof.
11. BINDING. This Second Amendment shall inure to the benefit of, and
shall be binding upon the parties hereto, their successors in interest and
assigns.
12. ASSIGNMENT. The rights under this Second Amendment may not be
assigned without the prior written
3
<PAGE>
consent of the parties.
13. COUNTERPARTS. This Second Amendment may be executed in counterparts,
each of which when executed shall, irrespective of the date of its execution
and delivery, be deemed an original, and said counterparts together shall
constitute one and the same Agreement.
14. MISCELLANEOUS. Except as modified and supplemented by this Agreement,
all of the provisions of the Original Purchase Agreement, as amended by the
First Amendment, shall remain in full force and effect.
15. FACSIMILES. This Second Amendment may be executed by one or more
facsimile signatures and delivered by facsimile transmission. Facsimile
transmission of a copy of this Second Amendment that has been signed by an
authorized officer or agent of a party shall have the same force and effect
as physical delivery to the recipient of a manually signed copy of this
Agreement.
IN WITNESS WHEREOF, Buyer, Banter and Exchange Party have executed this
Agreement on this _____ day of ________, 1998.
BUYER:
SPEAKEASY GAMING OF LAS VEGAS, INC.,
a Nevada corporation
By:
---------------------------------
Edson R. Arneault, President
SELLER:
BANTER, INC.,
a Nevada corporation
By: Christopher S. Conboy
---------------------------------
Its: Asst. V.P.
--------------------------------
SOUTHWEST EXCHANGE CORPORATION,
a Nevada corporation
By:
---------------------------------
Its:
--------------------------------
4
<PAGE>
EXHIBIT 10.10
DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
THIS DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS, SECURITY
AGREEMENT AND FIXTURE FILING (this "DEED OF TRUST"), dated as of April 30,
1998, by SPEAKEASY GAMING OF LAS VEGAS, INC., a Nevada corporation having an
office c/o Mountaineer Park, Inc., Route 2 South, Chester, Virginia 26034
("TRUSTOR"), to NEVADA TITLE COMPANY, a Nevada corporation, having an office
at 3320 West Sahara Avenue, Suite 200, Las Vegas, Nevada 89102 ("TRUSTEE"),
for the benefit of MADELEINE LLC, a New York limited liability company,
having an office at 450 Park Avenue, New York, New York 10022
("BENEFICIARY").
W I T N E S S E T H:
Trustor hereby covenants and agrees as follows:
SECTION 1
GRANT OF SECURITY INTERESTS
1.01. Trustor irrevocably grants, bargains, sells, transfers
and assigns to Trustee, in trust, for the benefit of Beneficiary, with power
of sale, all of the following-described property, whether now owned or
hereafter acquired by Trustor (which property is hereinafter collectively
referred to as the "PROPERTY"):
1.01.1. The real property and all estate, right, title and
interest therein, situated, lying and being in the County of Clark, State of
Nevada, as more particularly described on EXHIBIT A attached hereto and made
a part hereof (the "REAL PROPERTY").
1.01.2. All buildings, structures and improvements of every
nature whatsoever now or hereafter situated on the Real Property (the
"IMPROVEMENTS"), including all goods, fixtures, inventory and articles of
personal property and accessions thereof and renewals, replacements thereof
and substitutions therefor, if any (including, but not limited to, beds,
bureaus, chiffoniers, chests, chairs, desks, lamps, mirrors, bookcases,
tables, rugs, carpeting, drapes, draperies, curtains, shades, venetian
blinds, screens, paintings, hangings, pictures, divans, couches, luggage
carts, luggage racks, stools, sofas, chinaware, linens, pillows, blankets,
glassware, foodcarts, cookware, dry cleaning facilities, dining room wagons,
keys or other entry systems, bars, bar fixtures, liquor and other drink
dispensers, icemakers, radios, television sets, intercom and paging
equipment, electric and electronic equipment, dictating equipment, private
telephone systems, medical equipment, potted plants, heating, lighting and
plumbing fixtures, fire prevention and extinguishing apparatus, cooling and
air-conditioning
<PAGE>
systems, elevators, escalators, fittings, plants, apparatus, stoves, ranges,
refrigerators, laundry machines, tools, machinery, engines, dynamos, motors,
boilers, incinerators, switchboards, conduits, compressors, vacuum cleaning
systems, floor cleaning, waxing and polishing equipment, call systems,
brackets, electrical signs, bulbs, bells, ash and fuel, conveyors, cabinets,
lockers, shelving, spotlighting equipment, dishwashers, garbage disposals,
washers and dryers), other customary hotel equipment, fittings, building
materials, machinery, equipment, furniture and furnishings and personal
property of every nature whatsoever now or hereafter owned by Trustor or in
which Trustor has rights and used or intended to be used in connection with
or with the operation of the Real Property and/or the Improvements, including
all improvements, landscaping, fixtures, trade fixtures, equipment and
building materials and supplies (whether or not annexed thereto or located
thereon) now or hereafter used in connection therewith, including all
machinery, materials, appliances and fixtures for generating or distributing
air, water, heat, electricity, light, fuel, refrigeration, for ventilating,
cooling or sanitary purposes, for the exclusion of vermin or insects and for
the removal of dust, refuse or garbage, telephone, computer, surveillance,
security and other electronic systems, engines, machinery, boilers, furnaces,
oil burners, coolers, refrigeration plants, motors, irrigating systems,
plumbing, water systems and power systems, incinerators, communication
systems, appliances, and all other and further installations and appliances
on the Real Property and/or the Improvements, all of said items, whether now
or hereafter located thereon, shall, at the option of Beneficiary, be deemed
to be for all purposes of this instrument a part of the realty and including
all extensions, additions, improvements, betterments, renewals, substitutions
and replacements to any of the foregoing, whether such fixtures, furnishings
and personal property are actually located on or adjacent to the Real
Property and/or the Improvements or not, and whether in storage or otherwise,
wheresoever the same may be located (including any and all personal property
named in any Uniform Commercial Code financing statement executed in
conjunction with or in furtherance of this Deed of Trust).
1.01.3. All easements, reciprocal easement and similar agreements,
rights of way, strips and gores of land, streets, ways, alleys, passages,
sewer rights, waters, water courses, water rights and powers (whether
riparian, appropriative or otherwise and whether or not appurtenant), all
shares of stock evidencing any such water rights, mineral rights, air rights
and all development rights, estates, leases, rights, titles, interest,
privileges, liberties, tenements, hereditaments, and appurtenances
whatsoever, in any way belonging, relating or appertaining to any of the Real
Property and/or the Improvements, or which hereafter shall in any way belong,
relate or be appurtenant thereto, whether now owned or hereafter acquired by
Trustor, and the reversion and reversions, remainder and remainders, rents,
issues, profits thereof, and all estate, right, title, interest, property,
possession, claim and demand whatsoever at law, as well as in equity, of
Trustor of, in and to the same, including:
(a) All of lessor's interest in any and all leases, licenses
(except licenses that are not assignable and/or transferable) and occupancy
agreements of the Real Property and/or the Improvements, or any portion
thereof, now or hereafter owned or entered
<PAGE>
into by Trustor or any other party claiming by, through or under Trustor (all
of said leases, licenses and occupancy agreements and any and all interest
therein shall hereinafter be referred to as the "LEASES"), together with all
rents, royalties, profits, issues, revenues, receipts, income, deposits,
operating revenues, cash, benefits, account receivables and accounts which
may accrue from the Real Property, the Improvements and/or any business or
other activity conducted thereon from time to time, including, without
limitation, all revenues and credit card receipts collected from guest rooms,
restaurants, bars, meeting rooms, banquet rooms and recreational facilities,
all receivables, customer obligations, installment payment obligations and
other obligations now existing or hereafter arising or created out of the
sale, lease, sublease, license, concession or other grant of the right of the
use and occupancy of property or rendering of services by Trustor or any
operator or manager of the hotel or the commercial space located in the
Improvements or acquired from others (including, without limitation, from the
rental of any office space, retail space, guest rooms or other space, halls,
stores, and offices, and deposits securing reservations of such space),
license, lease, sublease and concession fees and rentals, health club
membership fees, food and beverage wholesale and retail sales, service
charges, vending machine sales and proceeds, if any, from business
interruption or other loss of income insurance (collectively, the "RENTS")
together with all benefits and advantages to be derived from the Leases
including, without limitation, all rights under any guarantees and other
security delivered in connection with the Leases, it being agreed that the
foregoing assignment of Leases and Rents is a perfected, absolute and present
assignment; PROVIDED, HOWEVER, that until a default (beyond applicable grace
and cure periods, if any) shall occur under this Deed of Trust, the Note (as
hereinafter defined) and/or any of the other Loan Documents (as hereinafter
defined), Beneficiary grants Trustor a license to receive, collect and enjoy
the Rents.
(b) All causes of action, claims, compensation, judgments,
insurance proceeds, awards of damages and settlements hereafter made
resulting from condemnation proceedings or the taking of the Property or any
part thereof under the power of eminent domain, or for any damage (whether
caused by such taking, by casualty or otherwise) to any and all of the
Property or any part thereof, or to any rights appurtenant thereto, including
any award for change of grade or streets.
(c) All option rights, books and records, and general
intangibles of Trustor relating to the Property, and all franchise
agreements, accounts, contract rights, instruments, chattel paper and other
rights of Trustor for payment of money, for property sold or lent, for
services rendered, for money lent, or for advances or deposits made relating
to the Property, including all tax refunds and refunds of any other monies
paid by or on behalf of Trustor relating to the Property and all contract
rights, plans, specifications and other similar documents, rights as
declarant or developer under any declaration or plan.
(d) All rights of Trustor to use, in connection with the Real
Property and/or the Improvements, any and all plans and specifications,
designs, drawings and other
<PAGE>
matters prepared for any construction on or improvements to the Real Property
and/or the Improvements and all studies, data and drawings related thereto.
(e) All rights of Trustor to use, in connection with the
Property, any contracts executed by Trustor with any provider of goods or
services for or in connection with any construction undertaken or to be
undertaken or services performed or to be performed in connection with the
Property (as any of the foregoing may be amended and/or restated from time to
time).
(f) Any and all permits, licenses (except licenses that are
not assignable and/or transferable), certificates, approvals and
authorizations, however characterized, issued or in any way furnished whether
necessary or not, for the construction, operation, use, occupancy and/or sale
of the Real Property, Improvements and/or Leases including building permits,
environmental certificates, certificates of operation, warranties, guarantees
and general intangibles.
(g) All proceeds of the conversion, voluntary or involuntary,
of the items listed in subparagraphs (a) through (f) above into cash,
liquidated claims or other property.
1.01.4. All rights of Trustor, if any, in and to the names, trade
names, service marks, logos, designs, copyrights, patents and other similar
propriety rights, to the extent assignable under the terms of any applicable
license, franchise or similar agreement, and all registrations and
applications for registration of such rights, used by Trustor in the
operation and identification of the Real Property and/or the Improvements or
any portion thereof, and the goodwill associated therewith.
TO HAVE AND TO HOLD the Property, together with the rights,
privileges and appurtenances belonging thereto, unto Trustee and its
successors and assigns, forever, subject, however, to the absolute assignment
of Leases and Rents contained herein; and Trustor does hereby bind itself and
its successors and assigns, to specially warrant and forever defend the
Property unto such Trustee, its successors, substitutes and assigns, against
all persons whomsoever claiming, including all rights and benefits hereunder
by virtue of the homestead exemption laws of the State in which the Real
Property and/or the Improvements are located (which rights and benefits are
hereby expressly released and waived), for the uses and purposes herein set
forth.
Trustor makes the foregoing grant to Trustee to hold the Property
in trust for the benefit of Beneficiary and for the purposes and upon the
terms and conditions hereinafter set forth. Trustor does hereby empower
Beneficiary, its agents and attorneys, to collect, sue for, settle,
compromise and give acquittance for all such rents, issues, profits and
proceeds.
<PAGE>
1.02. This Deed of Trust is for the purpose of securing:
1.02.1. Performance of each and every term, covenant and condition
incorporated by reference or contained herein;
1.02.2. Payment of the indebtedness evidenced by that certain
Promissory Note (the "Term Note") dated the date hereof, from Trustor and
Mountaineer Park, Inc., a West Virginia corporation ("Mountaineer"), as
makers, to Beneficiary, as payee, in the original principal amount of Twenty
Seven Million Eight Hundred Sixty Five Thousand and 00/100 Dollars
($27,865,000.00), or so much thereof as shall have been advanced and remain
outstanding from time to time, and any extension, modification or renewal
thereof, evidencing the loan from Beneficiary to Trustor and Mountaineer (the
"Term Loan").
1.02.3. Payment of the indebtedness evidenced by a certain
Promissory Note (the "Line Note") dated the date hereof, from Trustor and
Mountaineer, as makers, to Beneficiary, as payee, in the original principal
amount of Ten Million Three Hundred Seventy Six Thousand Five Hundred and
00/100 Dollars, or so much thereof as shall have been advanced and remain
outstanding from time to time and any extension, modification or renewal
thereof, evidencing the loan from Beneficiary to Trustor and Mountaineer (the
"Line Loan").
1.02.4. Payment of the indebtedness evidenced by a certain
Promissory Note (the "Construction Note") dated the date hereof, from Trustor
and Mountaineer, as makers to Beneficiary, as payee, in the original
principal amount of One Million Seven Hundred Thousand and 00/100 Dollars,
and any extension, modification or renewal thereof, evidencing the loan from
Beneficiary to Trustor and Mountaineer (the "Construction Loan").
1.02.5. The Term Note, Line Note and Construction Note are
hereinafter collectively referred to as the "NOTE". The Term Loan, Line Loan
and Construction Loan are hereinafter collectively referred to as the "LOAN".
1.02.6. Payment and performance of each and every term, covenant and
condition required to be paid or performed by Trustor and/or Mountaineer under a
certain Third Amended and Restated Term Loan Agreement dated as of the date
hereof between Beneficiary, as lender, and Trustor and Mountaineer, as
borrowers, (as modified from time to time the "LOAN AGREEMENT");
1.02.7. Performance of each and every other instrument and agreement
securing payment of the Note or executed in connection therewith, including,
without limitation the Cheyenne Deed of Trust, the West Virginia Deed of Trust
and the General Security Agreement (each as defined in the Loan Agreement), as
any of the foregoing documents may be amended or otherwise modified from time to
time (the Note, the Loan Agreement and such other instruments and agreements
being hereinafter referred to collectively as the "LOAN DOCUMENTS"); and
<PAGE>
1.02.8 Payment of such additional sums as may hereafter be
advanced pursuant to this Deed of Trust, the Loan Agreement, or any other
Loan Document for the account of Trustor or Mountaineer, or their respective
assigns by Beneficiary, with interest thereon as provided herein or in the
applicable Loan Document.
1.03. Trustor acknowledges and agrees: (i) that this Deed of
Trust shall constitute a Security Agreement within the meaning of the Nevada
Uniform Commercial Code (the "CODE") with respect to all sums on deposit with
Beneficiary ("DEPOSITS") and with respect to any property included in the
definition herein of the words "Property" which property may not be deemed to
form a part of the real estate described in EXHIBIT A or may not constitute a
"fixture" (within the meaning of NRS 104.9313 of the Code), and all
replacements of such property, and the proceeds thereof (said property,
replacements, substitutions, additions and the proceeds thereof being
sometimes herein collectively referred to as the "COLLATERAL"); (ii) that a
security interest in and to the Collateral and the Deposits is hereby granted
to Beneficiary; and (iii) that the Deposits and all of Trustor's rights,
title and interest therein are hereby pledged and assigned to Beneficiary;
all to secure payment of the indebtedness evidenced by the Note and to secure
performance by Trustor of the terms, covenants and provisions contained in
this Deed of Trust. In addition to the foregoing, the lien and security
interest hereof will automatically attach without further act to all
after-acquired Collateral.
1.04. To the extent permitted by law, with respect to all of the
goods and personal property described herein which are or are to become
fixtures on the Real Property described in EXHIBIT A attached hereto and/or
the Improvements, this instrument, upon recording in the real estate records
of the proper office shall constitute a "FIXTURE FILING" within the meaning
of NRS 104.9402(6) and NRS 104.9313 of the Code. Trustor is the record owner
of the land described in EXHIBIT A attached hereto. The address of
Beneficiary set forth in the opening paragraph of this Deed of Trust is the
address of the secured party from which information concerning the security
interest granted to Beneficiary may be obtained.
SECTION 2
REPRESENTATIONS, WARRANTIES AND COVENANTS OF TRUSTOR
2.01. Trustor represents and warrants that:
2.01.1. Trustor has full, complete and marketable fee simple title
to the Property, subject only to the title encumbrances specified in the
title insurance policy issued to and approved by Beneficiary concurrently
with the execution and delivery of this Deed of Trust (the "Permitted
Encumbrances").
2.01.2. This Deed of Trust is and will remain a valid and
enforceable first lien on the Property, subject only to the Permitted
Encumbrances.
<PAGE>
2.01.3. Trustor has not performed any act and is not bound by any
instrument which would prevent Beneficiary from enforcing any of the Loan
Documents including the Note and this Deed of Trust.
2.01.4. Trustor has all requisite power and corporate authority to
own and operate the Property, and, subject to Section 2.15 hereof, will use
its best efforts to obtain as promptly as possible after the date hereof and
maintain in full force and effect, all licenses, certificates, approvals,
permits and authorizations necessary to own, use, occupy and operate its
properties and businesses as currently operated and conducted or proposed to
be operated and conducted.
2.01.5. The Loan Documents (including the Note and this Deed of
Trust) and the transactions in connection with which the Note was given are
valid and binding obligations of the parties thereto, enforceable in
accordance with their terms.
2.01.6. Except as set forth in the survey dated as of the 3rd day
of March, 1998 (the "Survey") delivered to Beneficiary concurrently herewith,
the Real Property is accessible by way of abutting public streets or to
public streets over properly granted or dedicated private rights-of-way.
2.01.7. Except as indicated by the Permitted Encumbrances and the
Survey, no person or entity other than Trustor, its management company,
lessee of the casino and hotel guests has any right to occupy any portion of
the Property.
2.01.8. The Leases and Rents are subject to no encumbrances of any
kind except for this Deed of Trust.
2.01.9. To Trustor's best knowledge, neither Trustor nor to
Trustor's knowledge the Property (i) is in violation of or in default under
any applicable laws or regulations; (ii) is in violation of or in default
under any order, writ, injunction, demand or decree of any court or any
person or entity; and (iii) is in violation of or in default under any
indenture, agreement or other instrument, except to the extent that the
pre-existing franchise agreement (the "Pre-Existing Days Inn Franchise
Agreement") dated _____________ between Cheyenne Hotel Casino, Inc. and Days
Inn of America, Inc. remains in effect with respect to the Property and is in
default.
2.01.10. To the best of Trustor's knowledge, the Real Property and
the Improvements have been issued all required certificates of occupancy, if
any, and Trustor has received no written notice that such certificates of
occupancy, if any, have been suspended or revoked.
2.01.11. Trustor has not granted any option, right of first
refusal and/or right of first offer pursuant to which any other party could
acquire any right to purchase or lease any interest in the Real Property
and/or the Improvements.
<PAGE>
2.01.12. There are no management agreements affecting the Real
Property or any portion thereof, except to the extent any third party
management agreements for the Property exist with the prior owner, all of
which shall be terminated upon execution of this Deed of Trust.
2.01.13. To Trustor's best knowledge, there are no actions, suits
or proceedings pending against Trustor and/or the Property, at law or in
equity, or by any person or entity, including without limitation, any
federal, state, municipal or other governmental department, commission,
board, agency or instrumentality.
2.02. Trustor shall complete and maintain in a good and
workmanlike manner any building or other improvements which are being or in
the future may be constructed on the Property and pay when due all claims for
labor performed and materials furnished therefor. Trustor shall comply with
all laws, rules, ordinances, regulations, covenants, conditions,
restrictions, easements and agreements pertaining to the Property or
Trustor's use thereof. Trustor shall not commit, suffer or permit any act to
be done in or upon the Property in violation of law.
2.03. Trustor shall not initiate or acquiesce in any change in
any zoning or other land use classification now or hereafter in effect and
affecting the Property or any part thereof, nor shall Trustor otherwise
change or attempt to change the use of the Property or any portion thereof
without in each case obtaining Beneficiary's prior written consent thereto,
PROVIDED, HOWEVER, that Beneficiary shall not unreasonably withhold its
consent to an application by Grantor for a change in zoning to the extent
that such application will enhance the ability of Trustor to operate the
Property for gaming purposes or will otherwise improve the operations of the
Property as a hotel.
2.04. Trustor shall not commit or permit waste on the Property
and will keep and maintain or cause to be kept and maintained at its own
expense the Property in a first-class condition and state of repair (the term
first-class condition and state of repair shall be deemed to be a condition
and state of repair equal to or better than the existing condition and state
of repair of the Property).
2.05. Trustor shall not permit any building, structure, fixture
or other improvement to be erected, removed, demolished, or materially
changed or altered without the prior written consent of Beneficiary. Trustor
will not remove or permit the removal of any of the personal property or any
part thereof (including renewals, replacements and other after acquired
property) from the Real Property and/or the Improvements without the prior
written consent of Beneficiary; PROVIDED, HOWEVER, that, no consent shall be
required to replace obsolete and worn out articles concurrently with the
replacement or renewal thereof with property of at least equal value and of
equal usefulness in the operation of the Real Property and/or the
Improvements. Trustor will promptly notify Beneficiary of any fire or other
casualty causing damage to the Property. Trustor will promptly and in good
and workmanlike manner repair and restore any
<PAGE>
improvement which may be damaged or destroyed to the condition existing
immediately prior to such damage or destruction. Trustor will promptly
replace any lost, stolen, damaged or destroyed personal property.
2.06. Trustor shall pay and discharge (i) Beneficiary's legal
fees and disbursements in connection with the preparation, execution and
delivery of this Deed of Trust and any of the other Loan Documents and the
consummation of the transactions contemplated herein and therein as more
particularly set forth in Sections 5.01, 5.03 and 10.04 of the Loan Agreement
(ii) except as may be expressly limited in Section 10.04 of the Loan
Agreement, Beneficiary's and Trustee's fees and expenses in connection with
its performance of due diligence, including fees and expenses incurred by
Beneficiary with respect to third-party providers of due diligence reports,
(iii) Beneficiary's title insurance premium, fees and expenses and the cost
of affirmative insurance and endorsements, (iv) all costs to record documents
and instruments required by this Deed of Trust and the other Loan Documents,
and all mortgage, documentary, recording and other similar taxes and expenses
relating to the Note, this Deed of Trust and any of the other Loan Documents,
and (v) Trustee's fees and expenses in connection with its obligations
hereunder (including Trustee's fees and expenses in connection with a sale of
the Property, whether completed or not), which amounts shall become due upon
demand by either Beneficiary or Trustee
2.07. Trustor shall pay when due, all taxes, impositions,
assessments, levies, utility fees and all other fees and charges of every
kind and nature, whether of a like or different nature, imposed upon or
assessed against or which may become a lien on the Property, or any part
thereof, or arising from, by reason of or in connection with, the use thereof
or this Deed of Trust. In addition, Trustor shall file all required tax
forms with the appropriate governmental authorities on or before the day on
which they become due. Trustor will promptly deliver to Beneficiary receipts
evidencing payment of taxes, impositions, assessments, levies, utility fees
and all other fees and charges as required in the Loan Agreement.
Beneficiary may require Trustor to obtain and pay for a tax service
satisfactory to Beneficiary in order to assure Beneficiary such taxes are
paid.
2.08. If any suit, action, arbitration, or other proceeding
shall be instituted for any purpose affecting the Property, any portion
thereof, any interest therein, title thereto or this Deed of Trust, or should
Trustor receive any notice from any governmental agency relating to the
structure, use or occupancy of the Property, Trustor shall immediately upon
service thereof but in any event not later than five (5) business days after
service of process with respect thereto, or the obtaining of knowledge
thereof, deliver to Beneficiary true copies of each notice, petition,
summons, complaint, notice of motion, order to show cause, and all other
process, pleadings and papers, however designated, served in any action or
proceeding. Immediately upon becoming aware of any development or other
information which may materially and adversely affect the business,
prospects, profits or condition (financial or otherwise) of Trustor or the
Property or the ability of Trustor to perform the obligations secured hereby,
Trustor shall promptly and in
<PAGE>
writing notify Beneficiary of the nature of such development or information
and such anticipated effect.
2.09. Trustor promises and agrees that if during the existence
of this Deed of Trust there be commenced or pending any suit, action,
arbitration, or other proceeding for any purpose affecting the Property, any
portion thereof, any interest therein, title thereto or this Deed of Trust,
or if any adverse claim for or against said Property, or any portion thereof,
any interest therein, title thereto or this Deed of Trust, be made or
asserted, Trustor shall appear in and defend any such proceeding and will pay
all costs and damages arising because of such proceeding. Beneficiary may
elect to appear in any such proceeding in its discretion. If Beneficiary
elects to appear in any such action or proceeding, Beneficiary shall have the
right to retain counsel of its choice. Trustor shall be solely responsible
for any and all expenses and costs, including the reasonable fees of counsel
retained by Beneficiary, which are incurred pursuant to this section. If
Beneficiary elects to appear in any action or proceeding, Trustor agrees to
indemnify Beneficiary against, release Beneficiary from, and hold Beneficiary
harmless from any damages, liability, costs, expenses, litigation, or claims
incurred in or in connection with such action or appearance, except as a
result of Beneficiary's gross negligence or willful misconduct.
2.10. Trustor shall not permit or suffer the filing of any
mechanics', materialmen's, or other liens against the Property, any part
thereof, any interest therein, or the revenue, rents, issues, income and
profits arising therefrom. If any such lien shall be filed against the
Property, any part thereof, or any interest therein, Trustor agrees to bond
or discharge the same of record within thirty (30) days after the same shall
have been filed.
2.11. Trustor shall take any and all actions which may be
necessary to prevent any third parties from acquiring any prescriptive
easement upon, over or across any part of the Property, or from acquiring any
rights whatsoever to or against the Property by virtue of adverse possession.
2.12. Trustor shall not enter into any Lease (or amendment
thereof) for all or any portion of the Property without the prior written
consent of Beneficiary. All such Leases shall be on a lease form
satisfactory to Beneficiary, and shall be on terms and conditions and with a
tenant satisfactory to Beneficiary, which consent shall not be unreasonably
withheld if Trustor enters into a Lease with a duly licensed and reputable
casino operator reasonably satisfactory to Beneficiary. Trustor shall pay on
demand all costs of Beneficiary (including, attorneys' fees and costs) in
connection with any review and/or approval pursuant to this Section 2.12,
Section 2.13 and Section 2.14.
2.13. Trustor shall not without Beneficiary's prior written
consent (i) enter into any assignment or pledge or agreement to assign or
pledge any of Trustor's interest in the Leases and Rents; (ii) accept any
payment of any installment of Rents more than thirty (30) days before the due
date thereof, excluding reasonable security deposits and payment of last
month's rent; (iii) except as otherwise expressly provided hereinabove or in
the Loan Agreement, enter into
<PAGE>
any Lease or management agreement for all or any portion of the Property;
(iv) make any Lease or other contract for goods and/or services with any
entity that is a successor, affiliate or subsidiary of Trustor, other than
the "Approved Management Agreement" (as defined in the Loan Agreement); or
(v) amend, modify or waive any rights under any Lease, the Approved
Management Agreement or any other or management agreement. Trustor shall
promptly advise Beneficiary in writing of the giving of any notice by the
lessee under any Lease. Trustor shall execute and deliver, on request of
Beneficiary, such instruments as Beneficiary may deem useful or required to
permit Beneficiary to cure any default under any of the foregoing or permit
Beneficiary to take such other actions as Beneficiary considers desirable to
cure or remedy the matter in default and preserve the interest of Beneficiary
in such agreements and the Property.
2.14. Trustor shall at its sole cost and expense enforce, short
of termination thereof, the performance of all terms, covenants and
conditions of the Leases to be performed by the lessees thereunder. Trustor
shall appear in and defend any action or proceeding arising under, growing
out of or in any manner connected with the Leases or the obligations, duties
or liabilities of Trustor or of any tenants thereunder.
2.15. Trustor shall at all times, be in compliance with any and
all approvals, licenses and permits required to be obtained pursuant to
Nevada law; provided, however that to the extent that any such approval,
license or permit is not in place solely by reason of the acts or omission of
Cheyenne Hotel Casino, Inc., Trustor shall use its best efforts to obtain, or
cause to be obtained, at Trustor's sole cost and expense, such approval,
license or permit. Nothing in the Note, this Deed of Trust or in any of the
other Loan Documents shall be construed to obligate Trustor to obtain from
the State of Nevada licenses or permits to conduct gaming on the Real
Property, but all gaming activities coducted on any portion of the Real
Property shall be condcuted in accordance with applicable law.
2.16. Nothing in the Note, this Deed of Trust or in any of the
other Loan Documents, shall be construed to obligate Beneficiary, expressly
or by implication, to perform any of the covenants of landlord under any
Leases or to pay any sum or money or damages therein provided to be paid by
the landlord each and all of which covenants and payments Trustor agrees to
perform and pay or cause to be performed and paid.
2.17. To the extent not provided by applicable law, all future
Leases shall provide that, in the event of the enforcement by Trustee or
Beneficiary of the remedies provided for by law or by this Deed of Trust, the
tenant thereunder shall, if requested by Beneficiary or by any person
succeeding to the interest of Trustor as the result of said enforcement,
automatically become the tenant of any such successor-in-interest, without
any change in the terms or other provisions of such Lease; PROVIDED, HOWEVER,
that said successor-in-interest shall not be bound by (i) any payment of Rent
for more than one (1) month in advance, except prepayments in the nature of
security for the performance by tenant of its obligations under said Lease
not in excess of an amount equal to one (1) month's rental, (ii) any
amendment or modification in such Lease made without the consent of
Beneficiary or any successor-in-interest; or (iii) any prior acts
<PAGE>
and/or omissions in violation of any of the terms, covenants and conditions
contained in the Lease.
2.18. The lessee under the Leases may and shall rely upon the
receipt of any notice from Beneficiary that Trustor is in default thereunder
and thereafter Beneficiary, or Beneficiary's designee, shall be paid all
rents due under the Leases until the lessees thereunder are notified
otherwise in writing by Beneficiary or until directed otherwise by a final
judgment of a court of competent jurisdiction. All amounts collected
hereunder, after deducting the expenses of operating the Property and after
deducting the expenses of collection and all other expenses incurred
hereunder, including attorneys' fees, shall be applied in such manner as
Beneficiary may elect in its sole and absolute discretion. Trustor shall
cause to be included as terms in all Leases hereafter executed or renewed the
provisions of the first sentence of this Section 2.18, and shall further
cause the refusal of any lessee under any such Lease to pay all rents due
under the Leases to Beneficiary as aforesaid to be a breach of such Lease by
the lessee thereof. Nothing herein shall be deemed to impose on Beneficiary
any obligation to operate or maintain the Property or to enforce any Lease.
Notwithstanding the conveyance or transfer of title to any or all of the
Property to any lessee under any of the Leases, the lessee's leasehold estate
under such Lease shall not merge into the fee estate and the lessee shall
remain obligated under such lease as assigned by this Deed of Trust.
2.19. All lessees under the Leases shall agree that the Leases
are and shall be subordinate hereto and that upon any sale or deed in lieu of
sale hereunder such lessees shall attorn to the purchaser or grantee, as the
case may be, and recognize the same as lessor under the Leases as fully as if
such purchaser or grantee had been named as lessor under the Leases, but
without any claim or offset against such purchaser or grantee for any
liability of any previous lessor. Such lessees shall, from time to time
during the term hereof, within ten (10) days after demand therefor by
Beneficiary, execute and deliver to Beneficiary, or any party designated by
Beneficiary, a certificate in recordable form certifying that attached
thereto is a true and correct copy of such lessee's Lease, the term of such
Lease, the date to which all rentals and other charges have been paid, the
amount of any security deposit, that no rent has been prepaid or discounted,
that such Lease is in full force and effect, and that no defaults have
occurred thereunder (or specifying the nature of such defaults), together
with such other information with respect to such Lease and/or lessee as
Beneficiary may reasonably request.
2.20. Trustor will pay all amounts required to be paid under the
Note, as and when required under the terms of the Note, and Trustor will
comply with all terms and conditions of the Loan Agreement within the time
periods specified in the Loan Agreement for such compliance.
2.21. Trustor agrees at any time and from time to time during
the term hereof and within ten (10) days after demand therefor from
Beneficiary, to execute and deliver to Beneficiary, or any party designated
by Beneficiary, a certificate in recordable form certifying the amount then
due pursuant to this Deed of Trust and the obligations secured hereby, the
terms
<PAGE>
of payment thereof, the dates to which payments have been paid, that this
Deed of Trust and all instruments and obligations secured hereby are in full
force and effect and that there are no defenses or offsets thereto, or
specifying in what regards this Deed of Trust or such obligations are not in
full force and effect and the nature of any defense or offsets thereto,
together with such other information as Beneficiary may request.
2.22. Notwithstanding anything in this Deed of Trust to the
contrary, and except to the extent expressly permitted under the terms of the
Loan Agreement, Trustor shall not enter into leases, conditional sale
agreements and/or security agreements relating to fixtures, trade fixtures,
furniture, furnishings and equipment without the prior written consent of
Beneficiary.
2.23. Trustor will enforce the covenants, agreements, terms and
conditions to be performed by any other parties to any agreements, bonds,
leases, licenses, rental agreements, geological surveys, plans and
specifications, documents, chattel paper, instruments, and other contracts
and policies of insurance encumbered hereby in accordance with their terms
and will not enter into, modify or amend or permit the modification or
amendment thereof and will not cancel, surrender, fail to renew or permit the
cancellation, surrender or failure to renew of any of the foregoing without,
in each case, the prior written consent of Beneficiary.
2.24. Trustor shall execute, acknowledge and deliver to
Beneficiary, and, if applicable, cause to be recorded or filed at Trustor's
cost and expense, any and all such mortgages, assignments, transfers,
assurances, financing statements and other instruments and documents and do
such acts as Beneficiary shall from time to time require for the better
perfecting, assuring, conveying, assigning, transferring and confirming unto
Beneficiary the Property and rights herein conveyed or assigned or intended
now or hereafter so to be. Unless prohibited by law, Trustor hereby
authorizes Beneficiary to execute and file any such financing statements or
continuation statements on Trustor's behalf. The parties agree that this
Deed of Trust shall constitute a security agreement under the Code and that a
carbon, photographic or other reproduction of this Deed of Trust or of a
financing statement shall be sufficient as a financing statement. Trustor
shall not change its name, identity or corporate structure from and after the
date hereof without notifying Beneficiary at least sixty (60) days in advance.
2.25. Trustor shall procure, pay for and maintain and shall not
transfer, assign or pledge or agree to transfer, assign or pledge any of
Trustor's interest in the permits, licenses and other authorizations required
by any law, rule or regulation to be procured and/or maintained by Trustor,
and for the lawful and proper operation and maintenance of the Property,
including, without limitation, certificates of completion and occupancy
permits required for the legal use, occupancy and operation of the Real
Property as a hotel and any applicable liquor license.
2.26. Except as expressly permitted pursuant to the Loan
Agreement, Trustor shall not further encumber, create, assume, suffer to
exist, alienate, hypothecate or grant a security interest in or grant a lien,
charge or any other interest whatsoever in or with respect to
<PAGE>
the Property (whether superior or inferior to the liens of this Deed of Trust
and the other documents executed in connection herewith) in favor of any
person or entity.
2.27. [Intentionally Deleted].
2.28. All contracts and licenses entered into by Trustor or on
behalf of Trustor that relate to the Property are and shall be subordinate
hereto.
2.29. If, at any time or times, regardless of the existence of a
default (except with respect to clauses (iii) and (iv) below, which shall be
subject to a default having occurred) Beneficiary shall employ counsel or
other advisors for advice or other representation or shall incur legal or
other costs and expenses in connection with:
(i) any amendment, modification or waiver, or consent
with respect to, any of the Loan Documents (unless or except to the extent
such amendment, modification, waiver or consent is being made at
Beneficiary's request and for Beneficiary's benefit);
(ii) any litigation, contest, dispute, suit, proceeding
or action (whether instituted by Beneficiary, Trustor or any other party) in
any way relating to the Property, any of the Loan Documents or any other
agreements to be executed or delivered in connection herewith, unless Trustor
prevails against Beneficiary therein;
(iii) any attempt to enforce any rights of Beneficiary
against Trustor, or any other party, that may be obligated to Beneficiary by
virtue of any of the Loan Documents, unless Trustor prevails against
Beneficiary therein;
(iv) any attempt to verify, protect, collect, sell,
liquidate or otherwise dispose of the Property; or
(v) any exercise of remedies, collection of amounts due
under any of the Loan Documents, or protection of the security for the
obligations, or the enforcement of any covenant or agreement by Trustor,
under the Note or any of the other Loan Documents, unless Trustor prevails
against therein;
then, and in each and any such event, the attorneys' and other parties' fees
actually and necessarily arising from such services, including those of any
trial court proceedings, appellate proceedings, bankruptcy proceedings,
arbitration proceedings and mediation proceedings and all expenses, costs,
charges and other fees incurred by such counsel and others in any way or
respect arising in connection with or relating to any of the events or
actions described in this Section shall be payable, on demand, by Trustor to
Beneficiary and shall be additional obligations of Trustor secured by this
Deed of Trust and all of the other Loan Documents.
<PAGE>
2.30. Trustor will not conceal from creditors any of its assets
and will not participate in the concealing of assets of any other person or
entity.
2.31. Trustor is not insolvent and the consummation of the
transactions contemplated by this Deed of Trust and any of the other Loan
Documents will not render Trustor insolvent.
SECTION 3
CASUALTY, CONDEMNATION AND INSURANCE
3.01. Until the Loan has been fully satisfied, Trustor shall
obtain, or cause to be obtained, and shall maintain or cause to be maintained
with respect to the Property, at their own cost and expense, and shall
deposit with Beneficiary on or before the Closing Date the following (unless
otherwise indicated):
(a) PROPERTY INSURANCE. To the extent the Property is
improved, Trustor shall maintain an "All Risk," including flood, perils
policy covering the building and improvements, and any other permanent
structures for one hundred percent (100%) of the replacement cost. Upon the
request of Beneficiary replacement cost for insurance purposes will be
established by an independent appraiser selected by Beneficiary. The policy
will include Agreed Amount (waiving co-insurance), Replacement Cost Valuation
and Building Ordinance endorsements. The policy will include a standard
Beneficiary clause (ISO form or equivalent) and provide that all losses in
excess of Five Hundred Thousand Dollars ($500,000) be adjusted with
Beneficiary.
(b) PERSONAL PROPERTY. (including machinery, equipment,
furniture, fixtures, stock.) Trustor shall maintain "All Risk" property
coverage for all personal property owned, leased or for which Trustor's are
legally liable (to the extent such personal property exists).
The policy(ies) providing real and personal property
coverages may include a deductible of no more than Ten Thousand Dollars
($10,000) for any single occurrence. Flood and Earthquake deductibles can be
no more than One Hundred Thousand Dollars ($100,000), if a separate
deductible applies.
(c) Rental loss and/or business interruption insurance in
an amount equal to the greater of (A) estimated annual gross revenues for
twelve (12) months from the operation of the Real Property or (B) the
projected operating expenses (including debt service) for twelve (12) months
for the maintenance and operation of the Real Property. The amount of such
insurance shall be increased from time to time during the term of this Deed
of Trust as and when the estimate of (or the actual) gross revenue or
operating expenses, as may be applicable, increases.
<PAGE>
(d) CRIME INSURANCE. To the extent Trustor maintains a
business on the Property, Trustor shall, within ninety (90) days from the
date hereof, obtain and at all times thereafter maintain a comprehensive
crime policy, including the following coverages:
(i) Employee Dishonesty - One Million Dollars
($1,000,000);
(ii) Money and Securities - (inside) - Five Hundred
Thousand Dollars ($500,000);
(iii) Money and Securities - (outside) - Five Hundred
Thousand Dollars ($500,000);
(iv) Depositor's Forgery - One Million Dollars
($1,000,000);
(v) Computer Fraud - One Million Dollars
($1,000,000).
The policy may contain deductibles of no greater than One
Hundred Thousand Dollars ($100,000) for Employee Dishonesty and Fifty
Thousand Dollars ($50,000) for all other coverages listed above.
(e) COMMERCIAL GENERAL LIABILITY (1993 FORM OR
EQUIVALENT). Trustor shall maintain a Commercial General Liability policy
with a One Million Dollar ($1,000,000) combined single limit for bodily
injury and property damage, including Contractual Liability, and all standard
policy form extensions. The policy must provide Two Million Dollar
($2,000,000) general aggregate (per location, if multi-location risk) and be
written on an "occurrence form". If the general liability policy contains a
self-insured retention, it shall be no greater than Ten Thousand Dollars
($10,000) per occurrence, with an aggregate retention of no more than One
Hundred Thousand Dollars ($100,000).
The policy shall be endorsed to include Beneficiary as an
additional insured. Definition of additional insured shall include all
officers, directors, employees, agents and representatives of the additional
insured. The coverage for the additional insured shall apply on a primary
basis irrespective of any other insurance whether collectible or not.
(f) AUTOMOBILE. To the extent Trustor owns any
automobiles, Trustor shall within ninety (90) days from the date hereof,
obtain and at all times thereafter maintain a comprehensive Automobile
Liability Insurance Policy written under coverage "symbol 1," providing a One
Million Dollar ($1,000,000) combined single limit for bodily injury and
property damage covering all owned, non-owned and hired vehicles of the
Trustor. If a policy contains a self-insured retention it shall be no
greater than Ten Thousand Dollars ($10,000) per occurrence, with an aggregate
retention of no more than One Hundred Thousand Dollars ($100,000).
<PAGE>
(g) WORKERS COMPENSATION AND EMPLOYERS LIABILITY
INSURANCE. To the extent Trustor employs any employees, Trustor shall within
ninety (90) days from the date hereof, obtain and at all times thereafter
maintain standard Workers Compensation Policy, as required by law.
(h) UMBRELLA LIABILITY. An Umbrella Liability policy
shall be purchased with a limit of not less than Twenty-Five Million Dollars
($25,000,000) providing excess coverage over all limits and coverages
indicated in paragraphs (e), (f) and (g) above (to the extent Trustor owns no
automobiles and employs no employees then Trustor shall maintain such excess
coverage with respect to (e)). The limits can be obtained by a combination
of Primary and Excess Umbrella polices, provided that all layers follow form
with the underlying policies indicated in (e), (f) and (g) and are written on
an "occurrence" form. This policy shall be endorsed to include the
Beneficiary as an additional insured, as defined under paragraph (e) above.
If Trustor's general liability and automobile policies
include a self-insured retention, it is agreed and fully understood that
Trustor is solely responsible for payment of all amounts due within said
self-insured retentions. Any Indemnification/Hold Harmless provision is
extended to cover all liabilities associated with said self-insured
retentions.
(i) All policies indicated above shall be written
with insurance companies licensed and admitted to do
business in the State of Nevada and rated no lower than
"AVIII" in the most recent edition of A. M. Best and "AA"
in the most recent edition of Standard & Poor's, or such
other carrier reasonably acceptable to Beneficiary. All
policies discussed above shall be endorsed to provide
that in the event of a cancellation, non-renewal or
material modification, Beneficiary shall receive thirty
(30) days prior written notice thereof.
All policies providing property (first party) coverages
under this agreement shall provide that any loss be payable to Beneficiary
notwithstanding (i) any act or negligence by Trustor or any lessee or other
occupant of the Property which might otherwise result in forfeiture of said
insurance, (ii) use of all or any portion of the Property for purposes more
hazardous than permitted by such policy, (iii) any sale or other proceeding
pursuant hereto, or (iv) any change in title to or ownership of the Property
or any portion thereof.
Trustor shall be furnished with a Certificate of Insurance
executed by an authorized agent evidencing compliance with all insurance
provisions above on an annual basis. Certificates of Insurance executed by
an authorized agent of each carrier providing insurance evidencing
continuation of all coverages will be provided on the Closing Date and thirty
(30) days prior to the expiration of each policy. All certificates and other
notices related to the insurance program shall be delivered to Beneficiary
concurrently with the delivery of such certificates or notices to Trustor.
<PAGE>
Trustor shall obtain and maintain any other insurance
reasonably requested by Beneficiary in such amounts and covering such risks
as may be reasonably required by Beneficiary.
3.02. Trustor shall immediately notify Beneficiary of the
pendency of any proceedings for the condemnation of the Property, any part
thereof, or any interest therein upon obtaining knowledge of the institution
of the pendency of such proceedings. Beneficiary may, but shall not be
required to, participate in any such proceedings and Trustor from time to
time will deliver to Beneficiary all instruments requested by it to permit
such participation. Trustor shall pay all of Beneficiary's costs and
expenses, including attorneys' fees, incurred in any such proceedings. In
the event of such condemnation proceedings, any award or compensation shall
be paid to Beneficiary and shall be applied, after payment of all costs and
expenses of Beneficiary or Trustee incurred in collecting the same, in such
manner as Beneficiary elects in its sole and absolute discretion, without
regard to whether or not its security hereunder has been impaired. For the
purposes hereof, any proceeding to acquire any interest in or affecting the
value of the Property, or seeking damages therefor, including severance or
change of grade, whether by court action or purchase in lieu thereof, shall
be deemed a proceeding for condemnation and any award for inverse
condemnation shall be deemed condemnation proceeds.
3.03. Notwithstanding any provision in this Deed of Trust to the
contrary but subject to Section 3.04 below, Beneficiary may, in its sole and
absolute discretion, whether or not its security hereunder has been impaired,
and notwithstanding any other provision hereof, direct that any casualty
insurance or condemnation proceeds, or any portion thereof, remaining after
payment of all costs and expenses of Beneficiary or Trustee in collecting the
same ("NET PROCEEDS"), be paid, in such manner as Beneficiary elects,
including to apply the Net Proceeds to any and all amounts due hereunder or
under any of the other Loan Documents without regard to whether or not its
security hereunder has been impaired. If Beneficiary elects to apply all or
any portion of the Net Proceeds for the restoration and repair of the
improvements and/or personal property, then such Net Proceeds shall be
disbursed by Beneficiary pursuant to such disbursement procedures as
Beneficiary may provide, in its sole and absolute discretion. The amount of
such proceeds used toward payment of the cost of repair or restoration that
is released to Trustor shall not be deemed a payment of any indebtedness or
obligation secured hereby and shall be disbursed to Trustor pursuant to such
disbursement procedures as Beneficiary may provide, in its sole and absolute
discretion, to ensure the full, prompt and lien-free completion of such
restoration, repair or alteration
3.04. Notwithstanding the foregoing provisions of Section 3.03,
provided no Event of Default which remains uncured has occurred with respect
to the Loan, and provided, that, the restoration costs for damage due to an
insured casualty is $250,000.00 or less, any Net Proceeds in respect of
casualty insurance shall, at the request of the Trustor made in writing to
the Beneficiary, be disbursed by the Beneficiary to Trustor, in accordance
the conditions of Beneficiary's construction provisions contained in the Loan
Agreement (or, if
<PAGE>
there are none, in accordance with customary construction loan disbursement
procedures), for the payment (or reimbursement) of necessary costs actually
incurred by Trustor in the restoration or replacement of the Improvements or
the Personalty, under the following conditions:
(a) Prior to the commencement of the restoration or
replacement of the Improvements or the Personalty, other than such work as
may be reasonably necessary to protect the same from further damage, the
Beneficiary shall have approved the Plans and Specifications for such
restoration or replacement, which approval shall not be unreasonably
withheld, delayed or conditioned;
(b) In the event the Net Proceeds are not sufficient, in
the reasonable judgment of the Beneficiary, for the purpose of accomplishing
the restoration or replacement of the Improvements or the Personalty in
accordance with the Plans and Specifications aforesaid, Trustor shall provide
evidence reasonably satisfactory to the Beneficiary of the availability of
additional funds for the purpose of accomplishing the restoration or
replacement of the Improvements or the Personalty and such additional funds
shall be expended for that purpose before the Beneficiary shall have any
obligation to disburse insurance proceeds; and
(c) Each request for an advance of the Net Proceeds shall
be made to the Beneficiary at least two (2) business days prior to the date
upon which such advance is sought and shall be accompanied by evidence
reasonably satisfactory to the Beneficiary to the effect that (i) all work
then completed has been performed substantially in accordance with the Plans
and Specifications aforesaid and in accordance with all applicable building
codes and similar governmental requirements; (i) the amount requested to be
advanced is required for payments due to the contractor responsible for the
work, or to subcontractors, materialmen, laborers, engineers, architects or
to other persons responsible for services, labor or materials in connection
with the restoration or replacement of the Improvements or the Personalty, or
for third party fees or the like necessarily incurred in connection with the
same; (ii) all governmental permits and consents required for the performance
of the work have been obtained and are in full force and effect; (iii) funds
remaining available to Trustor and the Beneficiary for the purpose of
accomplishing the restoration or replacement of the Improvements or the
Personalty are sufficient for that purpose; and (iv) there has not been filed
with respect the Property any mechanic's or similar lien, or notice of
intention to file the same, which has not been dismissed, bonded or satisfied
of record.
SECTION 4
TRANSFERS, ETC.
4.01 Trustor shall not, directly or indirectly, sell, transfer,
assign, mortgage, pledge, hypothecate or encumber, including the granting of
any option to mortgage, pledge, hypothecate or encumber, whether voluntary or
involuntary, by agreement, operation of law or
<PAGE>
otherwise, of the whole or any portion of Trustor's right, title or interest
in and to the Collateral, the Property or Trustor, or any portion thereof or
any right or interest therein, without the prior written consent of
Beneficiary.
SECTION 5
TRUSTEE AND BENEFICIARY'S RIGHTS
5.01. The waiver or release by Beneficiary or Trustee of any
default or of any of the provisions, covenants and conditions hereof on the
part of Trustor to be kept and performed shall not be a waiver or release of
any preceding or subsequent breach of the same or any other provision,
covenant or condition contained herein. The subsequent acceptance of any sum
in payment of any indebtedness secured hereby or any other payment hereunder
by Trustor to Beneficiary or Trustee shall not be construed to be a waiver or
release of any preceding breach by Trustor of any provision, covenant or
condition of this Deed of Trust other than the failure of Trustor to pay the
particular sum so accepted, regardless of Beneficiary's or Trustee's
knowledge of such preceding breach at the time of acceptance of such payment.
No payment by Trustor or receipt by Beneficiary of a lesser amount than the
amount therein provided shall be deemed to be other than on account of the
earliest sums due and payable hereunder, nor shall any endorsement or
statement on any check or any letter accompanying any check or payment be
deemed an accord and satisfaction, and Beneficiary may accept any check or
payment without prejudice to Beneficiary's right to recover the balance of
such sum or pursue any other remedy provided in this Deed of Trust. The
consent by Beneficiary or Trustee to any matter or event requiring such
consent shall not constitute a waiver of the necessity for such consent to
any subsequent matter or event.
5.02. Beneficiary shall be subrogated to the lien of any and all
prior encumbrances, liens, or charges paid or discharged from the proceeds of
the Note, and even though said prior liens may have been released of record,
the repayment of the Note shall be secured by such liens on the portions of
the Property affected thereby to the extent of such payments. In
consideration of the advances made to Trustor, Trustor hereby waives and
releases all demands and causes of action for offsets, payments and rentals
to, and in connection with said prior indebtedness.
5.03. Notwithstanding the right otherwise provided to Trustor to
collect rent and other payments pursuant to any Leases while Trustor is not
in default under the Note, this Deed of Trust or any other Loan Document, if
there is filed any petition in bankruptcy by or against any lessee under any
of the Leases or there is appointed a receiver or trustee to take possession
of all or a substantial portion of the assets of such lessee or there is a
general assignment by such lessee for the benefit of creditors, or any action
is taken by or against such lessee under any state or federal insolvency law
or bankruptcy act, or any similar law now or hereafter in effect, Beneficiary
is appointed a creditor of such lessee and is entitled to recover on any
claim or right
<PAGE>
of recovery that Trustor may have against such lessee or its receiver or
trustee; PROVIDED, HOWEVER, that Beneficiary shall not be obligated to pursue
any such claim or right of recovery. Beneficiary may apply any such recovery
against any obligation secured hereby in such manner as it may deem
desirable, in its sole and absolute discretion.
5.04. Beneficiary may, upon not less than one (1) business day
advance notice, make or cause to be made reasonable entries upon and
inspection of the Property, provided however, Beneficiary shall use
reasonable efforts not to interfere with any use or enjoyment of the guests,
occupants or visitors of the Property.
5.05. Beneficiary may, at any time, by instrument in writing,
appoint a successor or successors to Trustee named herein or acting
hereunder, which instrument, executed and acknowledged by Beneficiary, and
recorded in the Office of the County Recorder, Clark County, Nevada, shall be
conclusive proof of the proper substitution of such successor trustee, who
shall have all the estate, powers, duties and trusts in the premises vested
in or conferred on the original trustee. If there be more than one trustee,
either may act alone and execute these trusts upon the request of Beneficiary
and his acts shall be deemed to be the acts of all trustees, and the recital
in any conveyance executed by such sole trustee of such requests shall be
conclusive evidence thereof, and of the authority of such sole trustee to act.
5.06. Without affecting the liability of Trustor or any other
person, except any person expressly released in writing, for payment of any
indebtedness secured hereby or for performance of any of the obligations or
any of the terms, covenants and conditions hereof, and without affecting the
rights of Trustee and Beneficiary with respect to any security not expressly
released in writing, at any time and from time to time, without notice or
consent other than consent of Beneficiary, Trustee and/or Beneficiary may:
(a) Release any person liable for payment of all or any
part of the indebtedness or for the performance of any obligation;
(b) Make any agreement extending the time or otherwise
altering the terms of payment of all or any part of said indebtedness or
modifying or waiving any obligation or subordinating, modifying or otherwise
dealing with the lien or charge hereof;
(c) Exercise or refrain from exercising or waive any
right either of them may have;
(d) Accept additional security of any kind; and
(e) Release or otherwise deal with any property, real or
personal, securing the obligations secured hereby.
5.07. If, after an event of default, Trustor fails to execute,
acknowledge or deliver to Beneficiary any and all mortgages, assignments,
transfers, assurances, financing
<PAGE>
statements, maps, and other instruments or documents required to be so
executed, acknowledged or delivered hereunder, within fifteen (15) days after
Beneficiary's demand or such lesser period as may be provided elsewhere
herein, then Trustor hereby appoints Beneficiary as Trustor's true and lawful
attorney-in-fact to act in Trustor's name, place and stead to execute,
acknowledge and deliver the same.
5.08. Whenever under any provision of this Deed of Trust Trustor
shall be obligated to make any payment or expenditure, or to do any act or
thing, or to incur any liability whatsoever, and Trustor fails, refuses or
neglects to perform as herein required, Beneficiary shall be entitled, but
shall not be obligated, to make any such payment or expenditure or to do any
such act or thing, or to incur any such liability, all on behalf of and at
the cost and for the account of Trustor. Beneficiary shall not be bound to
inquire into the validity of any apparent or threatened tax, assessment,
adverse title, lien, encumbrance, claim, or charge before making an advance
for the purpose of preventing, removing or paying the same. Beneficiary
shall be subrogated to all rights, equities and liens discharged by any such
expenditure.
5.09. A. It is expressly agreed that the entire unpaid
principal amount of the Note, together with any and all accrued and unpaid
interest and any and all other sums due thereunder, under this Deed of Trust
and/or under any of the other Loan Documents shall, except as otherwise
explicitly provided hereunder, under the Note and/or under any of the other
Loan Documents, at the option of Beneficiary, become immediately due and
payable (a) without notice, upon the failure of Trustor to make any payment
of principal, interest or other sums due hereunder, under the Note and/or
under any of the other Loan Documents (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise); (b) Trustor fails to
pay any interest due under the Note and/or any other Loan Document or any fee
or other amount (whether by scheduled payment, acceleration, demand or
otherwise) within three (3) business days of the date when due; PROVIDED
HOWEVER, that failure to make payments when due with respect to the
obligations of this Subsection 5.09.(b) more than three (3) times in any
twelve (12) month period shall constitute an event of default hereunder; (c)
upon the occurrence of any "Event of Default" (as defined in the Loan
Agreement) or (d) upon the occurrence and continuation for ten (10) days
after notice from Beneficiary to Trustor of any other default hereunder;
PROVIDED, HOWEVER, that in the case of a default which cannot with due
diligence be cured within such ten (10) day period, Trustor shall have up to
ninety (90) days from the date of such notice to cure such default, provided
that such default is capable of being cured within such ninety (90) day
period, as determined by Beneficiary, and Trustor commences to cure such
default within such ten (10) day period and thereafter diligently prosecutes
such cure to completion.
B. It shall also be a default hereunder if Trustor breaches (beyond
applicable notice and cure periods, if any) any representation, warranty or
covenant contained in any of the Loan Documents. In addition, Trustor shall be
in default hereunder (without any obligation on the part of Beneficiary to
provide any notice and cure period) if (a) any license or permit necessary for
operation of the Property or any portion thereof is revoked or any proceeding
to revoke the same is commenced or threatened; (b) if without Beneficiary's
prior consent,
<PAGE>
(i) except as provided under the Loan Agreement, the hotel manager for the
Real Property under the Approved Management Agreement (as defined in the Loan
Agreement) (or any successor management agreement) resigns or is removed, or
(ii) the ownership, management or control of such hotel manager is
transferred to a person or entity other than an affiliate of the Trustor, or
(iii) except as permitted in the Loan Agreement, there is any material change
in the Approved Management Agreement (or any successor management agreement);
(c) [intentionally deleted]; (d) if without Beneficiary's prior consent,
there is any material change in the Approved Franchise Agreement (as defined
in Section 7.02) (or any successor franchise agreement) or if the Approved
Franchise Agreement expires pursuant to its terms or a successor franchise
agreement is executed by Trustor and such successor franchise agreement is
not approved by Beneficiary; (e) if a default has occurred and continues
beyond any applicable cure period under the Approved Franchise Agreement (or
any successor franchise agreement) if such default permits the franchisor to
terminate or cancel the Approved Franchise Agreement (or any successor
franchise agreement); or (f) if Trustor ceases to do business as a hotel or
motel on the Real Property or terminates such business for any reason
whatsoever (other than temporary cessation in connection with any renovations
to the Real Property which does not exceed such reasonable number of days
from the date hereof necessary for Trustor to undertake the renovation of the
Real Property). Trustor shall give Beneficiary prompt notice of the
occurrence of any default under this Section 5.09B. but such notice shall not
be a condition precedent to Beneficiary exercising any of its remedies
hereunder, under the Note and/or under any of the other Loan Documents.
Notwithstanding the foregoing, if any event of default under Section
5.09(B)(a) hereof shall occur, and such default arises solely from (i) a
default by Cheyenne Hotel Casino, Inc. under the Pre-Existing Days Inn
Franchise Agreement or (ii) the operation of the Property by Cheyenne Hotel
Casino, Inc. prior to the date hereof, then no default shall be deemed to
have occurred; PROVIDED HOWEVER that Trustor hereby covenants and agrees that
from and after the date hereof, Trustor will use its best and diligent
efforts to cure as promptly as possible any such default or enter into a new
franchise agreement or pursuant to the Loan Agreement, operate the Property
independently (it being expressly understood that Trustor shall not be
obligated to expend any monies to cure any monetary default of Cheyenne Hotel
Casino, Inc.).
5.10. The collection of rents and the application thereof by
Beneficiary or any receiver obtained by Beneficiary shall not cure or waive
any default or notice thereof, or invalidate any act of Beneficiary pursuant
thereto. In the exercise of the powers herein granted Beneficiary,
Beneficiary shall not be deemed to have affirmed any Lease or subordinated
the lien hereof thereto nor shall any liability be asserted or enforced
against Beneficiary, all such liability being hereby expressly waived and
released by Trustor. Neither Beneficiary nor any receiver shall be obligated
to perform or discharge any obligation, duty or liability under any Lease
under or by reason of the assignment contained in this Deed of Trust and
Trustor shall and does hereby agree to indemnify Beneficiary and such
receiver from and to hold them harmless of and from any and all liability,
loss, costs, charges, penalties, obligations, expenses, attorneys' fees,
litigation, judgments, damages, claims and demands which they may or might
incur by reason of, arising from, or in connection with the Leases, such
assignment, any alleged obligations or
<PAGE>
undertakings on their part to perform or discharge any of the terms,
covenants or agreements contained in the Leases, any alleged affirmation of
or subordination to the Leases, or any action taken by Beneficiary or such
receiver pursuant to any provision of this Deed of Trust. Without limiting
the generality of the foregoing, no security deposited by the lessee with the
lessor under the terms of any Lease hereby assigned has been transferred to
Beneficiary, and Beneficiary assumes no liability for any security so
deposited.
5.11. In the event of any default hereunder or in the
performance of any of the obligations secured hereby, Beneficiary may
exercise any and all of its rights provided hereunder or by law. Without
limiting the generality of the foregoing, any personal property may, at the
sole and absolute option of Beneficiary (i) be sold hereunder, (ii) be sold
pursuant to the Code, or (iii) be dealt with by Beneficiary in any other
manner provided by statute, law or equity. The proceeds of any such sale may
be applied against the amounts due and owing Beneficiary hereunder. Without
limiting the foregoing, Beneficiary may require Trustor to assemble the
personal property and make it available to Beneficiary at a place to be
designated by Beneficiary. In the event of default, Beneficiary shall be the
attorney-in-fact of Trustor with respect to any and all matters pertaining to
the Property with full power and authority to give instructions with respect
to the collection and remittance of payments, to endorse checks, to enforce
the rights and remedies of Trustor, and to execute on behalf of Trustor and
in Trustor's name any instruction, agreement or other writing required
therefor. This power shall be irrevocable and deemed to be a power coupled
with an interest. Beneficiary may, in its sole discretion, appoint Trustee
as the agent of Beneficiary for the purpose of disposition of the personal
property in accordance with the Code. Trustor acknowledges and agrees that a
disposition of the personal property in accordance with Beneficiary's rights
and remedies in respect to real property as hereinabove provided is a
commercially reasonable disposition thereof.
5.12. In the event of any default hereunder or in the
performance of the obligations secured hereby, Beneficiary may, to the full
extent permitted by law, in addition to all other rights and remedies,
forthwith after any such default enter upon and take possession of the
Property, complete any buildings or other improvements under construction,
construct new improvements and make modifications to and/or demolish any of
the foregoing. In connection therewith Beneficiary shall have the power to
file any and all notices and obtain any and all permits and licenses which
Beneficiary, in its sole and absolute discretion, deems necessary or
appropriate, including the filing of notices of completion and the obtaining
of certificates of occupancy. Beneficiary shall also have the right to
receive all of the rents, issues and profits of the Property, overdue, due or
to become due, and to apply the same, after payment of all necessary charges
and expenses, including attorneys' fees, on account of the indebtedness
secured hereby. Beneficiary may do any and all of the foregoing in its own
name or in the name of Trustor and Trustor hereby irrevocably appoints
Beneficiary as its attorney-in-fact for such purposes. Beneficiary may also,
at any time after such default, apply to any court of competent jurisdiction
for the appointment of a receiver and Trustor agrees that such appointment
shall be made upon a PRIMA FACIE showing of a claimed default without
reference to any offsets or
<PAGE>
defenses against such default. Such receiver shall have all the rights and
powers provided Beneficiary pursuant to this section or otherwise provided
hereunder or by law. Said receiver may borrow monies and issue certificates
therefor. Said certificates shall be a lien on the Property subordinate only
to this Deed of Trust and the Leases; PROVIDED, HOWEVER, that should any of
said certificates be acquired by Beneficiary the amount thereof shall
constitute additional indebtedness secured hereby. Subject to compliance with
applicable laws, such receiver may lease all or any portion of the Property
on such terms and for such a term (which may extend beyond the terms of such
receiver's appointment and/or, if Beneficiary so consents, sale of the
Property hereunder) as such receiver may deem appropriate in its sole and
absolute discretion. The entering upon and taking possession of the Property
pursuant to this section and the collection of the rents, issues and profits
therefrom shall not cure or waive any default or notice of default hereunder
or invalidate any act of Beneficiary pursuant thereto.
5.13. Should default be made by Trustor in payment or
performance of any indebtedness or other obligation or agreement secured
hereby and/or in performance of any agreement herein, or should Trustor
otherwise be in default hereunder, Beneficiary may, subject to NRS 107.080,
declare all sums secured hereby immediately due by delivery to Trustee of a
written notice of breach and election to sell (which notice Trustee shall
cause to be recorded and mailed as required by law) and shall surrender to
Trustee this Deed of Trust and the Note.
5.14. After three (3) months shall have elapsed following
recordation of any such notice of breach, Trustee shall sell the property
subject hereto at such time and at such place in the State of Nevada as
Trustee, in its sole discretion, shall deem best to accomplish the objects of
these trusts, having first given notice of such sale as then required by law.
In the conduct of any such sale Trustee may act itself or through any
auctioneer, agent or attorney. The place of sale may be either in the county
in which the property to be sold, or any part thereof, is situated, or at an
office of Trustee located in the State of Nevada:
(a) Upon the request of Beneficiary or if required by law
Trustee shall postpone sale of all or any portion of said property or
interest therein by public announcement at the time fixed by said notice of
sale, and shall thereafter postpone said sale from time to time by public
announcement at the time previously appointed.
(b) At the time of sale so fixed, Trustee shall sell the
property so advertised or any part thereof or interest therein either as a
whole or in separate parcels, as Beneficiary may determine in its sole and
absolute discretion, to the highest bidder for cash in lawful money of the
United States, payable at time of sale, and shall deliver to such purchaser a
deed or deeds or other appropriate instruments conveying the property so
sold, but without covenant or warranty, express or implied. Beneficiary and
Trustee may bid and purchase at such sale. To the extent of the indebtedness
secured hereby, Beneficiary need not bid for cash at any sale of all or any
portion of the Property pursuant hereto, but the amount of any successful bid
by Beneficiary shall be applied in reduction of said indebtedness. Trustor
hereby agrees, if it is then
<PAGE>
still in possession, to surrender, immediately and without demand, possession
of said property to any purchaser.
5.15. Trustee shall apply the proceeds of any such sale to
payment of expenses of sale and all charges and expenses of Trustee and of
these trusts, including cost of evidence of title and Trustee's fee in
connection with sale; all sums expended under the terms hereof, not then
repaid, with accrued interest at the rate equal to the Default Rate; all
other sums then secured hereby, and the remainder, if any, to the person or
persons legally entitled thereto.
5.16. Beneficiary, from time to time before Trustee's sale, may
rescind any notice of breach and election to sell by executing, delivering
and causing Trustee to record a written notice of such rescission. The
exercise by Beneficiary of such right of rescission shall not constitute a
waiver of any breach or default then existing or subsequently occurring, or
impair the right of Beneficiary to execute and deliver to Trustee, as above
provided, other notices of breach and election to sell, nor otherwise affect
any term, covenant or condition hereof or under any obligation secured
hereby, or any of the rights, obligations or remedies of the parties
thereunder.
5.17 Trustor agree(s) that in the event that Trustor shall (a)
file with any bankruptcy court of competent jurisdiction or become the
subject of any petition under Title 11 of the United States Code, as amended,
(b) be the subject of any order for relief issued under Title 11 of the
United States Code, as amended, (c) file or be the subject of any petition
seeking any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under the present or future
federal or state act or law relating to bankruptcy, insolvency or other
relief for debtors, (d) have sought or consented to or acquiesced in the
appointment of any trustee, receiver, conservator or liquidator, (e) be the
subject of any order, judgment or decree entered by any court of competent
jurisdiction approving a petition filed against such party for any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future federal or state
law relating to bankruptcy, insolvency or relief for debtors, then, in such
event, Beneficiary or any designee or nominee, as the case may be, shall
thereupon be entitled to relief from any automatic stay imposed by Section
362 of Title 11 of the United States Code, as amended, on or against the
rights and remedies otherwise available to Beneficiary and designee or
nominee as provided in any of the Loan Documents, it being the intent of the
parties hereto that Trustor, without direct cost or expense to its
shareholders, agrees to take or consent to any and all action necessary to
effectuate such relief from the automatic stay.
SECTION 6
MISCELLANEOUS
6.01 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 Note secured
<PAGE>
hereby to Trustee for cancellation and upon payment of its fees, Trustee
shall reconvey without warranty the property then held hereunder. 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."
6.02. Trustor, for itself and for all persons hereafter claiming
through or under it or who may at any time hereafter become holders of liens
junior to the lien of this Deed of Trust, hereby expressly waives and
releases all rights 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 and/or any other property now or hereafter constituting security for
any of the indebtedness secured hereby marshaled upon any sale under this
Deed of Trust or of any other security for any of said indebtedness.
6.03. All notices, demands or requests relating to any matter
set forth herein shall be in writing and shall be served by delivery,
certified mail, return receipt requested, or by a reputable commercial
carrier that provides a receipt. All such notices or demands served shall be
with postage thereon fully prepaid, and addressed to the party so to be
served at its address stated below, or at such other address of which said
party shall have theretofore given notice in writing as provided herein. Any
such notices or demands shall be deemed effective on the day of actual
delivery as shown by the addressee's return receipt or upon the second (2nd)
business day after the date of mailing, whichever is earlier in time.
Notices shall be addressed as follows:
If to Beneficiary, to it at the following address:
Madeleine LLC
450 Park Avenue
New York, New York 10022
Attention: Mr. Kevin P. Genda
with a copy to:
Schulte Roth & Zabel LLP
900 Third Avenue
New York, New York 10022
Attention: Michael J. Feinman, Esq.
If to Trustor, to it at the following address:
Speakeasy Gaming of Las Vegas, Inc.
c/o Mountaineer Park, Inc.
Route 2 South
Chester, West Virginia 26034
Attention: Mr. Edson Arneault, President
<PAGE>
with copy to:
Ruben & Aronson, LLP
3299 K Street N.W.
Suite 403
Washington, D.C. 20007
Attention Robert L. Ruben, Esq.
If to Trustee, to it at the following address:
Nevada Title Compay
3320 West Sahara Avenue
Suite 200
Las Vegas, Nevada 89102
Attention: Roger A. Waite
Any party hereto may change its address for the purpose of
receiving notices or demands as herein provided by a written notice given in
the manner aforesaid to the other party hereto, which notice of change of
address shall not become effective, however, until the actual receipt thereof
by the other party. Whenever any law requires Beneficiary to give reasonable
notice of any act, election, or event, or proposed act, election, or event,
said requirement shall be deemed complied with if Beneficiary gives Trustor
ten (10) days written notice as herein provided. Information concerning the
security interest may be obtained from Beneficiary at the above address.
6.05. This Deed of Trust applies to, inures to the benefit of,
and binds all parties hereto, their heirs, legatees, devisees,
administrators, executors, successors and assigns (where permitted).
6.06. Trustee accepts these trusts when this Deed of Trust, duly
executed and acknowledged, is made a public record as provided by law.
6.07. Where any provision in this Deed of Trust refers to action
to be taken by Trustor, or which Trustor is prohibited from taking, such
provision shall be applicable whether such action is taken directly or
indirectly by Trustor.
6.08. In the event of any conflict between the provisions of
this Deed of Trust and the provisions of the Loan Agreement, the provisions
of the Loan Agreement shall govern and control, except that this Deed of
Trust shall govern and control with respect to (i) the provisions contained
in the Granting Clauses of Section 1 and in Sections 2, 4, and 5 hereof
and/or (ii) any other provisions contained in this Deed of Trust relating to
Beneficiary's rights or remedies or Trustor's obligations or liabilities in
respect of the Trust Property. In the event
<PAGE>
of any conflict between any provision hereof with respect to any Trust
Property which is personal property and any term or provision of the Security
Agreement, then such term or provision of the Security Agreement shall govern
and control with respect to such personal property to the extent of such
conflict. Trustor acknowledges that the provisions of this Deed of Trust may
impose additional or greater obligations on Trustor, or afford Beneficiary
additional or greater rights and remedies, in respect of the Trust Property
than the provisions of the Loan Agreement and such additional or greater
obligations and/or rights and remedies shall not be deemed to be a conflict
for purposes of the foregoing two sentences.
6.09. If any term, provision, covenant or condition of this Deed
of Trust, or any application thereof, should be held by a court of competent
jurisdiction to be invalid, void, or unenforceable, all provisions, covenants
and conditions of this Deed of Trust and all applications thereof not held
invalid, void or unenforceable, shall continue in full force and effect and
shall in no way be affected, impaired or invalidated thereby. If the lien of
this Deed of Trust is invalid or unenforceable as to any part of the
Property, or if the lien is invalid or unenforceable as to any part of the
indebtedness secured hereby, the unsecured or partially unsecured portion of
such indebtedness shall be completely paid prior to the payment of the
remaining and secured or partially secured portion of such indebtedness, and
all payments made on such indebtedness, whether voluntary or under
foreclosure or other enforcement action or procedure, shall be considered to
have been first paid on and applied to the full payment of that portion of
such indebtedness which is not secured or fully secured by the lien of this
Deed of Trust.
6.10. In the event that Trustor consists of more than one
person, firm or corporation then and in such event all of such persons, firms
or corporations shall be jointly and severally liable hereunder.
6.11. This Deed of Trust shall be governed by and construed in
accordance with the internal laws of the State of Nevada, without regard to
principles of conflicts of law.
6.12. This Deed of Trust shall be construed in accordance with
its intent and without regard to any presumption or other rule requiring
construction against the party causing the same to be drafted.
6.13. The various rights, options, elections and remedies of
Beneficiary and Trustee hereunder shall be cumulative and no one of them
shall be construed as exclusive of any other, or of any right, option,
election or remedy provided in any agreement or by law.
6.14. Time is of the essence of this Deed of Trust and all of
the terms, provisions, covenants and conditions hereof applicable to Trustor.
6.15. In this Deed of Trust, whenever the context so requires
the masculine gender includes the feminine and/or neuter, and the singular
number includes the plural, and vice-versa, the term Beneficiary shall
include any future holder, including pledgees, of the Note
<PAGE>
secured hereby, and the term Trustor shall mean the original signatory
hereof, the successors and assigns thereof and any future owners of the
Property or any portion thereof. In the event the ownership of all or any
portion of the Property becomes vested in a person other than the signatory
hereof, Beneficiary may, without notice to such signatory, deal with such
successor or successors with reference to this Deed of Trust and to the
indebtedness hereby secured in the same manner as with the signatory, without
in any way vitiating or discharging such signatory's liability hereunder or
upon the indebtedness hereby secured. In this Deed of Trust, the use of
words such as "including" or "such as" shall not be deemed to limit the
generality of the term or clause to which they have reference, whether or not
nonlimiting language (such as "without limitation," or "but not limited to,"
or words of similar import) is used with reference thereto, but rather shall
be deemed to refer to all other items or matters that could reasonably fall
within the broadest possible scope of such general statement, term or matter.
In any instance in which Beneficiary's consent, approval or satisfaction is
required hereunder, such consent, approval or satisfaction shall be deemed to
require the consent, approval or satisfaction of Beneficiary and, at
Beneficiary's election, Beneficiary's counsel, and unless otherwise provided
in this Deed of Trust, may be granted or withheld in Beneficiary's (or
Beneficiary's counsel's) reasonable discretion. In any instance in which
Beneficiary may elect to undertake any act hereunder, Beneficiary's election
shall be made in its sole and absolute discretion. In any instance in which
Beneficiary may elect to undertake any acts hereunder, Beneficiary's election
shall be made in its sole and absolute discretion. The captions appealing at
the commencement of the sections hereof are descriptive only and for
convenience in reference to this Deed of Trust and in no way whatsoever
define, limit or describe the scope or intent of this Deed of Trust, nor in
any way affect this Deed of Trust.
6.16. Trustor and Beneficiary each represents and warrants to the
other that it has not dealt with any broker or finder in connection with this
Deed of Trust. Trustor and Beneficiary shall indemnify, protect, defend and
hold each other harmless from and against any and all claims for brokerage,
leasing, finders or similar fees arising out of the breach on their respective
parts of any representation or agreement contested in this Section.
6.17. Trustor hereby knowingly, voluntarily and intentionally
waives (to the extent permitted by applicable law) trial by jury in any
action or proceeding of any kind or nature that may arise out of this Deed of
Trust, the Property or any other matter related thereto or by reason of any
other cause or dispute of any kind or nature between Trustor and Beneficiary.
6.18. Where not inconsistent with the above, the following
covenants, Nos. 1; 2 (full replacement value); 3; 4 (Default Rate as defined
in the Note); 5; 6; 7 (a reasonable percentage); 8 and 9 of NRS 107.030 are
hereby adopted and made a part of this Deed of Trust.
<PAGE>
IN WITNESS WHEREOF, Trustor has executed this Deed of Trust on the
day and year first above written.
SPEAKEASY GAMING OF LAS VEGAS, INC.,
a Nevada corporation
By: /S/ EDSON R. ARNEAULT
--------------------------------------
Name: Edson R. Arneault
Title: President
<PAGE>
STATE OF NEVADA )
) ss.:
COUNTY OF ____________)
On the ____ day of April, 1998, before me personally came Edson R. Arneault,
to me known to be the individual who executed the foregoing instrument, and
who, being duly sworn by me, did depose and say that he is President of
Speakeasy Gaming of Las Vegas, Inc., a Nevada corporation, and that he has
authority to sign the same, and acknowledged that he executed the same as the
act and deed of said corporation.
Sworn to before me this ____ day
of April, 1998.
- --------------------------------------------
Notary Public
<PAGE>
EXHIBIT 10.11
DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
THIS DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT
AND FIXTURE FILING (this "DEED OF TRUST"), dated as of April 30, 1998, by
SPEAKEASY GAMING OF RENO, INC., a Nevada corporation having an office c/o
Mountaineer Park, Inc., Route 2 South, Chester, Virginia 26034 ("TRUSTOR"), to
UNITED TITLE OF NEVADA, as agent for Chicago Title Insurance Company, having an
office at 201 West Liberty Street, Reno, Nevada 89509 ("TRUSTEE"), for the
benefit of MADELEINE LLC, a New York limited liability company, having an office
at 450 Park Avenue, New York, New York 10022 ("BENEFICIARY").
W I T N E S S E T H:
Trustor hereby covenants and agrees as follows:
SECTION 1
GRANT OF SECURITY INTERESTS
1.01. Trustor irrevocably grants, bargains, sells, transfers and
assigns to Trustee, in trust, for the benefit of Beneficiary, with power of
sale, all of the following-described property, whether now owned or hereafter
acquired by Trustor (which property is hereinafter collectively referred to as
the "PROPERTY"):
1.01.1. The real property and all estate, right, title and interest
therein, situated, lying and being in the County of Washoe, State of Nevada, as
more particularly described on EXHIBIT A attached hereto and made a part hereof
(the "REAL PROPERTY").
1.01.2. All buildings, structures and improvements of every nature
whatsoever now or hereafter situated on the Real Property (the "IMPROVEMENTS"),
including all goods, fixtures, inventory and articles of personal property and
accessions thereof and renewals, replacements thereof and substitutions
therefor, if any (including, but not limited to, beds, bureaus, chiffoniers,
chests, chairs, desks, lamps, mirrors, bookcases, tables, rugs, carpeting,
drapes, draperies, curtains, shades, venetian blinds, screens, paintings,
hangings, pictures, divans, couches, luggage carts, luggage racks, stools,
sofas, chinaware, linens, pillows, blankets, glassware, foodcarts, cookware, dry
cleaning facilities, dining room wagons, keys or other entry systems, bars, bar
fixtures, liquor and other drink dispensers, icemakers, radios, television sets,
intercom and paging equipment, electric and electronic equipment, dictating
equipment, private telephone systems, medical equipment, potted plants, heating,
lighting and plumbing fixtures, fire prevention and extinguishing apparatus,
cooling and air-conditioning
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systems, elevators, escalators, fittings, plants, apparatus, stoves, ranges,
refrigerators, laundry machines, tools, machinery, engines, dynamos, motors,
boilers, incinerators, switchboards, conduits, compressors, vacuum cleaning
systems, floor cleaning, waxing and polishing equipment, call systems,
brackets, electrical signs, bulbs, bells, ash and fuel, conveyors, cabinets,
lockers, shelving, spotlighting equipment, dishwashers, garbage disposals,
washers and dryers), other customary hotel equipment, fittings, building
materials, machinery, equipment, furniture and furnishings and personal
property of every nature whatsoever now or hereafter owned by Trustor or in
which Trustor has rights and used or intended to be used in connection with
or with the operation of the Real Property and/or the Improvements, including
all improvements, landscaping, fixtures, trade fixtures, equipment and
building materials and supplies (whether or not annexed thereto or located
thereon) now or hereafter used in connection therewith, including all
machinery, materials, appliances and fixtures for generating or distributing
air, water, heat, electricity, light, fuel, refrigeration, for ventilating,
cooling or sanitary purposes, for the exclusion of vermin or insects and for
the removal of dust, refuse or garbage, telephone, computer, surveillance,
security and other electronic systems, engines, machinery, boilers, furnaces,
oil burners, coolers, refrigeration plants, motors, irrigating systems,
plumbing, water systems and power systems, incinerators, communication
systems, appliances, and all other and further installations and appliances
on the Real Property and/or the Improvements, all of said items, whether now
or hereafter located thereon, shall, at the option of Beneficiary, be deemed
to be for all purposes of this instrument a part of the realty and including
all extensions, additions, improvements, betterments, renewals, substitutions
and replacements to any of the foregoing, whether such fixtures, furnishings
and personal property are actually located on or adjacent to the Real
Property and/or the Improvements or not, and whether in storage or otherwise,
wheresoever the same may be located (including any and all personal property
named in any Uniform Commercial Code financing statement executed in
conjunction with or in furtherance of this Deed of Trust).
1.01.3. All easements, reciprocal easement and similar
agreements, rights of way, strips and gores of land, streets, ways, alleys,
passages, sewer rights, waters, water courses, water rights and powers
(whether riparian, appropriative or otherwise and whether or not
appurtenant), all shares of stock evidencing any such water rights, mineral
rights, air rights and all development rights, estates, leases, rights,
titles, interest, privileges, liberties, tenements, hereditaments, and
appurtenances whatsoever, in any way belonging, relating or appertaining to
any of the Real Property and/or the Improvements, or which hereafter shall in
any way belong, relate or be appurtenant thereto, whether now owned or
hereafter acquired by Trustor, and the reversion and reversions, remainder
and remainders, rents, issues, profits thereof, and all estate, right, title,
interest, property, possession, claim and demand whatsoever at law, as well
as in equity, of Trustor of, in and to the same, including:
(a) All of lessor's interest in any and all leases, licenses
(except licenses that are not assignable and/or transferable) and occupancy
agreements of the Real
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Property and/or the Improvements, or any portion thereof, now or hereafter
owned or entered into by Trustor or any other party claiming by, through or
under Trustor (all of said leases, licenses and occupancy agreements and any
and all interest therein shall hereinafter be referred to as the "LEASES"),
together with all rents, royalties, profits, issues, revenues, receipts,
income, deposits, operating revenues, cash, benefits, account receivables and
accounts which may accrue from the Real Property, the Improvements and/or any
business or other activity conducted thereon from time to time, including,
without limitation, all revenues and credit card receipts collected from
guest rooms, restaurants, bars, meeting rooms, banquet rooms and recreational
facilities, all receivables, customer obligations, installment payment
obligations and other obligations now existing or hereafter arising or
created out of the sale, lease, sublease, license, concession or other grant
of the right of the use and occupancy of property or rendering of services by
Trustor or any operator or manager of the hotel or the commercial space
located in the Improvements or acquired from others (including, without
limitation, from the rental of any office space, retail space, guest rooms or
other space, halls, stores, and offices, and deposits securing reservations
of such space), license, lease, sublease and concession fees and rentals,
health club membership fees, food and beverage wholesale and retail sales,
service charges, vending machine sales and proceeds, if any, from business
interruption or other loss of income insurance (collectively, the "RENTS")
together with all benefits and advantages to be derived from the Leases
including, without limitation, all rights under any guarantees and other
security delivered in connection with the Leases, it being agreed that the
foregoing assignment of Leases and Rents is a perfected, absolute and present
assignment; PROVIDED, HOWEVER, that until a default (beyond applicable grace
and cure periods, if any) shall occur under this Deed of Trust, the Note (as
hereinafter defined) and/or any of the other Loan Documents (as hereinafter
defined), Beneficiary grants Trustor a license to receive, collect and enjoy
the Rents.
(b) All causes of action, claims, compensation, judgments,
insurance proceeds, awards of damages and settlements hereafter made
resulting from condemnation proceedings or the taking of the Property or any
part thereof under the power of eminent domain, or for any damage (whether
caused by such taking, by casualty or otherwise) to any and all of the
Property or any part thereof, or to any rights appurtenant thereto, including
any award for change of grade or streets.
(c) All option rights, books and records, and general
intangibles of Trustor relating to the Property, and all franchise
agreements, accounts, contract rights, instruments, chattel paper and other
rights of Trustor for payment of money, for property sold or lent, for
services rendered, for money lent, or for advances or deposits made relating
to the Property, including all tax refunds and refunds of any other monies
paid by or on behalf of Trustor relating to the Property and all contract
rights, plans, specifications and other similar documents, rights as
declarant or developer under any declaration or plan.
(d) All rights of Trustor to use, in connection with the Real
Property and/or the Improvements, any and all plans and specifications, designs,
drawings and other
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matters prepared for any construction on or improvements to the Real Property
and/or the Improvements and all studies, data and drawings related thereto.
(e) All rights of Trustor to use, in connection with the
Property, any contracts executed by Trustor with any provider of goods or
services for or in connection with any construction undertaken or to be
undertaken or services performed or to be performed in connection with the
Property (as any of the foregoing may be amended and/or restated from time to
time).
(f) Any and all permits, licenses (except licenses that are not
assignable and/or transferable), certificates, approvals and authorizations,
however characterized, issued or in any way furnished whether necessary or not,
for the construction, operation, use, occupancy and/or sale of the Real
Property, Improvements and/or Leases including building permits, environmental
certificates, certificates of operation, warranties, guarantees and general
intangibles.
(g) All proceeds of the conversion, voluntary or involuntary,
of the items listed in subparagraphs (a) through (f) above into cash,
liquidated claims or other property.
1.01.4. All rights of Trustor, if any, in and to the names, trade
names, service marks, logos, designs, copyrights, patents and other similar
propriety rights, to the extent assignable under the terms of any applicable
license, franchise or similar agreement, and all registrations and
applications for registration of such rights, used by Trustor in the
operation and identification of the Real Property and/or the Improvements or
any portion thereof, and the goodwill associated therewith.
TO HAVE AND TO HOLD the Property, together with the rights,
privileges and appurtenances belonging thereto, unto Trustee and its
successors and assigns, forever, subject, however, to the absolute assignment
of Leases and Rents contained herein; and Trustor does hereby bind itself and
its successors and assigns, to specially warrant and forever defend the
Property unto such Trustee, its successors, substitutes and assigns, against
all persons whomsoever claiming, including all rights and benefits hereunder
by virtue of the homestead exemption laws of the State in which the Real
Property and/or the Improvements are located (which rights and benefits are
hereby expressly released and waived), for the uses and purposes herein set
forth.
Trustor makes the foregoing grant to Trustee to hold the Property
in trust for the benefit of Beneficiary and for the purposes and upon the
terms and conditions hereinafter set forth. Trustor does hereby empower
Beneficiary, its agents and attorneys, to collect, sue for, settle,
compromise and give acquittance for all such rents, issues, profits and
proceeds.
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1.02. This Deed of Trust is for the purpose of securing:
1.02.1. Performance of each and every term, covenant and condition
incorporated by reference or contained herein;
1.02.2. Payment of the indebtedness evidenced by that certain
Promissory Note (the "Term Note") dated the date hereof, from Trustor and
Mountaineer Park, Inc., a West Virginia corporation ("Mountaineer"), as
makers, to Beneficiary, as payee, in the original principal amount of Twenty
Seven Million Eight Hundred Sixty Five Thousand and 00/100 Dollars
($27,865,000.00), or so much thereof as shall have been advanced and remain
outstanding from time to time, and any extension, modification or renewal
thereof, evidencing the loan from Beneficiary to Trustor and Mountaineer (the
"Term Loan").
1.02.3. Payment of the indebtedness evidenced by a certain
Promissory Note (the "Line Note") dated the date hereof, from Trustor and
Mountaineer, as makers, to Beneficiary, as payee, in the original principal
amount of Ten Million Three Hundred Seventy Six Thousand Five Hundred and
00/100 Dollars, or so much thereof as shall have been advanced and remain
outstanding from time to time and any extension, modification or renewal
thereof, evidencing the loan from Beneficiary to Trustor and Mountaineer (the
"Line Loan").
1.02.4. Payment of the indebtedness evidenced by a certain
Promissory Note (the "Construction Note") dated the date hereof, from Trustor
and Mountaineer, as makers to Beneficiary, as payee, in the original
principal amount of One Million Seven Hundred Thousand and 00/100 Dollars,
and any extension, modification or renewal thereof, evidencing the loan from
Beneficiary to Trustor and Mountaineer (the "Construction Loan").
1.02.5. The Term Note, Line Note and Construction Note are
hereinafter collectively referred to as the "NOTE". The Term Loan, Line Loan
and Construction Loan are hereinafter collectively referred to as the "LOAN".
1.02.6. Payment and performance of each and every term, covenant
and condition required to be paid or performed by Trustor and/or Mountaineer
under a certain Third Amended and Restated Term Loan Agreement dated as of
the date hereof between Beneficiary, as lender, and Trustor and Mountaineer,
as borrowers, (as modified from time to time the "LOAN AGREEMENT");
1.02.7. Performance of each and every other instrument and
agreement securing payment of the Note or executed in connection therewith,
including, without limitation the Cheyenne Deed of Trust, the West Virginia
Deed of Trust and the General Security Agreement (each as defined in the Loan
Agreement), as any of the foregoing documents may be amended or otherwise
modified from time to time (the Note, the Loan Agreement and such other
instruments and agreements being hereinafter referred to collectively as the
"LOAN DOCUMENTS"); and
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1.02.8 Payment of such additional sums as may hereafter be advanced
pursuant to this Deed of Trust, the Loan Agreement, or any other Loan Document
for the account of Trustor or Mountaineer, or their respective assigns by
Beneficiary, with interest thereon as provided herein or in the applicable Loan
Document.
1.03. Trustor acknowledges and agrees: (i) that this Deed of
Trust shall constitute a Security Agreement within the meaning of the Nevada
Uniform Commercial Code (the "CODE") with respect to all sums on deposit with
Beneficiary ("DEPOSITS") and with respect to any property included in the
definition herein of the words "Property" which property may not be deemed to
form a part of the real estate described in EXHIBIT A or may not constitute a
"fixture" (within the meaning of NRS 104.9313 of the Code), and all
replacements of such property, and the proceeds thereof (said property,
replacements, substitutions, additions and the proceeds thereof being
sometimes herein collectively referred to as the "COLLATERAL"); (ii) that a
security interest in and to the Collateral and the Deposits is hereby granted
to Beneficiary; and (iii) that the Deposits and all of Trustor's rights,
title and interest therein are hereby pledged and assigned to Beneficiary;
all to secure payment of the indebtedness evidenced by the Note and to secure
performance by Trustor of the terms, covenants and provisions contained in
this Deed of Trust. In addition to the foregoing, the lien and security
interest hereof will automatically attach without further act to all
after-acquired Collateral.
1.04. To the extent permitted by law, with respect to all of the
goods and personal property described herein which are or are to become fixtures
on the Real Property described in EXHIBIT A attached hereto and/or the
Improvements, this instrument, upon recording in the real estate records of the
proper office shall constitute a "FIXTURE FILING" within the meaning of NRS
104.9402(6) and NRS 104.9313 of the Code. Trustor is the record owner of the
land described in EXHIBIT A attached hereto. The address of Beneficiary set
forth in the opening paragraph of this Deed of Trust is the address of the
secured party from which information concerning the security interest granted to
Beneficiary may be obtained.
SECTION 2
REPRESENTATIONS, WARRANTIES AND COVENANTS OF TRUSTOR
2.01. Trustor represents and warrants that:
2.01.1. Trustor has full, complete and marketable fee simple title to
the Property, subject only to the title encumbrances specified in the title
insurance policy issued to and approved by Beneficiary concurrently with the
execution and delivery of this Deed of Trust (the "Permitted Encumbrances").
2.01.2. This Deed of Trust is and will remain a valid and enforceable
first lien on the Property, subject only to the Permitted Encumbrances.
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2.01.3. Trustor has not performed any act and is not bound by any
instrument which would prevent Beneficiary from enforcing any of the Loan
Documents including the Note and this Deed of Trust.
2.01.4. Trustor has all requisite power and corporate authority to
own and operate the Property, and subject to Section 2.15 hereof, will use its
best efforts to obtain as promptly as possible after the date hereof, and, to
maintain in full force and effect thereafter, all licenses, certificates,
approvals, permits and authorizations necessary to own, use, occupy and operate
its properties and businesses as currently operated and conducted or proposed to
be operated and conducted.
2.01.5. The Loan Documents (including the Note and this Deed of
Trust) and the transactions in connection with which the Note was given are
valid and binding obligations of the parties thereto, enforceable in accordance
with their terms.
2.01.6. Except as set forth in the survey dated as of the 21st day of
March, 1998 (the "Survey") delivered to Beneficiary concurrently herewith, the
Real Property is accessible by way of abutting public streets or to public
streets over properly granted or dedicated private rights-of-way.
2.01.7. Except as indicated by the Permitted Encumbrances and the
Survey, no person or entity other than Trustor, its management company, lessee
of the casino and hotel guests has any right to occupy any portion of the
Property.
2.01.8. The Leases and Rents are subject to no encumbrances of any
kind except for this Deed of Trust.
2.01.9. To Trustor's best knowledge, neither Trustor nor to Trustor's
knowledge the Property (i) is in violation of or in default under any applicable
laws or regulations; (ii) is in violation of or in default under any order,
writ, injunction, demand or decree of any court or any person or entity; and
(iii) is in violation of or in default under any indenture, agreement or other
instrument, except to the extent that the pre-existing franchise agreement (the
"Pre-Existing Ramada Franchise Agreement") dated April 10, 1997 between Reno
Hotel, LLC and Ramada Franchising Systems, Inc. remains in effect with respect
to the Property and is in default.
2.01.10. To the best of Trustor's knowledge, without independent
inquiry, and as evidenced by the permit, a copy of which was delivered by Reno
Hotel, LLC to Trustor, the Real Property and the Improvements have been issued
all required certificates of occupancy, if any, and Trustor has received no
written notice that such certificates of occupancy, if any, have been suspended
or revoked.
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2.01.11. Trustor has not granted any option, right of first refusal
and/or right of first offer pursuant to which any other party could acquire any
right to purchase or lease any interest in the Real Property and/or the
Improvements.
2.01.12. There are no management agreements affecting the Real
Property or any portion thereof, except for the management agreement between
Reno Hotel LLC and NHG LLP d/b/a Northwest Hospitality Group, which will be
terminated by Reno Hotel LLC upon the execution of this Deed of Trust.
2.01.13. To Trustor's best knowledge, there are no actions, suits or
proceedings pending against Trustor and/or the Property, at law or in equity, or
by any person or entity, including without limitation, any federal, state,
municipal or other governmental department, commission, board, agency or
instrumentality.
2.02. Trustor shall complete and maintain in a good and
workmanlike manner any building or other improvements which are being or in the
future may be constructed on the Property and pay when due all claims for labor
performed and materials furnished therefor. Trustor shall comply with all laws,
rules, ordinances, regulations, covenants, conditions, restrictions, easements
and agreements pertaining to the Property or Trustor's use thereof. Trustor
shall not commit, suffer or permit any act to be done in or upon the Property in
violation of law.
2.03. Trustor shall not initiate or acquiesce in any change in any
zoning or other land use classification now or hereafter in effect and affecting
the Property or any part thereof, nor shall Trustor otherwise change or attempt
to change the use of the Property or any portion thereof without in each case
obtaining Beneficiary's prior written consent thereto. PROVIDED, HOWEVER, that
Beneficiary shall not unreasonably withhold its consent to an application by
Grantor for a change in zoning to the extent that such application will enhance
the ability of Trustor to operate the Property for gaming purposes or will
otherwise improve the operations of the Property as a hotel.
2.04. Trustor shall not commit or permit waste on the Property and
will keep and maintain or cause to be kept and maintained at its own expense the
Property in a first-class condition and state of repair (the term first-class
condition and state of repair shall be deemed to be a condition and state of
repair equal to or better than the existing condition and state of repair of the
Property).
2.05. Trustor shall not permit any building, structure, fixture or
other improvement to be erected, removed, demolished, or materially changed or
altered without the prior written consent of Beneficiary. Trustor will not
remove or permit the removal of any of the personal property or any part thereof
(including renewals, replacements and other after acquired
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property) from the Real Property and/or the Improvements without the prior
written consent of Beneficiary; PROVIDED, HOWEVER, that, no consent shall be
required to replace obsolete and worn out articles concurrently with the
replacement or renewal thereof with property of at least equal value and of
equal usefulness in the operation of the Real Property and/or the
Improvements. Trustor will promptly notify Beneficiary of any fire or other
casualty causing damage to the Property. Trustor will promptly and in good
and workmanlike manner repair and restore any improvement which may be
damaged or destroyed to the condition existing immediately prior to such
damage or destruction. Trustor will promptly replace any lost, stolen,
damaged or destroyed personal property.
2.06. Trustor shall pay and discharge (i) Beneficiary's legal
fees and disbursements in connection with the preparation, execution and
delivery of this Deed of Trust and any of the other Loan Documents and the
consummation of the transactions contemplated herein and therein as more
particularly set forth in Sections 5.01, 5.03 and 10.04 of the Loan Agreement
(ii) except as may be expressly limited in Section 10.04 of the Loan
Agreement, Beneficiary's and Trustee's fees and expenses in connection with
its performance of due diligence, including fees and expenses incurred by
Beneficiary with respect to third-party providers of due diligence reports,
(iii) Beneficiary's title insurance premium, fees and expenses and the cost
of affirmative insurance and endorsements, (iv) all costs to record documents
and instruments required by this Deed of Trust and the other Loan Documents,
and all mortgage, documentary, recording and other similar taxes and expenses
relating to the Note, this Deed of Trust and any of the other Loan Documents,
and (v) Trustee's fees and expenses in connection with its obligations
hereunder (including Trustee's fees and expenses in connection with a sale of
the Property, whether completed or not), which amounts shall become due upon
demand by either Beneficiary or Trustee
2.07. Trustor shall pay when due, all taxes, impositions,
assessments, levies, utility fees and all other fees and charges of every
kind and nature, whether of a like or different nature, imposed upon or
assessed against or which may become a lien on the Property, or any part
thereof, or arising from, by reason of or in connection with, the use thereof
or this Deed of Trust. In addition, Trustor shall file all required tax
forms with the appropriate governmental authorities on or before the day on
which they become due. Trustor will promptly deliver to Beneficiary receipts
evidencing payment of taxes, impositions, assessments, levies, utility fees
and all other fees and charges as required in the Loan Agreement.
Beneficiary may require Trustor to obtain and pay for a tax service
satisfactory to Beneficiary in order to assure Beneficiary such taxes are
paid.
2.08. If any suit, action, arbitration, or other proceeding shall
be instituted for any purpose affecting the Property, any portion thereof, any
interest therein, title thereto or this Deed of Trust, or should Trustor receive
any notice from any governmental agency relating to the structure, use or
occupancy of the Property, Trustor shall immediately upon service thereof but in
any event not later than five (5) business days after service of process with
respect thereto, or the
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obtaining of knowledge thereof, deliver to Beneficiary true copies of each
notice, petition, summons, complaint, notice of motion, order to show cause,
and all other process, pleadings and papers, however designated, served in
any action or proceeding. Immediately upon becoming aware of any development
or other information which may materially and adversely affect the business,
prospects, profits or condition (financial or otherwise) of Trustor or the
Property or the ability of Trustor to perform the obligations secured hereby,
Trustor shall promptly and in writing notify Beneficiary of the nature of
such development or information and such anticipated effect.
2.09. Trustor promises and agrees that if during the existence
of this Deed of Trust there be commenced or pending any suit, action,
arbitration, or other proceeding for any purpose affecting the Property, any
portion thereof, any interest therein, title thereto or this Deed of Trust,
or if any adverse claim for or against said Property, or any portion thereof,
any interest therein, title thereto or this Deed of Trust, be made or
asserted, Trustor shall appear in and defend any such proceeding and will pay
all costs and damages arising because of such proceeding. Beneficiary may
elect to appear in any such proceeding in its discretion. If Beneficiary
elects to appear in any such action or proceeding, Beneficiary shall have the
right to retain counsel of its choice. Trustor shall be solely responsible
for any and all expenses and costs, including the reasonable fees of counsel
retained by Beneficiary, which are incurred pursuant to this section. If
Beneficiary elects to appear in any action or proceeding, Trustor agrees to
indemnify Beneficiary against, release Beneficiary from, and hold Beneficiary
harmless from any damages, liability, costs, expenses, litigation, or claims
incurred in or in connection with such action or appearance, except as a
result of Beneficiary's gross negligence or willful misconduct.
2.10. Trustor shall not permit or suffer the filing of any
mechanics', materialmen's, or other liens against the Property, any part
thereof, any interest therein, or the revenue, rents, issues, income and
profits arising therefrom. If any such lien shall be filed against the
Property, any part thereof, or any interest therein, Trustor agrees to bond
or discharge the same of record within thirty (30) days after the same shall
have been filed.
2.11. Trustor shall take any and all actions which may be
necessary to prevent any third parties from acquiring any prescriptive
easement upon, over or across any part of the Property, or from acquiring any
rights whatsoever to or against the Property by virtue of adverse possession.
2.12. Trustor shall not enter into any Lease (or amendment
thereof) for all or any portion of the Property without the prior written
consent of Beneficiary. All such Leases shall be on a lease form
satisfactory to Beneficiary, and shall be on terms and conditions and with a
tenant satisfactory to Beneficiary, which consent shall not be unreasonably
withheld if Trustor enters into a Lease with a duly licensed and reputable
casino operator reasonably satisfactory to Beneficiary. Trustor shall pay on
demand all costs of Beneficiary (including,
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attorneys' fees and costs) in connection with any review and/or approval
pursuant to this Section 2.12, Section 2.13 and Section 2.14.
2.13. Trustor shall not without Beneficiary's prior written
consent (i) enter into any assignment or pledge or agreement to assign or pledge
any of Trustor's interest in the Leases and Rents; (ii) accept any payment of
any installment of Rents more than thirty (30) days before the due date thereof,
excluding reasonable security deposits and payment of last month's rent; (iii)
except as otherwise expressly provided hereinabove or in the Loan Agreement,
enter into any Lease or management agreement for all or any portion of the
Property; (iv) make any Lease or other contract for goods and/or services with
any entity that is a successor, affiliate or subsidiary of Trustor, other than
the "Approved Management Agreement" (as defined in the Loan Agreement); or (v)
amend, modify or waive any rights under any Lease, the Approved Management
Agreement or any other or management agreement. Trustor shall promptly advise
Beneficiary in writing of the giving of any notice by the lessee under any
Lease. Trustor shall execute and deliver, on request of Beneficiary, such
instruments as Beneficiary may deem useful or required to permit Beneficiary to
cure any default under any of the foregoing or permit Beneficiary to take such
other actions as Beneficiary considers desirable to cure or remedy the matter in
default and preserve the interest of Beneficiary in such agreements and the
Property.
2.14. Trustor shall at its sole cost and expense enforce, short of
termination thereof, the performance of all terms, covenants and conditions of
the Leases to be performed by the lessees thereunder. Trustor shall appear in
and defend any action or proceeding arising under, growing out of or in any
manner connected with the Leases or the obligations, duties or liabilities of
Trustor or of any tenants thereunder.
2.15. Trustor shall at all times, be in compliance with any and
all approvals, licenses and permits required to be obtained pursuant to Nevada
law; PROVIDED HOWEVER, that to the extent that any such approval, license or
permit is not in place solely by reason of the acts or omission of Reno Hotel,
LLC, Trustor shall use its best efforts to obtain, or cause to be obtained, at
Trustor's sole cost and expense, such approval, license or permit. Nothing in
the Note, this Deed of Trust or in any of the Loan Documents shall be construed
to obligate Trustor to obtain from the State of Nevada licenses or permits to
conduct gaming on the Real Property, but all gaming activities coducted on any
portion of the Real Property shall be condcuted in accordance with applicable
law.
2.16. Nothing in the Note, this Deed of Trust or in any of the
other Loan Documents, shall be construed to obligate Beneficiary, expressly or
by implication, to perform any of the covenants of landlord under any Leases or
to pay any sum or money or damages therein provided to be paid by the landlord
each and all of which covenants and payments Trustor agrees to perform and pay
or cause to be performed and paid.
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2.17. To the extent not provided by applicable law, all future
Leases shall provide that, in the event of the enforcement by Trustee or
Beneficiary of the remedies provided for by law or by this Deed of Trust, the
tenant thereunder shall, if requested by Beneficiary or by any person
succeeding to the interest of Trustor as the result of said enforcement,
automatically become the tenant of any such successor-in-interest, without
any change in the terms or other provisions of such Lease; PROVIDED, HOWEVER,
that said successor-in-interest shall not be bound by (i) any payment of Rent
for more than one (1) month in advance, except prepayments in the nature of
security for the performance by tenant of its obligations under said Lease
not in excess of an amount equal to one (1) month's rental, (ii) any
amendment or modification in such Lease made without the consent of
Beneficiary or any successor-in-interest; or (iii) any prior acts and/or
omissions in violation of any of the terms, covenants and conditions
contained in the Lease.
2.18. The lessee under the Leases may and shall rely upon the
receipt of any notice from Beneficiary that Trustor is in default thereunder
and thereafter Beneficiary, or Beneficiary's designee, shall be paid all
rents due under the Leases until the lessees thereunder are notified
otherwise in writing by Beneficiary or until directed otherwise by a final
judgment of a court of competent jurisdiction. All amounts collected
hereunder, after deducting the expenses of operating the Property and after
deducting the expenses of collection and all other expenses incurred
hereunder, including attorneys' fees, shall be applied in such manner as
Beneficiary may elect in its sole and absolute discretion. Trustor shall
cause to be included as terms in all Leases hereafter executed or renewed the
provisions of the first sentence of this Section 2.18, and shall further
cause the refusal of any lessee under any such Lease to pay all rents due
under the Leases to Beneficiary as aforesaid to be a breach of such Lease by
the lessee thereof. Nothing herein shall be deemed to impose on Beneficiary
any obligation to operate or maintain the Property or to enforce any Lease.
Notwithstanding the conveyance or transfer of title to any or all of the
Property to any lessee under any of the Leases, the lessee's leasehold estate
under such Lease shall not merge into the fee estate and the lessee shall
remain obligated under such lease as assigned by this Deed of Trust.
2.19. All lessees under the Leases shall agree that the Leases are
and shall be subordinate hereto and that upon any sale or deed in lieu of sale
hereunder such lessees shall attorn to the purchaser or grantee, as the case may
be, and recognize the same as lessor under the Leases as fully as if such
purchaser or grantee had been named as lessor under the Leases, but without any
claim or offset against such purchaser or grantee for any liability of any
previous lessor. Such lessees shall, from time to time during the term hereof,
within ten (10) days after demand therefor by Beneficiary, execute and deliver
to Beneficiary, or any party designated by Beneficiary, a certificate in
recordable form certifying that attached thereto is a true and correct copy of
such lessee's Lease, the term of such Lease, the date to which all rentals and
other charges have been paid, the amount of any security deposit, that no rent
has been prepaid or discounted, that such Lease is in full force and effect, and
that no defaults have occurred
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thereunder (or specifying the nature of such defaults), together with such
other information with respect to such Lease and/or lessee as Beneficiary may
reasonably request.
2.20. Trustor will pay all amounts required to be paid under the
Note, as and when required under the terms of the Note, and Trustor will comply
with all terms and conditions of the Loan Agreement within the time periods
specified in the Loan Agreement for such compliance.
2.21. Trustor agrees at any time and from time to time during the
term hereof and within ten (10) days after demand therefor from Beneficiary, to
execute and deliver to Beneficiary, or any party designated by Beneficiary, a
certificate in recordable form certifying the amount then due pursuant to this
Deed of Trust and the obligations secured hereby, the terms of payment thereof,
the dates to which payments have been paid, that this Deed of Trust and all
instruments and obligations secured hereby are in full force and effect and that
there are no defenses or offsets thereto, or specifying in what regards this
Deed of Trust or such obligations are not in full force and effect and the
nature of any defense or offsets thereto, together with such other information
as Beneficiary may request.
2.22. Notwithstanding anything in this Deed of Trust to the
contrary, and except to the extent expressly permitted under the terms of the
Loan Agreement, Trustor shall not enter into leases, conditional sale agreements
and/or security agreements relating to fixtures, trade fixtures, furniture,
furnishings and equipment without the prior written consent of Beneficiary.
2.23. Trustor will enforce the covenants, agreements, terms and
conditions to be performed by any other parties to any agreements, bonds,
leases, licenses, rental agreements, geological surveys, plans and
specifications, documents, chattel paper, instruments, and other contracts and
policies of insurance encumbered hereby in accordance with their terms and will
not enter into, modify or amend or permit the modification or amendment thereof
and will not cancel, surrender, fail to renew or permit the cancellation,
surrender or failure to renew of any of the foregoing without, in each case, the
prior written consent of Beneficiary.
2.24. Trustor shall execute, acknowledge and deliver to
Beneficiary, and, if applicable, cause to be recorded or filed at Trustor's cost
and expense, any and all such mortgages, assignments, transfers, assurances,
financing statements and other instruments and documents and do such acts as
Beneficiary shall from time to time require for the better perfecting, assuring,
conveying, assigning, transferring and confirming unto Beneficiary the Property
and rights herein conveyed or assigned or intended now or hereafter so to be.
Unless prohibited by law, Trustor hereby authorizes Beneficiary to execute and
file any such financing statements or continuation statements on Trustor's
behalf. The parties agree that this Deed of Trust shall constitute a security
agreement under the Code and that a carbon, photographic or other reproduction
of this Deed of Trust or of a financing statement shall be sufficient as a
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financing statement. Trustor shall not change its name, identity or corporate
structure from and after the date hereof without notifying Beneficiary at least
sixty (60) days in advance.
2.25. Trustor shall procure, pay for and maintain and shall not
transfer, assign or pledge or agree to transfer, assign or pledge any of
Trustor's interest in the permits, licenses and other authorizations required by
any law, rule or regulation to be procured and/or maintained by Trustor, and for
the lawful and proper operation and maintenance of the Property, including,
without limitation, certificates of completion and occupancy permits required
for the legal use, occupancy and operation of the Real Property as a hotel and
any applicable liquor license.
2.26. Except as expressly permitted pursuant to the Loan
Agreement, Trustor shall not further encumber, create, assume, suffer to exist,
alienate, hypothecate or grant a security interest in or grant a lien, charge or
any other interest whatsoever in or with respect to the Property (whether
superior or inferior to the liens of this Deed of Trust and the other documents
executed in connection herewith) in favor of any person or entity.
2.27. [Intentionally Deleted].
2.28. All contracts and licenses entered into by Trustor or on
behalf of Trustor that relate to the Property are and shall be subordinate
hereto.
2.29. If, at any time or times, regardless of the existence of a
default (except with respect to clauses (iii) and (iv) below, which shall be
subject to a default having occurred) Beneficiary shall employ counsel or other
advisors for advice or other representation or shall incur legal or other costs
and expenses in connection with:
(i) any amendment, modification or waiver, or consent
with respect to, any of the Loan Documents (unless or except to the extent
such amendment, modification, waiver or consent is being made at
Beneficiary's request and for Beneficiary's benefit);
(ii) any litigation, contest, dispute, suit, proceeding or
action (whether instituted by Beneficiary, Trustor or any other party) in any
way relating to the Property, any of the Loan Documents or any other
agreements to be executed or delivered in connection herewith, unless Trustor
prevails against Beneficiary therein;
(iii) any attempt to enforce any rights of Beneficiary
against Trustor, or any other party, that may be obligated to Beneficiary by
virtue of any of the Loan Documents, unless Trustor prevails against
Beneficiary therein;
(iv) any attempt to verify, protect, collect, sell,
liquidate or otherwise dispose of the Property; or
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(v) any exercise of remedies, collection of amounts due
under any of the Loan Documents, or protection of the security for the
obligations, or the enforcement of any covenant or agreement by Trustor,
under the Note or any of the other Loan Documents, unless Trustor prevails
against therein;
then, and in each and any such event, the attorneys' and other parties' fees
actually and necessarily arising from such services, including those of any
trial court proceedings, appellate proceedings, bankruptcy proceedings,
arbitration proceedings and mediation proceedings and all expenses, costs,
charges and other fees incurred by such counsel and others in any way or respect
arising in connection with or relating to any of the events or actions described
in this Section shall be payable, on demand, by Trustor to Beneficiary and shall
be additional obligations of Trustor secured by this Deed of Trust and all of
the other Loan Documents.
2.30. Trustor will not conceal from creditors any of its assets
and will not participate in the concealing of assets of any other person or
entity.
2.31. Trustor is not insolvent and the consummation of the
transactions contemplated by this Deed of Trust and any of the other Loan
Documents will not render Trustor insolvent.
SECTION 3
CASUALTY, CONDEMNATION AND INSURANCE
3.01. Until the Loan has been fully satisfied, Trustor shall
obtain, or cause to be obtained, and shall maintain or cause to be maintained
with respect to the Property, at their own cost and expense, and shall deposit
with Beneficiary on or before the Closing Date the following (unless otherwise
indicated):
(a) PROPERTY INSURANCE. To the extent the Property is improved,
Trustor shall maintain an "All Risk," including earthquake, perils policy
covering the building and improvements, and any other permanent structures for
one hundred percent (100%) of the replacement cost. Upon the request of
Beneficiary replacement cost for insurance purposes will be established by an
independent appraiser selected by Beneficiary. The policy will include Agreed
Amount (waiving co-insurance), Replacement Cost Valuation and Building Ordinance
endorsements. The policy will include a standard Beneficiary clause (ISO form
or equivalent) and provide that all losses in excess of Five Hundred Thousand
Dollars ($500,000) be adjusted with Beneficiary.
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(b) PERSONAL PROPERTY. (including machinery, equipment, furniture,
fixtures, stock.) Trustor shall maintain "All Risk" property coverage for all
personal property owned, leased or for which Trustor's are legally liable (to
the extent such personal property exists).
The policy(ies) providing real and personal property coverages may
include a deductible of no more than Ten Thousand Dollars ($10,000) for any
single occurrence. Flood and Earthquake deductibles can be no more than One
Hundred Thousand Dollars ($100,000), if a separate deductible applies.
(c) Rental loss and/or business interruption insurance in an amount
equal to the greater of (A) estimated annual gross revenues for twelve (12)
months from the operation of the Real Property or (B) the projected operating
expenses (including debt service) for twelve (12) months for the maintenance and
operation of the Real Property. The amount of such insurance shall be increased
from time to time during the term of this Deed of Trust as and when the estimate
of (or the actual) gross revenue or operating expenses, as may be applicable,
increases.
(d) CRIME INSURANCE. To the extent Trustor maintains a business on
the Property, Trustor shall, within ninety (90) days from the date hereof,
obtain and at all times thereafter maintain a comprehensive crime policy,
including the following coverages:
(i) Employee Dishonesty - One Million Dollars ($1,000,000);
(ii) Money and Securities - (inside) - Five Hundred Thousand
Dollars ($500,000);
(iii) Money and Securities - (outside) - Five Hundred
Thousand Dollars ($500,000);
(iv) Depositor's Forgery - One Million Dollars ($1,000,000);
(v) Computer Fraud - One Million Dollars ($1,000,000).
The policy may contain deductibles of no greater than One Hundred
Thousand Dollars ($100,000) for Employee Dishonesty and Fifty Thousand Dollars
($50,000) for all other coverages listed above.
(e) COMMERCIAL GENERAL LIABILITY (1993 FORM OR EQUIVALENT). Trustor
shall maintain a Commercial General Liability policy with a One Million Dollar
($1,000,000) combined single limit for bodily injury and property damage,
including Contractual Liability, and all standard policy form extensions. The
policy must provide Two Million Dollar ($2,000,000) general aggregate (per
location, if multi-location risk) and be written on an "occurrence form". If
the general liability policy contains a self-insured retention, it shall be no
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greater than Ten Thousand Dollars ($10,000) per occurrence, with an aggregate
retention of no more than One Hundred Thousand Dollars ($100,000).
The policy shall be endorsed to include Beneficiary as an additional
insured. Definition of additional insured shall include all officers,
directors, employees, agents and representatives of the additional insured. The
coverage for the additional insured shall apply on a primary basis irrespective
of any other insurance whether collectible or not.
(f) AUTOMOBILE. To the extent Trustor owns any automobiles,
Trustor shall, within ninety (90) days from the date hereof, obtain and at
all times thereafter maintain a comprehensive Automobile Liability Insurance
Policy written under coverage "symbol 1," providing a One Million Dollar
($1,000,000) combined single limit for bodily injury and property damage
covering all owned, non-owned and hired vehicles of the Trustor. If a policy
contains a self-insured retention it shall be no greater than Ten Thousand
Dollars ($10,000) per occurrence, with an aggregate retention of no more than
One Hundred Thousand Dollars ($100,000).
(g) WORKERS COMPENSATION AND EMPLOYERS LIABILITY INSURANCE. To the
extent Trustor employs any employees, Trustor shall, within ninety (90) days
from the date hereof, obtain and at all times thereafter maintain standard
Workers Compensation Policy, as required by law.
(h) UMBRELLA LIABILITY. An Umbrella Liability policy shall be
purchased with a limit of not less than Twenty-Five Million Dollars
($25,000,000) providing excess coverage over all limits and coverages
indicated in paragraphs (e), (f) and (g) above (to the extent Trustor owns no
automobiles and employs no employees then Trustor shall maintain such excess
coverage with respect to (e)). The limits can be obtained by a combination
of Primary and Excess Umbrella polices, provided that all layers follow form
with the underlying policies indicated in (e), (f) and (g) and are written on
an "occurrence" form. This policy shall be endorsed to include the
Beneficiary as an additional insured, as defined under paragraph (e) above.
If Trustor's general liability and automobile policies include a
self-insured retention, it is agreed and fully understood that Trustor is
solely responsible for payment of all amounts due within said self-insured
retentions. Any Indemnification/Hold Harmless provision is extended to cover
all liabilities associated with said self-insured retentions.
(i) All policies indicated above shall be written with insurance
companies licensed and admitted to do business in the State of Nevada
and rated no lower than "AVIII" in the most recent edition of A. M.
Best and "AA" in the most recent edition of Standard & Poor's, or such
other carrier reasonably acceptable to Beneficiary. All policies
discussed above shall be endorsed to
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provide that in the event of a cancellation, non-renewal or material
modification, Beneficiary shall receive thirty (30) days prior
written notice thereof.
All policies providing property (first party) coverages under this
agreement shall provide that any loss be payable to Beneficiary notwithstanding
(i) any act or negligence by Trustor or any lessee or other occupant of the
Property which might otherwise result in forfeiture of said insurance, (ii) use
of all or any portion of the Property for purposes more hazardous than permitted
by such policy, (iii) any sale or other proceeding pursuant hereto, or (iv) any
change in title to or ownership of the Property or any portion thereof.
Trustor shall be furnished with a Certificate of Insurance executed by
an authorized agent evidencing compliance with all insurance provisions above on
an annual basis. Certificates of Insurance executed by an authorized agent of
each carrier providing insurance evidencing continuation of all coverages will
be provided on the Closing Date and thirty (30) days prior to the expiration of
each policy. All certificates and other notices related to the insurance
program shall be delivered to Beneficiary concurrently with the delivery of such
certificates or notices to Trustor.
Trustor shall obtain and maintain any other insurance reasonably
requested by Beneficiary in such amounts and covering such risks as may be
reasonably required by Beneficiary.
3.02. Trustor shall immediately notify Beneficiary of the pendency
of any proceedings for the condemnation of the Property, any part thereof, or
any interest therein upon obtaining knowledge of the institution of the pendency
of such proceedings. Beneficiary may, but shall not be required to, participate
in any such proceedings and Trustor from time to time will deliver to
Beneficiary all instruments requested by it to permit such participation.
Trustor shall pay all of Beneficiary's costs and expenses, including attorneys'
fees, incurred in any such proceedings. In the event of such condemnation
proceedings, any award or compensation shall be paid to Beneficiary and shall be
applied, after payment of all costs and expenses of Beneficiary or Trustee
incurred in collecting the same, in such manner as Beneficiary elects in its
sole and absolute discretion, without regard to whether or not its security
hereunder has been impaired. For the purposes hereof, any proceeding to acquire
any interest in or affecting the value of the Property, or seeking damages
therefor, including severance or change of grade, whether by court action or
purchase in lieu thereof, shall be deemed a proceeding for condemnation and any
award for inverse condemnation shall be deemed condemnation proceeds.
3.03. Notwithstanding any provision in this Deed of Trust to the
contrary but subject to Section 3.04 below, Beneficiary may, in its sole and
absolute discretion, whether or not its security hereunder has been impaired,
and notwithstanding any other provision hereof,
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direct that any casualty insurance or condemnation proceeds, or any portion
thereof, remaining after payment of all costs and expenses of Beneficiary or
Trustee in collecting the same ("NET PROCEEDS"), be paid, in such manner as
Beneficiary elects, including to apply the Net Proceeds to any and all
amounts due hereunder or under any of the other Loan Documents without regard
to whether or not its security hereunder has been impaired. If Beneficiary
elects to apply all or any portion of the Net Proceeds for the restoration
and repair of the improvements and/or personal property, then such Net
Proceeds shall be disbursed by Beneficiary pursuant to such disbursement
procedures as Beneficiary may provide, in its sole and absolute discretion.
The amount of such proceeds used toward payment of the cost of repair or
restoration that is released to Trustor shall not be deemed a payment of any
indebtedness or obligation secured hereby and shall be disbursed to Trustor
pursuant to such disbursement procedures as Beneficiary may provide, in its
sole and absolute discretion, to ensure the full, prompt and lien-free
completion of such restoration, repair or alteration
3.04. Notwithstanding the foregoing provisions of Section 3.03,
provided no Event of Default which remains uncured has occurred with respect to
the Loan, and provided, that, the restoration costs for damage due to an insured
casualty is $250,000.00 or less, any Net Proceeds in respect of casualty
insurance shall, at the request of the Trustor made in writing to the
Beneficiary, be disbursed by the Beneficiary to Trustor, in accordance the
conditions of Beneficiary's construction provisions contained in the Loan
Agreement (or, if there are none, in accordance with customary construction loan
disbursement procedures), for the payment (or reimbursement) of necessary costs
actually incurred by Trustor in the restoration or replacement of the
Improvements or the Personalty, under the following conditions:
(a) Prior to the commencement of the restoration or replacement
of the Improvements or the Personalty, other than such work as may be reasonably
necessary to protect the same from further damage, the Beneficiary shall have
approved the Plans and Specifications for such restoration or replacement, which
approval shall not be unreasonably withheld, delayed or conditioned;
(b) In the event the Net Proceeds are not sufficient, in the
reasonable judgment of the Beneficiary, for the purpose of accomplishing the
restoration or replacement of the Improvements or the Personalty in accordance
with the Plans and Specifications aforesaid, Trustor shall provide evidence
reasonably satisfactory to the Beneficiary of the availability of additional
funds for the purpose of accomplishing the restoration or replacement of the
Improvements or the Personalty and such additional funds shall be expended for
that purpose before the Beneficiary shall have any obligation to disburse
insurance proceeds; and
(c) Each request for an advance of the Net Proceeds shall be
made to the Beneficiary at least two (2) business days prior to the date upon
which such advance is sought and shall be accompanied by evidence reasonably
satisfactory to the Beneficiary to the
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effect that (i) all work then completed has been performed substantially in
accordance with the Plans and Specifications aforesaid and in accordance with
all applicable building codes and similar governmental requirements; (i) the
amount requested to be advanced is required for payments due to the
contractor responsible for the work, or to subcontractors, materialmen,
laborers, engineers, architects or to other persons responsible for services,
labor or materials in connection with the restoration or replacement of the
Improvements or the Personalty, or for third party fees or the like
necessarily incurred in connection with the same; (ii) all governmental
permits and consents required for the performance of the work have been
obtained and are in full force and effect; (iii) funds remaining available to
Trustor and the Beneficiary for the purpose of accomplishing the restoration
or replacement of the Improvements or the Personalty are sufficient for that
purpose; and (iv) there has not been filed with respect the Property any
mechanic's or similar lien, or notice of intention to file the same, which
has not been dismissed, bonded or satisfied of record.
SECTION 4
TRANSFERS, ETC.
4.01 Trustor shall not, directly or indirectly, sell, transfer,
assign, mortgage, pledge, hypothecate or encumber, including the granting of any
option to mortgage, pledge, hypothecate or encumber, whether voluntary or
involuntary, by agreement, operation of law or otherwise, of the whole or any
portion of Trustor's right, title or interest in and to the Collateral, the
Property or Trustor, or any portion thereof or any right or interest therein,
without the prior written consent of Beneficiary.
SECTION 5
TRUSTEE AND BENEFICIARY'S RIGHTS
5.01. The waiver or release by Beneficiary or Trustee of any
default or of any of the provisions, covenants and conditions hereof on the part
of Trustor to be kept and performed shall not be a waiver or release of any
preceding or subsequent breach of the same or any other provision, covenant or
condition contained herein. The subsequent acceptance of any sum in payment of
any indebtedness secured hereby or any other payment hereunder by Trustor to
Beneficiary or Trustee shall not be construed to be a waiver or release of any
preceding breach by Trustor of any provision, covenant or condition of this Deed
of Trust other than the failure of Trustor to pay the particular sum so
accepted, regardless of Beneficiary's or Trustee's knowledge of such preceding
breach at the time of acceptance of such payment. No payment by Trustor or
receipt by Beneficiary of a lesser amount than the amount therein provided shall
be deemed to be other than on account of the earliest sums due and payable
hereunder, nor shall any endorsement or statement on any check or any letter
accompanying any check or payment be deemed an
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accord and satisfaction, and Beneficiary may accept any check or payment
without prejudice to Beneficiary's right to recover the balance of such sum
or pursue any other remedy provided in this Deed of Trust. The consent by
Beneficiary or Trustee to any matter or event requiring such consent shall
not constitute a waiver of the necessity for such consent to any subsequent
matter or event.
5.02. Beneficiary shall be subrogated to the lien of any and all
prior encumbrances, liens, or charges paid or discharged from the proceeds of
the Note, and even though said prior liens may have been released of record, the
repayment of the Note shall be secured by such liens on the portions of the
Property affected thereby to the extent of such payments. In consideration of
the advances made to Trustor, Trustor hereby waives and releases all demands and
causes of action for offsets, payments and rentals to, and in connection with
said prior indebtedness.
5.03. Notwithstanding the right otherwise provided to Trustor to
collect rent and other payments pursuant to any Leases while Trustor is not in
default under the Note, this Deed of Trust or any other Loan Document, if there
is filed any petition in bankruptcy by or against any lessee under any of the
Leases or there is appointed a receiver or trustee to take possession of all or
a substantial portion of the assets of such lessee or there is a general
assignment by such lessee for the benefit of creditors, or any action is taken
by or against such lessee under any state or federal insolvency law or
bankruptcy act, or any similar law now or hereafter in effect, Beneficiary is
appointed a creditor of such lessee and is entitled to recover on any claim or
right of recovery that Trustor may have against such lessee or its receiver or
trustee; PROVIDED, HOWEVER, that Beneficiary shall not be obligated to pursue
any such claim or right of recovery. Beneficiary may apply any such recovery
against any obligation secured hereby in such manner as it may deem desirable,
in its sole and absolute discretion.
5.04. Beneficiary may, upon not less than one (1) business day
advance notice, make or cause to be made reasonable entries upon and inspection
of the Property, provided however, Beneficiary shall use reasonable efforts not
to interfere with any use or enjoyment of the guests, occupants or visitors of
the Property.
5.05. Beneficiary may, at any time, by instrument in writing,
appoint a successor or successors to Trustee named herein or acting hereunder,
which instrument, executed and acknowledged by Beneficiary, and recorded in the
Office of the County Recorder, Washoe County, Nevada, shall be conclusive proof
of the proper substitution of such successor trustee, who shall have all the
estate, powers, duties and trusts in the premises vested in or conferred on the
original trustee. If there be more than one trustee, either may act alone and
execute these trusts upon the request of Beneficiary and his acts shall be
deemed to be the acts of all trustees, and the recital in any conveyance
executed by such sole trustee of such requests shall be conclusive evidence
thereof, and of the authority of such sole trustee to act.
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5.06. Without affecting the liability of Trustor or any other
person, except any person expressly released in writing, for payment of any
indebtedness secured hereby or for performance of any of the obligations or any
of the terms, covenants and conditions hereof, and without affecting the rights
of Trustee and Beneficiary with respect to any security not expressly released
in writing, at any time and from time to time, without notice or consent other
than consent of Beneficiary, Trustee and/or Beneficiary may:
(a) Release any person liable for payment of all or any part of
the indebtedness or for the performance of any obligation;
(b) Make any agreement extending the time or otherwise altering
the terms of payment of all or any part of said indebtedness or modifying or
waiving any obligation or subordinating, modifying or otherwise dealing with the
lien or charge hereof;
(c) Exercise or refrain from exercising or waive any right
either of them may have;
(d) Accept additional security of any kind; and
(e) Release or otherwise deal with any property, real or
personal, securing the obligations secured hereby.
5.07. If, after an event of default, Trustor fails to execute,
acknowledge or deliver to Beneficiary any and all mortgages, assignments,
transfers, assurances, financing statements, maps, and other instruments or
documents required to be so executed, acknowledged or delivered hereunder,
within fifteen (15) days after Beneficiary's demand or such lesser period as may
be provided elsewhere herein, then Trustor hereby appoints Beneficiary as
Trustor's true and lawful attorney-in-fact to act in Trustor's name, place and
stead to execute, acknowledge and deliver the same.
5.08. Whenever under any provision of this Deed of Trust Trustor
shall be obligated to make any payment or expenditure, or to do any act or
thing, or to incur any liability whatsoever, and Trustor fails, refuses or
neglects to perform as herein required, Beneficiary shall be entitled, but shall
not be obligated, to make any such payment or expenditure or to do any such act
or thing, or to incur any such liability, all on behalf of and at the cost and
for the account of Trustor. Beneficiary shall not be bound to inquire into the
validity of any apparent or threatened tax, assessment, adverse title, lien,
encumbrance, claim, or charge before making an advance for the purpose of
preventing, removing or paying the same. Beneficiary shall be subrogated to all
rights, equities and liens discharged by any such expenditure.
5.09. A. It is expressly agreed that the entire unpaid principal
amount of the Note, together with any and all accrued and unpaid interest and
any and all other sums due thereunder, under this Deed of Trust and/or under any
of the other Loan Documents shall, except
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as otherwise explicitly provided hereunder, under the Note and/or under any
of the other Loan Documents, at the option of Beneficiary, become immediately
due and payable (a) without notice, upon the failure of Trustor to make any
payment of principal, interest or other sums due hereunder, under the Note
and/or under any of the other Loan Documents (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise); (b) Trustor fails to
pay any interest due under the Note and/or any other Loan Document or any fee
or other amount (whether by scheduled payment, acceleration, demand or
otherwise) within three (3) business days of the date when due; PROVIDED
HOWEVER, that failure to make payments when due with respect to the
obligations of this Subsection 5.09.(b) more than three (3) times in any
twelve (12) month period shall constitute an event of default hereunder; (c)
upon the occurrence of any "Event of Default" (as defined in the Loan
Agreement) or (d) upon the occurrence and continuation for ten (10) days
after notice from Beneficiary to Trustor of any other default hereunder;
PROVIDED, HOWEVER, that in the case of a default which cannot with due
diligence be cured within such ten (10) day period, Trustor shall have up to
ninety (90) days from the date of such notice to cure such default, provided
that such default is capable of being cured within such ninety (90) day
period, as determined by Beneficiary, and Trustor commences to cure such
default within such ten (10) day period and thereafter diligently prosecutes
such cure to completion.
B. It shall also be a default hereunder if Trustor breaches (beyond
applicable notice and cure periods, if any) any representation, warranty or
covenant contained in any of the Loan Documents. In addition, Trustor shall be
in default hereunder (without any obligation on the part of Beneficiary to
provide any notice and cure period) if (a) any material license or permit
necessary for operation of the Property or any portion thereof is revoked or
any proceeding to revoke the same is commenced or threatened; (b) if without
Beneficiary's prior consent, (i) except as permitted under the Loan Agreement,
the hotel manager for the Real Property under the Approved Management Agreement
(as defined in the Loan Agreement) (or any successor management agreement)
resigns or is removed, or (ii) the ownership, management or control of such
hotel manager is transferred to a person or entity other than an affiliate of
the Trustor, or (iii) except as permitted in the Loan Agreement, there is any
material change in the Approved Management Agreement (or any successor
management agreement); (c) [intentionally deleted]; (d) if without Beneficiary's
prior consent, there is any material change in the Approved Franchise Agreement
(as defined in Section 7.02) (or any successor franchise agreement) or if the
Approved Franchise Agreement expires pursuant to its terms or a successor
franchise agreement is executed by Trustor and such successor franchise
agreement is not approved by Beneficiary; (e) if a default has occurred and
continues beyond any applicable cure period under the Approved Franchise
Agreement (or any successor franchise agreement) if such default permits the
franchisor to terminate or cancel the Approved Franchise Agreement (or any
successor franchise agreement); or (f) if Trustor ceases to do business as a
hotel or motel on the Real Property or terminates such business for any reason
whatsoever (other than temporary cessation in connection with any renovations to
the Real Property which does not exceed such reasonable number of days from the
date hereof necessary for Trustor to undertake the
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renovation of the Real Property). Trustor shall give Beneficiary prompt
notice of the occurrence of any default under this Section 5.09B. but such
notice shall not be a condition precedent to Beneficiary exercising any of
its remedies hereunder, under the Note and/or under any of the other Loan
Documents. Notwithstanding the foregoing, if any event of default under
Section 5.09(B)(a) hereof shall occur, and such default arises solely from
(i) a default by Reno Hotel, LLC under the Pre-Existing Ramada Franchise
Agreement or (ii) the operation of the Property by Reno Hotel, LLC prior to
the date hereof, then no default shall be deemed to have occurred; PROVIDED
HOWEVER that Trustor hereby covenants and agrees that from and after the date
hereof, Trustor will use its best and diligent efforts to cure as promptly as
possible any such default or enter into a new franchise agreement (it being
expressly understood that Trustor shall not be obligated to expend any monies
to cure any monetary default of Reno Hotel LLC).
5.10. The collection of rents and the application thereof by
Beneficiary or any receiver obtained by Beneficiary shall not cure or waive any
default or notice thereof, or invalidate any act of Beneficiary pursuant
thereto. In the exercise of the powers herein granted Beneficiary, Beneficiary
shall not be deemed to have affirmed any Lease or subordinated the lien hereof
thereto nor shall any liability be asserted or enforced against Beneficiary, all
such liability being hereby expressly waived and released by Trustor. Neither
Beneficiary nor any receiver shall be obligated to perform or discharge any
obligation, duty or liability under any Lease under or by reason of the
assignment contained in this Deed of Trust and Trustor shall and does hereby
agree to indemnify Beneficiary and such receiver from and to hold them harmless
of and from any and all liability, loss, costs, charges, penalties, obligations,
expenses, attorneys' fees, litigation, judgments, damages, claims and demands
which they may or might incur by reason of, arising from, or in connection with
the Leases, such assignment, any alleged obligations or undertakings on their
part to perform or discharge any of the terms, covenants or agreements contained
in the Leases, any alleged affirmation of or subordination to the Leases, or any
action taken by Beneficiary or such receiver pursuant to any provision of this
Deed of Trust. Without limiting the generality of the foregoing, no security
deposited by the lessee with the lessor under the terms of any Lease hereby
assigned has been transferred to Beneficiary, and Beneficiary assumes no
liability for any security so deposited.
5.11. In the event of any default hereunder or in the performance
of any of the obligations secured hereby, Beneficiary may exercise any and all
of its rights provided hereunder or by law. Without limiting the generality of
the foregoing, any personal property may, at the sole and absolute option of
Beneficiary (i) be sold hereunder, (ii) be sold pursuant to the Code, or
(iii) be dealt with by Beneficiary in any other manner provided by statute, law
or equity. The proceeds of any such sale may be applied against the amounts due
and owing Beneficiary hereunder. Without limiting the foregoing, Beneficiary
may require Trustor to assemble the personal property and make it available to
Beneficiary at a place to be designated by Beneficiary. In the event of
default, Beneficiary shall be the attorney-in-fact of Trustor with respect to
any and all matters pertaining to the Property with full power and authority to
give instructions with
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respect to the collection and remittance of payments, to endorse checks, to
enforce the rights and remedies of Trustor, and to execute on behalf of
Trustor and in Trustor's name any instruction, agreement or other writing
required therefor. This power shall be irrevocable and deemed to be a power
coupled with an interest. Beneficiary may, in its sole discretion, appoint
Trustee as the agent of Beneficiary for the purpose of disposition of the
personal property in accordance with the Code. Trustor acknowledges and
agrees that a disposition of the personal property in accordance with
Beneficiary's rights and remedies in respect to real property as hereinabove
provided is a commercially reasonable disposition thereof.
5.12. In the event of any default hereunder or in the performance
of the obligations secured hereby, Beneficiary may, to the full extent permitted
by law, in addition to all other rights and remedies, forthwith after any such
default enter upon and take possession of the Property, complete any buildings
or other improvements under construction, construct new improvements and make
modifications to and/or demolish any of the foregoing. In connection therewith
Beneficiary shall have the power to file any and all notices and obtain any and
all permits and licenses which Beneficiary, in its sole and absolute discretion,
deems necessary or appropriate, including the filing of notices of completion
and the obtaining of certificates of occupancy. Beneficiary shall also have the
right to receive all of the rents, issues and profits of the Property, overdue,
due or to become due, and to apply the same, after payment of all necessary
charges and expenses, including attorneys' fees, on account of the indebtedness
secured hereby. Beneficiary may do any and all of the foregoing in its own name
or in the name of Trustor and Trustor hereby irrevocably appoints Beneficiary as
its attorney-in-fact for such purposes. Beneficiary may also, at any time after
such default, apply to any court of competent jurisdiction for the appointment
of a receiver and Trustor agrees that such appointment shall be made upon a
PRIMA FACIE showing of a claimed default without reference to any offsets or
defenses against such default. Such receiver shall have all the rights and
powers provided Beneficiary pursuant to this section or otherwise provided
hereunder or by law. Said receiver may borrow monies and issue certificates
therefor. Said certificates shall be a lien on the Property subordinate only to
this Deed of Trust and the Leases; PROVIDED, HOWEVER, that should any of said
certificates be acquired by Beneficiary the amount thereof shall constitute
additional indebtedness secured hereby. Subject to compliance with applicable
laws, such receiver may lease all or any portion of the Property on such terms
and for such a term (which may extend beyond the terms of such receiver's
appointment and/or, if Beneficiary so consents, sale of the Property hereunder)
as such receiver may deem appropriate in its sole and absolute discretion. The
entering upon and taking possession of the Property pursuant to this section and
the collection of the rents, issues and profits therefrom shall not cure or
waive any default or notice of default hereunder or invalidate any act of
Beneficiary pursuant thereto.
5.13. Should default be made by Trustor in payment or performance
of any indebtedness or other obligation or agreement secured hereby and/or in
performance of any agreement herein, or should Trustor otherwise be in default
hereunder, Beneficiary may, subject to NRS 107.080, declare all sums secured
hereby immediately due by delivery to Trustee of a
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written notice of breach and election to sell (which notice Trustee shall
cause to be recorded and mailed as required by law) and shall surrender to
Trustee this Deed of Trust and the Note.
5.14. After three (3) months shall have elapsed following
recordation of any such notice of breach, Trustee shall sell the property
subject hereto at such time and at such place in the State of Nevada as Trustee,
in its sole discretion, shall deem best to accomplish the objects of these
trusts, having first given notice of such sale as then required by law. In the
conduct of any such sale Trustee may act itself or through any auctioneer, agent
or attorney. The place of sale may be either in the county in which the
property to be sold, or any part thereof, is situated, or at an office of
Trustee located in the State of Nevada:
(a) Upon the request of Beneficiary or if required by law
Trustee shall postpone sale of all or any portion of said property or interest
therein by public announcement at the time fixed by said notice of sale, and
shall thereafter postpone said sale from time to time by public announcement at
the time previously appointed.
(b) At the time of sale so fixed, Trustee shall sell the
property so advertised or any part thereof or interest therein either as a whole
or in separate parcels, as Beneficiary may determine in its sole and absolute
discretion, to the highest bidder for cash in lawful money of the United States,
payable at time of sale, and shall deliver to such purchaser a deed or deeds or
other appropriate instruments conveying the property so sold, but without
covenant or warranty, express or implied. Beneficiary and Trustee may bid and
purchase at such sale. To the extent of the indebtedness secured hereby,
Beneficiary need not bid for cash at any sale of all or any portion of the
Property pursuant hereto, but the amount of any successful bid by Beneficiary
shall be applied in reduction of said indebtedness. Trustor hereby agrees, if
it is then still in possession, to surrender, immediately and without demand,
possession of said property to any purchaser.
5.15. Trustee shall apply the proceeds of any such sale to payment
of expenses of sale and all charges and expenses of Trustee and of these trusts,
including cost of evidence of title and Trustee's fee in connection with sale;
all sums expended under the terms hereof, not then repaid, with accrued interest
at the rate equal to the Default Rate; all other sums then secured hereby, and
the remainder, if any, to the person or persons legally entitled thereto.
5.16. Beneficiary, from time to time before Trustee's sale, may
rescind any notice of breach and election to sell by executing, delivering and
causing Trustee to record a written notice of such rescission. The exercise by
Beneficiary of such right of rescission shall not constitute a waiver of any
breach or default then existing or subsequently occurring, or impair the right
of Beneficiary to execute and deliver to Trustee, as above provided, other
notices of breach and election to sell, nor otherwise affect any term, covenant
or condition hereof or under any obligation secured hereby, or any of the
rights, obligations or remedies of the parties thereunder.
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5.17 Trustor agree(s) that in the event that Trustor shall (a) file
with any bankruptcy court of competent jurisdiction or become the subject of any
petition under Title 11 of the United States Code, as amended, (b) be the
subject of any order for relief issued under Title 11 of the United States Code,
as amended, (c) file or be the subject of any petition seeking any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under the present or future federal or state act or law
relating to bankruptcy, insolvency or other relief for debtors, (d) have sought
or consented to or acquiesced in the appointment of any trustee, receiver,
conservator or liquidator, (e) be the subject of any order, judgment or decree
entered by any court of competent jurisdiction approving a petition filed
against such party for any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any present or
future federal or state law relating to bankruptcy, insolvency or relief for
debtors, then, in such event, Beneficiary or any designee or nominee, as the
case may be, shall thereupon be entitled to relief from any automatic stay
imposed by Section 362 of Title 11 of the United States Code, as amended, on or
against the rights and remedies otherwise available to Beneficiary and designee
or nominee as provided in any of the Loan Documents, it being the intent of the
parties hereto that Trustor, without direct cost or expense to its shareholders,
agrees to take or consent to any and all action necessary to effectuate such
relief from the automatic stay.
SECTION 6
MISCELLANEOUS
6.01 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 Note secured hereby to Trustee for cancellation and upon payment of its
fees, Trustee shall reconvey without warranty the property then held hereunder.
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."
6.02. Trustor, for itself and for all persons hereafter claiming
through or under it or who may at any time hereafter become holders of liens
junior to the lien of this Deed of Trust, hereby expressly waives and releases
all rights 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
and/or any other property now or hereafter constituting security for any of the
indebtedness secured hereby marshaled upon any sale under this Deed of Trust or
of any other security for any of said indebtedness.
6.03. All notices, demands or requests relating to any matter set
forth herein shall be in writing and shall be served by delivery, certified
mail, return receipt requested, or by a reputable commercial carrier that
provides a receipt. All such notices or demands served shall be with postage
thereon fully prepaid, and addressed to the party so to be served at its address
stated
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below, or at such other address of which said party shall have theretofore
given notice in writing as provided herein. Any such notices or demands
shall be deemed effective on the day of actual delivery as shown by the
addressee's return receipt or upon the second (2nd) business day after the
date of mailing, whichever is earlier in time. Notices shall be addressed as
follows:
If to Beneficiary, to it at the following address:
Madeleine LLC
450 Park Avenue
New York, New York 10022
Attention: Mr. Kevin P. Genda
with a copy to:
Schulte Roth & Zabel LLP
900 Third Avenue
New York, New York 10022
Attention: Michael J. Feinman, Esq.
If to Trustor, to it at the following address:
Speakeasy Gaming of Reno, Inc.
c/o Mountaineer Park, Inc.
Route 2 South
Chester, West Virginia 26034
Attention: Mr. Edson Arneault, President
with copy to:
Ruben & Aronson, LLP
3299 K Street N.W.
Suite 403
Washington, D.C. 20007
Attention Robert L. Ruben, Esq.
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If to Trustee, to it at the following address:
United Title of Nevada
201 West Liberty Street
Reno, Nevada 89509
Attention: Wayne Bergevin
Any party hereto may change its address for the purpose of receiving
notices or demands as herein provided by a written notice given in the manner
aforesaid to the other party hereto, which notice of change of address shall not
become effective, however, until the actual receipt thereof by the other party.
Whenever any law requires Beneficiary to give reasonable notice of any act,
election, or event, or proposed act, election, or event, said requirement shall
be deemed complied with if Beneficiary gives Trustor ten (10) days written
notice as herein provided. Information concerning the security interest may be
obtained from Beneficiary at the above address.
6.05. This Deed of Trust applies to, inures to the benefit of, and
binds all parties hereto, their heirs, legatees, devisees, administrators,
executors, successors and assigns (where permitted).
6.06. Trustee accepts these trusts when this Deed of Trust, duly
executed and acknowledged, is made a public record as provided by law.
6.07. Where any provision in this Deed of Trust refers to action
to be taken by Trustor, or which Trustor is prohibited from taking, such
provision shall be applicable whether such action is taken directly or
indirectly by Trustor.
6.08. In the event of any conflict between the provisions of this
Deed of Trust and the provisions of the Loan Agreement, the provisions of the
Loan Agreement shall govern and control, except that this Deed of Trust shall
govern and control with respect to (i) the provisions contained in the Granting
Clauses of Section 1 and in Sections 2, 4, and 5 hereof and/or (ii) any other
provisions contained in this Deed of Trust relating to Beneficiary's rights or
remedies or Trustor's obligations or liabilities in respect of the Trust
Property. In the event of any conflict between any provision hereof with
respect to any Trust Property which is personal property and any term or
provision of the Security Agreement, then such term or provision of the Security
Agreement shall govern and control with respect to such personal property to the
extent of such conflict. Trustor acknowledges that the provisions of this Deed
of Trust may impose additional or greater obligations on Trustor, or afford
Beneficiary additional or greater rights and remedies, in respect of the Trust
Property than the provisions of the Loan Agreement and such additional or
greater obligations and/or rights and remedies shall not be deemed to be a
conflict for purposes of the foregoing two sentences.
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6.09. If any term, provision, covenant or condition of this Deed
of Trust, or any application thereof, should be held by a court of competent
jurisdiction to be invalid, void, or unenforceable, all provisions, covenants
and conditions of this Deed of Trust and all applications thereof not held
invalid, void or unenforceable, shall continue in full force and effect and
shall in no way be affected, impaired or invalidated thereby. If the lien of
this Deed of Trust is invalid or unenforceable as to any part of the Property,
or if the lien is invalid or unenforceable as to any part of the indebtedness
secured hereby, the unsecured or partially unsecured portion of such
indebtedness shall be completely paid prior to the payment of the remaining and
secured or partially secured portion of such indebtedness, and all payments made
on such indebtedness, whether voluntary or under foreclosure or other
enforcement action or procedure, shall be considered to have been first paid on
and applied to the full payment of that portion of such indebtedness which is
not secured or fully secured by the lien of this Deed of Trust.
6.10. In the event that Trustor consists of more than one person,
firm or corporation then and in such event all of such persons, firms or
corporations shall be jointly and severally liable hereunder.
6.11. This Deed of Trust shall be governed by and construed in
accordance with the internal laws of the State of Nevada, without regard to
principles of conflicts of law.
6.12. This Deed of Trust shall be construed in accordance with its
intent and without regard to any presumption or other rule requiring
construction against the party causing the same to be drafted.
6.13. The various rights, options, elections and remedies of
Beneficiary and Trustee hereunder shall be cumulative and no one of them shall
be construed as exclusive of any other, or of any right, option, election or
remedy provided in any agreement or by law.
6.14. Time is of the essence of this Deed of Trust and all of the
terms, provisions, covenants and conditions hereof applicable to Trustor.
6.15. In this Deed of Trust, whenever the context so requires the
masculine gender includes the feminine and/or neuter, and the singular number
includes the plural, and vice-versa, the term Beneficiary shall include any
future holder, including pledgees, of the Note secured hereby, and the term
Trustor shall mean the original signatory hereof, the successors and assigns
thereof and any future owners of the Property or any portion thereof. In the
event the ownership of all or any portion of the Property becomes vested in a
person other than the signatory hereof, Beneficiary may, without notice to such
signatory, deal with such successor or successors with reference to this Deed of
Trust and to the indebtedness hereby secured in the same manner as with the
signatory, without in any way vitiating or discharging such signatory's
liability hereunder or upon the indebtedness hereby secured. In this Deed of
Trust, the use of words such as "including" or "such as" shall not be deemed to
limit the generality of the term or
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<PAGE>
clause to which they have reference, whether or not nonlimiting language
(such as "without limitation," or "but not limited to," or words of similar
import) is used with reference thereto, but rather shall be deemed to refer
to all other items or matters that could reasonably fall within the broadest
possible scope of such general statement, term or matter. In any instance in
which Beneficiary's consent, approval or satisfaction is required hereunder,
such consent, approval or satisfaction shall be deemed to require the
consent, approval or satisfaction of Beneficiary and, at Beneficiary's
election, Beneficiary's counsel, and unless otherwise provided in this Deed
of Trust, may be granted or withheld in Beneficiary's (or Beneficiary's
counsel's) reasonable discretion. In any instance in which Beneficiary may
elect to undertake any act hereunder, Beneficiary's election shall be made in
its sole and absolute discretion. In any instance in which Beneficiary may
elect to undertake any acts hereunder, Beneficiary's election shall be made
in its sole and absolute discretion. The captions appealing at the
commencement of the sections hereof are descriptive only and for convenience
in reference to this Deed of Trust and in no way whatsoever define, limit or
describe the scope or intent of this Deed of Trust, nor in any way affect
this Deed of Trust.
6.16. Trustor and Beneficiary each represents and warrants to the
other that it has not dealt with any broker or finder in connection with this
Deed of Trust. Trustor and Beneficiary shall indemnify, protect, defend and
hold each other harmless from and against any and all claims for brokerage,
leasing, finders or similar fees arising out of the breach on their respective
parts of any representation or agreement contested in this Section.
6.17. Trustor hereby knowingly, voluntarily and intentionally
waives (to the extent permitted by applicable law) trial by jury in any action
or proceeding of any kind or nature that may arise out of this Deed of Trust,
the Property or any other matter related thereto or by reason of any other cause
or dispute of any kind or nature between Trustor and Beneficiary.
6.18. Where not inconsistent with the above, the following
covenants, Nos. 1; 2 (full replacement value); 3; 4 (Default Rate as defined in
the Note); 5; 6; 7 (a reasonable percentage); 8 and 9 of NRS 107.030 are hereby
adopted and made a part of this Deed of Trust.
[ NO FURTHER TEXT ON THIS PAGE]
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IN WITNESS WHEREOF, Trustor has executed this Deed of Trust on the day
and year first above written.
SPEAKEASY GAMING OF RENO, INC.,
a Nevada corporation
By:/s/ Edson R. Arneault
-----------------------------------
Name: Edson R. Arneault
Title: President
<PAGE>
STATE OF NEVADA )
) ss.:
COUNTY OF ____________)
On the ____ day of ______, 1998, before me personally came Edson R. Arneault, to
me known to be the individual who executed the foregoing instrument, and who,
being duly sworn by me, did depose and say that he is President of Speakeasy
Gaming of Reno, Inc., a Nevada corporation, and that he has authority to sign
the same, and acknowledged that he executed the same as the act and deed of said
corporation.
Sworn to before me this ____ day
of _____________, 1998.
_________________________________
Notary Public
<PAGE>
EXHIBIT 10.12
THIRD AMENDED AND RESTATED TERM LOAN AGREEMENT
THIRD AMENDED AND RESTATED TERM LOAN AGREEMENT (the "AGREEMENT"),
dated as of July 2, 1996, as amended and restated as of December 10, 1996, as
further amended and restated as of July 2, 1997, and as further amended and
restated as of April 30, 1998, among MOUNTAINEER PARK, INC., a West Virginia
corporation ("MOUNTAINEER"), SPEAKEASY GAMING OF LAS VEGAS, INC., a Nevada
corporation ("SPEAKEASY VEGAS"), SPEAKEASY GAMING OF RENO, INC., a Nevada
corporation ("SPEAKEASY RENO", and together with Mountaineer and Speakeasy
Vegas, collectively the "BORROWERS"), MTR Gaming Group, Inc. f/k/a WINNERS
ENTERTAINMENT, INC., a Delaware corporation (the "GUARANTOR" and together with
the Borrowers, collectively, the "LOAN PARTIES" and individually each a "LOAN
PARTY"), and MADELEINE LLC, a New York limited liability company (the "LENDER").
RECITALS
WHEREAS, Mountaineer, the Guarantor and the Lender are parties to a
Term Loan Agreement, dated as of July 2, 1996, pursuant to which the Lender has
made a term loan to Mountaineer in the original principal amount of $5,000,000;
WHEREAS, Mountaineer, the Guarantor and the Lender are parties to an
Amended and Restated Term Loan Agreement, dated as of July 2, 1996, as amended
and restated as of December 10, 1996, pursuant to which the Lender has made (i)
a term loan to Mountaineer in the original principal amount of $16,100,000
(including the prior $5,000,000 term loan), and (ii) a three year line of credit
available for loans in the aggregate maximum principal amount not to exceed
$5,376,500 at any time outstanding;
WHEREAS, Mountaineer, the Guarantor and the Lender are parties to a
Second Amended and Restated Term Loan Agreement, dated as of July 2, 1996, as
amended and restated as of December 10, 1996, and as further amended and
restated as of July 2, 1997 (the "Second Amended Agreement"), pursuant to which
the Lender and Mountaineer agreed to amend the Loan Agreement to extend the
maturity date of the Loans and change the terms of payment of certain fees in
respect of the loans;
WHEREAS, Mountaineer and the Guarantor have requested that the Lender
agree to further amend and restate the Loan Agreement for the purposes of, among
other things, adding Speakeasy Reno and Speakeasy Vegas as Borrowers under the
Agreement, increasing the Term Commitment and the Line Commitment to the
Borrowers, adding a construction loan facility, and amending the terms of
payment of certain fees in respect of the Loans; and
WHEREAS, the Lender is willing, on the terms and conditions herein, to
amend and restate the Second Amended Agreement.
<PAGE>
NOW, THEREFORE, in consideration of the premises and the agreements
herein and in order to induce the Lender to make and maintain the Loans, the
Lender, the Borrowers and the Guarantor hereby agree as follows:
ARTICLE I
DEFINITIONS; CERTAIN TERMS
SECTION 1.01. Definitions. As used in this Agreement, the following
terms shall have the respective meanings indicated below, such meanings to be
applicable equally to both the singular and plural forms of such terms:
"AFFILIATE" means, as to any Person, (i) any other Person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such Person, or (ii) any trade
or business (whether or not incorporated) which is a member of a group of which
such Person is a member and which is under common control within the meaning of
Section 414 of the Internal Revenue Code and the rules and regulations
promulgated thereunder from time to time.
"AMENDED AND RESTATED SECURITY AGREEMENT" means the Amended and
Restated General Security Agreement, dated as of July 2, 1996, as amended and
Restated on December 10, 1996, made by Mountaineer in favor of the Lender, as
amended or otherwise modified from time to time.
"AMENDED CLOSING DATE" means December 10, 1996.
"AMENDED LOAN AGREEMENT" means the Amended and Restated Term Loan
Agreement, dated July 2, 1996, as amended and restated as of December 10, 1996,
by and between Mountaineer, the Guarantor, and the Lender.
"BORROWERS" has the meaning specified therefor in the preamble hereto.
"BUSINESS DAY" means any day not a Saturday, Sunday or legal holiday
on which the Lender is open for business in New York City and banks in the
States of West Virginia and Nevada are not required or authorized to close.
"CAPITAL LEASES" means, with respect to any Person, leases or
agreements to lease by such Person and its Consolidated Subsidiaries that, in
accordance with GAAP, have been or should be capitalized on the books of such
Person.
"CAPITALIZED LEASE OBLIGATIONS" means, with respect to any Person, any
obligation of such Person and its Consolidated Subsidiaries for the payment of
rent for any real or personal property under Capital Leases and, for purposes
hereof, the amount of any such obligation shall be the capitalized amount
thereof, all computed and consolidated in accordance with generally accepted
accounting principles applied on a consistent basis.
<PAGE>
"CHEYENNE CONSTRUCTION LOANS" means one or more construction loans to
be made by the Lender to Speakeasy Vegas pursuant to Article IV hereof in an
original principal amount not to exceed the Construction Commitment amount, to
be used by Speakeasy Vegas for the purpose of improving the Cheyenne Hotel
Property.
"CHEYENNE DEED OF TRUST" means the Deed of Trust, Assignment of Rents,
Security Agreement, and Fixture Filing, dated the date hereof, made by Speakeasy
Vegas in favor of the Lender, with respect to the Cheyenne Hotel Property.
"CHEYENNE HOTEL PROPERTY" means the property described on Exhibit C
hereto, together with the Cheyenne Hotel situated on such land.
"CHEYENNE TERM LOAN" means the term loan made by the Lender to
Speakeasy Vegas in the aggregate principal amount of $3,765,000, pursuant to
Article II hereof, to be used by Speakeasy Vegas for the purpose of acquiring
the Cheyenne Hotel Property from Banter, Inc.
"CHEYENNE PURCHASE AGREEMENT" means the Purchase Agreement, dated as
of April 30, 1998, by and among Speakeasy Vegas, Banter, Inc. and Cheyenne
Hotel, Inc. with respect to the purchase by Speakeasy Vegas of the Cheyenne
Hotel Property.
"CLOSING DATE" means as of April 30, 1998.
"COLLATERAL" means all of the property (real and personal) of the
Borrowers purported to be subject to the lien or security interest purported to
be created by any mortgage, deed of trust, security agreement, pledge agreement,
assignment or other security document heretofore or hereafter executed by the
Borrowers in favor of the Lender as security for all or any part of the
Obligations, including, without limitation, any asset purchased, in whole or in
part, with proceeds of a Line Loan, a Cheyenne Construction Loan or with a Term
Loan, subject to the limitation set forth in Section 7.01(k) hereof.
"COMMITMENT" means the Term Commitment, the Line Commitment and the
Construction Commitment.
"COMMON STOCK" means the common stock of the Guarantor, par value
$0.00001 per share.
"CONSOLIDATED EBITDA" means for each fiscal quarter of any Person, all
earnings of such Person and its Consolidated Subsidiaries for such period as
determined in accordance with GAAP, before (a) the sum, without duplication, of
(i) gross interest expense for such period minus gross interest income for such
period, in each case determined in accordance with GAAP, (ii) income tax
expense, (iii) depreciation expense, (iv) amortization expense net of negative
goodwill amortization, and (v) extraordinary or unusual non-cash losses
(provided such extraordinary or unusual losses do not at any time result in a
cash outlay by such Person), less (b) extraordinary gains of such Person and
each Consolidated Subsidiary, each determined on a consolidated basis for such
Person and its Consolidated Subsidiaries in accordance with GAAP.
<PAGE>
"CONSOLIDATED SUBSIDIARY" of a Person at any time shall mean those
Subsidiaries of such Person whose accounts are or should in accordance with GAAP
be consolidated with those of such Person.
"CONSTRUCTION COMMITMENT" means the commitment of the Lender to make
one or more Cheyenne Construction Loans to Speakeasy Vegas pursuant to Article
IV hereof in an original aggregate principal amount outstanding not to exceed
$1,700,000.
"CONSTRUCTION NOTE" means the promissory note of the Borrowers, dated
the date hereof, in the original principal amount of not more than $1,700,000,
evidencing the Indebtedness resulting from the making of the Cheyenne
Construction Loans and delivered to the Lender pursuant to Article IV hereof, as
such promissory note may be modified or amended from time to time, and any
promissory note or notes issued in exchange or replacement therefor.
"CONSTRUCTION OBLIGATIONS" means all Obligations in respect of the
Cheyenne Construction Loans.
"DEFAULT" means any event that, with the giving of notice or the
passage of time or both, would result in an Event of Default.
"EBITDA AVERAGE" means, as of any date, the average Consolidated
EBITDA for each of the six calendar months immediately preceding such date;
PROVIDED, HOWEVER, that for the purpose of the calculation of EBITDA Average, at
the discretion of Mountaineer, the months of December and January may be
excluded from such calculation and such months shall be deemed not to have
occurred.
"EFFECTIVE DATE" means the date on which all of the conditions
precedent under Article V of the Initial Loan Agreement were met.
"EMPLOYEE PLAN" means an employee benefit plan (other than a
Multiemployer Plan) covered by Title IV of ERISA and maintained for employees of
a Borrower or any of its Affiliates.
"ENVIRONMENTAL LAW" means 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 Toxic Substances Control Act (15 U.S.C.
Section 2601 ET SEQ.), the Occupational Safety and Health Act (29 U.S.C. Section
6451 ET SEQ.), and the Medical Waste Tracking Act of 1988, Pub. L. No. 100-582,
102 Stat. 2950 (1988), as such laws have been amended or supplemented from time
to time, and any similar present or future Federal, state or local statute,
ordinance, rule or regulation.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and, unless the context otherwise requires, the rules
and regulations promulgated thereunder from time to time.
<PAGE>
"EVENT OF DEFAULT" means any of the events set forth in Section 9.01
hereof.
"FINANCIAL STATEMENTS" means the audited financial statements of the
Guarantor and its Subsidiaries as set forth in the Guarantor's Annual Report on
Form 10-K for the fiscal year ended December 31, 1997, and, upon filing with the
Securities and Exchange Commission, the unaudited financial statements of the
Guarantor and its Subsidiaries as set forth in the Guarantor's Quarterly Report
on Form 10-Q for the fiscal quarter ended March 31, 1998.
"FUNDING DATE" has the meaning assigned to such term in Section 6.01
hereof.
"FUNDING DATE LOAN AMOUNT" means the amount of (a) the Reno Loan, (b)
the Cheyenne Loan, (c) any Line Loan and (d) any Cheyenne Construction Loan,
made by Lender to any Borrower on the Funding Date.
"GAAP" means generally accepted accounting principles as in effect
from time-to-time in the United States, consistently applied.
"GOVERNMENTAL AUTHORITY" means any nation or government, any federal,
state, city, town, municipality, county, local or other political subdivision
thereof or thereto and any department, commission, board, bureau,
instrumentality, agency or other entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government
and having jurisdiction over the Parties to the Loan Documents.
"GUARANTY" means the Guaranty made by the Guarantor in favor of the
Lender pursuant to Article X hereof, guaranteeing the Obligations under the Loan
Documents.
"GUARANTOR" has the meaning specified therefor in the preamble hereto.
"HAZARDOUS MATERIALS" means, without limit, any pollutant, waste,
flammable explosives, radioactive materials, hazardous materials, hazardous
wastes, hazardous or toxic substances, or other materials defined in or
regulated under any Environmental Law.
"INDEBTEDNESS" means (i) all indebtedness or other obligations of any
Borrower for borrowed money or for the deferred purchase price of property or
services, (ii) Capitalized Lease Obligations of each Borrower, (iii) all
obligations of each Borrower under direct or indirect guaranties, contingent or
other obligations of a Borrower to purchase or otherwise acquire or assure a
creditor against loss in respect thereof, indebtedness or other obligations of
any other Person for borrowed money or for the deferred purchase price of
property or services or Capitalized Lease Obligations of any other Person,
(iv) all indebtedness or other obligations of each Borrower for borrowed money
or for the deferred purchase price of property or services secured by (or for
which the holder of such indebtedness has an existing right, contingent or
otherwise, to be secured by) any lien, security interest or other charge or
encumbrance upon or in property owned by any Borrower, (v) all obligations of
any Borrower in respect of letters of credit and bankers' acceptances with the
exception of any such letter of credit or bankers' acceptance issued in favor
of, or required by, a Governmental Authority, (vi) liabilities incurred under
Title IV of ERISA with respect to any plan covered by Title IV of
<PAGE>
ERISA and maintained for employees of any Borrower or any of its Affiliates,
and (vii) withdrawal liability incurred under ERISA by any Borrower or any of
its Affiliates to any Multiemployer Plan.
"INITIAL CLOSING DATE" means July 2, 1996.
"INITIAL LOAN AGREEMENT" means the Term Loan Agreement, dated July 2,
1996, by and between Mountaineer, the Guarantor, and the Lender.
"INITIAL TERM LOAN" means the term loan made by the Lender to the
Borrower in the aggregate principal amount of $16,100,000, pursuant to Article
II of the Second Amended Agreement and maintained pursuant to Article II hereof.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended from time to time.
"LENDER" has the meaning specified therefor in the preamble hereto.
"LIEN" means any security interest, mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or otherwise),
charge against or interest in property to secure payment of a debt or
performance of an obligation or other priority or preferential arrangement of
any kind or nature whatsoever.
"LINE COMMITMENT" means the commitment of the Lender to make one or
more Line Loans to the Borrowers pursuant to Article III hereof in the original
aggregate principal amount outstanding not to exceed $10,376,500.
"LINE LOAN" has the meaning assigned to such term in Section 3.02
hereof.
"LINE NOTE" means the promissory note of the Borrowers, dated the
Closing Date, in the original principal amount outstanding, not to exceed
$10,376,500, evidencing the Indebtedness resulting from the making of the Line
Loans and delivered to the Lender pursuant to Article III of this Agreement, as
such promissory note may be modified or amended from time to time, and any
promissory note or notes issued in exchange or replacement therefor.
"LINE OBLIGATIONS" means all Obligations in respect of the Line Loans.
"LOAN" or "LOANS" means the Term Loans, the Line Loans and the
Cheyenne Construction Loans.
"LOAN DOCUMENTS" means this Agreement, the Notes, the West Virginia
Deed of Trust, the Amended and Restated Security Agreement, the West Virginia
First Priority Deed of Trust, the Guaranty, the Stock Certificates, the
Warrants, the Registration Rights Agreement, Amendment No. 1 to Registration
Rights Agreement, Amendment No. 2 to Registration Rights Agreement, the Stock
Transfer Agreement, the Cheyenne Deed of Trust, the Reno Deed of Trust, the
Speakeasy Security Agreement, the Cheyenne Purchase Agreement, the Reno Purchase
<PAGE>
Agreement and all other instruments, documents and agreements executed and
delivered pursuant hereto or thereto.
"LOAN FEE" shall have the meaning assigned to such term in Section
5.01 hereof.
"LOAN FEES" means all of the fees and expenses payable, whether in
cash, in kind, in Common Stock or in Warrants, by each Borrower and the
Guarantor, jointly and severally, under Section 5.01 of this Agreement.
"LOAN PARTIES" means the Borrowers and the Guarantor.
"MATURITY DATE" means July 2, 2001, or such earlier date on which the
Loans shall become due and payable, in whole or in part, in accordance with the
terms of this Agreement, whether by acceleration or otherwise.
"MOUNTAINEER" means Mountaineer Park, Inc., a West Virginia
corporation.
"MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA.
"NOTE" or "NOTES" means the Term Note, the Line Note and the
Construction Note, as applicable.
"OBLIGATIONS" means (i) the obligation of any Loan Party to pay,
jointly and severally, as and when due and payable (by scheduled maturity or
otherwise), all amounts from time to time owing by it in respect of any Loan
Document, whether for principal (including, without limitation, an amount equal
to the product of (a) the Prepayment Factor and (b) the aggregate outstanding
principal amount of the Loans), interest (including interest accruing on or
after the filing of any petition in bankruptcy or for reorganization relating to
any Borrower or the Guarantor, whether or not a claim for post-filing interest
is allowed pursuant to 11 U.S.C. Section 506 or otherwise in such cases), fees
or otherwise and (ii) the obligation of any Loan Party to perform or observe all
of its other obligations from time to time existing under any Loan Document.
"OPERATING LEASES" means leases or agreements to lease of each
Borrower, other than Capital Leases.
"OPERATING LEASE OBLIGATIONS" means all obligations of a Borrower for
the payment of rent for any real or personal property under leases or agreements
to lease, other than Capitalized Lease Obligations, all computed in accordance
with GAAP.
"PAYMENT OFFICE" means Madeleine LLC, 450 Park Avenue, New York, New
York 10022, Attn.: Mr. Kevin P. Genda.
"PERMITTED INVESTMENTS" means (i) marketable direct obligations issued
or unconditionally guaranteed by the United States Government, or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year
<PAGE>
from the date of acquisition thereof, (ii) commercial paper, maturing not
more than 270 days after the date of issue, issued by a corporation rated P-1
by Moody's Investors Service, Inc. or A-1 by Standard & Poor's Corporation or
issued by the Lender or its Affiliates, (iii) time certificates of deposit,
issued by commercial banking institutions, each of which is a member of the
Federal Reserve System and has a combined capital and surplus of not less
than $100,000,000, (iv) money market accounts maintained with mutual funds
having assets in excess of $2,500,000,000, and (v) tax exempt securities
rated A or better by Moody's Investors Service, Inc. or A+ or better by
Standard & Poor's Corporation; PROVIDED, HOWEVER, that deposits or
certificates of deposits with commercial banking institutions which are a
member of the Federal Reserve System are Permitted Investments so long as any
such deposit does not exceed $250,000.
"PERSON" means an individual, corporation, partnership, association,
joint-stock company, trust, unincorporated organization, joint venture or
governmental authority.
"PLAN OF REMEDIATION" means collectively (i) the Corrective Action
Plan, dated August 14, 1995, (ii) the Phase I Environmental Site Assessment of
the Cheyenne Hotel Property, dated March 16, 1997, and (iii) the Phase I
Environmental Site Assessment of the Reno Hotel Property, dated March, 1998.
"PLEDGE AGREEMENTS" mean the Pledge and Security Agreement made on the
date hereof by the Guarantor in favor of the Lender, whereunder the Guarantor's
interests in Speakeasy Reno and Speakeasy Vegas are pledged.
"POST-DEFAULT RATE" means a rate per annum equal to 22%.
"PREPAYMENT FACTOR" means (i) at any time during the period beginning
on the Second Amended Closing Date to and including the first anniversary
thereof, 1.05; (ii) at any time during the period beginning on the day after the
first anniversary of the Second Amended Closing Date to and including the second
anniversary of the Second Amended Closing Date, 1.03; (iii) at any time during
the period beginning on the day after the second anniversary of the Second
Amended Closing Date to and including the third anniversary of the Second
Amended Closing Date, 1.02; (iv) at any time during the period beginning on the
day after the third anniversary of the Second Amended Closing Date to and
including the fourth anniversary of the Second Amended Closing Date, 1.01; and
on the scheduled Maturity Date, 1.00.
"PROPERTY" means (i) the Reno Hotel Property, (ii) the Cheyenne Hotel
Property, and (iii) the West Virginia Property.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated July 2, 1996, between the Lender and the Guarantor, as amended
or otherwise modified from time to time.
"RENO DEED OF TRUST" means the Deed of Trust, Assignment of Rents,
Security Agreement and Fixture Filing, dated the date hereof, made by Speakeasy
Reno in favor of the Lender, with respect to the Reno Hotel.
<PAGE>
"RENO HOTEL PROPERTY" means the property described on Exhibit D
hereto, together with the Reno Hotel situated on such land.
"RENO LOAN" means the term loan made by the Lender to the Borrower in
an aggregate principal amount of $8,000,000, pursuant to Article II hereof, to
be used by Speakeasy Reno for the purpose of acquiring the Reno Hotel from Reno
Hotel LLC.
"RENO PURCHASE AGREEMENT" means the Purchase Agreement, dated as of
April 30, 1998, by and between Speakeasy Reno and Reno Hotel LLC with respect to
the purchase by Speakeasy of the Reno Hotel Property.
"SECOND AMENDED CLOSING DATE" means July 2, 1997.
"SECOND AMENDED LOAN AGREEMENT" means the Second Amended and Restated
Term Loan Agreement, dated July 2, 1996, as amended and restated as of December
10, 1996, as further amended and restated as of July 2, 1997, by and between
Mountaineer, the Guarantor, and the Lender.
"SECURITY AGREEMENTS" means the Speakeasy Security Agreements and the
Amended and Restated Security Agreement.
"SPEAKEASY RENO" means Speakeasy Gaming of Reno, Inc., a Nevada
corporation.
"SPEAKEASY VEGAS" means Speakeasy Gaming of Las Vegas Inc., a Nevada
corporation.
"SPEAKEASY SECURITY AGREEMENTS" means collectively (i) the General
Security Agreement, dated as of the date hereof, made by Speakeasy Reno in favor
of the Lender, as amended or otherwise modified from time to time and (ii) the
General Security Agreement, dated as of the date hereof, made by Speakeasy Vegas
in favor of the Lender, as amended or otherwise modified from time to time.
"STOCK CERTIFICATE" means any original stock certificate issued by the
Guarantor representing shares of Common Stock.
"STOCK TRANSFER AGREEMENT" means the Stock Transfer Agreement, dated
as of July 2, 1996, between the Lender and the Guarantor.
"SUBSIDIARY" means any corporation of which more than 50% of the
outstanding capital stock or similar rights of holders of equity having (in the
absence of contingencies) ordinary voting power to elect directors (or Persons
performing similar functions) of such corporation is, at the time of
determination, owned directly, or indirectly through one or more intermediaries,
by any Person.
"TAXES" means any tax imposed by the States of West Virginia or Nevada
or any subdivision thereof.
<PAGE>
"TERM COMMITMENT" means the commitment of the Lender to make Term
Loans to the Borrower pursuant to Article II hereof in the principal amount not
to exceed $27,865,000.
"TERM LOANS" means (a) the Initial Term Loan, (b) the Reno Loan, and
(c) the Cheyenne Term Loan, each as described in Article II hereof.
"TERM NOTE" means the promissory note of the Borrowers, dated the
Closing Date, in the original principal amount of $27,865,000, evidencing the
Indebtedness resulting from the making of the Term Loans and delivered to the
Lender pursuant to Article II hereof, as such Term Note may be modified or
amended from time to time, and any promissory note or notes issued in exchange
or replacement therefor.
"TERM OBLIGATIONS" has the meaning assigned to such term in Section
10.13 hereof.
"TERMINATION DATE" means the earlier to occur of (a) the Maturity Date
and (b) the date on which all of the Obligations have been fully performed.
"TRANSACTION COSTS" has the meaning specified therefore in Section
10.04 hereof.
"UNFUNDED LIABILITY" has the meaning specified therefore in Subsection
7.01(j) hereof.
"WARRANTS" means validly issued warrants for the purchase of shares of
Common Stock, in substantially the form attached hereto as Exhibit A.
"WEST VIRGINIA DEED OF TRUST" means the Deed of Trust, Leasehold Deed
of Trust Security Agreement, Assignment, Fixture Filing, and Financing
Statement, dated July 2, 1996, made by Mountaineer in favor of the Lender, with
respect to the West Virginia Property.
"WEST VIRGINIA FIRST PRIORITY DEED OF TRUST" means the Credit Line
Deed of Trust, Leasehold Deed of Trust, Security Agreement, Assignment, Fixture
Filing and Financing Statement, dated as of December 10, 1996, by and among
Mountaineer, the Lender and the trustees named therein, as amended or otherwise
modified from time to time, with respect to the West Virginia Property.
"WEST VIRGINIA PROPERTY" means the property described on Exhibit E
hereto.
SECTION 1.02. Accounting and Other Terms. Unless otherwise expressly
stated herein, all accounting determinations hereunder shall be made, all
accounting terms used herein shall be interpreted, and all financial statements
required to be delivered hereunder shall be prepared in accordance with GAAP.
All terms used in this Agreement which are defined in Article 9 of the Uniform
Commercial Code in effect in the State of New York on the date hereof and which
are not otherwise defined herein shall have the same meanings herein as set
forth therein.
<PAGE>
ARTICLE II
AMOUNT AND TERMS OF THE TERM LOANS
SECTION 2.01. TERM COMMITMENT. Any principal amount of any Term
Loan which is repaid or prepaid by the Borrowers may not be reborrowed.
SECTION 2.02. MAKING THE TERM LOANS. The Lender has made or will
on the Funding Date make Term Loans to the Borrowers in the form of (a) the
Initial Term Loan made under the Amended Loan Agreement in the original
principal amount of $16,100,000 disbursed to Mountaineer in the amounts of
$5,000,000 on July 3, 1996 and $11,100,000 on December 26, 1996, (b) the Reno
Loan in the original principal amount of $8,000,000 disbursed to Speakeasy Reno
on the Funding Date, and (c) the Cheyenne Term Loan in the original principal
amount of $3,765,000 disbursed to Speakeasy Vegas on the Funding Date. The Term
Loans shall continue to be outstanding until the Termination Date. The amount
of the Term Loans may be increased to provide for the funding and payment of the
Lender's fees and costs incurred in connection herewith, together with interest
due thereon, which are unpaid as of the Termination Date and which accrue
thereafter. The books and records of the Lender shall be presumptive evidence
of the amount of Obligations under the Term Loans outstanding from time to time,
whether in excess of the principal amount of the Term Note or otherwise, absent
manifest error.
SECTION 2.03. TERM LOAN INTEREST.
(a) LOAN. The Term Loans shall bear interest on the principal
amount thereof from time to time outstanding from the Effective Date until such
principal amount becomes due at an interest rate per annum of thirteen percent
(13%).
(b) INTEREST PAYMENT. Interest on the Term Loans shall be
payable monthly, in arrears, on the last day of each month, commencing April 30,
1998, and ending on the Termination Date (whether by demand, acceleration or
otherwise). Interest at the Post-Default Rate shall be payable on demand.
SECTION 2.04. REPAYMENT. The Term Loans shall be payable as to
principal in full on the Maturity Date, together with all such other amounts as
may be necessary to repay in full all unpaid Term Obligations to the Lender. In
the event that the Term Loans are prepaid due to acceleration of the Term Loans
after the occurrence of an Event of Default, the amount of the outstanding
principal of the Term Loans shall be determined by multiplying the outstanding
principal amount under the Term Note by the Prepayment Factor (excluding the
Cheyenne Construction Loans, the Cheyenne Term Loan and the Reno Term Loan).
SECTION 2.05. OPTIONAL PREPAYMENT OF THE TERM LOANS. Any
Borrower may, on the same Business Day's telephone notice no later than 11:00
A.M. (New York City time) (promptly confirmed in writing) prepay the outstanding
amount of the Term Loans in whole, but not in part, by payment of the sum of (i)
an amount equal to the product of (a) the Prepayment Factor and (b) the
outstanding principal amount of the Term Loans (excluding the Cheyenne
Construction Loans, the Cheyenne Term Loan and the Reno Term Loan), plus (ii)
<PAGE>
accrued interest to the date of such prepayment, plus (iii) the balance of the
Loan Fees not previously paid to the Lender, plus (iv) all other Term
Obligations; PROVIDED, HOWEVER, that the Borrowers may not prepay the Term Loans
unless, simultaneously therewith, the Borrowers also prepay the Line Loan as set
forth in Section 3.05 hereof and the Cheyenne Construction Loans as set forth in
Section 4.05 hereof. Upon such payment in accordance with Section 2.05, at the
sole cost and expense of the Borrowers, the Lender will return to the Borrowers
appropriate and proper releases of the Cheyenne Deed of Trust, the Reno Deed of
Trust, the West Virginia Deed of Trust, the West Virginia First Priority Deed of
Trust, and such other documents as the Loan Parties may reasonably request to
effect a release of the Lender's security interest in the Collateral.
SECTION 2.06. USE OF PROCEEDS. (a) The proceeds of the Line
Loans will be used for general working capital purposes of Mountaineer and up to
an aggregate amount of $1,500,000 of the principal amount of the Line Loans may
be borrowed to fund general working capital of Speakeasy Reno and Speakeasy
Vegas relating to the Reno Hotel Property or the Cheyenne Hotel Property,
respectively; (b) the proceeds of the Reno Loan will be used solely to finance
the acquisition by Speakeasy Reno of the Reno Hotel Property from Reno Hotel
LLC; (c) the proceeds of the Cheyenne Loan will be used solely to finance the
acquisition by Speakeasy Vegas of the Cheyenne Hotel Property from Banter, Inc.;
and (d) the proceeds of the Cheyenne Construction Loans will be used solely by
Speakeasy Vegas to finance improvements to the Cheyenne Hotel Property.
ARTICLE III
AMOUNT AND TERMS OF THE LINE LOANS
SECTION 3.01. LINE COMMITMENT. Any principal amount of the Line
Loan which is repaid or prepaid by the Borrowers subsequent to the Funding Date
may not be reborrowed.
SECTION 3.02. MAKING THE LINE LOANS. Two (2) Business Days after
receipt by the Lender of a written request for a loan in substantially the form
of Exhibit B attached hereto, the Lender shall make available to the Borrower
requesting such loan an amount set forth in such borrowing notice not less than
$100,000 nor more than an amount (the "ADDITIONAL LINE AMOUNT") equal to the
positive difference between the outstanding principal amount of the Line Loans
on the funding date of the requested Line Loan and the Line Commitment, and the
Borrowers shall, upon satisfaction of all of the conditions relating thereto
contained herein and in the other Loan Documents, borrow such amount on the
terms and conditions set forth hereunder. The sum of (a) the outstanding
principal amount of the Line Loans as of the opening of business on the Funding
Date and (b) the Additional Line Amount shall be evidenced by the Line Note and
shall be the "LINE LOANS". The Lender may act without liability upon the basis
of written notice believed by the Lender in good faith to be from a Borrower
(or from any officer thereof designated in writing to the Lender). On the
funding date of the applicable Line Loan, and upon fulfillment of the applicable
conditions set forth in Article
<PAGE>
VI hereof, the Lender will make available the applicable Line Loan to the
applicable Borrower by delivering the proceeds thereof, in immediately
available funds (either in the form of a certified bank check or wire
transfer) less the fees and expenses then due and payable under Sections
5.01(a) and 10.04 hereof. The applicable Line Loan will be disbursed to the
Borrower requesting the applicable Line Loan. The outstanding amount of a
Line Loan may be increased to provide for the funding and payment of the
Lender's fees and costs incurred in connection with the applicable Line Loan,
together with interest due thereon, which are unpaid as of the Termination
Date and which accrue thereafter. The records of the Lender shall be
presumptive evidence of the amount of Obligations under the Line Loans
outstanding from time to time whether in excess of the initial principal
amount of the Line Note or otherwise, absent manifest error.
SECTION 3.03. LINE LOAN INTEREST.
(a) LOANS. The Line Loans shall bear interest on the principal
amount thereof from time to time outstanding from the Effective Date until such
principal amount becomes due at an interest rate per annum of thirteen percent
(13%).
(b) INTEREST PAYMENT. Interest on the outstanding principal
amount of the Line Loans shall be payable monthly, in arrears, on the last day
of each month, commencing April 30, 1998, and on the Termination Date (whether
by demand, acceleration or otherwise). Interest at the Post-Default Rate shall
be payable on demand.
SECTION 3.04. REPAYMENT. The Line Loans shall be payable as to
principal in full on the Maturity Date, together with all such other amounts as
may be necessary to repay in full all unpaid Line Obligations to the Lender. In
the event that the Line Loans are prepaid due to acceleration of the Line Loans
after the occurrence of an Event of Default, the amount of the outstanding
principal of the Line Loans shall be determined by multiplying the outstanding
principal amount under the Line Note by the Prepayment Factor.
SECTION 3.05. PREPAYMENT OF THE LINE LOAN. The Borrowers may, on
the same Business Day's telephone notice no later than 11:00 A.M. (New York City
time) (promptly confirmed in writing) prepay the outstanding amount of the Line
Loans in whole, but not in part, by payment of the sum of (i) an amount equal to
the product of (a) the Prepayment Factor and (b) the outstanding amount of the
Line Loans, plus (ii) accrued interest to the date of such prepayment, plus
(iii) the balance of the Loan Fees not previously paid to the Lender; PROVIDED,
HOWEVER, that the Borrowers may not prepay the Line Loans unless, simultaneously
therewith, the Borrowers also prepay the Term Loans as set forth in Section 2.05
hereof and the Cheyenne Construction Loans as set forth in Section 4.05 hereof.
<PAGE>
ARTICLE IV
AMOUNT AND TERMS OF THE CHEYENNE CONSTRUCTION LOANS
SECTION 4.01. CONSTRUCTION COMMITMENT. Any principal amount of
the Cheyenne Construction Loans which is repaid or prepaid by the Borrowers
subsequent to the Funding Date may not be reborrowed.
SECTION 4.02. MAKING THE CHEYENNE CONSTRUCTION LOANS.
(a) BORROWING PROCEDURES. Two (2) Business Days after receipt by the
Lender of a written request for a loan in substantially the form of Exhibit B
attached hereto, the Lender shall make available to Speakeasy Vegas an amount
set forth in such borrowing notice in an amount not to exceed the amount (the
"ADDITIONAL CONSTRUCTION AMOUNT") equal to the positive difference between the
outstanding principal amount of the Cheyenne Construction Loans on the funding
date of the requested Cheyenne Construction Loan and the Construction
Commitment, and the Borrowers shall, upon satisfaction of all of the conditions
relating thereto contained herein and in the other Loan Documents, borrow such
amount on the terms and conditions set forth hereunder. The sum of (i) the
outstanding principal amount of the Cheyenne Construction Loans as of the
opening of business on the Funding Date and (ii) the Additional Construction
Amount shall be evidenced by the Construction Note and shall be the
"CONSTRUCTION LOANS". The Lender may act without liability upon the basis of
written notice believed by the Lender in good faith to be from a Borrower (or
from any officer thereof designated in writing to the Lender). On the funding
date of the applicable Cheyenne Construction Loan, and upon fulfillment of the
applicable conditions set forth in Section 4.02(b) and Article VI hereof, the
Lender will make available the applicable Cheyenne Construction Loan to the
applicable Borrower by delivering the proceeds thereof, in immediately available
funds (either in the form of a certified bank check or wire transfer) less the
fees and expenses then due and payable under Sections 5.01(a) and 10.04 hereof.
The applicable Cheyenne Construction Loan will be disbursed to Speakeasy Vegas.
The outstanding amount of the applicable Cheyenne Construction Loan may be
increased to provide for the funding and payment of the Lender's fees and costs
incurred in connection with the applicable Cheyenne Construction Loan, together
with interest due thereon, which are unpaid as of the Termination Date and which
accrue thereafter. The records of the Lender shall be presumptive evidence of
the amount of Obligations under the Cheyenne Construction Loans outstanding from
time to time whether in excess of the initial principal amount of the
Construction Note or otherwise, absent manifest error.
(b) CONDITIONS PRECEDENT. Notwithstanding anything herein to the
contrary, no Cheyenne Construction Loan shall exceed an amount equal to the
out-of-pocket costs and expenses paid to unaffiliated third parties and
incurred by Speakeasy with respect to improvements constructed on the
Cheyenne Hotel Property, and the amount so advanced shall thereupon be added
to the outstanding principal balance of the Construction Note and shall
thereafter bear interest as set forth herein. Any disbursement by the Lender
hereunder shall be subject to there having occurred no Default or Event of
Default which shall then be continuing.
<PAGE>
SECTION 4.03. CHEYENNE CONSTRUCTION LOAN INTEREST.
(a) LOANS. The Cheyenne Construction Loans shall bear interest
on the principal amount thereof from time to time outstanding from the Effective
Date until such principal amount becomes due at an interest rate per annum of
thirteen percent (13%).
(b) INTEREST PAYMENT. Interest on the outstanding principal
amount of the Cheyenne Construction Loans shall be payable monthly, in
arrears, on the last day of each month, commencing April 30, 1998, and on the
Termination Date (whether by demand, acceleration or otherwise). Interest at
the Post-Default Rate shall be payable on demand.
SECTION 4.04. REPAYMENT. The Cheyenne Construction Loans shall
be payable as to principal in full on the Maturity Date, together with all such
other amounts as may be necessary to repay in full all unpaid Construction
Obligations to the Lender.
SECTION 4.05. PREPAYMENT OF THE CHEYENNE CONSTRUCTION LOANS. The
Borrowers may, on the same Business Day's telephone notice no later than 11:00
A.M. (New York City time) (promptly confirmed in writing) prepay the outstanding
amount of the Cheyenne Construction Loans in whole, but not in part, by payment
of the sum of (i) an amount equal to the outstanding amount of the Cheyenne
Construction Loans, plus (ii) accrued interest to the date of such prepayment,
plus (iii) the balance of the Loan Fees not previously paid to the Lender;
PROVIDED, HOWEVER, that the Borrowers may not prepay the Cheyenne Construction
Loans unless, simultaneously therewith, the Borrowers also prepay the Term Loan
as set forth in Section 2.05 hereof and the Line Loans as set forth in Section
3.05 hereof.
ARTICLE V
FEES, PAYMENTS, DEFAULT INTEREST AND OTHER COMPENSATION
SECTION 5.01. FEES AND OTHER CONSIDERATION. The fees and other
consideration provided for herein are in addition to the fees and other
consideration which were due and payable on the Initial Closing Date, the
Amended Closing Date and the Second Amended Closing Date.
(a) LINE LOAN FEES. On the Closing Date, the Borrowers,
jointly and severally, shall pay to the Lender, in immediately available
funds, a non-refundable fee (the "LOAN FEE") of $150,000 in consideration of
the Lender's agreement to increase the Line Commitment from $5,376,500 to
$10,376,500. Each of the Borrowers and the Guarantor hereby acknowledges and
confirms that the Line Loan Fee has been unconditionally earned by the Lender
as of the Closing Date. The Borrowers hereby instruct the Lender to withhold
such portion of the Line Loan Fee due on the Closing Date, as elected by the
Borrowers, from the proceeds of the Funding Date Loan Amount, and the amount
so withheld shall constitute a part of the Line Loan for all purposes
hereunder.
<PAGE>
(b) AUDIT AND COLLATERAL MONITORING FEES. The Borrowers shall
pay to the Lender, jointly and severally, on each anniversary of the Effective
Date, the costs and expenses incurred by the Lender in connection with the
periodic collateral appraisals and audit reviews performed by or on behalf of
the Lender in such year; PROVIDED, HOWEVER, that so long as no Event of Default
has occurred and is continuing, the Borrowers' obligation under this Subsection
5.01(c) shall be limited to $25,000 for each 365 (or 366, as applicable) day
period following the Effective Date.
(c) COMMON STOCK AND WARRANTS. The Lender hereby acknowledges
and agrees that the Guarantor has delivered to the Lender all Stock Certificates
and Warrants required to be delivered pursuant to Section 4.01(c) and (d) of the
Second Amended Loan Agreement (except for such Stock Certificates and Warrants
that may be required to be delivered to the Lender in connection with a complete
or partial exercise of such Warrants by the Lender).
SECTION 5.02. PAYMENTS AND COMPUTATIONS. The Borrowers, jointly
and severally, will make each payment under the Loan Documents to which they are
a party not later than 2:30 P.M. (New York City time) on the day when due, in
lawful money of the United States of America and in immediately available funds,
to the Lender at the Payment Office, or at such other place or to such account
as the Lender may designate by notice to the Borrowers. All payments shall be
made by the Borrowers without defense, set-off or counterclaim to the Lender.
Subject to Section 9.01 below, all interest, fees, costs and expenses for which
the Borrowers are obligated under any Loan Document shall, if not timely paid by
the Borrowers, be added to the principal amount of the Line Loan, Term Loan or
Cheyenne Construction Loan, and the Borrowers hereby authorize the Lender to,
and the Lender may, from time to time, increase the principal amount of the Line
Loan, the Term Loan or Cheyenne Construction Loan by any such amounts due under
any Loan Document to which the Borrowers are a party. The Borrowers confirm
that any addition to principal which the Lender so makes to a Loan as herein
provided will be made as an accommodation to the Borrowers and solely at the
Lender's discretion. Whenever any payment to be made under any such Loan
Document shall be stated to be due on a day other than a Business Day, such
payment shall be made on the next succeeding Business Day and such extension of
time shall in such case be included in the computation of interest and fees.
All computations of interest under this Agreement and any other Loan Document
and all fees shall be made by the Lender on the basis of a year of 360 days for
the actual number of days occurring in the period for which such interest is
payable; PROVIDED, HOWEVER, that with respect to any date on which any Borrower
makes a repayment or prepayment of principal, interest in respect of such
principal repayment or prepayment amount shall be calculated on the basis of a
year of 360 days for the actual number of days occurring in the period for which
such interest is payable but excluding the day on which such repayment or
prepayment of principal is made. In no event shall prior recourse to any
Collateral be a prerequisite to the Lender's right to demand payment of any
Obligation. The Lender's records kept in the ordinary course of its business
shall be presumed to be correct and shall constitute PRIMA FACIE evidence of the
amount owing or paid with respect to any Obligation, absent manifest error.
SECTION 5.03. TAXES. (a) If any Borrower shall be required by
any applicable law, rule or regulation to deduct or withhold any Taxes from or
in respect of any
<PAGE>
amount payable hereunder, then (i) the amount so payable shall be increased
to the extent necessary so that after making all required deductions and
withholdings (including Taxes on amounts payable to the Lender pursuant to
this sentence) the Lender shall receive an amount equal to the sum it would
have received had no such deductions or withholdings been made, (ii) the
Borrowers shall make such deductions or withholdings and (iii) the Borrowers,
jointly and severally, shall pay to the relevant taxation authority the full
amount required to be so deducted or withheld. Whenever any Taxes are
payable by any Borrower, as promptly as possible thereafter such Borrower
shall send the Lender an official receipt or other documentation satisfactory
to the Lender evidencing such payment to such authority. If, due to the
imposition of any Taxes, the Lender's tax liability with respect to any
amounts payable hereunder to any other taxing authority is reduced, the
amount of such reduction shall be paid by the Lender to the Borrowers upon
Borrowers' demand therefor; PROVIDED, HOWEVER, that in no event shall the
Lender be required to pay to any Borrower an amount in excess of the amount
withheld by such Borrower in respect of Taxes due from or in respect of any
amount payable hereunder.
(b) If the Lender shall be required to pay any West Virginia
Taxes in respect of any amount payable by any Borrower hereunder, then the
Borrowers shall, upon demand by the Lender, jointly and severally, pay to the
Lender an amount equal to the difference between (i) the Taxes required to be
paid by the Lender, and (ii) the amount, if any, of the reduction of the
Lender's tax liability to any other taxing authority resulting from the payment
of such Taxes; PROVIDED, HOWEVER, that in no event shall the Lender be required
to pay to the Borrowers an amount in excess of the amount paid by such Borrower
to the Lender pursuant to this paragraph 5.03(b).
SECTION 5.04. DEFAULT INTEREST. Any Obligation hereunder with
respect to the Loans, including the principal of the Loans, fees and (to the
extent permitted by law) interest which is not paid when due (after any
applicable grace period therefor set forth in Section 9 hereof), whether upon
demand, by acceleration or otherwise, and all amounts payable after the
occurrence and during the continuance of an Event of Default, shall bear
interest from the day when due until such amount is paid in full at a rate per
annum equal to the Post-Default Rate. In the event that any amount of principal
of, or interest on, any Loan is not paid within 10 days of the due date thereof
(whether by demand, acceleration or otherwise) when due, the Borrowers shall,
upon demand, pay an additional fee equal to 5% of the amount of such principal
and/or interest not timely paid and such fee shall be owed, jointly and
severally, by each Borrower.
ARTICLE VI
CONDITIONS TO EFFECTIVENESS AND LENDING
SECTION 6.01. CONDITIONS TO FUNDING OF THE FUNDING DATE LOAN
AMOUNT. The Lender shall have no obligation to fund the Funding Date Loan
Amount until the date (the "FUNDING DATE") on which each of the following
conditions precedent shall have been satisfied:
<PAGE>
(a) PAYMENT OF FEES, ETC. The Borrowers shall have paid on or
before the Funding Date all fees, costs, expenses and Taxes then payable by the
Borrowers pursuant to Sections 5.01, 5.03 and 10.04 hereof.
(b) REPRESENTATIONS AND WARRANTIES; NO EVENT OF DEFAULT. The
representations and warranties contained in Section 7.01 of this Agreement and
in each other Loan Document and certificate or other writing delivered to the
Lender pursuant hereto on or prior to the Funding Date, shall be correct on and
as of the Funding Date as though made on and as of such date; and no Event of
Default, or event which with the giving of notice or the lapse of time or both
would constitute an Event of Default, shall have occurred and be continuing on
the Funding Date or would result from the increase in the Line Loans, the
Cheyenne Construction Loans and the Term Loan by the Funding Date Loan Amount.
(c) LEGALITY. The making of the Loans shall not contravene any
law, rule or regulation applicable to the Lender, the Borrowers or the
Guarantor.
(d) DELIVERY OF DOCUMENTS. The Lender shall have received on or
before the Funding Date the following, each in form and substance satisfactory
to the Lender and, unless indicated otherwise, dated the Funding Date (except
for items 6.01(d)(vi) and (vii), which shall be dated December 10, 1996) in each
case duly executed by the parties thereto:
(i) this Agreement;
(ii) the Reno Purchase Agreement;
(iii) the Cheyenne Purchase Agreement;
(iv) the Reno Deed of Trust;
(v) the Cheyenne Deed of Trust;
(vi) the Term Note made by the Borrowers to the order of
the Lender in the amount of $27,865,000, dated the Closing Date, pursuant
to Article II hereof.;
(vii) the Line Note made by the Borrowers to the order of
the Lender in the amount of $10,376,500, dated the Closing Date, pursuant
to Article III hereof;
(viii) the Construction Note made by the Borrowers to the
order of the Lender in the amount of $1,700,000, dated the Closing Date,
pursuant to Article IV hereof;
(ix) the Speakeasy Security Agreements;
(x) the Pledge Agreements;
(xi) financing statements on Form UCC-1, duly executed
by Speakeasy Reno, Speakeasy Vegas and the Guarantor and duly filed in such
office or
<PAGE>
offices as may be necessary or, in the opinion of the Lender,
desired to perfect the security interests purported to be created by the
Speakeasy Security Agreements;
(xii) certified copies of the requests for information on
Form UCC-11, listing all effective financing statements which name
Speakeasy Reno, Speakeasy Vegas and the Guarantor as debtors, together with
copies of such financing statements;
(xiii) notice of borrowing from the Borrowers and the
Guarantor in favor of the Lender, as required pursuant to Section 3.02 of
this Agreement;
(xiv) evidence of the recording of the Cheyenne Deed of
Trust in such other office or offices as may be necessary or, in the
opinion of the Lender, desirable to perfect each Lien purported to be
created thereby or to otherwise protect the rights of the Lender
thereunder;
(xv) evidence of the recording of the Reno Deed of Trust
in such other office or offices as may be necessary or, in the opinion of
the Lender, desirable to perfect each Lien purported to be created thereby
or to otherwise protect the rights of the Lender thereunder;
(xvi) the Title Insurance Policy for the Cheyenne Hotel
Property;
(xvii) the Title Insurance Policy for the Reno Hotel
Property;
(xviii) a Survey of the Cheyenne Hotel Property;
(xix) a Survey of the Reno Hotel Property;
(xx) a title report with respect to the Cheyenne Hotel
Property showing only those exceptions as are acceptable to the Lender, in
its sole and absolute discretion;
(xxi) a title report with respect to the Reno Hotel
Property showing only those exceptions as are acceptable to the Lender, in
its sole and absolute discretion;
(xxii) a certificate of insurance evidencing insurance on
all Property of the Borrowers as is required by Section 8.01(g) hereof,
naming the Lender as additional insured as its interests may appear for all
insurance maintained by the Borrowers;
(xxiii) all of the Property Documents in the possession of
any Loan Party as described in Section 2(b) of the Cheyenne Purchase
Agreement;
<PAGE>
(xxiv) all of the Property Documents in the possession of
any Loan Party as described in Section 2(b) of the Reno Purchase Agreement;
(xxv) a copy of the resolutions adopted by the Board of
Directors of each Loan Party, certified as of the Funding Date by an
authorized officer thereof, authorizing (A) the borrowings hereunder and
the transactions contemplated by the Loan Documents to which such entity is
or will be a party, and (B) the execution, delivery and performance by each
Loan Party of each Loan Document to which it is or will be a party and the
execution and delivery of the other documents to be delivered by the Loan
Parties in connection herewith;
(xxvi) a certificate of an authorized officer of each Loan
Party certifying the names and true signatures of the officers of such Loan
Party authorized to sign each Loan Document to which such entity is or will
be a party and the other documents to be executed and delivered by the Loan
Parties in connection herewith, together with evidence of the incumbency of
such authorized officers;
(xxvii) a copy of the corporate charter of each Loan Party,
certified as of the Funding Date by an authorized officer of each Loan
Party;
(xxiii) a copy of the by-laws of each Loan Party, certified
as of the Funding Date by an authorized officer of such Loan Party;
(xxix) an opinion of (i) Ruben & Aronson, LLP, and (ii)
Nevada counsel to the Borrowers and the Guarantor, in each case as to such
matters as the Lender may reasonably request;
(xxx) a copy of the Financial Statements, together with a
certificate of the chief executive officer or chief financial officer of
each of the Borrowers, setting forth all existing guarantees and other
contingent liabilities of the Borrowers;
(xxxi) a certificate, dated as of a date not more than ten
(10) Business Days prior to the Closing Date, of the appropriate official
of the jurisdiction of incorporation and each jurisdiction of foreign
qualification, both inside and outside the United States, of each Loan
Party, certifying as to the subsistence in good standing of, and the
payment of taxes by, each Loan Party in such jurisdictions and listing all
charter documents of each Loan Party on file with such official(s),
together with confirmation by telephone or telegram (where available) on
the Closing Date from such official(s) as to such matters; and
(xxxii) such other agreements, instruments, approvals,
opinions and other documents as the Lender may reasonably request.
(e) PROCEEDINGS; RECEIPT OF DOCUMENTS. All proceedings in
connection with the transactions contemplated by this Agreement, and all
documents incidental
<PAGE>
thereto, shall be satisfactory to the Lender and its counsel, and the Lender
and such counsel shall have received all such information and such
counterpart originals or certified or other copies of such documents as the
Lender or such counsel may reasonably request.
(f) MATERIAL ADVERSE CHANGE. The Lender shall have determined,
in its sole and absolute discretion, that no material adverse change shall have
occurred in the business, operations, assets, financial condition or prospects
of any Borrower or the Guarantor after December 31, 1997.
(g) DUE DILIGENCE. The Lender shall have completed its due
diligence with respect to the Loan Parties and the results thereof shall be
acceptable to the Lender, in its sole and absolute discretion.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
SECTION 7.01. REPRESENTATIONS AND WARRANTIES OF THE BORROWERS AND
THE GUARANTOR. The Borrower and the Guarantor, as appropriate, each represent
and warrant, jointly and severally, as follows:
(a) ORGANIZATION, GOOD STANDING, ETC. Each Loan Party (i) is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation, (ii) has all requisite power and
authority to conduct its business as now conducted and as presently contemplated
to make the borrowings hereunder and to consummate the transactions contemplated
hereby and by each of the Loan Documents to which it is a party, and (iii) is
duly qualified to do business and is in good standing in each jurisdiction and
territory, inside and outside of the United States, in which the character of
the properties owned or leased by it or in which the transaction of its business
makes such qualification necessary. Each Borrower is a wholly-owned subsidiary
of the Guarantor.
(b) AUTHORIZATION, ETC. The execution, delivery and performance
by each Loan Party of each Loan Document to which it is a party (i) have been
duly authorized by all necessary corporate action, (ii) do not and will not
contravene the charter or by-laws, law or any contractual restriction binding on
or otherwise affecting it or any of its properties, (iii) do not and will not
result in or require the creation of any lien, security interest or other charge
or encumbrance (other than pursuant to any such Loan Document) upon or with
respect to any of its properties, and (iv) do not and will not result in any
suspension, revocation, impairment, forfeiture or nonrenewal of any permit,
license, authorization or approval applicable to its operations or any of its
properties.
(c) GOVERNMENTAL APPROVALS. No authorization or approval or
other action by, and no notice to or filing with, any Governmental Authority or
other regulatory body is required in connection with the due execution, delivery
and performance by each Borrower or the Guarantors of any Loan Document to which
such Persons are or will be parties.
<PAGE>
(d) ENFORCEABILITY OF LOAN DOCUMENTS. This Agreement is, and
each other Loan Document to which each Borrower or the Guarantor is or will be a
party, when delivered hereunder, will be a legal, valid and binding obligation
of such Person, enforceable against such Person in accordance with its terms.
(e) CERTIFICATES. Each Stock Certificate issued and
delivered pursuant to subsection 5.01(c) or pursuant to the terms of any
Warrant shall, upon issuance and delivery pursuant to the terms hereof or the
terms of such Warrant, as may be the case, represent validly issued, fully
paid and non-assessable shares of Common Stock.
(f) SUBSIDIARIES. There are no Subsidiaries of Mountaineer
other than Mountaineer Magic, Inc. There are no subsidiaries of Speakeasy Reno
or Speakeasy Vegas. There are no subsidiaries of the Guarantor other than
(i) Mountaineer, (ii) Speakeasy Reno, (iii) Speakeasy Vegas, (iv) Excal Energy
Corporation, a Michigan Corporation, and (v) Golden Palace Casinos, Inc., a
Minnesota Corporation. The Guarantor owns 100% of the common stock of each of
the foregoing subsidiaries.
(g) LITIGATION. Except as set forth on Schedule I and in the
Financial Statements, there is no pending or threatened action, suit or
proceeding affecting any Borrower or the Guarantors before any court or other
Governmental Authority or any arbitrator. There is no pending or threatened
action, suit or proceeding affecting any Borrower or the Guarantor before any
court or other Governmental Authority or any arbitrator which may materially
adversely affect the operations or condition, financial or otherwise, of such
Person or the ability of such Person to perform its obligations under any Loan
Document to which such Person is or will be a party.
(h) FINANCIAL CONDITION. The Financial Statements, copies of
which have been delivered to the Lender, fairly present the financial condition
of the Loan Parties as of the respective dates thereof and the results of
operations of the Loan Parties for the fiscal periods ended on such respective
dates, all in accordance with GAAP. Since December 31, 1997, there has been no
material adverse change in such condition or operations. There has been no
change in the number of shares of Common Stock outstanding since March 20, 1998,
as reported on the Form 10-K of the Guarantor for the period ending December 31,
1997, other than as set forth on Schedule II.
(i) COMPLIANCE WITH LAW, ETC. Any Borrower nor the Guarantor is
in violation of its charter or by-laws, any law or any material term of any
agreement or instrument binding on or otherwise affecting it or any of its
properties.
(j) ERISA. Neither Loan Party maintains, or is obligated to
maintain or contribute to, any Employee Plan or Multiemployer Plan. As of the
Closing Date, neither Loan Party has any employee benefit plan with respect to
which the present value of all vested, nonforfeitable benefits under such plan
exceeds the fair market value of the assets of such plan allocable to such
benefits (any such amount constituting an "UNFUNDED LIABILITY").
<PAGE>
(k) TAXES, ETC. After giving effect to any lawful extension,
all Federal, state and local tax returns and other reports required by
applicable law to be filed by each Borrower or the Guarantor have been filed,
and all taxes, assessments and other governmental charges imposed upon each
Borrower or the Guarantor or any property of any Borrower or the Guarantor which
have become due and payable on or prior to the date hereof have been paid,
except to the extent contested in good faith by proper proceedings which stay
the imposition of any penalty, fine or lien resulting from the non-payment
thereof and with respect to which adequate reserves have been set aside for the
payment thereof.
(l) REGULATION U. Any Borrower nor the Guarantor is or will not
be engaged in the business of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning of Regulation U issued by the Board of
Governors of the Federal Reserve System), and no proceeds of the Loan will be
used to purchase or carry any margin stock or to extend credit to others for the
purpose of purchasing or carrying any margin stock.
(m) ADVERSE AGREEMENTS, ETC. Any Borrower nor the Guarantor is
a party to any agreement or instrument, or subject to any charter or other
corporate restriction or any judgment, order, regulation, ruling or other
requirement of a court or other Governmental Authority or regulatory body, which
materially adversely affects, or, to the best knowledge of any Borrower or the
Guarantor, in the future is reasonably likely to materially adversely affect,
the condition or operations, financial or otherwise, of any Borrower or the
Guarantor or the ability of any Borrower or the Guarantor to perform its
obligations under any Loan Document to which any Loan Party is or will be a
party.
(n) HOLDING COMPANY AND INVESTMENT COMPANY ACTS. Any Borrower
nor the Guarantor is (i) a "holding company" or a "subsidiary company" of a
"holding company" or an "affiliate" of a "holding company", as such terms are
defined in the Public Utility Holding Company Act of 1935, as amended, or (ii)
an "investment company" or an "affiliated person" or "promoter" of, or
"principal underwriter" of or for, an "investment company", as such terms are
defined in the Investment Company Act of 1940, as amended.
(o) PERMITS, ETC. Each of the Borrowers and the Guarantor has
all permits, licenses, authorizations and approvals required for it to lawfully
own and operate its respective businesses other than those that, if not obtained
or in effect, would not in the aggregate have a material adverse effect on the
business of the Borrowers and the Guarantor, respectively; PROVIDED, HOWEVER,
that the permits, licenses, authorizations and approvals of Speakeasy Vegas and
Speakeasy Reno with respect to gaming and hotel operation in Nevada, set forth
on Schedule X hereto, have not been obtained and Speakeasy Reno and Speakeasy
Vegas hereby agree to use their best efforts to obtain all such licenses,
permits, authorizations and approvals as soon as practicable. Schedule III sets
forth all licenses, permits, authorizations and approvals required by any
Governmental Authority for the lawful conduct of each Borrowers' business, and,
except for those listed on Schedule X, each of the foregoing has been obtained
by the Borrowers and is in full force and effect as of the Closing Date. On the
last Business Day of each month, until all such permits have been obtained,
Borrowers will supplement Schedules III and X.
<PAGE>
(p) TITLE TO PROPERTIES. Each Borrower has good and marketable
title to all of its properties and assets, free and clear of all liens, security
interests and other charges and encumbrances and other types of preferential
arrangements, except such as are permitted by Section 8.02(a) hereof. All of
the properties of any Borrower are titled in such Borrower's legal name. Any
Borrower has used, or filed a financing statement (or other evidence of a lien,
charge or Security Interest) under, any other name in any United States
jurisdiction or territory outside the United States for at least the last five
(5) years.
(q) FULL DISCLOSURE. Except for any misstatements or omissions
which may be contained in any Property Document (other than any and all Property
Documents prepared by or on behalf of any Borrower), no Loan Document or
schedule or exhibit thereto and no certificate, report, statement or other
document or information furnished to the Lender in connection herewith or with
the consummation of the transactions contemplated hereby, contains any
misstatement of material fact or omits to state a material fact or any fact
necessary to make the statements contained herein or therein not misleading.
There is no contingent liability or other material fact of which any Borrower or
the Guarantor is aware after reasonable inquiry that may adversely affect the
condition or operations, financial or otherwise, or the business or prospects of
any Borrower or the Guarantor which has not been set forth in a footnote
included in the Financial Statements or a Schedule thereto or hereto.
(r) OPERATING LEASE OBLIGATIONS. No Borrower has any obligation
as lessee for the payment of rent for any real or personal property other than
as set forth in Schedule IV.
(s) INDEBTEDNESS. The Borrowers have no Indebtedness other than
Indebtedness set forth on Schedule V.
(t) ENVIRONMENTAL MATTERS. Except as set forth in the Plan of
Remediation, (i) each Borrower is in compliance with all applicable
Environmental Laws, and (ii) none of the operations of any Borrower is the
subject of any Federal, state or local investigation to determine whether any
remedial action is needed to address the presence, disposal, release or
threatened release of any Hazardous Material into the environment which may have
a material adverse effect on the business, operations, property, assets or
financial or other condition of any Borrower, and no Borrower has any contingent
liability in connection with any release of any Hazardous Material into the
environment which may have a material adverse effect on its business,
operations, property, assets or financial or other condition.
(u) SCHEDULES. All of the information which is scheduled to
this Agreement is correct and accurate in all material respects, and all of the
information that would be required to accurately revise each such schedule to
bring it current as of the Closing Date has been disclosed to the Lender by the
Borrowers or the Guarantor in writing delivered to the Lender. No subsequent
event except for operating losses incurred by Speakeasy Vegas with respect to
the Cheyenne Hotel Property and by Speakeasy Reno with respect to the Reno Hotel
Property, could reasonably be expected to have a material adverse effect on any
of (a) the business, assets, properties or condition of a Loan Party, (b) the
ability of either Loan Party to
<PAGE>
perform any of the obligations of such Loan Party under any Loan Document,
(c) the legality, validity or enforceability of this Agreement or any of the
other Loan Documents, (d) the rights and remedies of the Lender under this
Agreement or any of the other Loan Documents, or (e) the creation, perfection
or priority of the Lender's lien on, or security interest in, any of the
Collateral, securing the payment of any of the Obligations.
(v) INSURANCE. Each Borrower and the Guarantor keeps its
insurable properties adequately insured and maintains (i) insurance to such
extent and against such risks, including fire, as is customary with companies in
the same or similar businesses, (ii) workmen's compensation insurance in the
amount required by applicable law, (iii) personal liability insurance and public
liability insurance, in the amount customary with companies in the same or
similar business against claims for personal injury or death or properties
owned, occupied or controlled by it, and (iv) such other insurance as may be
required by law or as may be reasonably required in writing by the Lender.
(w) SOLVENCY OF MOUNTAINEER. As of the date first written
above, and after giving effect to the Loans and to liens created by Mountaineer
in connection therewith, (i) the sum of the assets, at a fair valuation, of
Mountaineer will exceed its debts ("debt" means any liability on a claim, and
"claim" means (A) right to payment, whether or not such a right is reduced to
judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured,
disputed, undisputed, legal, equitable, secured, or unsecured or (B) right to an
equitable remedy for breach of performance if such breach gives rise to payment,
whether or not such right to an equitable remedy is reduced to judgment, fixed,
contingent, matured, unmatured, disputed, undisputed, secured or unsecured);
(ii) Mountaineer has not incurred and does not intend to incur, and does not
believe that it will incur, debts beyond its ability to pay such debts as such
debts mature; and (iii) Mountaineer has, and will have, sufficient capital with
which to conduct its business.
(x) SOLVENCY OF THE GUARANTOR. As of the date first written
above, and after giving effect to the Loans and to liens created by each
Borrower in connection therewith, (i) the sum of the consolidated assets, at a
fair valuation, of the Guarantor will exceed its consolidated debts ("debt"
means any liability on a claim, and "claim" means (A) right to payment, whether
or not such a right is reduced to judgment, liquidated, unliquidated, fixed,
contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured,
or unsecured or (B) right to an equitable remedy for breach of performance if
such breach gives rise to payment, whether or not such right to an equitable
remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed,
undisputed, secured or unsecured); (ii) the Guarantor has not incurred and does
not intend to incur, and does not believe that it will incur, debts beyond its
ability to pay such debts as such debts mature; and (iii) the Guarantor will
have sufficient capital with which to conduct its business.
(y) BUSINESS OF SPEAKEASY. Other than the transactions
contemplated hereby, Speakeasy Reno and Speakeasy Vegas have conducted no
business, have no assets or liabilities and have incurred no Indebtedness.
<PAGE>
SECTION 7.02. REPRESENTATIONS, WARRANTIES AND COVENANTS OF
LENDER. Lender hereby represents and warrants to and covenants with the
Borrowers and the Guarantor that:
All shares of Common Stock acquired by Lender in accordance with
this Agreement are being acquired by Lender without a view to distribute any of
the shares of Common Stock in any transaction which would be in violation of the
Securities Act of 1933, as amended.
ARTICLE VIII
COVENANTS OF THE BORROWER AND THE GUARANTOR
SECTION 8.01. AFFIRMATIVE COVENANTS. So long as any principal of
or interest on any Loan shall remain unpaid or the Lender shall have any
commitment to make a Loan hereunder, each Borrower, jointly and severally, and,
where appropriate, the Guarantor will, unless the Lender shall otherwise consent
in writing:
(a) REPORTING REQUIREMENTS. Furnish to the Lender:
(i) as soon as available and in any event within 45
days after the end of each month, an interim (A) consolidated and
consolidating balance sheets of each Borrower as at the end of such month
and for the period commencing at the end of the immediately preceding
fiscal year and ending with the end of such month, (B) consolidated and
consolidating statement of income of each Borrower as at the end of such
month and for the period commencing at the end of the immediately preceding
fiscal year and ending with the end of such month, and (C) consolidated and
consolidating statement of cash flow of each Borrower for such month and
for the period commencing at the end of the immediately preceding fiscal
year and ending with the end of such month, setting forth in comparative
form the corresponding figures for the corresponding date or period of the
immediately preceding fiscal year and setting forth the budget for such
period all in reasonable detail and prepared in accordance with generally
accepted accounting principles consistently applied, each duly certified by
the chief financial officer of such Borrower as (1) fairly presenting the
financial condition of such Borrower at the end of such month, and the
results of the operations of such Borrower for such month (subject to
normal year-end audit adjustments), and (2) having been prepared in
accordance with generally accepted accounting principles consistently
applied;
(ii) as soon as available and in any event within 45
days after the end of each fiscal quarter of each Borrower, an interim (A)
consolidated and consolidating balance sheet of each Borrower as at the end
of such quarter and for the period commencing at the end of the immediately
preceding fiscal year and ending with the end of such quarter, (B)
consolidated and consolidating statement of income of each Borrower as at
the end of such quarter and for the period commencing at the end of the
immediately preceding fiscal year and ending with the end of such quarter,
and (C)
<PAGE>
consolidated and consolidating statement of cash flow of each Borrower
for such quarter and for the period commencing at the end of the
immediately preceding fiscal year and ending with the end of such
quarter setting forth in comparative form the corresponding figures for
the corresponding date or period of the immediately preceding fiscal
year and setting forth the budget for such period, all in reasonable
detail and prepared in accordance with generally accepted accounting
principles consistently applied, each duly certified by the chief
financial officer of such Borrower as (1) fairly presenting the
financial condition of such Borrower at the end of such quarter, and the
results of the operations of such Borrower for such quarter (subject to
normal year-end audit adjustments), and (2) having been prepared in
accordance with generally accepted accounting principles consistently
applied;
(iii) as soon as available and in any event within 90
days after the end of each fiscal year of each Borrower or such time that
the information required to be delivered pursuant to subparagraph
7.01(a)(v) is delivered to the Securities and Exchange Commission without
violation of any rule, regulation or order thereof, a (A) consolidated and
consolidating balance sheet of each Borrower as at the end of such fiscal
year, (B) consolidated and consolidating statement of income of each
Borrower as at the end of such fiscal year, and (C) consolidated and
consolidating statement of cash flow of each Borrower for such fiscal year
setting forth in comparative form the corresponding figures for the
immediately preceding fiscal year and setting forth the budget for such
fiscal year, all in reasonable detail and prepared in accordance with
generally accepted accounting principles consistently applied and, in the
case of balance sheets and statement of income, accompanied by a report and
an unqualified opinion, prepared in accordance with generally accepted
auditing standards, of an independent certified public accountant of
recognized standing selected by each Borrower and satisfactory to the
Lender, together with any management letter prepared by such accountant and
a written statement of such accountant (1) to the effect that in making the
examination necessary for its certification of such financial statements,
it has not obtained any knowledge of the existence of an Event of Default,
or an event which, with the giving of notice or the lapse of time or both,
would constitute an Event of Default, or (2) if such accountant shall have
obtained any knowledge of the existence of an Event of Default, or an event
which, with the giving of notice or the lapse of time or both, would
constitute an Event of Default, describing the nature thereof;
(iv) within 45 days after the end of any fiscal quarter
of the Guarantor or such time that the information required to be delivered
pursuant to this subparagraph 7.01(a)(iv) is delivered to the Securities
and Exchange Commission without violation of any rule, regulation or order
thereof, balance sheets of the Guarantor and its subsidiaries as of the end
of such fiscal quarter and statements of income and retained earnings of
the Guarantor and its subsidiaries for the period commencing at the
beginning of the fiscal year in which such fiscal quarter falls through the
end of such fiscal quarter, certified as accurate and correct by the chief
financial officer of the Guarantor;
<PAGE>
(v) within 120 days after the end of each fiscal year
of the Guarantor or such time that the information required to be delivered
pursuant to this subparagraph 7.01(a)(v) is delivered to the Securities and
Exchange Commission without violation of any rule, regulation or order
thereof, a copy of the annual report for such fiscal year for the Guarantor
and its subsidiaries containing financial statements for such year
certified in a manner acceptable to Lender by independent public
accountants of recognized standing;
(vi) promptly after the sending or filing thereof,
copies of all reports that the Guarantor sends to any of its security
holders, reports and copies of all reports and registration statements that
the Guarantor or any subsidiary files with the Securities and Exchange
Commission or any national securities exchange;
(vii) promptly upon delivery thereof, all reports and
filings made by each Borrower and/or the Guarantor to the West Virginia
Racing Commission or the West Virginia Lottery Commission;
(viii) simultaneously with the delivery of the financial
statements required by clauses (i), (ii), (iii), (iv) and (v) of this
Section 8.01(a), (A) a certificate of the chief financial officer of the
appropriate Loan Party, stating that such officer has reviewed the
provisions of this Agreement and the other Loan Documents to which such
Loan Party is a party and has made or caused to be made under his
supervision a review of the condition and operations of such Loan Party
during the period covered by such financial statements with a view to
determining whether each Borrower was in compliance with all of the
provisions of such Loan Documents, and that such review has not disclosed,
and such officer has no knowledge of, the existence during such period of
an Event of Default, or an event which, with the giving of notice or the
lapse of time or both, would constitute an Event of Default;
(ix) as soon as available, and in any event no later
than 90 days after the end of each year, annual financial projections
(including forecasted income statements, cash flow statements, schedules of
cash receipts and disbursements and borrowings hereunder) of each Borrower
and the Guarantor for the next succeeding three-year period, all in
reasonable detail, together with all such supporting information as the
Lender shall reasonably request;
(x) promptly after submission to any Governmental
Authority not otherwise referred to in this subsection 8.01(a), all
documents and information furnished to such Governmental Authority, unless
such documents and information are furnished in the ordinary course of
business and will not result in any adverse action to be taken by such
Governmental Authority;
(xi) promptly after obtaining knowledge thereof but in
any event not later than five (5) days after the occurrence of an Event of
Default, or an event which, with the giving of notice or the lapse of time
or both, would constitute an Event of Default, or a material adverse change
in the condition or operations, financial or
<PAGE>
otherwise, of each Borrower, the written statement of the chief
executive officer or the chief financial officer of such Borrower,
setting forth the details of such Event of Default, event or material
adverse change and the action which such Borrower proposes to take with
respect thereto;
(xii) as soon as possible and in any event within 10 days
after any Borrower, the Guarantor or any of their Affiliates knows or has
reason to know of the existence of any Unfunded Liability, a notice setting
forth the amount of such Unfunded Liability, certified by the chief
financial officer of the applicable Loan Party.
(xiii) promptly after the commencement thereof but in any
event not later than ten (10) days after service of process with respect
thereto on, or the obtaining of knowledge thereof by, any Borrower or the
Guarantor, notice of each action, suit or proceeding before any court or
other Governmental Authority or other regulatory body or any arbitrator
which may materially adversely affect the condition or operations,
financial or otherwise, of any Borrower or the Guarantor; and
(xiv) promptly upon request, such other information
concerning the condition or operations, financial or otherwise, of each
Borrower or the Guarantor as the Lender from time to time may reasonably
request.
(b) COMPLIANCE WITH LAWS, ETC. Comply in all material
respects with all applicable laws, rules, regulations and orders, such
compliance to include, without limitation, (i) paying before the same become
delinquent all taxes, assessments and governmental charges or levies imposed
upon it or upon its income or profits or upon any of their properties, and
(ii) paying all lawful claims which if unpaid might become a lien or charge
upon any of their properties, except to the extent contested in good faith by
proper proceedings which stay the imposition of any penalty, fine or lien
resulting from the non-payment thereof and with respect to which adequate
reserves have been set aside for the payment thereof.
(c) PRESERVATION OF EXISTENCE, ETC. Maintain and preserve its
existence, rights and privileges, and become or remain duly qualified and in
good standing in each jurisdiction in which the character of the properties
owned or leased by it or in which the transaction of its business makes such
qualification necessary. Maintain all licenses and accreditations necessary to
conduct the business of each Borrower and the Guarantor.
(d) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. Keep adequate
records and books of account, with complete entries made in accordance with
GAAP.
(e) INSPECTION RIGHTS. Permit the Lender or any agent or
representative thereof at any reasonable time and from time to time to examine
and make copies of and abstracts from its records and books of account, to visit
and inspect its properties, to conduct audits or examinations, and to discuss
its affairs, finances and accounts with any of the directors, officers,
employees, independent accountants or other representatives thereof. The
Borrowers, jointly and severally, agree to pay the cost of each such audit or
examination as provided in subsection 5.01(c).
<PAGE>
(f) MAINTENANCE OF PROPERTIES, ETC. Maintain and preserve all
of its properties which are necessary or useful in the proper conduct of its
business in good working order and condition, ordinary wear and tear excepted,
and comply at all times with the provisions of all leases to which a Borrower or
the Guarantor is a party as lessee or under which a Borrower or the Guarantor
occupies property, so as to prevent any loss or forfeiture thereof or
thereunder.
(g) MAINTENANCE OF INSURANCE. Maintain insurance with
responsible and reputable insurance companies or associations (including,
without limitation, comprehensive general liability, personal liability and
hazard insurance) with respect to its properties and business, in such amounts
and covering such risks, as is required by (i) any Governmental Authority or
other regulatory body having jurisdiction with respect thereto (ii) any Loan
Document or (iii) as is carried generally in accordance with sound business
practice by companies in similar businesses similarly situated. The Borrowers
shall pay over to the Lender any amount of insurance proceeds received by any
Borrower or the Guarantor payable in respect of a casualty loss in excess of
$250,000.00 (as a mandatory prepayment (without application of the Prepayment
Factor) of the then outstanding Loans, to be applied by the Lender to such Loans
in its discretion).
(h) ENVIRONMENTAL INDEMNITY. Comply with the requirements of
all applicable Environmental Laws, provide to the Lender all documentation in
connection with such compliance that the Lender may reasonably request, and
defend, indemnify, and hold harmless the Lender, its employees, agents,
officers, and directors, from and against any claims, demands, penalties, fines,
liabilities, settlements, damages, costs, or expenses (including, without
limitation, attorney and consultant fees, investigation and laboratory fees,
court costs, and litigation expenses) arising out of (i) the presence, disposal,
release, or threatened release of any Hazardous Materials on any property at any
time owned or occupied by any Borrower (or its predecessors in interest or
title); (ii) any personal injury (including wrongful death) or property damage
(real or personal) arising out of or related to such Hazardous Materials; (iii)
any investigation, lawsuit brought or threatened, settlement reached, or
government order relating to such Hazardous Materials; and/or (iv) any violation
of any Environmental Law; PROVIDED, HOWEVER, that with respect to the Reno Hotel
Property and the Cheyenne Hotel Property, the foregoing environmental indemnity
shall not apply to or relate to any condition to the extent such condition
existed on the Reno Hotel Property or the Cheyenne Hotel Property during the
period of time prior to the acquisition by Speakeasy Reno of the Reno Hotel
Property or Speakeasy Vegas of the Cheyenne Hotel Property.
(i) NOTIFICATION OF EVENT OF DEFAULT. Immediately notify Lender
in writing of any default of nonpayment or any other default or event of default
or notice thereof under any agreements or instruments representing material
Indebtedness of a Borrower or the Guarantor or any Lien on their respective
assets.
(j) FURTHER ASSURANCES. Each Loan Party shall do, execute,
acknowledge and deliver, at the sole cost and expense of such Loan Party, all
such further acts, deeds, conveyances, mortgages, assignments, estoppel
certificates, financing statements, notices of assignment, transfers and
assurances as the Lender may reasonably require from time to time
<PAGE>
in order to better assure, convey, grant, assign, transfer and confirm unto
the Lender the rights now or hereafter intended to be granted to the Lender
under this Agreement, any Loan Document or any other instrument under which
such Loan Party may be or may hereafter become bound to convey, mortgage or
assign to the Lender to effect the intention or facilitate the performance of
the terms of the Agreement.
(k) ADDITIONAL SECURITY. The Borrowers shall, within 14 days of
the acquisition of any asset by any Borrower with the proceeds of a Line Loan or
a Cheyenne Construction Loan (whether such acquisition is funded in whole or in
part by such proceeds), execute and deliver all documents necessary or
desirable, in the opinion of counsel to the Lender, to perfect a first priority
security interest in such asset in favor of the Lender; PROVIDED, HOWEVER, that
with respect to any asset that is partially funded by a purchase money mortgage
or purchase money security interest in accordance with subsection 8.02(a)(vii)
hereof, the Lender's security interest may be subject to such purchase money
mortgage or security interest; and PROVIDED, FURTHER, HOWEVER, that the Lender
shall not have additional security in the event such purchase money mortgage or
security agreement precludes junior financing. Each Borrower and the Guarantor
hereby acknowledge and agree that (i) any asset other than an equity interest in
a Person acquired by it after the date hereof shall be automatically subject to
a Lien in favor of the Lender pursuant to the Security Agreements and be subject
to the terms thereof, and (ii) any asset that is an equity interest in another
Person shall be subject to the terms and conditions of a pledge agreement in
form and substance reasonably satisfactory to the Lender.
(l) ENVIRONMENTAL ACTIONS The Borrowers shall take all remedial
and other actions as set forth in the Plan of Remediation in a timely manner.
(m) SPEAKEASY RENO FRANCHISE AGREEMENTS. Speakeasy Reno is
currently in negotiations with Ramada Franchise Systems, Inc. or an affiliate
thereof ("Ramada") regarding the Reno Hotel Property. Speakeasy Reno will use
its best efforts to finalize with Ramada or another franchise company reasonably
satisfactory to Lender, a new license agreement for the Reno Hotel Property
which shall include (or be coupled with) a termination of the pre-existing
franchise agreement dated April 10, 1997 (the "Pre-Existing Ramada Franchise
Agreement") between Reno Hotel, LLC and Ramada Franchising Systems, Inc. without
requiring Lender or Reno Hotel LLC to pay Ramada liquidated damages pursuant to
the existing franchise agreement. Concurrently with the execution of any new
franchise agreement, Speakeasy Reno shall require the franchise company to
execute, for the benefit of Lender, either a comfort letter, tri-party agreement
or conditional assignment of the new franchise agreement, in each case in a form
reasonably satisfactory to Lender. Speakeasy Reno shall immediately deliver
such instrument to Lender along with a copy of the executed franchise agreement.
(n) SPEAKEASY VEGAS FRANCHISE AGREEMENTS. Speakeasy Vegas has
determined not to pursue a franchise agreement with Days Inn of America Inc.
with respect to the Cheyenne Hotel Property and is currently in negotiations
with Ramada regarding the Cheyenne Hotel Property. Speakeasy Vegas will use its
best efforts to finalize with Ramada or another reputable franchise company
(including a new agreement with Days Inn of America Inc.) as soon as practicable
(it being understood that (i) Speakeasy Vegas intends to close the Cheyenne
Hotel Property for a period of time during construction of improvements and
renovation of hotel rooms; and (ii) no franchise agreement will be in place
during such "dark" time) a new license agreement for the Cheyenne Hotel
<PAGE>
Property. In the event Speakeasy Vegas cannot, despite its best efforts,
conclude a franchise agreement for the Cheyenne Hotel Property on terms
acceptable to it, then Speakeasy Vegas shall operate the Cheyenne Hotel Property
as an "independent" hotel without any affiliation with a hotel franchise company
and shall do so in a prudent manner, in accordance with the customary business
practices of the hotel and/or casino industry.
(o) MANAGEMENT AGREEMENT, FRANCHISE AGREEMENTS. Any
management agreement which shall be entered into by any Borrower, pursuant to
which the Reno Hotel Property or the Cheyenne Hotel Property are managed, or
any subsequent modification thereto or replacement thereof, shall be in a
form satisfactory to the Lender and shall be approved by the Lender in
writing (an "Approved Management Agreement"). Concurrently with the
execution of any Approved Management Agreement, the Borrowers shall require
the management company to execute, for the benefit of Lender, either a
comfort letter, tri-party agreement or conditional assignment of the Approved
Management Agreement, in each case in a form reasonably satisfactory to
Lender. With respect to (i) an Approved Management and/or (ii) the license
agreement or agreements entered into pursuant to Section 8.01 (m) or (n)
above, or any modifications or replacements thereof approved in writing by
Lender, or any substitute hotel franchise or license agreement approved in
writing by Lender (collectively, an "Approved Franchise Agreement"), each of
Speakeasy Reno and Speakeasy Vegas hereby covenants and agrees with Lender
that it shall:
(i) promptly notify Lender of any default under the
Approved Franchise Agreement or the Approved Management Agreement of which
it is aware; and
(ii) promptly deliver to Lender a copy of each financial
statement, business plan, capital expenditures plan, default notice and
other material report received by it under the Approved Franchise Agreement
or the Approved Management Agreement.
(p) MANAGEMENT AGREEMENT, FRANCHISE AGREEMENTS. Each of
Speakeasy Reno and Speakeasy Vegas further covenants to Lender that it shall
not, without Lender's prior consent:
(i) surrender, terminate or cancel any Approved
Franchise Agreement or Approved Management Agreement; or
(ii) otherwise modify, change, supplement, alter or
amend, or waive or release any of its rights and remedies under the
Approved Franchise Agreement or the Approved Management Agreement in any
materially adverse respect.
Notwithstanding the foregoing provisions of this subsection (p), with respect to
an Approved Franchise Agreement, so long as no Event of Default or event which
with the giving of notice or the passage of time or both would constitute an
Event of Default exists, Speakeasy Reno and/or
<PAGE>
Speakeasy Vegas shall have the right, upon written notice to but without the
prior consent of Lender, to effect a termination or cancellation of an
Approved Franchise Agreement if it is coupled with the execution of a new
Franchise Agreement which is (i) on business terms at least as favorable as
the Approved Franchise Agreement and (ii) with a reputable franchise company
which licenses properties that have a standard average daily rate equal to or
greater than the average daily rate required under the Approved Franchise
Agreement.
(q) LEASES WITH CASINO OPERATORS. Speakeasy shall have the
right to terminate the lease entered into (and consented to by Lender pursuant
to Section 2.12 of the Reno Deed of Trust and/or the Cheyenne Deed of Trust) for
the operation of a casino in a portion of the Reno Hotel Property or the
Cheyenne Hotel Property at such time as Speakeasy or an affiliate thereof shall
have obtained all governmental approvals required to operate a casino at one or
both of such properties and, in such event, Speakeasy (or its affiliate,
pursuant to an agreement reasonably acceptable to Lender) shall thereafter
operate such casino(s) in accordance with the applicable terms of this Agreement
and in accordance with law.
SECTION 8.02. NEGATIVE COVENANTS. So long as any principal of or
interest on any Loan, or any Obligation, shall remain unpaid or the Lender shall
have any commitment to make any Loan, the Borrowers will not and, where
appropriate, the Guarantor will not, without the prior written consent of the
Lender:
(a) LIENS, ETC. Create or suffer to exist any Lien upon or with
respect to any of its properties, rights or other assets, whether now owned or
hereafter acquired, or assign or otherwise transfer any right to receive income,
other than:
(i) Liens created pursuant to the Loan Documents;
(ii) With respect to Mountaineer, liens existing on the
date hereof as set forth on Schedule VI to the Amended Loan Agreement, or,
with respect to Speakeasy Reno or Speakeasy Vegas, liens existing on the
date hereof, as set forth in Schedule VI hereto, and the renewal and
replacement of such liens, provided that any such renewal or replacement
lien shall be limited to the property or assets covered by the lien renewed
or replaced and the indebtedness secured by any such renewal or replacement
lien shall be in an amount not greater than the amount of indebtedness
secured by the lien renewed or replaced;
(iii) Liens for taxes, assessments or governmental
charges or levies to the extent that the payment thereof shall not be
required by Section 8.01(b)(i) hereof;
(iv) Liens created by operation of law, such as
materialmen's liens, mechanics' liens and other similar liens, arising in
the ordinary course of business and securing claims the payment of which
shall not be required by Section 8.01(b)(ii) hereof;
<PAGE>
(v) deposits, pledges or Liens (other than liens
arising under ERISA) securing (A) obligations incurred in respect of
workers' compensation, unemployment insurance or other forms of
governmental insurance or benefits, (B) the performance of bids, tenders,
leases, contracts (other than for the payment of money) and statutory
obligations, or (C) obligations on surety or appeal bonds, but only to the
extent such deposits, pledges or liens are incurred or otherwise arise in
the ordinary course of business and secure obligations which are not past
due;
(vi) restrictions on the use of real property and minor
irregularities in the title thereto which do not (A) secure obligations for
the payment of money or (B) materially impair the value of such property or
its use by any Loan Party in the normal conduct of such Loan Party's
business;
(vii) (A) purchase money liens on or purchase money
security interests in equipment acquired or held by any Borrower in the
ordinary course of its business to secure the purchase price of such
property or Indebtedness incurred solely for the purpose of financing the
acquisition of such property, or (B) liens or security interests existing
on such property at the time of its acquisition, PROVIDED, that (1) no such
lien or security interests shall extend to cover any other property of the
Borrowers, and (2) the principal amount of the Indebtedness secured by any
such lien or security interest shall not exceed 100% of the lesser of the
fair market value or the cost of the property so held or acquired; and
(viii) any other Lien in favor of the Lender.
(b) INDEBTEDNESS. Create, incur or suffer to exist any
Indebtedness, other than:
(i) Indebtedness to the Lender;
(ii) Indebtedness created hereunder or under the Notes;
(iii) Indebtedness existing on the date hereof, as set
forth in Schedule V hereto, and any extension of maturity, refinancing or
other modification of the terms thereof, PROVIDED, HOWEVER, that such
extension, refinancing or modification (A) is pursuant to terms that are
not less favorable to the Borrowers than the terms of the Indebtedness
being extended, refinanced or modified, and (B) after giving effect to the
extension, refinancing or modification of such Indebtedness, the amount of
such Indebtedness outstanding is not greater than the amount of such
Indebtedness outstanding immediately prior to such extension, refinancing
or modification;
(iv) Indebtedness represented by accounts payable
incurred in the ordinary course of business;
(v) Indebtedness secured by liens or security interests
permitted by clause (vii) of subsection (a) of this Section 8.02;
<PAGE>
(vi) Subordinated Indebtedness of the Borrowers on terms
approved, in writing, by the Lender; and
(vii) Indebtedness under Operating Leases permitted by
Section 8.02(g) hereof.
(c) GUARANTIES, ETC. Assume, guarantee, endorse or otherwise
become directly or contingently liable (including, without limitation, liable by
way of agreement, contingent or otherwise, to purchase, to provide funds for
payment, to supply funds to or otherwise invest in the debtor or otherwise to
assure the creditor against loss), in connection with any Indebtedness of any
other Person, other than:
(i) guaranties created hereunder or under any Loan
Document;
(ii) guaranties by endorsement of negotiable instruments
for deposit or collection in the ordinary course of business;
(iii) guaranties existing on the date hereof, as set
forth in Schedule VII, including any renewal or other modification thereof,
PROVIDED, HOWEVER, that such renewal or modification (A) is pursuant to
terms that are not less favorable to the Borrowers than the terms of the
guaranty being renewed or modified, and (B) after giving effect to the
renewal or modification of such guaranty, the amount of the outstanding
indebtedness guaranteed by such guaranty is not greater than the amount of
the outstanding indebtedness guaranteed by such guaranty immediately prior
to such renewal or modification; and
(iv) guaranties of any other Indebtedness to the Lender
or Indebtedness permitted by subsection (b) of this Section 8.02;
PROVIDED, HOWEVER, that the Guarantor may: (i) form subsidiaries which incur
Indebtedness ("NEW SUBSIDIARY DEBT"); and (ii) in the discretion of the
Guarantor, guarantee such New Subsidiary Debt pursuant to a guarantee of
collection (but not a guarantee of payment), in each case subject to the
conditions that such guarantee of collection or other obligation of any kind of
the Guarantor in respect of such New Subsidiary Debt, or guarantee thereof,
contains provisions reasonably satisfactory to the Lender to the effect that (A)
no Person with any rights to any payment in respect of such New Subsidiary Debt
shall have the right, at any time prior to the date which is one year and one
day after the date on which all of the Obligations have been satisfied in full,
to acquiesce, petition or otherwise invoke, or cause any other Person acquiesce,
petition or otherwise to invoke, the process of any court or other Governmental
Authority for the purpose of commencing or sustaining a case against the
Guarantor under any federal or state bankruptcy, insolvency or similar law, or
appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or
other similar official of the Guarantor or any substantial part of its property,
or ordering the winding up or liquidation of the affairs of the Guarantor, (B)
no recourse may be had against the common stock of the borrower owned by the
Guarantor, or any assets of any Borrower, in respect of such New Subsidiary Debt
or guarantee thereof, and (C) no term or covenant with respect to such New
Subsidiary Debt may, directly or indirectly, impair Lender's
<PAGE>
Liens, security interests and claims granted or arising under this Agreement
or the other Loan Documents.
(d) MERGER, CONSOLIDATION, SALE OF ASSETS, ETC.
(i) merge or consolidate with any Person; or
(ii) sell, assign, lease, engage in sale leaseback
transactions or otherwise transfer or dispose of, whether in one
transaction or in a series of related transactions, any substantial portion
of its properties, rights or other assets (whether now owned or hereafter
acquired) to any Person.
(e) CHANGE IN NATURE OF BUSINESS. Make any material change in
the nature of its business as conducted on at the date hereof.
(f) INVESTMENTS, ETC. Make any loan, advance or contribution to
any Person or purchase or otherwise acquire any capital stock, properties,
assets or obligations of, or any interest in, any Person, other than (i)
Permitted Investments, (ii) investments existing on the date hereof, as set
forth in Schedule VIII, (iii) advances to employees or vendors made in the
ordinary course of its business as presently conducted, not to exceed at any one
time outstanding an aggregate of $500,000 for all such loans and advances,
(iv) advances, loans or contributions to Affiliates of the Guarantor with the
consent of the Lender, such consent not to be unreasonably withheld and (v) the
acquisition by Speakeasy Reno of the Reno Hotel Property and the acquisition by
Speakeasy Vegas of the Cheyenne Hotel Property.
(g) LEASE OBLIGATIONS. Create, incur or suffer to exist any
obligation as lessee (i) for the payment of rent for any real or personal
property in connection with any sale and leaseback transaction, or (ii) for the
payment of rent for any real or personal property under Operating Leases which
would cause the aggregate amount of all obligations in respect of Operating
Leases payable by any Borrower in any fiscal year of such Borrower to exceed
105% of the Operating Leases outstanding as of the end of the prior fiscal year;
PROVIDED, HOWEVER, that the Borrowers may incur such obligations with respect to
Capital Leases and capital purchases for video lottery terminals and other
gaming equipment in an aggregate amount not to exceed $5,000,000 per year; and
PROVIDED FURTHER that Speakeasy Vegas and Speakeasy Reno may enter into office
leases, the monthly lease payments for which shall not exceed, in the aggregate,
$3,000.00. Nothing herein shall be deemed to place a general limit on capital
expenditures which are not specifically limited herein.
(h) SALARIES AND WITHDRAWALS. Pay or become obligated to pay
any fees, wages, distributions, salary, bonus, commission, contributions to
deferred benefit plans or any other compensation (with the exception of options
to purchase common stock of the Guarantor for a price not less than the market
price on the date of grant) ("Compensation") to, or for the benefit of, the
Guarantor or any officers of any Borrower or the Guarantor in any calendar year
in excess of 120% of such Persons Compensation in the immediately preceding
calendar year to the extent such Persons were employed in the preceding year.
<PAGE>
(i) DIVIDENDS, ETC. Declare or pay any dividend, purchase or
otherwise acquire for value any of its capital stock now or hereafter
outstanding, return any capital to its stockholders as such, or make any other
payment or distribution of assets to its stockholders as such or to purchase or
otherwise acquire for value any stock of any Borrower; PROVIDED, HOWEVER, that
nothing herein shall prevent any Borrower from making distributions to the
Guarantor in the aggregate in any fiscal year equal to the lesser of (i) the
amount necessary to pay the expenses of the Guarantor, and (ii) $500,000.00 plus
expenses paid to any third parties, in each case minus the funds available to
the Guarantor from other sources other than through the issuance of securities.
(j) FEDERAL RESERVE REGULATIONS. Permit the Loan or the
proceeds of the Loan under this Agreement to be used for the purpose which
violates or is inconsistent with the provisions of Regulations G, T, U or X of
the Board of Governors of the Federal Reserve System.
(k) TRANSACTIONS WITH AFFILIATES. Permit a Borrower to enter
into or be a party to any transaction with any of its Affiliates, except in the
ordinary course of business for fair consideration and on terms no less
favorable to such Borrower as are available from unaffiliated third parties;
PROVIDED that the Guarantor may form a wholly-owned Subsidiary to enter into
management contracts with (i) its Affiliates to operate gaming and hotel
properties, and (ii) non-Affiliates for gaming and hotel property services, in
each case subject to (x) approval by the Lender of the form and substance of
such contracts and the receipt by the Lender of a collateral assignment of each
such contract pursuant to documentation reasonably satisfactory to the Lender,
(y) the pledge by the Guarantor of all of the capital stock of such wholly-owned
Subsidiary, and (z) subject to the requirements of the law the granting by such
wholly-owned Subsidiary of a first priority, perfected security interest in all
of such wholly-owned Subsidiary's assets pursuant to documentation reasonably
satisfactory to the Lender.
(l) FISCAL YEAR, ACCOUNTING POLICIES. Permit any material
change in the fiscal year or accounting policies and procedure of each Borrower
without the prior written consent of the Lender.
(m) IMPROVEMENTS. Make or commit to make any improvements on
the Property with a total cost in excess of $250,000.00 without the prior
written consent of the Lender, after Lender's review of all plans, permits and
other items necessary to ensure that any such improvement will comply with all
applicable building and safety requirements as the Lender, in its sole and
absolute discretion, may determine; PROVIDED, HOWEVER, that the foregoing
limitations shall not apply to the proceeds of the Line Loans or the Cheyenne
Construction Loans, which proceeds shall be used primarily for such
improvements.
(n) ISSUANCE OF STOCK. Permit the issuance by any Borrower of
(i) any additional shares of any class of capital stock, (ii) any securities
convertible voluntarily by the holder thereof or automatically upon the
occurrence or non-occurrence of any event or condition into, or exchangeable
for, any such shares of capital stock or (iii) any warrants, options, contracts
<PAGE>
or other commitments that entitle any Person to purchase or otherwise acquire
any such shares of capital stock.
SECTION 8.03. ADDITIONAL COVENANTS OF THE GUARANTOR. So long as
any of the Obligations remains outstanding, the Guarantor:
(a) shall not take any action to increase the par value of the
Common Stock (except to the extent required in the event of a reverse split of
the Common Stock);
(b) shall not issue any Common Stock, any preferred stock or any
security providing for the purchase of or convertibility into, or exchangeable
for, Common Stock or preferred stock, other than;
(i) in connection with stock rights, warrants and
options existing on the date hereof as set forth on Schedule IX;
(ii) in connection with future incentive stock options
or warrants for employees of the Guarantor not to exceed 4% of the number
of outstanding shares of Common Stock in any fiscal year, it being
understood that the re-granting (upon expiration or other cancellation
thereof) of any stock options previously granted pursuant to a plan set
forth in Schedule IX shall not be included in such 4%;
(iii) in the ordinary course of business of the Guarantor
not to exceed 2% of the number of outstanding shares of Common Stock in any
fiscal year;
(iv) in connection with any merger, acquisition or sale
of a major portion of the assets of the Guarantor approved in writing by
the Lender, such approval not to be unreasonably withheld; and
(v) to the Lender;
(c) shall not create or suffer to exist any Lien upon or with
respect to any of the common stock of any Borrower other than a Lien in favor of
the Lender; and
(d) shall, after the filing with the West Virginia Lottery
Commission by the Lender of its application for approval under the license of
any Borrower, use its best efforts to obtain the approval of each applicable
Governmental Authority to the pledge of all of the shares of the common stock of
such Borrower pursuant to a pledge agreement and, upon such approval, or the
written opinion of counsel to the Guarantor that such pledge would not result in
a revocation of any approval, license or permit required by such Borrower for
the conduct of its gaming businesses, shall execute and deliver a pledge
agreement to the Lender in form and substance reasonably satisfactory to the
Lender, together with such other documents as are customarily delivered and /or
executed and delivered in connection therewith.
SECTION 8.04. ADDITIONAL COVENANT. So long as any of the
Obligations remains outstanding, Mountaineer shall maintain an EBITDA Average of
at least $500,000.
<PAGE>
ARTICLE IX
EVENTS OF DEFAULT
SECTION 9.01. EVENTS OF DEFAULT. If any of the following Events
of Default shall occur and be continuing:
(a) any Borrower shall fail to pay any principal on any Loan
when due (whether by scheduled maturity, required prepayment, acceleration,
demand or otherwise);
(b) any Borrower shall fail to pay any interest on any Loan or
any fee or other amount (whether by scheduled payment, acceleration, demand or
otherwise) within three (3) Business Days of the date when due; PROVIDED,
HOWEVER, that failure to make payments when due with respect to Obligations in
this Subsection 8.01(b) more than three (3) times in any twelve (12) month
period shall constitute an Event of Default hereunder;
(c) any representation or warranty made by any Loan Party or any
officer of any Loan Party under or in connection with any Loan Document shall
have been incorrect in any material respect when made;
(d) any Loan Party shall fail to perform or observe any of the
covenants contained in Sections 8.01, 8.02, or 8.03 hereof, or Article XI
hereof;
(e) any Loan Party shall fail to perform or observe any other
term, covenant or agreement contained in any Loan Document and to be performed
or observed by such Loan Party within twenty-eight (28) days of the receipt by
such Loan Party of notice of the failure to perform or observe such term,
covenant or agreement;
(f) there shall occur any breach or default under any other
agreement involving the borrowing of money under which such Loan Party or any of
its subsidiaries may be obligated as borrower or guarantor;
(g) any Loan Party (i) shall institute any proceeding or
voluntary case seeking to adjudicate it a bankrupt or insolvent, or seeking
dissolution, liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief or composition of it or its debts under any law relating to
bankruptcy, insolvency, reorganization or relief of debtors, or seeking the
entry of an order for relief or the appointment of a receiver, trustee,
custodian or other similar official for such Person or for any substantial part
of its property, (ii) shall be generally not paying its debts as such debts
become due, or shall admit in writing its inability to pay its debts generally,
(iii) shall make a general assignment for the benefit of creditors, or (iv)
shall take any action to authorize or effect any of the actions set forth above
in this subsection (g);
(h) any proceeding shall be instituted against any Loan Party
seeking to adjudicate it a bankrupt or insolvent, or seeking dissolution,
liquidation, winding up, reorganization, arrangement, adjustment, protection,
relief of debtors, or seeking the entry of an order for relief or the
appointment of a receiver, trustee, custodian or other similar official for
<PAGE>
such Person or for any substantial part of its property, and either such
proceeding shall remain undismissed or unstayed for a period of 60 days or
any of the actions sought in such proceeding (including, without limitation,
the entry of an order for relief against it or the appointment of a receiver,
trustee, custodian or other similar official for it or for any substantial
part of its property) shall occur;
(i) any provision of any Loan Document shall at any time for any
reason be declared to be null and void, or the validity or enforceability
thereof shall be contested by any Loan Party, or a proceeding shall be commenced
by any Loan Party, or by any Governmental Authority or other regulatory body
having jurisdiction over any Loan Party, seeking to establish the invalidity or
unenforceability thereof, or any Loan Party shall deny that such Loan Party has
any liability or obligation purported to be created under any Loan Document;
(j) the Security Agreements, the West Virginia Deed of Trust,
the West Virginia First Priority Deed of Trust, the Reno Deed of Trust, the
Cheyenne Deed of Trust or any other security document, after delivery thereof
pursuant hereto, shall for any reason fail or cease to create a valid and
perfected and, to the extent provided for by the terms hereof or thereof, first
or second priority lien on or security interest in any Collateral purported to
be covered thereby;
(k) one or more judgments or orders (other than a judgment or
award described in subsections (g) and (h) of this Section 9.01) for the payment
of money exceeding any applicable insurance coverage shall be rendered against
any Loan Party, and either (i) enforcement proceedings shall have been commenced
by any creditor upon any such judgment or order, or (ii) there shall be any
period of 30 consecutive days during which a stay of enforcement of any such
judgment or order, by reason of a pending appeal or otherwise, shall not be in
effect;
(l) any Loan Party or any Affiliate of a Loan Party shall suffer
to exist any Unfunded Liability in excess of $100,000; or
(m) Mountaineer shall fail to perform or observe the covenant
contained in Section 8.04 hereof;
then, and in any such event, the Lender may, by notice to the Borrowers, (i)
declare its Commitment to make any Loan hereunder to be terminated, whereupon
such Commitment shall forthwith terminate, (ii) declare the Loans, all interest
thereon and all other amounts payable under this Agreement to be forthwith due
and payable, whereupon the Loans (including, without limitation, all of the Term
Obligations then accrued and an amount equal to the product of (a) the
Prepayment Factor and (b) the outstanding principal amount of the Loans), all
such interest and all such amounts shall become and be forthwith due and
payable, without presentment, demand, protest or further notice of any kind, all
of which are hereby expressly waived by the Borrowers; PROVIDED, HOWEVER, that
upon the occurrence of an Event of Default described in subsections (g) and (h)
of this Section 9.01, the Commitment to make any Loan hereunder shall
immediately terminate and the Loans, all such interest thereon and all other
amounts shall become payable and be forthwith due and payable, without
presentment, demand, protest or further notice of any
<PAGE>
kind, all of which are expressly waived by the Borrowers; PROVIDED FURTHER,
that upon the occurrence of an Event of Default other than the events
described in Subsections (a), (b), (g) and (h), the Borrowers shall have
three (3) Business Days in which to cure such Event of Default and (iii)
exercise any and all of its other rights under applicable law, hereunder and
under the other Loan Documents; PROVIDED, FURTHER, that the Event of Default
described in subsection (m) of this Section 9.01 shall apply to the Line Loan
only, and shall not be deemed a default under subsection (f) of this Section
9.01 with respect to the Term Loan and, accordingly, not result in the
acceleration of amounts due under the Term Note.
ARTICLE X
MISCELLANEOUS
SECTION 10.01. NOTICES, ETC. All notices and other communications
provided for hereunder shall be in writing and shall be mailed, telecopied, with
a copy sent promptly thereafter by U.S. mail, return receipt requested or
delivered, if to a Borrower or the Guarantor, at the following address:
Mountaineer Park, Inc.
Route 2 South
Chester, West Virginia 26034
Attention: Mr. Edson Arneault, President
Telephone No.: (304) 387-2400
Telecopy No.: (304) 387-1598
with copies to:
Ruben & Aronson, LLP
3299 K Street, N.W., Suite 403
Washington, D.C. 20007
Attention: Robert L. Ruben, Esq.
Telephone No.: (202) 965-3600
Telecopy No.: (202) 965-3700
and if to the Lender, to it at the following address:
Madeleine LLC
450 Park Avenue
New York, New York 10022
Attention: Mr. Kevin P. Genda
Telephone No.: (212) 891-2117
Telecopy No.: (212) 758-5305
<PAGE>
with copies to:
Schulte Roth & Zabel LLP
900 Third Avenue
New York, New York 10022
Attention: Paul E. Weber, Esq.
Telephone No.: (212) 756-2232
Telecopy No.: (212) 593-5955
or, as to each party, at such other address as shall be designated by such party
in a written notice to the other party complying as to delivery with the terms
of this Section 10.01. All such notices and other communications shall be
effective (i) if mailed, when received or three days after mailing, whichever
first occurs, (ii) if telecopied, when transmitted, provided same is on a
Business Day and, if not, on the next Business Day, or (iii) if delivered, upon
delivery, provided same is on a Business Day and, if not, on the next Business
Day, except that notices to the Lender pursuant to Article II hereof shall not
be effective until received by the Lender.
SECTION 10.02. AMENDMENTS, ETC. No amendment of any provision of
this Agreement, any Note or any other Loan Document shall be effective unless it
is in writing and signed by each Borrower, the Guarantor and the Lender, and no
waiver of any provision of this Agreement, any Note or any other Loan Document,
nor consent to any departure by a Borrower or the Guarantor therefrom, shall be
effective unless it is in writing and signed by the Lender, and then such waiver
or consent shall be effective only in the specific instance and for the specific
purpose for which given.
SECTION 10.03. NO WAIVER; REMEDIES, ETC. No failure on the part
of the Lender to exercise, and no delay in exercising, any right hereunder or
under any other Loan Document shall operate as a waiver thereof; nor shall any
single or partial exercise of any right under any Loan Document preclude any
other or further exercise thereof or the exercise of any other right. The
rights and remedies of the Lender provided herein and in the other Loan
Documents are cumulative and are in addition to, and not exclusive of, any right
or remedy provided by law. The rights of the Lender under any Loan Document
against any party thereto are not conditional or contingent on any attempt by
the Lender to exercise any of its rights under any other Loan Document against
such party or against any other Person.
SECTION 10.04. FEES, COSTS, EXPENSES AND TAXES. The Borrowers
will pay, jointly and severally, on demand (i) all fees, costs and expenses in
connection with the preparation, execution, delivery, filing, recording,
amendment, modification and waiver of the Loan Documents and the other documents
to be delivered pursuant to the Loan Documents, including, without limitation,
the reasonable fees, out-of-pocket expenses and other client charges of Schulte
Roth & Zabel LLP, counsel to the Lender, Lionel Sawyer & Collins, Nevada counsel
to the Lender, and Bowles Rice McDavid Graff & Love, West Virginia counsel to
the Lender, and the reasonable fees, out-of-pocket expenses and other client
charges of all accountants, auditors and consultants retained by the Lender in
connection with the transactions contemplated by this Agreement, and (ii) all
costs and expenses, if any (including reasonable
<PAGE>
counsel fees, out-of-pocket expenses and other client charges), in connection
with the enforcement of the Loan Documents and the other documents to be
delivered pursuant to the Loan Documents. In addition, the Borrowers will
pay, jointly and severally, any and all stamp and other taxes and fees
payable or determined to be payable in connection with the execution,
delivery, filing and recording of the Loan Documents and the other documents
to be delivered pursuant to the Loan Documents, and will save the Lender
harmless from and against any and all liabilities with respect to or
resulting from any delay in paying or omission to pay such taxes and fees.
All of the foregoing fees, costs, expenses and taxes are herein referred to
as "Transaction Costs". Upon the occurrence of the Closing Date, the
Borrowers' obligation to pay the fees of Schulte Roth & Zabel LLP and Lionel
Sawyer & Collins relating solely to the sale to Speakeasy Vegas of the
Cheyenne Hotel Property and to Speakeasy Reno of the Reno Hotel Property
shall terminate. For the avoidance of doubt, the Borrowers shall continue to
be obligated to pay all of the fees of Schulte Roth & Zabel LLP and Lionel
Sawyer & Collins with respect to all matters other than the sale of such
properties. In no event, however, shall the Borrowers be obligated to pay
any of the fees of Schulte Roth & Zabel LLP or Lionel Sawyer & Collins with
respect to Lender's application for license by, or exemption from, the
licensing requirements of any Governmental Authority in the State of Nevada.
SECTION 10.05. RIGHT OF SET-OFF. Upon the occurrence and during
the continuance of any Event of Default, the Lender may, and is hereby
authorized to, at any time and from time to time, without notice to the
Borrowers (any such notice being expressly waived by the Borrower) and to the
fullest extent permitted by law, set off and apply any and all indebtedness at
any time owing by the Lender to or for the credit or the account of the
Borrowers against any and all Obligations now or hereafter existing,
irrespective of whether or not the Lender shall have made any demand hereunder
or thereunder and although such Obligations may be contingent or unmatured. The
Lender agrees to notify the Borrowers promptly after any such set-off and
application made by the Lender, provided that the failure to give such notice
shall not affect the validity of such set-off and application. The rights of
the Lender under this Section 10.05 are in addition to the other rights and
remedies (including, without limitation, other rights of set-off) which the
Lender may have.
SECTION 10.06. SEVERABILITY. Any provision of this Agreement, or
of any other Loan Document to which each Borrower or the Guarantor is a party,
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining portions hereof or thereof
or affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 10.07. SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of each Borrower, the Guarantor and the
Lender and their respective successors and assigns, except that any Borrower nor
any Guarantor may assign its rights hereunder or any interest herein without the
prior written consent of the Lender. The Lender may assign to one or more banks
or other entities all or any part of, or may grant participations to one or more
banks or other entities in or to all or any part of the Commitment, the Loans or
the Notes and, to the extent of any such assignment or participation (unless
otherwise stated therein), the assignee of such assignment shall have the same
rights and benefits
<PAGE>
hereunder and under such Note(s) as it would have if it were the Lender
hereunder. In connection with any assignment by the Lender pursuant hereto,
the Borrowers shall, promptly upon request by the Lender, execute and deliver
a new Note or Notes, in replacement of the then effective Note or Notes, in
an aggregate principal amount equal to the outstanding principal amount of
the applicable Loan or Loans at such time, payable to the order of the Lender
and/or an assignee(s). The Lender may, in connection with any such
assignment or participation or as may be required by law or any Governmental
Authority or other regulatory body, disclose any public and non-public
information relating to each Borrower and the Guarantor furnished by or on
behalf of such Borrower or the Guarantor or any of their Affiliates to the
Lender.
SECTION 10.08. COUNTERPARTS. This Agreement may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which shall be deemed to be an original, but all of which
taken together shall constitute one and the same agreement.
SECTION 10.09. HEADINGS. Section headings herein are included for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose.
SECTION 10.10. GOVERNING LAW. This Agreement, each Note, and the
other Loan Documents shall be governed by, and construed in accordance with, the
law of the State of New York applicable to contracts made and to be performed in
such State without regard to conflicts of law principles. Any legal action or
proceeding with respect to this Agreement or any other Loan Document may be
brought in the courts of the State of New York or of the United States for the
Southern District of New York, and, by execution and delivery of this Agreement,
each Borrower and the Guarantor hereby irrevocably accept for themselves in
respect of their property, generally and unconditionally, the jurisdiction of
the aforesaid courts. Each Borrower and the Guarantor further irrevocably
consent to the service of process out of any of the aforementioned courts and in
any such action or proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to such Borrower at its address for notices
contained in Section 10.01, such service to become effective thirty (30) days
after such mailing. Both Borrower and the Guarantor hereby irrevocably appoint
Mr. Robert A. Blatt, c/o CRC Group, 1890 Palmer Avenue, Suite 303, Larchmont,
New York 10538, or such other Person as shall be acceptable to the Lender, as
their agent for service of process in respect of any such action or proceeding.
Nothing herein shall affect the right of the Lender to service of process in any
other manner permitted by law or to commence legal proceedings or otherwise
proceed against any Borrower and the Guarantor in any other jurisdiction.
SECTION 10.11. WAIVER OF JURY TRIAL, ETC. EACH OF THE BORROWERS,
THE GUARANTOR AND THE LENDER HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING ANY RIGHT UNDER THIS AGREEMENT,
ANY NOTE, OR OTHER LOAN DOCUMENT, OR UNDER ANY AMENDMENT, WAIVER, CONSENT,
INSTRUMENT, DOCUMENT OR OTHER AGREEMENT DELIVERED OR WHICH IN THE FUTURE MAY BE
DELIVERED IN CONNECTION THEREWITH, OR ARISING FROM ANY
<PAGE>
RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREES THAT ANY
SUCH ACTION, PROCEEDINGS OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND
NOT BEFORE A JURY. EACH OF THE BORROWERS AND THE GUARANTOR HEREBY WAIVES ANY
RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY
DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES. EACH BORROWER AND THE
GUARANTOR CERTIFY THAT NO OFFICER, REPRESENTATIVE, AGENT OR ATTORNEY OF THE
LENDER HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE LENDER WOULD NOT, IN
THE EVENT OF ANY ACTION, PROCEEDING OR COUNTERCLAIM, SEEK TO ENFORCE THE
FOREGOING WAIVERS. EACH BORROWER AND THE GUARANTOR HEREBY ACKNOWLEDGE THAT
THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER ENTERING INTO THIS
AGREEMENT.
SECTION 10.12. REINSTATEMENT; CERTAIN PAYMENTS. If a claim is
ever made upon the Lender for repayment or recovery of any amount or amounts
received by the Lender in payment or on account of any of the Obligations under
this Agreements, the Lender shall give prompt notice of such claim to the
Borrowers, and if the Lender repays all or part of said amount by reason of (i)
any judgment, decree or order of any court or administrative body having
jurisdiction over the Lender or any of its property, or (ii) any settlement or
compromise of any such claim effected by the Lender with any such claimant, then
and in such event each of the Borrowers and the Guarantor (A) agree that any
such judgment, decree, order, settlement or compromise shall be binding upon the
Borrowers and the Guarantor notwithstanding the cancellation of any Note or
other instrument evidencing the Obligations under this Agreement or the other
Loan Documents or the termination of this Agreement or the other Loan Documents,
and (B) shall be and remain liable to the Lender hereunder for the amount so
repaid or recovered to the same extent as if such amount had never originally
been received by the Lender.
SECTION 10.13. INDEMNIFICATION. In addition to all of their other
Obligations under this Agreement, each of the Borrowers and the Guarantor,
jointly and severally, agree to defend, protect, indemnify and hold harmless the
Lender and any assignee of the Lenders rights hereunder, and all of their
respective officers, directors, employees, attorneys, consultants and agents
(including, without limitation, those retained in connection with the
satisfaction or attempted satisfaction of any of the conditions set forth in
this Agreement) (collectively called the "INDEMNITEES") from and against any and
all losses, damages, liabilities, obligations, penalties, fees, costs and
expenses (including, without limitation, attorneys' fees, costs and expenses)
incurred by such Indemnitees, whether prior to or from and after the Effective
Date, whether direct, indirect or consequential, as a result of or arising from
or relating to any suit, investigation, action or proceeding by any Person,
whether threatened or initiated, asserting a claim for any legal or equitable
remedy against any Person under any statute or regulation, including, without
limitation, any Federal or state securities or labor laws, or under any Federal,
state or local environmental, health or safety laws, regulations or, common law
principles, arising from or in connection with the past, present or future
operations of each Borrower or its predecessors in interest, arising from or in
connection with any of the following:
<PAGE>
(i) the negotiation, preparation, execution or performance of this Agreement
or of any document executed in connection with the transactions contemplated
by this Agreement, (ii) the Lender's furnishing of funds to the Borrowers
under this Agreement, including, without limitation, the management of the
Loans, or (iii) any matter relating to the financing transactions
contemplated by this Agreement or by any document executed in connection with
the transactions contemplated by this Agreement (collectively, the
"INDEMNIFIED MATTERS"); PROVIDED, HOWEVER, that the Borrowers and the
Guarantor shall have no obligation to any Indemnitee hereunder for any
Indemnified Matter (i) caused by or resulting from the gross negligence or
willful misconduct of such Indemnitee, as determined by a final judgment of a
court of competent jurisdiction, or (ii) relating to any environmental
condition, or impairment of title to, either the Cheyenne Hotel Property or
the Reno Hotel Property to the extent such conditions or impairment existed
prior to the acquisition by Speakeasy Reno of the Reno Hotel Property or the
acquisition by Speakeasy Vegas of the Cheyenne Hotel Property. Such
indemnification for all of the foregoing losses, damages, fees, costs and
expenses of the Lender shall be part of the Obligations in respect of the
Term Loan (the "TERM OBLIGATIONS"), secured by the Collateral and added to
the principal amount of the Term Loan; PROVIDED, FURTHER, HOWEVER, that if
the Term Loan has been paid in full, then all of the foregoing losses,
damages, fees, costs and expenses of the Lender shall be part of the Line
Obligations, secured by the Collateral and added to the principal amount of
the Line Loan. To the extent that the undertaking to indemnify, pay and hold
harmless set forth in this Section 10.13 may be unenforceable because it is
violative of any law or public policy, each of the Borrowers and the
Guarantor shall contribute the maximum portion which it is permitted to pay
and satisfy under applicable law, to the payment and satisfaction of all
Indemnified Matters incurred by the Indemnitees. The provisions of this
Section 10.13 shall survive termination of this Agreement.
ARTICLE XI
GUARANTY
SECTION 11.01. GUARANTY. the Guarantor, and each other Guarantor
that may become party hereto, hereby (i) irrevocably, absolutely and
unconditionally guarantees the prompt payment, as and when due and payable
(whether by scheduled maturity, required prepayment, acceleration, demand or
otherwise), of (A) all the Obligations, including, without limitation, all
amounts now or hereafter owing in respect of the Loan Documents, whether for
principal, interest, fees, expenses or otherwise, and (B) all indebtedness,
obligations and other liabilities, direct or indirect, absolute or contingent,
now existing or hereafter arising of each of the Borrowers to the Lender and
(ii) agrees, to pay any and all expenses (including reasonable counsel fees and
expenses) incurred by the Lender in enforcing its rights under this Agreement,
the Guarantee and each other Loan Document.
SECTION 11.02. OBLIGATIONS UNCONDITIONAL.
(i) the Guarantor and each other Guarantor that may
become party hereto, hereby guarantees that the Obligations will be paid
strictly in accordance
<PAGE>
with the terms of the Loan Documents, regardless of any law, regulation
or order now or hereafter in effect in any jurisdiction affecting any of
such terms or the rights of the Lender with respect thereto. the
Guarantor and each other Guarantor agrees that its guarantee constitutes
a guaranty of payment when due and not of collection, and waives any
right to require that any resort be had by the Lender to any security
held for payment of the Obligations or to any balance of any deposit
account or credit on the books of the Lender in favor of any Borrower or
for any other reason. The liability of the Guarantor and each other
Guarantor hereunder shall be absolute and unconditional irrespective of:
(i) any lack of validity or enforceability of any Loan Document or any
agreement or instrument relating thereto; (ii) any extension or change
in the time, manner or place of payment of, or in any other term in
respect of, all or any of the Obligations (including, without
limitation, any extension for longer than the original period), or any
other amendment or waiver of or consent to any departure from any
provision of any Loan Document; (iii) any exchange or release of, or
non-perfection of any lien on or security interest in, any Collateral,
or any release or amendment or waiver of or consent to any departure
from any other guaranty, for all or any of the Obligations; or (iv) any
other circumstance which might otherwise constitute a defense available
to, or a discharge of, any Borrower or any other Guarantor in respect of
the Obligations or the Guarantor and each other Guarantor in respect
hereof.
(ii) This Guaranty (i) is a continuing guaranty and
shall remain in full force and effect until such date on which all of the
Obligations and all other expenses to be paid by the Guarantor or any other
Guarantor pursuant hereto shall have been satisfied in full after the
Commitment shall have been terminated, (ii) shall continue to be effective
or shall be reinstated, as the case may be, if at any time any payment of
any of the Obligations is rescinded or must otherwise be returned by the
Lender upon the insolvency, bankruptcy or reorganization of each of the
Borrowers or otherwise, all as though such payment had not been made, and
(iii) shall be binding upon the Guarantor, any other Guarantor or their
respective heirs, executors, successors and assigns.
SECTION 11.03. WAIVERS. The Guarantor hereby waives, to the
extent permitted by applicable law, (i) promptness and diligence, (ii) notice of
acceptance and notice of the incurrence of any Obligation, (iii) notice of any
action taken by the Lender or each of the Borrowers or any other agreement or
instrument relating thereto, (iv) all other notices, demands and protests, and
all other formalities of every kind in connection with the enforcement of the
Obligations or of the obligations of the Guarantor and each other Guarantor
hereunder, the omission of or delay in which, but for the provisions of this
Section 11.03, might constitute grounds for relieving the Guarantor or any other
Guarantor of its obligations hereunder, and (v) any requirement that the Lender
protect, secure, perfect or insure any security interest or lien or any property
subject thereto or exhaust any right or take any action against any Person or
any Collateral. All such waivers by the Guarantor shall be effective only to
the extent permitted by applicable law.
SECTION 11.04. SUBROGATION. The Guarantor hereby waives and
agrees that it will not exercise any rights which it may acquire by way of
subrogation hereunder, by any
<PAGE>
payment made by it hereunder or otherwise. If the amount shall be paid to
the Guarantor or such other Guarantor on account of such subrogation rights
at any time when all of such Obligations and all other Obligations shall not
have been paid in full, such amount shall be held in trust for the benefit of
the Lender, shall be segregated from the other funds of the Guarantor or such
other Guarantor and shall forthwith be paid over to the Lender to be applied
in whole or in part by the Lender against the Obligations, whether matured or
unmatured, in accordance with the terms of this Agreement.
SECTION 11.05. NO WAIVER; REMEDIES. No failure on the part of the
Lender to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and not
exclusive of any remedy provided by law.
SECTION 11.06. TAXES.
(a) Each payment by the Guarantor under this Loan Agreement
shall be made without withholding for or on account of any present or future
taxes, levies, imposts, deductions, charges or withholdings, and all liabilities
with respect thereto, excluding, in the case of the Lender, taxes imposed on its
income, and franchise taxes imposed on it by the jurisdiction (or any political
subdivision thereof) under the laws of which the Lender is organized (all such
nonexcluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "OTHER TAXES"); PROVIDED, HOWEVER,
that if such Other Taxes are required by law to be withheld from any such
payment, the Guarantor shall make such withholding for the account of the
Lender, make timely payment thereof to the appropriate governmental authority,
and forthwith pay for the account of the Lender such additional amount as may be
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 11.06.) the Lender
receives an amount equal to the sum it would have received had no such
deductions been made. All such Other Taxes shall be paid by the Guarantor prior
to the date on which penalties attach thereto or interest accrues thereon;
PROVIDED, HOWEVER, that, if any such penalties or interest become due, the
Guarantor shall make prompt payment thereof to the appropriate governmental
authority.
(b) the Guarantor will indemnify the Lender for the full amount
of Other Taxes (including any Other Taxes on amounts payable under this Section
10.06.) paid by the Lender and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto, whether or not such Other
Taxes were correctly or legally asserted. This indemnification shall be made
within 30 days from the date the Lender makes written demand therefor.
(c) Within 30 days after the date of any payment of Other Taxes,
the Guarantor will furnish to the Lender the original or a certified copy of a
receipt evidencing payment thereof. If no Other Taxes are payable in respect of
any payment hereunder or under any Note, the Guarantor will furnish to the
Lender a certificate from each appropriate taxing
<PAGE>
authority, or an opinion of counsel acceptable to the Lender, in either case
stating that such payment is exempt from or not subject to Other Taxes.
SECTION 11.07. STAY OF ACCELERATION. If acceleration of the time
for payment of any amount payable by any of the Borrowers in respect of the
Obligations is stayed upon the insolvency, bankruptcy or reorganization of any
of the Borrowers, all such amounts otherwise subject to acceleration under the
terms of this Agreement shall nonetheless be payable by the Guarantor forthwith
on demand by the Lender.
ARTICLE XII
REAFFIRMATION; AMENDMENTS
SECTION 12.01. REAFFIRMATION. Each Loan Party hereby agrees that
the amending and restating of the Second Amended Loan Agreement in no way
releases such Loan Party from any obligation under any other Loan Document, each
of which shall remain in full force and effect and is hereby ratified and
confirmed in all respects. The Guarantor, by execution hereof, confirms that
the Guaranty is in full force and effect pursuant to its terms in respect of all
of the Obligations.
SECTION 12.02. AMENDMENTS. Each party hereto agrees and confirms
that all references in any Loan Document to the Loan Agreement, the Second
Amended and Restated Term Loan Agreement, the Amended and Restated Term Loan
Agreement, the Initial Term Loan Agreement, the Term Loan Agreement or any other
similar term which refers to the agreement among the parties in respect of the
making by the Lender of the Loans and the terms and conditions thereof in effect
shall, as of any date on and after the Closing Date, be deemed to refer to this
Agreement as amended and restated hereby. By way of example, but in no way in
limitation of the foregoing, all references in the West Virginia Deed of Trust
or the West Virginia First Priority Deed of Trust to "Restated Loan Agreement"
shall be deemed to refer to this Agreement, as amended and restated hereby.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective officers thereunto duly authorized, as of
the date first above written.
MOUNTAINEER PARK, INC.
By: /s/ Edson R. Arneault
------------------------------------------
Name: Edson R. Arneualt
Title: President, Chief Executive Officer
SPEAKEASY GAMING OF LAS VEGAS, INC.
By: /s/ Edson R. Arneault
------------------------------------------
Name: Edson R. Arneualt
Title: President, Chief Executive Officer
SPEAKEASY GAMING OF RENO, INC.
By: /s/ Edson R. Arneault
------------------------------------------
Name: Edson R. Arneualt
Title: President, Chief Executive Officer
MTR GAMING GROUP, INC.
By: /s/ Edson R. Aneault
------------------------------------------
Name: Edson R. Arneualt
Title: President, Chief Executive Officer
MADELEINE LLC
By: /s/ Mark A. Neporent
------------------------------------------
Name: Mark A. Neporent
Title: Attorney-in-Fact
<PAGE>
Exhibit 10.13
PLEDGE AND SECURITY AGREEMENT
PLEDGE AND SECURITY AGREEMENT dated as of April 30, 1998, made by MTR
GAMING GROUP, INC. (f/k/a WINNERS ENTERTAINMENT, INC.), a Delaware corporation
(the "Pledgor"), in favor of Madeleine LLC (the "Lender").
W I T N E S S E T H:
WHEREAS, the Pledgor, Mountaineer Park, Inc. ("Mountaineer"),
Speakeasy Gaming of Reno, Inc. ("Speakeasy Reno"), Speakeasy Gaming of Las
Vegas, Inc. ("Speakeasy Vegas", together with Speakeasy Reno and Mountaineer,
collectively, the "Borrowers") and the Lender are entering into a Third Amended
and Restated Loan Agreement, dated as of July 2, 1996, as amended and restated
as of December 10, 1996, as further amended and restated as of July 2, 1997, and
as further amended and restated as of the date hereof, (such agreement, as
further amended or otherwise modified from time to time, being hereinafter
referred to as the "Loan Agreement");
WHEREAS, pursuant to the Loan Agreement, the Lender has agreed to make
(and has from time to time made) (i) certain term loans (collectively the "Term
Loans") to the Borrowers in an aggregate principal amount not to exceed the Term
Commitment (as defined in the Loan Agreement), and (ii) a line of credit
available for loans to the Borrowers (the "Line Loans" and, collectively with
the Term Loan, the "Loans") in an aggregate principal amount not to exceed the
Line Commitment (as defined in the Loan Agreement);
WHEREAS, the Pledgor, Mountaineer, Speakeasy Reno, Speakeasy Vegas and
the Lender are entering into the third amendment and restatement of the Loan
Agreement for the purposes of making increases to the Term Commitment and the
Line Commitment and for the purpose of adding the Speakeasy Reno and Speakeasy
Vegas as Borrowers under the Loan Agreement to be bound by the terms of such
agreement as Borrowers;
WHEREAS, the Pledgor owns the number of issued and outstanding shares
of capital stock of the Speakeasy Reno and Speakeasy Vegas as set forth on
Schedule I hereto, and will receive direct and substantial economic benefit from
the transactions contemplated by the Loan Agreement; and
WHEREAS, it is a condition precedent to the making of the Loans by the
Lenders pursuant to the Loan Agreement that the Pledgor shall have executed and
delivered to the Lender a pledge and security agreement providing for the pledge
to the Lender, and the grant to the Lender, of a security interest in, all of
the issued and outstanding capital stock of Speakeasy Reno and Speakeasy Vegas
owned by the Pledgor;
NOW, THEREFORE, in consideration of the premises and the agreements
herein and in order to induce the Lenders to make and maintain the Loans
pursuant to the Loan Agreement, the Pledgor hereby agrees with the Lender as
follows:
<PAGE>
SECTION 1. DEFINITIONS. Reference is hereby made to the Loan
Agreement for a statement of the terms thereof. All terms used in this
Agreement which are defined in the Loan Agreement or in Article 8 or 9 of the
Uniform Commercial Code (the "Code") currently in effect in the State of New
York and which are not otherwise defined herein shall have the same meanings
herein as set forth therein.
SECTION 2. PLEDGE AND GRANT OF SECURITY INTEREST. As collateral
security for all of the Obligations (as defined in Section 3 hereof), the
Pledgor hereby pledges and assigns to the Lender, and grants to the Lender a
continuing security interest in, the following (the "Pledged Collateral"):
(a) the shares of stock described in Schedule I hereto (the
"Pledged Shares") issued by Speakeasy Reno and Speakeasy Vegas, the
certificates representing the Pledged Shares (the "Certificates"), all
options and other rights, contractual or otherwise, in respect thereof and
all dividends, cash, instruments and other property from time to time
received, receivable or otherwise distributed in respect of or in exchange
for any or all of the Pledged Shares;
(b) all additional shares of stock, from time to time acquired by
the Pledgor, of Speakeasy Reno and Speakeasy Vegas, the certificates
representing such additional shares, all options and other rights,
contractual or otherwise, in respect thereof and all dividends, cash,
instruments and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of such
additional shares;
(c) all securities entitlements of the Pledgor with respect to any
and all of the foregoing; and
(d) all proceeds of any and all of the foregoing;
in each case, howsoever its interest therein may arise or appear
(whether by ownership, security interest, claim or otherwise).
SECTION 3. SECURITY FOR OBLIGATIONS. The security interest created
hereby in the Pledged Collateral constitutes continuing collateral security for
all of the Obligations (as that term is defined in Section 1.01 of the Loan
Agreement) whether now existing or hereafter incurred.
SECTION 4. DELIVERY OF THE PLEDGED COLLATERAL.
(a) All Certificates currently representing the Pledged Shares shall
be delivered to the Lender on or prior to the execution and delivery of this
Agreement. All other Certificates constituting Pledged Collateral from time to
time shall be delivered to the Lender promptly upon the receipt thereof by or on
behalf of the Pledgor. All such Certificates shall be held by or on behalf of
the Lender pursuant hereto and shall be delivered in suitable form for transfer
by delivery or shall be accompanied by duly executed instruments of transfer or
assignment in blank, all in form and substance satisfactory to the Lender.
(b) If the Pledgor shall receive, by virtue of its being or having
been an owner of any Pledged Collateral, any (i) stock certificate (including,
without limitation, any certificate
<PAGE>
representing a stock dividend or distribution in connection with any increase
or reduction of capital, reclassification, merger, consolidation, sale of
assets, combination of shares, stock split, spin-off or split-off),
promissory note or other instrument, (ii) option or right, whether as an
addition to, substitution for, or in exchange for, any Pledged Collateral, or
otherwise, (iii) dividends payable in cash (except such dividends permitted
to be retained by the Pledgor pursuant to Section 7 hereof) or in securities
or other property or (iv) dividends or other distributions in connection with
a partial or total liquidation or dissolution or in connection with a
reduction of capital, capital surplus or paid-in surplus, the Pledgor shall
receive such stock certificate, promissory note, instrument, option, right,
payment or distribution in trust for the benefit of the Lender, shall
segregate it from the Pledgor's other property and shall deliver it forthwith
to the Lender in the exact form received, with any necessary endorsement
and/or appropriate stock powers duly executed in blank, to be held by the
Lender as Pledged Collateral and as further collateral security for the
Obligations.
SECTION 5. REPRESENTATIONS AND WARRANTIES. The Pledgor represents
and warrants as follows:
(a) The Pledgor (i) is a corporation duly organized, validly
existing and in good standing under the laws of the state of its
incorporation as set forth on the first page hereof, and (ii) has all
requisite power and authority to execute, deliver and perform this Agreement.
(b) The execution, delivery and performance by the Pledgor of this
Agreement (i) have been duly authorized by all necessary corporate action,
(ii) do not and will not contravene its charter or by-laws, law or any
contractual restriction binding on or affecting the Pledgor or any of its
properties; except as may be required in connection with any sale of any
Pledged Collateral by laws affecting the offering and sale of securities
generally and the gaming laws of the States of Nevada or West Virginia or any
rules or regulations of any regulatory agency thereof having jurisdiction
over Speakeasy Reno or Speakeasy Vegas or Pledgor with respect to the sale or
change in control of Speakeasy Reno or Speakeasy Vegas; and (iii) do not and
will not result in or require the creation of any lien, security interest or
other charge or encumbrance upon or with respect to any of its properties,
except as contemplated by this Agreement.
(c) This Agreement is a legal, valid and binding obligation of the
Pledgor, enforceable against the Pledgor in accordance with its terms.
(d) To the best of its knowledge, after due inquiry, the Pledged
Shares have been duly authorized and validly issued, are fully paid and
nonassessable, and constitute 100% of the issued shares of capital stock of
the Speakeasy Reno and Speakeasy Vegas. All other shares of stock
constituting Pledged Collateral will be duly authorized and validly issued,
fully paid and nonassessable.
(e) The Pledgor is and will be at all times the legal and
beneficial owner of the Pledged Collateral free and clear of any lien,
security interest, option or other charge or encumbrance except for the
security interest created by this Agreement.
(f) Assuming that the Lender's sale of the Pledged Collateral and
the purchaser or purchasers of the Pledged Collateral from Lender have
complied with the laws of the States of Nevada or West Virginia or any rules
or regulations of any regulatory agency thereof having
<PAGE>
jurisdiction over Speakeasy Reno or Speakeasy Vegas or Pledgor with respect
to the sale or change in control of Speakeasy Reno or Speakeasy Vegas, the
exercise by the Lender of any of its rights and remedies hereunder will not
contravene any law or any contractual restriction binding on or affecting the
Pledgor or any of its properties and will not result in or require the
creation of any lien, security interest or other charge or encumbrance upon
or with respect to any of its properties.
(g) No authorization or approval or other action by, and no notice
to or filing with, any governmental authority or other regulatory body is
required for (i) the due execution, delivery and performance by the Pledgor
of this Agreement, (ii) the grant by the Pledgor, or the perfection, of the
security interest purported to be created hereby in the Pledged Collateral or
(iii) the exercise by the Lender of any of its rights and remedies hereunder,
except as may be required in connection with any sale of any Pledged
Collateral by laws affecting the offering and sale of securities generally
and the laws of the States of Nevada or West Virginia or any rules or
regulations of any regulatory agency thereof having jurisdiction over
Speakeasy Reno or Speakeasy Vegas or Pledgor with respect to the sale or
change in control of Speakeasy Reno or Speakeasy Vegas.
(h) This Agreement creates a valid security interest in favor of
the Lender in the Pledged Collateral, as security for the Obligations. The
Lender's having possession of the promissory notes evidencing the Loans, the
Certificates representing the Pledged Shares and all other certificates,
instruments and cash constituting Pledged Collateral from time to time
results in the perfection of such security interest. Such security interest
is, or in the case of Pledged Collateral in which the Pledgor obtains rights
after the date hereof, will be, a perfected, first priority security
interest. All action necessary or desirable to perfect and protect such
security interest has been duly taken, except for the Lender's having
possession of certificates, instruments and cash constituting Pledged
Collateral after the date hereof.
SECTION 6. COVENANTS AS TO THE PLEDGED COLLATERAL. So long as any of
the Obligations shall remain outstanding, the Pledgor will, unless the Lender
shall otherwise consent in writing:
(a) keep adequate records concerning the Pledged Collateral and
permit the Lender or any agents or representatives thereof at any reasonable
time and from time to time to examine and make copies of and abstracts from
such records;
(b) at its expense, promptly deliver to the Lender a copy of each
notice or other communication received by it in respect of the Pledged
Collateral;
(c) at its expense, defend the Lender's right, title and security
interest in and to the Pledged Collateral against the claims of any Person;
(d) at its expense, at any time and from time to time, promptly
execute and deliver all further instruments and documents and take all
further action that may be necessary or desirable or that the Lender may
request in order to (i) perfect and protect the security interest purported
to be created hereby, (ii) enable the Lender to exercise and enforce its
rights and remedies hereunder in respect of the Pledged Collateral, or (iii)
otherwise effect the purposes of this
<PAGE>
Agreement, including, without limitation, delivering to the Lender
irrevocable proxies in respect of the Pledged Collateral;
(e) not sell, assign (by operation of law or otherwise), exchange
or otherwise dispose of any Pledged Collateral or any interest therein except
as permitted by Section 7(a)(i) hereof;
(f) not create or suffer to exist any lien, security interest or
other charge or encumbrance upon or with respect to any Pledged Collateral
except for the security interest created hereby;
(g) not make or consent to any amendment or other modification or
waiver with respect to any Pledged Collateral or enter into any agreement or
permit to exist any restriction with respect to any Pledged Collateral other
than pursuant hereto;
(h) not consent to the issuance of (i) any additional shares of any
class of capital stock of the Speakeasy Reno or Speakeasy Vegas, (ii) any
securities convertible voluntarily by the holder thereof or automatically
upon the occurrence or non-occurrence of any event or condition into, or
exchangeable for, any such shares of capital stock or (iii) any warrants,
options, contracts or other commitments entitling any Person to purchase or
otherwise acquire any such shares of capital stock; and
(i) not take or fail to take any action which would in any manner
impair the value or enforceability of the Lender's security interest in any
Pledged Collateral.
SECTION 7. VOTING RIGHTS, DIVIDENDS, ETC. IN RESPECT OF THE PLEDGED
COLLATERAL.
(a) So long as no Event of Default or event which, with the giving of
notice or lapse of time or both, would constitute an Event of Default, shall
have occurred and be continuing:
(i) the Pledgor may exercise any and all voting and other
consensual rights pertaining to any Pledged Collateral for any purpose
not inconsistent with the terms of this Agreement or the other Loan
Documents; PROVIDED, HOWEVER, that (A) the Pledgor will not exercise
or refrain from exercising any such right, as the case may be, if the
Lender gives it notice that, in the Lender's judgment, such action
would have a material adverse effect on the value of any Pledged
Collateral and (B) the Pledgor will give the Lender at least five
days' notice of the manner in which it intends to exercise, or the
reasons for refraining from exercising, any such right;
(ii) the Pledgor may receive and retain any and all
dividends and interest paid in respect of the Pledged Collateral;
PROVIDED, HOWEVER, that any and all (A) dividends and interest paid or
payable other than in cash in respect of, and instruments and other
property received, receivable or otherwise distributed in respect of
or in exchange for, any Pledged Collateral, (B) dividends and other
distributions paid or payable in cash in respect of any Pledged
Collateral in connection with a partial or total liquidation or
dissolution or in connection with a reduction of capital, capital
surplus or paid-in surplus and (C) cash paid, payable or otherwise
distributed in redemption of, or in exchange for, any Pledged
<PAGE>
Collateral, shall be, and shall forthwith be delivered to the Lender
to hold as, Pledged Collateral and shall, if received by the Pledgor,
be received in trust for the benefit of the Lender, shall be
segregated from the other property or funds of the Pledgor, and shall
be forthwith delivered to the Lender in the exact form received with
any necessary endorsement and/or appropriate stock powers duly
executed in blank, to be held by the Lender as Pledged Collateral and
as further collateral security for the Obligations; and
(iii) the Lender will execute and deliver (or cause to be
executed and delivered) to the Pledgor all such proxies and other
instruments as the Pledgor may reasonably request for the purpose of
enabling the Pledgor to exercise the voting and other rights which it
is entitled to exercise pursuant to paragraph (i) of this Section 7(a)
and to receive the dividends which it is authorized to receive and
retain pursuant to paragraph (ii) of this Section 7(a).
(b) Upon the occurrence and during the continuance of an Event of
Default or an event which, with the giving of notice or the lapse of time or
both, would constitute an Event of Default:
(i) all rights of the Pledgor to exercise the voting and
other consensual rights which it would otherwise be entitled to
exercise pursuant to paragraph (i) of subsection (a) of this Section
7, and to receive the dividends and interest payments which it would
otherwise be authorized to receive and retain pursuant to paragraph
(ii) of subsection (a) of this Section 7, shall, in the discretion of
the Lender upon notice to the Pledgor, cease, and all such rights
shall thereupon become vested in the Lender which shall thereupon have
the sole right to exercise such voting and other consensual rights and
to receive and hold as Pledged Collateral such dividends and interest
payments;
(ii) without limiting the generality of the foregoing, the
Lender may at its option exercise any and all rights of conversion,
exchange, subscription or any other rights, privileges or options
pertaining to any of the Pledged Collateral as if it were the absolute
owner thereof, including, without limitation, the right to exchange,
in its discretion, any and all of the Pledged Collateral upon the
merger, consolidation, reorganization, recapitalization or other
adjustment of Speakeasy Reno or Speakeasy Vegas, or upon the exercise
by Speakeasy Reno or Speakeasy Vegas of any right, privilege or option
pertaining to any Pledged Collateral, and, in connection therewith, to
deposit and deliver any and all of the Pledged Collateral with any
committee, depository, transfer agent, registrar or other designated
agent upon such terms and conditions as it may determine; and
(iii) all dividends and interest payments which are received
by the Pledgor contrary to the provisions of paragraph (i) of this
Section 7(b) shall be received in trust for the benefit of the Lender,
shall be segregated from other funds of the Pledgor, and shall be
forthwith paid over to the Lender as Pledged Collateral in the exact
form received with any necessary endorsement and/or appropriate stock
powers duly executed in blank, to be held by the Lender as Pledged
Collateral and as further collateral security for the Obligations.
SECTION 8. ADDITIONAL PROVISIONS CONCERNING THE PLEDGED COLLATERAL.
<PAGE>
(a) The Pledgor hereby authorizes the Lender to file, without the
signature of the Pledgor where permitted by law, one or more financing or
continuation statements, and amendments thereto, relating to the Pledged
Collateral.
(b) The Pledgor hereby irrevocably appoints the Lender the
Pledgor's attorney-in-fact and proxy, with full authority in the place and
stead of the Pledgor and in the name of the Pledgor or otherwise, from time
to time in the Lender's discretion, to take any action and to execute any
instrument which the Lender may deem necessary or advisable to accomplish the
purposes of this Agreement (subject to the rights of the Pledgor under
Section 7(a) hereof), including, without limitation, to receive, indorse and
collect all instruments made payable to the Pledgor representing any dividend
or other distribution in respect of any Pledged Collateral and to give full
discharge for the same.
(c) If the Pledgor fails to perform any agreement or obligation
contained herein, the Lender may itself perform, or cause performance of,
such agreement or obligation, and the expenses of the Lender incurred in
connection therewith shall be payable by the Pledgor pursuant to Section 10
hereof.
(d) Other than the exercise of reasonable care to assure the safe
custody of the Pledged Collateral while held hereunder, the Lender shall have
no duty or liability to preserve rights pertaining thereto and shall be
relieved of all responsibility for the Pledged Collateral upon surrendering
it or tendering surrender of it to the Pledgor. The Lender shall be deemed
to have exercised reasonable care in the custody and preservation of the
Pledged Collateral in its possession if the Pledged Collateral is accorded
treatment substantially equal to that which the Lender accords its own
property, it being understood that the Lender shall not have responsibility
for (i) ascertaining or taking action with respect to calls, conversions,
exchanges, maturities, tenders or other matters relating to any Pledged
Collateral, whether or not the Lender has or is deemed to have knowledge of
such matters, or (ii) taking any necessary steps to preserve rights against
any parties with respect to any Pledged Collateral.
SECTION 9. REMEDIES UPON DEFAULT. If any Event of Default shall have
occurred and be continuing:
(a) The Lender may exercise in respect of the Pledged Collateral,
in addition to other rights and remedies provided for herein or otherwise
available to it, all of the rights and remedies of a secured party on default
under the Code then in effect in the State of New York; and without limiting
the generality of the foregoing and without notice except as specified below,
sell the Pledged Collateral or any part thereof in one or more parcels at
public or private sale, at any exchange or broker's board or elsewhere, at
such price or prices and on such other terms as may be commercially
reasonable. Any sale of the Pledged Collateral conducted in conformity with
reasonable commercial practices of banks, commercial finance companies,
insurance companies, or other financial institutions disposing of property
similar to the Pledged Collateral shall be deemed to be commercially
reasonable. The Pledgor agrees that, to the extent notice of sale shall be
required by law, at least 10 days' notice to the Pledgor of the time and
place of any public sale or the time after which any private sale is to be
made shall constitute reasonable notification. The Lender shall not be
obligated to make any sale of Pledged Collateral regardless of notice of sale
<PAGE>
having been given. The Lender 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.
(b) In the event that the Lender determines to exercise its right
to sell all or any part of the Pledged Collateral pursuant to subsection (a)
of this Section 9, the Pledgor will, at the Pledgor's expense and upon
request by the Lender: (i) execute and deliver, and cause Speakeasy Reno or
Speakeasy Vegas and the directors and officers thereof to execute and
deliver, all such instruments and documents, and do or cause to be done all
such other acts and things, as may be necessary or, in the opinion of the
Lender, advisable to register such Pledged Collateral under the provisions of
the Securities Act of 1933, as amended (the "Securities Act"), and to cause
the registration statement relating thereto to become effective and to remain
effective for such period as prospectuses are required by law to be
furnished, and to make all amendments and supplements thereto and to the
related prospectus which, in the opinion of the Lender, are necessary or
advisable, all in conformity with the requirements of the Securities Act and
the rules and regulations of the Securities and Exchange Commission
applicable thereto, (ii) cause each issuer of such Pledged Collateral to
qualify such Pledged Collateral under the state securities or "Blue Sky" laws
of each jurisdiction, and to obtain all necessary governmental approvals for
the sale of the Pledged Collateral, as requested by the Lender, (iii) cause
Speakeasy Reno or Speakeasy Vegas to make available to its securityholders,
as soon as practicable, an earnings statement which will satisfy the
provisions of Section 11(a) of the Securities Act, and (iv) do or cause to be
done all such other acts and things as may be necessary to make such sale of
such Pledged Collateral valid and binding and in compliance with applicable
law.
(c) Notwithstanding the provisions of subsection (b) of this
Section 9, the Pledgor recognizes that the Lender may deem it impracticable
to effect a public sale of all or any part of the Pledged Shares or any other
securities constituting Pledged Collateral and that the Lender may,
therefore, determine to make one or more private sales of any such securities
to a restricted group of purchasers who will be obligated to agree, among
other things, to acquire such securities for their own account, for
investment and not with a view to the distribution or resale thereof. The
Pledgor acknowledges that any such private sale may be at prices and on terms
less favorable to the seller than the prices and other terms which might have
been obtained at a public sale and, notwithstanding the foregoing, agrees
that such private sales shall be deemed to have been made in a commercially
reasonable manner and that the Lender shall have no obligation to delay sale
of any such securities for the period of time necessary to permit the issuer
of such securities to register such securities for public sale under the
Securities Act. In conducting any such private sale, the Lender may solicit
offers to buy the Pledged Collateral, or any part of it, from a limited
number of investors deemed by the Lender, in its reasonable judgment, to be
financially responsible parties who might be interested in purchasing the
Pledged Collateral. If the Lender solicits such offers from not fewer than
three such investors, then acceptance by the Lender of the highest offer
obtained therefrom shall be deemed to be a commercially reasonable method of
disposing of such Pledged Collateral. The Pledgor further acknowledges and
agrees that any offer to sell such securities which has been (i) publicly
advertised on a bona fide basis in a newspaper or other publication of
general circulation in the financial community of New York, New York (to the
extent that such an offer may be so advertised without prior registration
under the Securities Act) or (ii) made privately in the manner described
above (upon at least 10 days' notice to Pledgor) to not
<PAGE>
less than fifteen BONA FIDE offerees shall be deemed to involve a "public
sale" for the purposes of Section 9-504(3) of the Code (or any successor or
similar, applicable statutory provision) as then in effect in the State of
New York, notwithstanding that such sale may not constitute a "public
offering" under the Securities Act, and that the Lender may, in such event,
bid for the purchase of such securities.
(d) Any cash held by the Lender as Pledged Collateral and all cash
proceeds received by the Lender in respect of any sale of, collection from,
or other realization upon, all or any part of the Pledged Collateral may, in
the discretion of the Lender, be held by the Lender as collateral for, and/or
then or at any time thereafter applied (after payment of any amounts payable
to the Lender pursuant to Section 10 hereof) in whole or in part by the
Lender against, all or any part of the Obligations in such order as the
Lender shall elect. Any surplus of such cash or cash proceeds held by the
Lender and remaining after payment in full of all of the Obligations shall be
paid over to the Pledgor or to such Person as may be lawfully entitled to
receive such surplus.
(e) In the event that the proceeds of any such sale, collection or
realization are insufficient to pay all amounts to which the Lender is
legally entitled, the Pledgor shall be liable for the deficiency, together
with interest thereon at the highest rate specified in each Note for interest
on overdue principal thereof or such other rate as shall be fixed by
applicable law, together with the costs of collection and the reasonable fees
of any attorneys employed by the Lender to collect such deficiency.
SECTION 10. INDEMNITY AND EXPENSES.
(a) The Pledgor agrees to indemnify the Lender from and against any
and all claims, losses and liabilities growing out of or resulting from this
Agreement (including, without limitation, enforcement of this Agreement), except
claims, losses or liabilities resulting solely and directly from the Lender's
gross negligence or willful misconduct.
(b) The Pledgor will upon demand pay to the Lender the amount of any
and all reasonable costs and expenses, including the fees and disbursements of
the Lender's counsel and of any experts and agents, which the Lender may incur
in connection with (i) the custody, preservation, use or operation of, or the
sale of, collection from, or other realization upon, any Pledged Collateral,
(ii) the exercise or enforcement of any of the rights of the Lender hereunder or
(iii) the failure by the Pledgor to perform or observe any of the provisions
hereof.
SECTION 11. NOTICES, ETC. All notices and other communications
provided for hereunder shall be in writing and shall be mailed (by certified
mail, return receipt requested), telecopied or delivered, if to the Pledgor, to
it at its address specified in the Loan Agreement; and if to the Lender, to it
at its address specified in the Loan Agreement; or as to either such Person at
such other address as shall be designated by such Person in a written notice to
such other Person complying as to delivery with the terms of this Section 11.
All such notices and other communications shall be effective (i) if mailed,
three (3) days after deposit in the mails, (ii) if telecopied, when delivered
and receipt confirmed to sender or (iii) if delivered by overnight courier or
other means of personal delivery, upon delivery.
SECTION 12. MISCELLANEOUS.
<PAGE>
(a) No amendment of any provision of this Agreement shall be
effective unless it is in writing and signed by the Pledgor and the Lender,
and no waiver of any provision of this Agreement, and no consent to any
departure by the Pledgor therefrom, shall be effective unless it is in
writing and signed by the Lender, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for
which given.
(b) No failure on the part of the Lender to exercise, and no delay
in exercising, any right hereunder or under any other Loan Document shall
operate as a waiver thereof; nor shall any single or partial exercise of any
such right preclude any other or further exercise thereof or the exercise of
any other right. The rights and remedies of the Lender provided herein and
in the other Loan Documents are cumulative and are in addition to, and not
exclusive of, any rights or remedies provided by law. The rights of the
Lender under any Loan Document against any party thereto are not conditional
or contingent on any attempt by the Lender to exercise any of its rights
under any other Loan Document against such party or against any other Person.
(c) Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining portions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.
(d) This Agreement shall create a continuing security interest in
the Pledged Collateral and shall (i) remain in full force and effect until
the indefeasible payment in full or release of the Obligations and (ii) be
binding on the Pledgor and its successors and assigns and shall inure,
together with all rights and remedies of the Lender hereunder, to the benefit
of the Lender and its successors, transferees and assigns. Without limiting
the generality of clause (ii) of the immediately preceding sentence, the
Lender may assign or otherwise transfer all or any portion of any Note, and
its rights under any other Loan Document, as set forth in Section 10.07 of
the Loan Agreement, and such other assignee shall thereupon become vested
with all of the benefits in respect thereof granted to or obligations of the
Lender herein or otherwise. None of the rights or obligations of the Pledgor
hereunder may be assigned or otherwise transferred without the prior written
consent of the Lender.
(e) Upon the satisfaction in full of the Obligations (as defined in
the Loan Agreement), (i) this Agreement and the security interest created
hereby shall terminate and all rights to the Pledged Collateral shall revert
to the Pledgor, and (ii) the Lender will, upon the Pledgor's request and at
the Pledgor's expense, (A) return to the Pledgor such of the Pledged
Collateral as shall not have been sold or otherwise disposed of or applied
pursuant to the terms hereof and (B) execute and deliver to the Pledgor such
documents as the Pledgor shall reasonably request to evidence such
termination.
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, except to the extent that the validity and
perfection or the perfection and the effect of perfection or non-perfection of
the security interest created hereby, or remedies hereunder, in respect of any
particular Pledged Collateral are governed by the law of a jurisdiction other
than the State of New York.
<PAGE>
IN WITNESS WHEREOF, the Pledgor has caused this Agreement to be
executed and delivered by its officer thereunto duly authorized, as of the date
first above written.
MTR GAMING GROUP, INC.
By: /s/ EDSON R. ARNEAULT
------------------------------------
Name: Edson R. Arneault
Title: President, Chief Executive Officer
<PAGE>
EXHIBIT 10.14
GENERAL SECURITY AGREEMENT
GENERAL SECURITY AGREEMENT dated as of April 30, 1998, made by
SPEAKEASY GAMING OF RENO, INC., a Nevada corporation (the "Grantor"), in
favor of MADELEINE LLC, as lender (the "Lender").
W I T N E S S E T H :
WHEREAS, the Grantor, Speakeasy Gaming of Las Vegas, Inc., a Nevada
corporation ("Speakeasy Vegas"), Mountaineer Park, Inc., a West Virginia
corporation ("Mountaineer" and together with the Grantor and Speakeasy Vegas,
collectively, the "Borrowers"), MTR Gaming Group, Inc., a Delaware
corporation, (the "Guarantor" and together with the Grantor, Speakeasy Vegas
and Mountaineer, collectively, the "Loan Parties"), and the Lender are
entering into a Third Amended and Restated Loan Agreement, dated as of July
2, 1996, as amended and restated as of December 10, 1996, as further amended
and restated as of July 2, 1997, and as further amended and restated as of
the date hereof, (such agreement, as further amended or otherwise modified
from time to time, being hereinafter referred to as the "Loan Agreement");
WHEREAS, pursuant to the Loan Agreement, the Lender has agreed to
make (and has from time to time made) (i) certain term loans (collectively
the "Term Loans") to the Borrowers in an aggregate principal amount not to
exceed the Term Commitment (as defined in the Loan Agreement), and (ii) a
line of credit available for loans to the Borrowers (the "Line Loans" and,
collectively with the Term Loan, the "Loans") in an aggregate principal
amount not to exceed the Line Commitment (as defined in the Loan Agreement);
WHEREAS, the Grantor, Mountaineer, the Guarantor, Speakeasy Vegas
and the Lender are entering into the third amendment and restatement of the
Loan Agreement for the purposes of making increases to the Term Commitment
and the Line Commitment and for the purpose of adding the Grantor and
Speakeasy Vegas as Borrowers under the Loan Agreement to be bound by the
terms of such agreement as Borrowers; and
WHEREAS, it is a condition precedent to the making and continuing
(as applicable) of the Loans by the Lender pursuant to the Loan Agreement
that the Grantor shall have executed and delivered to the Lender a security
agreement providing for the grant to the Lender of a security interest in all
personal property and fixtures of the Grantor;
NOW, THEREFORE, in consideration of the premises and the agreements
herein and in order to induce the Lender to make and maintain the Loans
pursuant to the Loan Agreement, the Grantor hereby agrees with the Lender as
follows:
SECTION 1. DEFINITIONS. Reference is hereby made to the Loan
Agreement for a statement of the terms thereof. All terms used in this
Agreement which are defined in the Loan Agreement or in Article 9 of the
Uniform Commercial Code (the "Code") currently in effect in the State of New
York and which are not otherwise defined herein shall have the same meanings
herein as set forth therein.
<PAGE>
SECTION 2. GRANT OF SECURITY INTEREST. As collateral security for
all of the Obligations (as defined in Section 3 hereof), the Grantor hereby
pledges and assigns to the Lender, and grants to the Lender a continuing
security interest in, all personal property and fixtures of the Grantor,
wherever located and whether now or hereafter existing and whether now owned
or hereafter acquired, of every kind and description, tangible or intangible
(the "Collateral"), including, without limitation, the following:
(a) all equipment of any kind including, without limitation, the
equipment described in Schedule I hereto, all furniture, fixtures, machinery
and all motor vehicles, tractors and other like property, whether or not the
title thereto is governed by a certificate of title or ownership (hereinafter
collectively referred to as the "Motor Vehicles"), wherever located and
whether now or hereafter existing and whether now owned or hereafter
acquired, together with all substitutes, replacements, accessions and
additions thereto, and all tools, parts, accessories and attachments used in
connection therewith (hereinafter collectively referred to as the
"Equipment");
(b) all of the Grantor's right, title and interest in and to all
inventory of any kind, wherever located and whether now or hereafter existing
and whether now owned or hereafter acquired, and all accessions thereto and
products thereof (any and all such inventory, accessions and products being
hereinafter referred to as the "Inventory");
(c) all of the Grantor's right, title and interest in and to (i)
all accounts, contract rights, chattel paper, instruments, documents, general
intangibles and other rights or obligations of any kind, whether now or
hereafter existing and whether now owned or hereafter acquired, arising out
of or in connection with the sale or lease of goods or the rendering of
services or otherwise and (ii) all rights now or hereafter existing in and to
all security agreements, leases and other contracts, now or hereafter
existing and securing or otherwise relating to any such accounts, contract
rights, chattel paper, instruments, general intangibles or obligations
(including without limitation, the contracts described in Schedule II hereto)
(any and all such accounts, contract rights, chattel paper, instruments,
general intangibles and obligations being hereinafter referred to as the
"Receivables", and any and all such security agreements, leases and other
contracts being hereinafter referred to as the "Related Contracts"); and
(d) all proceeds of any and all of the foregoing Collateral and,
to the extent not otherwise included, all payments under insurance (whether
or not the Lender is the loss payee thereof) (subject, however, to those
provisions in that certain Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing dated of even date herewith, between
the Grantor and the Lender, for the Reno Hotel Property (as defined in the
Loan Agreement) with respect to making insurance proceeds available for
restorations), or any indemnity, warranty or guaranty, payable by reason of
loss or damage to or otherwise with respect to any of the foregoing
Collateral; in each case, howsoever the Grantor's interest therein may arise
or appear (whether by ownership, security interest, claim or otherwise).
SECTION 3. SECURITY FOR OBLIGATIONS. The security interest
created hereby in the Collateral constitutes continuing collateral security
for all of the following obligations, whether now existing or hereafter
incurred (the "Obligations"):
<PAGE>
(a) the prompt payment by the Grantor, as and when due and
payable, of all amounts from time to time owing by it in respect of the Loan
Agreement, the Notes and the other Loan Documents; and
(b) the due performance and observance by the Grantor of all of
its other obligations from time to time existing in respect of the Loan
Documents.
SECTION 4. REPRESENTATIONS AND WARRANTIES. The Grantor represents
and warrants as follows:
(a) The Grantor (i) is a corporation duly organized, validly
existing and in good standing under the laws of the state of its
incorporation as set forth on the first page hereof, and (ii) has all
requisite power and authority to execute, deliver and perform this Agreement.
(b) The execution, delivery and performance by the Grantor of this
Agreement (i) have been duly authorized by all necessary corporate action,
(ii) do not and will not contravene its charter or by-laws, law or any
contractual restriction binding on or affecting the Grantor or any of its
properties, and (iii) do not and will not result in or require the creation
of any lien, security interest or other charge or encumbrance upon or with
respect to any of its properties, except as contemplated by the Loan
Documents.
(c) This Agreement is a legal, valid and binding obligation of the
Grantor, enforceable against the Grantor in accordance with its terms.
(d) All Equipment and Inventory now existing is, and all Equipment
and Inventory hereafter existing will be, located at the address(es)
specified therefor in Schedule III hereto. The Grantor's chief place of
business and chief executive office, the place where the Grantor keeps its
records concerning Receivables and all originals of all chattel paper which
constitute Receivables are located at the address specified therefor in
Schedule III. None of the Receivables is evidenced by a promissory note or
other instrument. Set forth as Schedule IV hereto is a complete and correct
list of each trade name used by the Grantor.
(e) The Grantor has delivered to the Lender complete and correct
copies of each Related Contract in its possession described in Schedule II
hereto, including all schedules and exhibits thereto. Each such Related
Contract sets forth the entire agreement and understanding of the parties
thereto relating to the subject matter thereof, and there are no other
agreements, arrangements or understandings, written or oral, relating to the
matters covered thereby or the rights of the Grantor or any of its Affiliates
in respect thereof. Other than those Related Contracts which the Grantor
acquired in connection with its acquisition of the Reno Hotel Property and to
which the Grantor is not a signatory, each Related Contract now existing is,
and each other Related Contract will be the legal, valid and binding
obligation of the parties thereto, enforceable against such parties in
accordance with its terms. To the best of the Grantor's knowledge, without
independent inquiry, all Related Contracts which have been assigned to
Grantor are legal, valid and binding obligations of the Grantor.
<PAGE>
(f) The Grantor is and will be at all times the owner of the
Collateral free and clear of any lien, security interest or other charge or
encumbrance except for (i) the security interest created by this Agreement
and (ii) the security interests and other encumbrances described in Schedule
V hereto. No effective financing statement or other instrument similar in
effect covering all or any part of the Collateral is on file in any recording
or filing office except (i) such as may have been filed in favor of the
Lender relating to this Agreement and (ii) such as may have been filed to
perfect or protect any security interest or encumbrance described in Schedule
V hereto.
(g) The exercise by the Lender of its rights and remedies
hereunder will not contravene any law or contractual restriction binding on
or affecting the Grantor or any of its properties and will not result in or
require the creation of any lien, security interest or other charge or
encumbrance upon or with respect to any of its properties.
(h) Except as otherwise provided in the Loan Agreement, no
authorization or approval or other action by, and no notice to or filing
with, any Governmental Authority or other regulatory body is required for (i)
the due execution, delivery and performance by the Grantor of this Agreement,
(ii) the grant by the Grantor, or the perfection, of the security interest
purported to be created hereby in the Collateral or (iii) the exercise by the
Lender of any of its rights and remedies hereunder, except for the filing
under the Code of the financing statement(s) required to be filed pursuant to
the Loan Agreement, all of which financing statements have been duly filed
and are in full force and effect.
(i) This Agreement creates a valid security interest in favor of
the Lender in the Collateral as security for the Obligations. The Lender's
having possession of all instruments and cash constituting Collateral from
time to time and the filing of the financing statements required to be filed
pursuant to the Loan Agreement results in the perfection of such security
interest. Such security interest is, or in the case of Collateral in which
the Grantor obtains rights after the date hereof, will be, a perfected, first
priority security interest, subject only to the security interests and other
encumbrances described in Schedule V hereto. Such filings and all other
action necessary or desirable to perfect and protect such security interest
have been duly taken, except for the Lender's having possession of
instruments and cash constituting Collateral after the date hereof.
SECTION 5. COVENANTS AS TO THE COLLATERAL. So long as any of the
Obligations (as such term is defined in clause (i) of Section 1.01 of the
Loan Agreement) shall remain outstanding, unless the Lender shall otherwise
consent in writing:
(a) FURTHER ASSURANCES. The Grantor will at its expense, at any
time and from time to time, promptly execute and deliver all further
instruments and documents and take all further action that may be necessary
or desirable or that the Lender may request in order (i) to perfect and
protect the security interest purported to be created hereby, (ii) to enable
the Lender to exercise and enforce its rights and remedies hereunder in
respect of the Collateral or (iii) to otherwise effect the purposes of this
Agreement, including, without limitation: (A) marking conspicuously each
chattel paper included in the Receivables and each Related Contract and, at
the request of the Lender, each of its records pertaining to the Collateral
with a legend, in form and substance satisfactory to the Lender, indicating
that such chattel paper, Related Contract or
<PAGE>
Collateral is subject to the security interest created hereby, (B) if any
Receivable shall be evidenced by a promissory note or other instrument or
chattel paper, delivering and pledging to the Lender hereunder such note,
instrument or chattel paper duly indorsed and accompanied by executed
instruments of transfer or assignment, all in form and substance satisfactory
to the Lender, (C) executing and filing such financing or continuation
statements, or amendments thereto, as may be necessary or desirable or that
the Lender may request in order to perfect and preserve the security interest
purported to be created hereby, (D) furnishing to the Lender from time to
time statements and schedules further identifying and describing the
Collateral and such other reports in connection with the Collateral as the
Lender may reasonably request, all in reasonable detail, and (E) upon the
acquisition after the date hereof by the Grantor of any Equipment covered by
a certificate of title or ownership, cause the Lender to be listed as the
lienholder (or, in the event such Equipment is subject to a purchase money
security interest (a "Permitted Lien"), as a junior lienholder) on such
certificate of title and within 60 days of the acquisition thereof and
deliver evidence of the same to the Lender.
(b) LOCATION OF EQUIPMENT AND INVENTORY. The Grantor will keep
the Equipment and Inventory (other than Inventory and used Equipment sold in
the ordinary course of business) at the location[s] specified therefor in
Section 4(d) hereof.
(c) CONDITION OF EQUIPMENT. The Grantor will cause the Equipment
to be maintained and preserved in the same condition, repair and working
order as when acquired, ordinary wear and tear excepted, and in accordance
with any manufacturer's manual, and will forthwith, or in the case of any
loss or damage to any Equipment as quickly as practicable after the
occurrence thereof, make or cause to be made all repairs, replacements, and
other improvements in connection therewith which are necessary or desirable
or that the Lender may request to such end. The Grantor will promptly
furnish to the Lender a statement respecting any loss or damage in excess of
$10,000 to any Equipment.
(d) TAXES. The Grantor will pay promptly when due all property
and other taxes, assessments and governmental charges or levies imposed upon,
and all claims (including claims for labor, materials and supplies) against,
the Equipment and Inventory, except to the extent the validity thereof is
being contested in good faith by proper proceedings which stay the imposition
of any penalty, fine or lien resulting from the non-payment thereof and with
respect to which adequate reserves have been set aside for the payment
thereof.
(e) INSURANCE.
(i) The Grantor will, at its own expense, maintain insurance
with respect to the Equipment and Inventory in such amounts, against such
risks, in such form and with such insurers, as shall be satisfactory to the
Lender from time to time. Each policy for liability insurance shall provide
for all losses to be paid on behalf of the Lender and the Grantor as their
respective interests may appear, and each policy for property damage
insurance shall provide for all losses to be adjusted with, and paid directly
to, the Lender ; PROVIDED, HOWEVER, that with respect to Equipment subject
to a Permitted Lien, or as otherwise provided in the Loan Documents, the
Lender's rights may be subject to the rights of the holder of such Permitted
Lien. Except as
<PAGE>
required by any agreement which creates a Permitted Lien, each such policy
shall in addition (A) name the Grantor and the Lender as insured parties
thereunder (without any representation or warranty by or obligation upon the
Lender) as their interests may appear, (B) contain the agreement by the
insurer that any loss thereunder shall be payable to the Lender
notwithstanding any action, inaction or breach of representation or warranty
by the Grantor, (C) provide that there shall be no recourse against the
Lender for payment of premiums or other amounts with respect thereto and (D)
provide that at least 30 days' prior written notice of cancellation or of
lapse shall be given to the Lender by the insurer. The Grantor will, if so
requested by the Lender, deliver to the Lender original or duplicate policies
of such insurance and, as often as the Lender may reasonably request, a
report of a reputable insurance broker with respect to such insurance. The
Grantor will also, at the request of the Lender, duly execute and deliver
instruments of assignment of such insurance policies and cause the respective
insurers to acknowledge notice of such assignment.
(ii) Reimbursement under any liability insurance maintained by
the Grantor pursuant to this Section 5(e) may be paid directly to the Person
who shall have incurred liability covered by such insurance. In the case of
any loss involving damage to Equipment or Inventory as to which paragraph
(iii) of this Section 5(e) is not applicable, the Grantor will make or cause
to be made the necessary repairs to or replacements of such Equipment or
Inventory, and any proceeds of insurance maintained by the Grantor pursuant
to this Section 5(e) shall be paid to the Grantor as reimbursement for the
costs of such repairs or replacements.
(iii) Except as otherwise provided in the Loan Documents,
upon the occurrence and during the continuance of an Event of Default or the
actual or constructive total loss (in excess of $10,000 per occurrence) of
any Equipment or Inventory, all insurance payments in respect of such
Equipment or Inventory shall be paid to the Lender and applied as specified
in Section 7(b) hereof.
(f) PROVISIONS CONCERNING THE RECEIVABLES AND THE RELATED
CONTRACTS.
(i) The Grantor will (A) give the Lender prompt notice of any
change in the Grantor's name, identity or corporate structure, (B) keep its
chief place of business and chief executive office and all originals of all
chattel paper which constitute Receivables at the location[s] specified
therefor in Section 4(d) hereof, and (C) keep adequate records concerning the
Receivables and such chattel paper and permit representatives of the Lender
at any time during normal business hours to inspect and make abstracts from
such records and chattel paper.
(ii) The Grantor will duly perform and observe all of its
obligations under each Related Contract and, except as otherwise provided in
this Subsection (f), continue to collect, at its own expense, all amounts due
or to become due under the Receivables. In connection with such collections,
the Grantor may (and, at the Lender's direction, will) take such action as
the Grantor or the Lender may deem necessary or advisable to enforce
collection or performance of the Receivables; PROVIDED, HOWEVER, that the
Lender shall have the right at any time, upon the occurrence and during the
continuance of an Event of Default or an event which, with the giving of
notice or the lapse of time or both, would constitute an Event of Default,
and upon written notice to the Grantor of its intention to do so, to notify
the account debtors or obligors under any Receivables
<PAGE>
of the assignment of such Receivables to the Lender and to direct such
account debtors or obligors to make payment of all amounts due or to become
due to the Grantor thereunder directly to the Lender and, upon such
notification and at the expense of the Grantor and to the extent permitted by
law, to enforce collection of any such Receivables and to adjust, settle or
compromise the amount or payment thereof, in the same manner and to the same
extent as the Grantor might have done. After receipt by the Grantor of the
notice from the Lender referred to in the proviso to the immediately
preceding sentence, (A) all amounts and proceeds (including instruments)
received by the Grantor in respect of the Receivables shall be received in
trust for the benefit of the Lender hereunder, shall be segregated from other
funds of the Grantor and shall be forthwith paid over to the Lender in the
same form as so received (with any necessary indorsement) to be held as cash
collateral and either (1) released to the Grantor so long as no Event of
Default shall have occurred and be continuing or (2) if any Event of Default
shall have occurred and be continuing, applied as specified in Section 7(b)
hereof, and (B) the Grantor will not adjust, settle or compromise the amount
or payment of any Receivable or release wholly or partly any account debtor
or obligor thereof or allow any credit or discount thereon.
(iii) Upon the occurrence and during the continuance of
any breach or default under any Related Contract referred to in Schedule II
hereto or otherwise specified by the Lender from time to time by any party
thereto other than the Grantor, (A) the Grantor will, promptly after
obtaining knowledge thereof, give the Lender written notice of the nature and
duration thereof, specifying what action, if any, it has taken and proposes
to take with respect thereto, (B) the Grantor will not, without the prior
written consent of the Lender, declare or waive any such breach or default or
affirmatively consent to the cure thereof or exercise any of its remedies in
respect thereof, and (C) the Grantor will, upon written instructions from the
Lender and at the Grantor's expense, take such action as the Lender may deem
necessary or advisable in respect thereof.
(iv) The Grantor will, at its expense, promptly deliver to the
Lender a copy of each notice or other communication received by it by which
any other party to any Related Contract referred to in Schedule II hereto or
otherwise specified by the Lender from time to time purports to exercise any
of its rights or affect any of its obligations thereunder, together with a
copy of any reply by the Grantor thereto.
(v) Except as otherwise permitted in the Loan Agreement, the
Grantor will not, without the prior written consent of the Lender, cancel,
terminate, amend, modify, or waive any provision of, any Related Contract
referred to in Schedule II hereto or otherwise specified by the Lender from
time to time.
(g) MOTOR VEHICLES.
(i) Within 60 days of the date hereof, the Grantor shall
deliver to the Lender photocopies of the certificates of title or ownership
for the Motor Vehicles owned by it with the Lender listed as lienholder.
(ii) Upon the acquisition after the date hereof by the Grantor
of any Motor Vehicle, the Grantor shall deliver to the Lender photocopies of
the certificates of title or
<PAGE>
ownership for such Motor Vehicle, together with the manufacturer's statement
of origin, with the Lender listed as lienholder.
(iii) The Grantor hereby appoints the Lender as its
attorney-in-fact, exercisable upon the occurrence of an Event of Default,
effective the date hereof and terminating upon the termination of this
Agreement, for the purpose of (i) executing on behalf of the Grantor title or
ownership applications for filing with appropriate Governmental Authorities
to enable Motor Vehicles now owned or hereafter acquired by the Grantor to be
retitled and the Lender listed as lienholder thereof, (ii) filing such
applications with such state agencies and (iii) executing such other
documents and instruments on behalf of, and taking such other action in the
name of, the Grantor as the Lender may deem necessary or advisable to
accomplish the purposes hereof (including, without limitation, for the
purpose of creating in favor of the Lender a perfected lien on the Motor
Vehicles and exercising the rights and remedies of the Lender hereunder).
This appointment as attorney-in-fact is irrevocable and coupled with an
interest.
(iv) Any photocopies of certificates of title or ownership
delivered pursuant to the terms hereof shall be accompanied by odometer
statements for each Motor Vehicle covered thereby.
(v) So long as no Event of Default or event which, with the
giving of notice or the lapse of time or both, would constitute an Event of
Default shall have occurred and be continuing, upon the request of the
Grantor, the Lender shall execute and deliver to the Grantor such instruments
as the Grantor shall reasonably request to remove the notation of the Lender
as lienholder on any certificate of title for any Motor Vehicle; provided
that any such instruments shall be delivered, and the release effective, only
upon receipt by the Lender of a certificate from the Grantor, stating that
the Motor Vehicle the lien on which is to be released is to be sold or has
suffered a casualty loss (with title thereto passing to the casualty
insurance company therefor in settlement of the claim for such loss) and any
proceeds of such sale or casualty loss being paid to the Lender hereunder to
be applied to the Obligations then outstanding in the manner contemplated by
Section 7(b) hereof.
(h) INSPECTION AND REPORTING. The Grantor shall permit
representatives of the Lender, upon reasonable notice and at any time during
normal business hours, to inspect and make abstracts from its books and
records pertaining to the Collateral, and permit representatives of the
Lender to be present at the Grantor's place of business to receive copies of
all communications and remittances relating to the Collateral, and to forward
copies of any notices or communications received or made by the Grantor with
respect to the Collateral, all in such manner as the Lender may require.
(i) TRANSFERS AND OTHER LIENS. The Grantor will not (i) sell,
assign (by operation of law or otherwise), exchange or otherwise dispose of
any of the Collateral (except for sales or other dispositions of Inventory
and used Equipment in the ordinary course of business) or (ii) create or
suffer to exist any lien, security interest or other charge or encumbrance
upon or with respect to any of the Collateral except for (A) the security
interest created hereby and (B) the security interests and other encumbrances
described in Schedule V hereto.
<PAGE>
SECTION 6. ADDITIONAL PROVISIONS CONCERNING THE COLLATERAL.
(a) The Grantor hereby authorizes the Lender to file, without the
signature of the Grantor where permitted by law, one or more financing or
continuation statements, and amendments thereto, relating to the Collateral.
(b) The Grantor hereby irrevocably appoints the Lender the
Grantor's attorney-in-fact and proxy, with full authority in the place and
stead of the Grantor and in the name of the Grantor or otherwise, from time
to time in the Lender's discretion, and following the occurrence of an Event
of Default, to take any action and to execute any instrument which the Lender
may deem necessary or advisable to accomplish the purposes of this Agreement,
including, without limitation: (i) to obtain and adjust insurance required
to be paid to the Lender pursuant to Section 5(e) hereof, (ii) to ask,
demand, collect, sue for, recover, compound, receive and give acquittance and
receipts for moneys due and to become due under or in respect of any
Collateral, (iii) to receive, indorse, and collect any drafts or other
instruments, documents and chattel paper in connection with clause (i) or
(ii) above and (iv) to file any claims or take any action or institute any
proceedings which the Lender may deem necessary or desirable for the
collection of any Collateral or otherwise to enforce the rights of the Lender
with respect to any Collateral.
(c) If the Grantor fails to perform any agreement contained herein
after the expiry of any applicable grace period, the Lender may itself
perform, or cause performance of, such agreement or obligation, and the
expenses of the Lender incurred in connection therewith shall be payable by
the Grantor pursuant to Section 8 hereof.
(d) The powers conferred on the Lender 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 safe custody of any Collateral
in its possession and the accounting for moneys actually received by it
hereunder, the Lender 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.
(e) Anything herein to the contrary notwithstanding, (i) the
Grantor shall remain liable under the Related Contracts to the extent set
forth therein to perform all of its obligations thereunder to the same extent
as if this Agreement had not been executed, (ii) the exercise by the Lender
of any of its rights hereunder shall not release the Grantor from any of its
obligations under the Related Contracts and (iii) the Lender shall not have
any obligation or liability by reason of this Agreement under the Related
Contracts nor shall the Lender be obligated to perform any of the obligations
or duties of the Grantor thereunder or to take any action to collect or
enforce any claim for payment assigned hereunder.
SECTION 7. REMEDIES UPON DEFAULT. If an Event of Default shall
have occurred and be continuing:
(a) The Lender may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise
available to it, all of the rights and remedies of a secured party on default
under the Code (whether or not the Code applies to the affected
<PAGE>
Collateral), and also may (i) require the Grantor to, and the Grantor hereby
agrees that it will at its expense and upon request of the Lender forthwith,
assemble all or part of the Collateral as directed by the Lender and make it
available to the Lender at a place to be designated by the Lender which is
reasonably convenient to both parties and (ii) without notice except as
specified below, sell the Collateral or any part thereof in one or more
parcels at public or private sale, at any of the Lender's offices or
elsewhere, for cash, on credit or for future delivery, and at such price or
prices and upon such other terms as the Lender may deem commercially
reasonable. The Grantor agrees that, to the extent notice of sale shall be
required by law, at least 10 days' notice to the 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. The Lender shall not be
obligated to make any sale of Collateral regardless of notice of sale having
been given. The Lender 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. The Grantor hereby waives any claims against the Lender arising
by reason of the fact that the price at which the Collateral may have been
sold at 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 Obligations,
even if the Lender accepts the first offer received and does not offer the
Collateral to more than one offeree.
(b) Any cash held by the Lender as Collateral and all cash
proceeds received by the Lender in respect of any sale of, collection from,
or other realization upon, all or any part of the Collateral shall be applied
as follows:
(i) First, to the payment of the reasonable costs and
expenses, including reasonable attorneys' fees and legal expenses, incurred
by the Lender in connection with (A) the administration of this Agreement,
(B) the custody, preservation, use or operation of, or the sale of,
collection from, or other realization upon, any Collateral, (C) the exercise
or enforcement of any of the rights of the Lender hereunder or (D) the
failure of the Grantor to perform or observe any of the provisions hereof;
(ii) Second, at the option of the Lender, to the payment or
other satisfaction of any liens and other encumbrances upon any of the
Collateral;
(iii) Third, ratably to the payment of the Obligations,
first in respect of any fees not covered by clause (i) above, second, in
respect of accrued but unpaid interest on the Loans, and third, in respect of
unpaid principal of the Loans;
(iv) Fourth, to the payment of any other amounts required by
applicable law (including, without limitation, Section 9-504(1)(c) of the
Code or any successor or similar, applicable statutory provision); and
(v) Fifth, the surplus proceeds, if any, to the Grantor or to
whomsoever shall be lawfully entitled to receive the same or as a court of
competent jurisdiction shall direct.
(c) In the event that the proceeds of any such sale, collection or
realization are insufficient to pay all amounts to which the Lender is
legally entitled, the Grantor shall be liable for the deficiency, together
with interest thereon at the highest rate specified in any Note for interest
on
<PAGE>
overdue principal thereof or such other rate as shall be fixed by applicable
law, together with the costs of collection and the reasonable fees of any
attorneys employed by the Lender to collect such deficiency.
SECTION 8. INDEMNITY AND EXPENSES.
(a) The Grantor agrees to indemnify the Lender from and against
any and all claims, losses and liabilities growing out of or resulting from
this Agreement (including, without limitation, enforcement of this
Agreement), except claims, losses or liabilities resulting solely and
directly from the Lender's gross negligence or willful misconduct.
(b) The Grantor will upon demand pay to the Lender the amount of
any and all costs and expenses, including the reasonable fees and
disbursements of the Lender's counsel and of any experts and Lenders, which
the Lender may 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 Collateral, (iii) the
exercise or enforcement of any of the rights of the Lender hereunder, or (iv)
the failure by the Grantor to perform or observe any of the provisions hereof.
SECTION 9. NOTICES, ETC. All notices and other communications
provided for hereunder shall be in writing and shall be mailed, telegraphed
or delivered, if to the Grantor, to it at its address specified in the Loan
Agreement; if to the Lender, to it at its address specified in the Loan
Agreement; or as to either such Person at such other address as shall be
designated by such Person in a written notice to such other Persons complying
as to delivery with the terms of this Section 9. All such notices and other
communications shall be effective (i) if mailed, when deposited in the mails,
(ii) if telegraphed, when delivered to the telegraph company, or (iii) if
delivered, upon delivery.
SECTION 10. MISCELLANEOUS.
(a) No amendment of any provision of this Agreement shall be
effective unless it is in writing and signed by the Grantor and the Lender,
and no waiver of any provision of this Agreement, and no consent to any
departure by the Grantor therefrom, shall be effective unless it is in
writing and signed by the Lender, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for
which given.
(b) No failure on the part of the Lender to exercise, and no delay
in exercising, any right hereunder or under any other Loan Document shall
operate as a waiver thereof; nor shall any single or partial exercise of any
such right preclude any other or further exercise thereof or the exercise of
any other right. The rights and remedies of the Lender provided herein and
in the other Loan Documents are cumulative and are in addition to, and not
exclusive of, any rights or remedies provided by law. The rights of the
Lender under any Loan Document against any party thereto are not conditional
or contingent on any attempt by the Lender to exercise any of its rights
under any other Loan Document against such party or against any other Person.
<PAGE>
(c) Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or invalidity without
invalidating the remaining portions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.
(d) This Agreement shall create a continuing security interest in
the Collateral and shall (i) remain in full force and effect until the
indefeasible payment in full or release of the Obligations (as such term is
defined in clause (i) of Section 1.01 of the Loan Agreement), (ii) be binding
on the Grantor and its successors and assigns and shall inure, together with
all rights and remedies of the Lender hereunder, to the benefit of the Lender
and its respective successors, transferees and assigns. Without limiting the
generality of the foregoing, the Lender may assign or otherwise transfer any
Note or portion thereof held by it, and the Lender may assign or otherwise
transfer its rights under any other Loan Document to any other Person, and
such other Person shall thereupon become vested with all of the benefits in
respect thereof granted to the Lender, herein or otherwise. None of the
rights or obligations of the Grantor hereunder may be assigned or otherwise
transferred without the prior written consent of the Lender.
(e) Upon the satisfaction in full of the Obligations, (i) this
Agreement and the security interest created hereby shall terminate and all
rights to the Collateral shall revert to the Grantor, and (ii) the Lender
will, upon the Grantor's request and at the Grantor's expense, (A) return to
the Grantor such of the Collateral as shall not have been sold or otherwise
disposed of or applied pursuant to the terms hereof and (B) execute and
deliver to the Grantor such documents as the Grantor shall reasonably request
to evidence such termination.
(f) This Agreement shall be governed by and construed in
accordance with the law of the State of New York, except as required by
mandatory provisions of law and except to the extent that the validity or
perfection or the perfection and the effect of the perfection or
non-perfection of the security interest created hereby, or remedies
hereunder, in respect of any particular Collateral are governed by the law of
a jurisdiction other than the State of New York.
(g) Any legal action or proceeding with respect to this Agreement
or any document related thereto may be brought in the courts of the State of
New York or the United States of America for the Southern District of New
York, and, by execution and delivery of this Agreement, the Grantor hereby
accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts. The Grantor
hereby irrevocably waives any objection, including, without limitation, any
objection to the laying of venue or based on the grounds of FORUM NON
CONVENIENS, which it may now or hereafter have to the bringing of any such
action or proceeding in such respective jurisdictions and consents to the
granting of such legal or equitable relief as is deemed appropriate by the
court.
(h) The Grantor irrevocably consents to the service of process of
any of the aforesaid courts in any such action or proceeding by the mailing
of copies thereof by registered or certified mail, postage prepaid, to such
Grantor at its address provided herein, such service to become effective 30
days after such mailing.
<PAGE>
(i) Nothing contained herein shall affect the right of the Lender
to serve process in any other manner permitted by law or commence legal
proceedings or otherwise proceed against the Grantor or any of the Grantor's
property in any other jurisdiction.
(j) EACH OF THE GRANTOR AND (BY ITS ACCEPTANCE OF THIS AGREEMENT)
THE LENDER WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED ON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, VERBAL OR WRITTEN STATEMENT OR OTHER ACTION OF THE PARTIES HERETO.
<PAGE>
IN WITNESS WHEREOF, the Grantor has caused this Agreement to be
executed and delivered by its officer thereunto duly authorized, as of the
date first above written.
SPEAKEASY GAMING OF RENO, INC.
By: /S/ EDSON R. ARNEAULT
--------------------------------
Name: Edson R. Arneault
Title: President, Chief Executive Officer
<PAGE>
EXHIBIT 10.15
GENERAL SECURITY AGREEMENT
GENERAL SECURITY AGREEMENT dated as of May 5, 1998, made by SPEAKEASY
GAMING OF LAS VEGAS, INC., a Nevada corporation (the "Grantor"), in favor of
MADELEINE LLC, as lender (the "Lender").
W I T N E S S E T H :
WHEREAS, the Grantor, Speakeasy Gaming of Reno, Inc., a Nevada
corporation ("Speakeasy Reno"), Mountaineer Park, Inc., a West Virginia
corporation ("Mountaineer" and together with the Grantor and Speakeasy Reno,
collectively, the "Borrowers"), MTR Gaming Group, Inc., a Delaware corporation,
(the "Guarantor" and together with the Grantor, Speakeasy Reno and Mountaineer,
collectively, the "Loan Parties"), and the Lender are entering into a Third
Amended and Restated Loan Agreement, dated as of July 2, 1996, as amended and
restated as of December 10, 1996, as further amended and restated as of July 2,
1997, and as further amended and restated as of the date hereof, (such
agreement, as further amended or otherwise modified from time to time, being
hereinafter referred to as the "Loan Agreement");
WHEREAS, pursuant to the Loan Agreement, the Lender has agreed to make
(and has from time to time made) (i) certain term loans (collectively the "Term
Loans") to the Borrowers in an aggregate principal amount not to exceed the Term
Commitment (as defined in the Loan Agreement), and (ii) a line of credit
available for loans to the Borrowers (the "Line Loans" and, collectively with
the Term Loan, the "Loans") in an aggregate principal amount not to exceed the
Line Commitment (as defined in the Loan Agreement);
WHEREAS, the Grantor, Mountaineer, the Guarantor, Speakeasy Reno and
the Lender are entering into the third amendment and restatement of the Loan
Agreement for the purposes of making increases to the Term Commitment and the
Line Commitment and for the purpose of adding the Grantor and Speakeasy Reno as
Borrowers under the Loan Agreement to be bound by the terms of such agreement as
Borrowers; and
WHEREAS, it is a condition precedent to the making and continuing (as
applicable) of the Loans by the Lender pursuant to the Loan Agreement that the
Grantor shall have executed and delivered to the Lender a security agreement
providing for the grant to the Lender of a security interest in all personal
property and fixtures of the Grantor;
NOW, THEREFORE, in consideration of the premises and the agreements
herein and in order to induce the Lender to make and maintain the Loans pursuant
to the Loan Agreement, the Grantor hereby agrees with the Lender as follows:
SECTION 1. DEFINITIONS. Reference is hereby made to the Loan
Agreement for a statement of the terms thereof. All terms used in this
Agreement which are defined in the Loan Agreement or in Article 9 of the Uniform
Commercial Code (the "Code") currently in effect in the State of New York and
which are not otherwise defined herein shall have the same meanings herein as
set forth therein.
<PAGE>
SECTION 2. GRANT OF SECURITY INTEREST. As collateral security for
all of the Obligations (as defined in Section 3 hereof), the Grantor hereby
pledges and assigns to the Lender, and grants to the Lender a continuing
security interest in, all personal property and fixtures of the Grantor,
wherever located and whether now or hereafter existing and whether now owned or
hereafter acquired, of every kind and description, tangible or intangible (the
"Collateral"), including, without limitation, the following:
(a) all equipment of any kind including, without limitation, the
equipment described in Schedule I hereto, all furniture, fixtures, machinery and
all motor vehicles, tractors and other like property, whether or not the title
thereto is governed by a certificate of title or ownership (hereinafter
collectively referred to as the "Motor Vehicles"), wherever located and whether
now or hereafter existing and whether now owned or hereafter acquired, together
with all substitutes, replacements, accessions and additions thereto, and all
tools, parts, accessories and attachments used in connection therewith
(hereinafter collectively referred to as the "Equipment");
(b) all of the Grantor's right, title and interest in and to all
inventory of any kind, wherever located and whether now or hereafter existing
and whether now owned or hereafter acquired, and all accessions thereto and
products thereof (any and all such inventory, accessions and products being
hereinafter referred to as the "Inventory");
(c) all of the Grantor's right, title and interest in and to (i) all
accounts, contract rights, chattel paper, instruments, documents, general
intangibles and other rights or obligations of any kind, whether now or
hereafter existing and whether now owned or hereafter acquired, arising out of
or in connection with the sale or lease of goods or the rendering of services or
otherwise and (ii) all rights now or hereafter existing in and to all security
agreements, leases and other contracts, now or hereafter existing and securing
or otherwise relating to any such accounts, contract rights, chattel paper,
instruments, general intangibles or obligations (including without limitation,
the contracts described in Schedule II hereto) (any and all such accounts,
contract rights, chattel paper, instruments, general intangibles and obligations
being hereinafter referred to as the "Receivables", and any and all such
security agreements, leases and other contracts being hereinafter referred to as
the "Related Contracts"); and
(d) all proceeds of any and all of the foregoing Collateral and, to
the extent not otherwise included, all payments under insurance (whether or not
the Lender is the loss payee thereof) (subject, however, to those provisions in
that certain Deed of Trust, Assignment of Leases and Rents, Security Agreement
and Fixture Filing dated of even date herewith, between the Grantor and the
Lender, for the Cheyenne Hotel Property (as defined in the Loan Agreement) with
respect to making insurance proceeds available for restorations), or any
indemnity, warranty or guaranty, payable by reason of loss or damage to or
otherwise with respect to any of the foregoing Collateral; in each case,
howsoever the Grantor's interest therein may arise or appear (whether by
ownership, security interest, claim or otherwise).
SECTION 3. SECURITY FOR OBLIGATIONS. The security interest created
hereby in the Collateral constitutes continuing collateral security for all of
the following obligations, whether now existing or hereafter incurred (the
"Obligations"):
<PAGE>
(a) the prompt payment by the Grantor, as and when due and payable,
of all amounts from time to time owing by it in respect of the Loan Agreement,
the Notes and the other Loan Documents; and
(b) the due performance and observance by the Grantor of all of its
other obligations from time to time existing in respect of the Loan Documents.
SECTION 4. REPRESENTATIONS AND WARRANTIES. The Grantor represents
and warrants as follows:
(a) The Grantor (i) is a corporation duly organized, validly existing
and in good standing under the laws of the state of its incorporation as set
forth on the first page hereof, and (ii) has all requisite power and authority
to execute, deliver and perform this Agreement.
(b) The execution, delivery and performance by the Grantor of this
Agreement (i) have been duly authorized by all necessary corporate action, (ii)
do not and will not contravene its charter or by-laws, law or any contractual
restriction binding on or affecting the Grantor or any of its properties, and
(iii) do not and will not result in or require the creation of any lien,
security interest or other charge or encumbrance upon or with respect to any of
its properties, except as contemplated by the Loan Documents.
(c) This Agreement is a legal, valid and binding obligation of the
Grantor, enforceable against the Grantor in accordance with its terms.
(d) All Equipment and Inventory now existing is, and all Equipment
and Inventory hereafter existing will be, located at the address(es) specified
therefor in Schedule III hereto. The Grantor's chief place of business and
chief executive office, the place where the Grantor keeps its records concerning
Receivables and all originals of all chattel paper which constitute Receivables
are located at the address specified therefor in Schedule III. None of the
Receivables is evidenced by a promissory note or other instrument. Set forth as
Schedule IV hereto is a complete and correct list of each trade name used by the
Grantor.
(e) The Grantor has delivered to the Lender complete and correct
copies of each Related Contract in its possession described in Schedule II
hereto, including all schedules and exhibits thereto. To the best of the
Grantor's knowledge, each such Related Contract sets forth the entire agreement
and understanding of the parties thereto relating to the subject matter thereof,
and there are no other agreements, arrangements or understandings, written or
oral, relating to the matters covered thereby or the rights of the Grantor or
any of its Affiliates in respect thereof. Other than those Related Contracts
which the Grantor acquired in connection with its acquisition of the Cheyenne
Hotel Property and to which the Grantor is not a signatory, each Related
Contract now existing is, and each other Related Contract will be the legal,
valid and binding obligation of the parties thereto, enforceable against such
parties in accordance with its terms. To the best of Grantor's knowledge,
without independent inquiry, all Related Contracts which have been assigned to
Grantor are legal, valid and binding obligations of the Grantor.
<PAGE>
(f) Except as otherwise provided in the Loan Agreement, the Grantor
is and will be at all times the owner of the Collateral free and clear of any
lien, security interest or other charge or encumbrance except for (i) the
security interest created by this Agreement and (ii) the security interests and
other encumbrances described in Schedule V hereto. No effective financing
statement or other instrument similar in effect covering all or any part of the
Collateral is on file in any recording or filing office except (i) such as may
have been filed in favor of the Lender relating to this Agreement and (ii) such
as may have been filed to perfect or protect any security interest or
encumbrance described in Schedule V hereto.
(g) The exercise by the Lender of its rights and remedies hereunder
will not contravene any law or contractual restriction binding on or affecting
the Grantor or any of its properties and will not result in or require the
creation of any lien, security interest or other charge or encumbrance upon or
with respect to any of its properties.
(h) Except as otherwise provided in the Loan Agreement, no
authorization or approval or other action by, and no notice to or filing with,
any Governmental Authority or other regulatory body is required for (i) the due
execution, delivery and performance by the Grantor of this Agreement, (ii) the
grant by the Grantor, or the perfection, of the security interest purported to
be created hereby in the Collateral or (iii) the exercise by the Lender of any
of its rights and remedies hereunder, except for the filing under the Code of
the financing statement(s) required to be filed pursuant to the Loan Agreement,
all of which financing statements have been duly filed and are in full force and
effect.
(i) This Agreement creates a valid security interest in favor of the
Lender in the Collateral as security for the Obligations. The Lender's having
possession of all instruments and cash constituting Collateral from time to time
and the filing of the financing statements required to be filed pursuant to the
Loan Agreement results in the perfection of such security interest. Such
security interest is, or in the case of Collateral in which the Grantor obtains
rights after the date hereof, will be, a perfected, first priority security
interest, subject only to the security interests and other encumbrances
described in Schedule V hereto. Such filings and all other action necessary or
desirable to perfect and protect such security interest have been duly taken,
except for the Lender's having possession of instruments and cash constituting
Collateral after the date hereof.
SECTION 5. COVENANTS AS TO THE COLLATERAL. So long as any of the
Obligations (as such term is defined in clause (i) of Section 1.01 of the Loan
Agreement) shall remain outstanding, unless the Lender shall otherwise consent
in writing:
(a) FURTHER ASSURANCES. The Grantor will at its expense, at any time
and from time to time, promptly execute and deliver all further instruments and
documents and take all further action that may be necessary or desirable or that
the Lender may request in order (i) to perfect and protect the security interest
purported to be created hereby, (ii) to enable the Lender to exercise and
enforce its rights and remedies hereunder in respect of the Collateral or (iii)
to otherwise effect the purposes of this Agreement, including, without
limitation: (A) marking conspicuously each chattel paper included in the
Receivables and each Related Contract and, at the request of the Lender, each of
its records pertaining to the Collateral with a legend, in form and
<PAGE>
substance satisfactory to the Lender, indicating that such chattel paper,
Related Contract or Collateral is subject to the security interest created
hereby, (B) if any Receivable shall be evidenced by a promissory note or
other instrument or chattel paper, delivering and pledging to the Lender
hereunder such note, instrument or chattel paper duly indorsed and
accompanied by executed instruments of transfer or assignment, all in form
and substance satisfactory to the Lender, (C) executing and filing such
financing or continuation statements, or amendments thereto, as may be
necessary or desirable or that the Lender may request in order to perfect and
preserve the security interest purported to be created hereby, (D) furnishing
to the Lender from time to time statements and schedules further identifying
and describing the Collateral and such other reports in connection with the
Collateral as the Lender may reasonably request, all in reasonable detail,
and (E) upon the acquisition after the date hereof by the Grantor of any
Equipment covered by a certificate of title or ownership, cause the Lender to
be listed as the lienholder (or, in the event such Equipment is subject to a
purchase money security interest (a "Permitted Lien"), as a junior
lienholder) on such certificate of title and within 60 days of the
acquisition thereof and deliver evidence of the same to the Lender.
(b) LOCATION OF EQUIPMENT AND INVENTORY. The Grantor will keep the
Equipment and Inventory (other than Inventory and used Equipment sold in the
ordinary course of business) at the location[s] specified therefor in Section
4(d) hereof.
(c) CONDITION OF EQUIPMENT. The Grantor will cause the Equipment to
be maintained and preserved in the same condition, repair and working order as
when acquired, ordinary wear and tear excepted, and in accordance with any
manufacturer's manual, and will forthwith, or in the case of any loss or damage
to any Equipment as quickly as practicable after the occurrence thereof, make or
cause to be made all repairs, replacements, and other improvements in connection
therewith which are necessary or desirable or that the Lender may request to
such end. The Grantor will promptly furnish to the Lender a statement
respecting any loss or damage in excess of $10,000 to any Equipment.
(d) TAXES. The Grantor will pay promptly when due all property and
other taxes, assessments and governmental charges or levies imposed upon, and
all claims (including claims for labor, materials and supplies) against, the
Equipment and Inventory, except to the extent the validity thereof is being
contested in good faith by proper proceedings which stay the imposition of any
penalty, fine or lien resulting from the non-payment thereof and with respect to
which adequate reserves have been set aside for the payment thereof.
(e) INSURANCE.
(i) The Grantor will, at its own expense, maintain insurance
with respect to the Equipment and Inventory in such amounts, against such risks,
in such form and with such insurers, as shall be satisfactory to the Lender from
time to time. Each policy for liability insurance shall provide for all losses
to be paid on behalf of the Lender and the Grantor as their respective interests
may appear, and each policy for property damage insurance shall provide for all
losses to be adjusted with, and paid directly to, the Lender; PROVIDED, HOWEVER,
that with respect to Equipment subject to a Permitted Lien, the Lender's rights
may be subject to the rights of the holder
<PAGE>
of such Permitted Lien. Except as required by any agreement which creates a
Permitted Lien, or as otherwise provided in the Loan Documents, each such
policy shall in addition (A) name the Grantor and the Lender as insured
parties thereunder (without any representation or warranty by or obligation
upon the Lender) as their interests may appear, (B) contain the agreement by
the insurer that any loss thereunder shall be payable to the Lender
notwithstanding any action, inaction or breach of representation or warranty
by the Grantor, (C) provide that there shall be no recourse against the
Lender for payment of premiums or other amounts with respect thereto and (D)
provide that at least 30 days' prior written notice of cancellation or of
lapse shall be given to the Lender by the insurer. The Grantor will, if so
requested by the Lender, deliver to the Lender original or duplicate policies
of such insurance and, as often as the Lender may reasonably request, a
report of a reputable insurance broker with respect to such insurance. The
Grantor will also, at the request of the Lender, duly execute and deliver
instruments of assignment of such insurance policies and cause the respective
insurers to acknowledge notice of such assignment.
(ii) Reimbursement under any liability insurance maintained by
the Grantor pursuant to this Section 5(e) may be paid directly to the Person who
shall have incurred liability covered by such insurance. In the case of any
loss involving damage to Equipment or Inventory as to which paragraph (iii) of
this Section 5(e) is not applicable, the Grantor will make or cause to be made
the necessary repairs to or replacements of such Equipment or Inventory, and any
proceeds of insurance maintained by the Grantor pursuant to this Section 5(e)
shall be paid to the Grantor as reimbursement for the costs of such repairs or
replacements.
(iii) Except as otherwise provided in the Loan Documents,
upon the occurrence and during the continuance of an Event of Default or the
actual or constructive total loss (in excess of $10,000 per occurrence) of any
Equipment or Inventory, all insurance payments in respect of such Equipment or
Inventory shall be paid to the Lender and applied as specified in Section 7(b)
hereof.
(f) PROVISIONS CONCERNING THE RECEIVABLES AND THE RELATED CONTRACTS.
(i) The Grantor will (A) give the Lender prompt notice of any
change in the Grantor's name, identity or corporate structure, (B) keep its
chief place of business and chief executive office and all originals of all
chattel paper which constitute Receivables at the location[s] specified therefor
in Section 4(d) hereof, and (C) keep adequate records concerning the Receivables
and such chattel paper and permit representatives of the Lender at any time
during normal business hours to inspect and make abstracts from such records and
chattel paper.
(ii) The Grantor will duly perform and observe all of its
obligations under each Related Contract and, except as otherwise provided in
this Subsection (f), continue to collect, at its own expense, all amounts due or
to become due under the Receivables. In connection with such collections, the
Grantor may (and, at the Lender's direction, will) take such action as the
Grantor or the Lender may deem necessary or advisable to enforce collection or
performance of the Receivables; PROVIDED, HOWEVER, that the Lender shall have
the right at any time, upon the occurrence and during the continuance of an
Event of Default or an event which, with the giving of notice or the lapse of
time or both, would constitute an Event of Default, and upon written notice to
<PAGE>
the Grantor of its intention to do so, to notify the account debtors or obligors
under any Receivables of the assignment of such Receivables to the Lender and to
direct such account debtors or obligors to make payment of all amounts due or to
become due to the Grantor thereunder directly to the Lender and, upon such
notification and at the expense of the Grantor and to the extent permitted by
law, to enforce collection of any such Receivables and to adjust, settle or
compromise the amount or payment thereof, in the same manner and to the same
extent as the Grantor might have done. After receipt by the Grantor of the
notice from the Lender referred to in the proviso to the immediately preceding
sentence, (A) all amounts and proceeds (including instruments) received by the
Grantor in respect of the Receivables shall be received in trust for the benefit
of the Lender hereunder, shall be segregated from other funds of the Grantor and
shall be forthwith paid over to the Lender in the same form as so received (with
any necessary indorsement) to be held as cash collateral and either (1) released
to the Grantor so long as no Event of Default shall have occurred and be
continuing or (2) if any Event of Default shall have occurred and be continuing,
applied as specified in Section 7(b) hereof, and (B) the Grantor will not
adjust, settle or compromise the amount or payment of any Receivable or release
wholly or partly any account debtor or obligor thereof or allow any credit or
discount thereon.
(iii) Upon the occurrence and during the continuance of any
breach or default under any Related Contract referred to in Schedule II hereto
or otherwise specified by the Lender from time to time by any party thereto
other than the Grantor, (A) the Grantor will, promptly after obtaining knowledge
thereof, give the Lender written notice of the nature and duration thereof,
specifying what action, if any, it has taken and proposes to take with respect
thereto, (B) the Grantor will not, without the prior written consent of the
Lender, declare or waive any such breach or default or affirmatively consent to
the cure thereof or exercise any of its remedies in respect thereof, and (C) the
Grantor will, upon written instructions from the Lender and at the Grantor's
expense, take such action as the Lender may deem necessary or advisable in
respect thereof.
(iv) The Grantor will, at its expense, promptly deliver to the
Lender a copy of each notice or other communication received by it by which any
other party to any Related Contract referred to in Schedule II hereto or
otherwise specified by the Lender from time to time purports to exercise any of
its rights or affect any of its obligations thereunder, together with a copy of
any reply by the Grantor thereto.
(v) Except as otherwise permitted in the Loan Agreement, the
Grantor will not, without the prior written consent of the Lender, cancel,
terminate, amend, modify, or waive any provision of, any Related Contract
referred to in Schedule II hereto or otherwise specified by the Lender from time
to time.
(g) MOTOR VEHICLES.
(i) Within 60 days of the date hereof, the Grantor shall
deliver to the Lender photocopies of the certificates of title or ownership
for the Motor Vehicles owned by it with the Lender listed as lienholder.
<PAGE>
(ii) Upon the acquisition after the date hereof by the
Grantor of any Motor Vehicle, the Grantor shall deliver to the Lender
photocopies of the certificates of title or ownership for such Motor Vehicle,
together with the manufacturer's statement of origin, with the Lender listed
as lienholder.
(iii) The Grantor hereby appoints the Lender as its
attorney-in-fact, exercisable upon the occurrence of an Event of Default,
effective the date hereof and terminating upon the termination of this
Agreement, for the purpose of (i) executing on behalf of the Grantor title or
ownership applications for filing with appropriate Governmental Authorities
to enable Motor Vehicles now owned or hereafter acquired by the Grantor to be
retitled and the Lender listed as lienholder thereof, (ii) filing such
applications with such state agencies and (iii) executing such other
documents and instruments on behalf of, and taking such other action in the
name of, the Grantor as the Lender may deem necessary or advisable to
accomplish the purposes hereof (including, without limitation, for the
purpose of creating in favor of the Lender a perfected lien on the Motor
Vehicles and exercising the rights and remedies of the Lender hereunder).
This appointment as attorney-in-fact is irrevocable and coupled with an
interest.
(iv) Any photocopies of certificates of title or ownership
delivered pursuant to the terms hereof shall be accompanied by odometer
statements for each Motor Vehicle covered thereby.
(v) So long as no Event of Default or event which, with the
giving of notice or the lapse of time or both, would constitute an Event of
Default shall have occurred and be continuing, upon the request of the Grantor,
the Lender shall execute and deliver to the Grantor such instruments as the
Grantor shall reasonably request to remove the notation of the Lender as
lienholder on any certificate of title for any Motor Vehicle; provided that any
such instruments shall be delivered, and the release effective, only upon
receipt by the Lender of a certificate from the Grantor, stating that the Motor
Vehicle the lien on which is to be released is to be sold or has suffered a
casualty loss (with title thereto passing to the casualty insurance company
therefor in settlement of the claim for such loss) and any proceeds of such sale
or casualty loss being paid to the Lender hereunder to be applied to the
Obligations then outstanding in the manner contemplated by Section 7(b) hereof.
(h) INSPECTION AND REPORTING. The Grantor shall permit
representatives of the Lender, upon reasonable notice and at any time during
normal business hours, to inspect and make abstracts from its books and records
pertaining to the Collateral, and permit representatives of the Lender to be
present at the Grantor's place of business to receive copies of all
communications and remittances relating to the Collateral, and to forward copies
of any notices or communications received or made by the Grantor with respect to
the Collateral, all in such manner as the Lender may require.
(i) TRANSFERS AND OTHER LIENS. The Grantor will not (i) sell, assign
(by operation of law or otherwise), exchange or otherwise dispose of any of the
Collateral (except for sales or other dispositions of Inventory and used
Equipment in the ordinary course of business) or (ii) create or suffer to exist
any lien, security interest or other charge or encumbrance upon or with
<PAGE>
respect to any of the Collateral except for (A) the security interest created
hereby and (B) the security interests and other encumbrances described in
Schedule V hereto.
SECTION 6. ADDITIONAL PROVISIONS CONCERNING THE COLLATERAL.
(a) The Grantor hereby authorizes the Lender to file, without the
signature of the Grantor where permitted by law, one or more financing or
continuation statements, and amendments thereto, relating to the Collateral.
(b) The Grantor hereby irrevocably appoints the Lender the Grantor's
attorney-in-fact and proxy, with full authority in the place and stead of the
Grantor and in the name of the Grantor or otherwise, from time to time in the
Lender's discretion, and following the occurrence of an Event of Default, to
take any action and to execute any instrument which the Lender may deem
necessary or advisable to accomplish the purposes of this Agreement, including,
without limitation: (i) to obtain and adjust insurance required to be paid to
the Lender pursuant to Section 5(e) hereof, (ii) to ask, demand, collect, sue
for, recover, compound, receive and give acquittance and receipts for moneys due
and to become due under or in respect of any Collateral, (iii) to receive,
indorse, and collect any drafts or other instruments, documents and chattel
paper in connection with clause (i) or (ii) above and (iv) to file any claims or
take any action or institute any proceedings which the Lender may deem necessary
or desirable for the collection of any Collateral or otherwise to enforce the
rights of the Lender with respect to any Collateral.
(c) If the Grantor fails to perform any agreement contained herein
after the expiry of any applicable grace period, the Lender may itself perform,
or cause performance of, such agreement or obligation, and the expenses of the
Lender incurred in connection therewith shall be payable by the Grantor pursuant
to Section 8 hereof.
(d) The powers conferred on the Lender 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 safe custody of any Collateral in its
possession and the accounting for moneys actually received by it hereunder, the
Lender 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.
(e) Anything herein to the contrary notwithstanding, (i) the Grantor
shall remain liable under the Related Contracts to the extent set forth therein
to perform all of its obligations thereunder to the same extent as if this
Agreement had not been executed, (ii) the exercise by the Lender of any of its
rights hereunder shall not release the Grantor from any of its obligations under
the Related Contracts and (iii) the Lender shall not have any obligation or
liability by reason of this Agreement under the Related Contracts nor shall the
Lender be obligated to perform any of the obligations or duties of the Grantor
thereunder or to take any action to collect or enforce any claim for payment
assigned hereunder.
SECTION 7. REMEDIES UPON DEFAULT. If an Event of Default shall have
occurred and be continuing:
<PAGE>
(a) The Lender may exercise in respect of the Collateral, in addition
to other rights and remedies provided for herein or otherwise available to it,
all of the rights and remedies of a secured party on default under the Code
(whether or not the Code applies to the affected Collateral), and also may (i)
require the Grantor to, and the Grantor hereby agrees that it will at its
expense and upon request of the Lender forthwith, assemble all or part of the
Collateral as directed by the Lender and make it available to the Lender at a
place to be designated by the Lender which is reasonably convenient to both
parties and (ii) without notice except as specified below, sell the Collateral
or any part thereof in one or more parcels at public or private sale, at any of
the Lender's offices or elsewhere, for cash, on credit or for future delivery,
and at such price or prices and upon such other terms as the Lender may deem
commercially reasonable. The Grantor agrees that, to the extent notice of sale
shall be required by law, at least 10 days' notice to the 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. The Lender shall not be
obligated to make any sale of Collateral regardless of notice of sale having
been given. The Lender 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. The
Grantor hereby waives any claims against the Lender arising by reason of the
fact that the price at which the Collateral may have been sold at 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 Obligations, even if the Lender accepts
the first offer received and does not offer the Collateral to more than one
offeree.
(b) Any cash held by the Lender as Collateral and all cash proceeds
received by the Lender in respect of any sale of, collection from, or other
realization upon, all or any part of the Collateral shall be applied as follows:
(i) First, to the payment of the reasonable costs and expenses,
including reasonable attorneys' fees and legal expenses, incurred by the Lender
in connection with (A) the administration of this Agreement, (B) the custody,
preservation, use or operation of, or the sale of, collection from, or other
realization upon, any Collateral, (C) the exercise or enforcement of any of the
rights of the Lender hereunder or (D) the failure of the Grantor to perform or
observe any of the provisions hereof;
(ii) Second, at the option of the Lender, to the payment or
other satisfaction of any liens and other encumbrances upon any of the
Collateral;
(iii) Third, ratably to the payment of the Obligations, first
in respect of any fees not covered by clause (i) above, second, in respect of
accrued but unpaid interest on the Loans, and third, in respect of unpaid
principal of the Loans;
(iv) Fourth, to the payment of any other amounts required by
applicable law (including, without limitation, Section 9-504(1)(c) of the Code
or any successor or similar, applicable statutory provision); and
(v) Fifth, the surplus proceeds, if any, to the Grantor or to
whomsoever shall be lawfully entitled to receive the same or as a court of
competent jurisdiction shall direct.
<PAGE>
(c) In the event that the proceeds of any such sale, collection or
realization are insufficient to pay all amounts to which the Lender is legally
entitled, the Grantor shall be liable for the deficiency, together with interest
thereon at the highest rate specified in any Note for interest on overdue
principal thereof or such other rate as shall be fixed by applicable law,
together with the costs of collection and the reasonable fees of any attorneys
employed by the Lender to collect such deficiency.
SECTION 8. INDEMNITY AND EXPENSES.
(a) The Grantor agrees to indemnify the Lender from and against any
and all claims, losses and liabilities growing out of or resulting from this
Agreement (including, without limitation, enforcement of this Agreement), except
claims, losses or liabilities resulting solely and directly from the Lender's
gross negligence or willful misconduct.
(b) The Grantor will upon demand pay to the Lender the amount of any
and all costs and expenses, including the reasonable fees and disbursements of
the Lender's counsel and of any experts and Lenders, which the Lender may 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 Collateral, (iii) the exercise or enforcement of any of
the rights of the Lender hereunder, or (iv) the failure by the Grantor to
perform or observe any of the provisions hereof.
SECTION 9. NOTICES, ETC. All notices and other communications
provided for hereunder shall be in writing and shall be mailed, telegraphed or
delivered, if to the Grantor, to it at its address specified in the Loan
Agreement; if to the Lender, to it at its address specified in the Loan
Agreement; or as to either such Person at such other address as shall be
designated by such Person in a written notice to such other Persons complying as
to delivery with the terms of this Section 9. All such notices and other
communications shall be effective (i) if mailed, when deposited in the mails,
(ii) if telegraphed, when delivered to the telegraph company, or (iii) if
delivered, upon delivery.
SECTION 10. MISCELLANEOUS.
(a) No amendment of any provision of this Agreement shall be
effective unless it is in writing and signed by the Grantor and the Lender, and
no waiver of any provision of this Agreement, and no consent to any departure by
the Grantor therefrom, shall be effective unless it is in writing and signed by
the Lender, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
(b) No failure on the part of the Lender to exercise, and no delay in
exercising, any right hereunder or under any other Loan Document shall operate
as a waiver thereof; nor shall any single or partial exercise of any such right
preclude any other or further exercise thereof or the exercise of any other
right. The rights and remedies of the Lender provided herein and in the other
Loan Documents are cumulative and are in addition to, and not exclusive of, any
rights or remedies provided by law. The rights of the Lender under any Loan
Document against any party thereto are
<PAGE>
not conditional or contingent on any attempt by the Lender to exercise any of
its rights under any other Loan Document against such party or against any
other Person.
(c) Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or invalidity without invalidating the
remaining portions hereof or thereof or affecting the validity or enforceability
of such provision in any other jurisdiction.
(d) This Agreement shall create a continuing security interest in the
Collateral and shall (i) remain in full force and effect until the indefeasible
payment in full or release of the Obligations (as such term is defined in clause
(i) of Section 1.01 of the Loan Agreement), (ii) be binding on the Grantor and
its successors and assigns and shall inure, together with all rights and
remedies of the Lender hereunder, to the benefit of the Lender and its
respective successors, transferees and assigns. Without limiting the generality
of the foregoing, the Lender may assign or otherwise transfer any Note or
portion thereof held by it, and the Lender may assign or otherwise transfer its
rights under any other Loan Document to any other Person, and such other Person
shall thereupon become vested with all of the benefits in respect thereof
granted to the Lender, herein or otherwise. None of the rights or obligations
of the Grantor hereunder may be assigned or otherwise transferred without the
prior written consent of the Lender.
(e) Upon the satisfaction in full of the Obligations, (i) this
Agreement and the security interest created hereby shall terminate and all
rights to the Collateral shall revert to the Grantor, and (ii) the Lender will,
upon the Grantor's request and at the Grantor's expense, (A) return to the
Grantor such of the Collateral as shall not have been sold or otherwise disposed
of or applied pursuant to the terms hereof and (B) execute and deliver to the
Grantor such documents as the Grantor shall reasonably request to evidence such
termination.
(f) This Agreement shall be governed by and construed in accordance
with the law of the State of New York, except as required by mandatory
provisions of law and except to the extent that the validity or perfection or
the perfection and the effect of the perfection or non-perfection of the
security interest created hereby, or remedies hereunder, in respect of any
particular Collateral are governed by the law of a jurisdiction other than the
State of New York.
(g) Any legal action or proceeding with respect to this Agreement or
any document related thereto may be brought in the courts of the State of New
York or the United States of America for the Southern District of New York, and,
by execution and delivery of this Agreement, the Grantor hereby accepts for
itself and in respect of its property, generally and unconditionally, the
jurisdiction of the aforesaid courts. The Grantor hereby irrevocably waives any
objection, including, without limitation, any objection to the laying of venue
or based on the grounds of FORUM NON CONVENIENS, which it may now or hereafter
have to the bringing of any such action or proceeding in such respective
jurisdictions and consents to the granting of such legal or equitable relief as
is deemed appropriate by the court.
(h) The Grantor irrevocably consents to the service of process of any
of the aforesaid courts in any such action or proceeding by the mailing of
copies thereof by registered or
<PAGE>
certified mail, postage prepaid, to such Grantor at its address provided
herein, such service to become effective 30 days after such mailing.
(i) Nothing contained herein shall affect the right of the Lender to
serve process in any other manner permitted by law or commence legal proceedings
or otherwise proceed against the Grantor or any of the Grantor's property in any
other jurisdiction.
(j) EACH OF THE GRANTOR AND (BY ITS ACCEPTANCE OF THIS AGREEMENT) THE
LENDER WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED ON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT
OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, VERBAL
OR WRITTEN STATEMENT OR OTHER ACTION OF THE PARTIES HERETO.
<PAGE>
IN WITNESS WHEREOF, the Grantor has caused this Agreement to be
executed and delivered by its officer thereunto duly authorized, as of the date
first above written.
SPEAKEASY GAMING OF LAS VEGAS, INC.
By: /s/ Edson R. Arneault
--------------------------------------
Name: Edson R. Arneault
Title: President, Chief Executive Officer
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EXHIBIT 10.16
1998 STOCK INCENTIVE PLAN
of
MTR GAMING GROUP, INC.
1. PURPOSES OF THE PLAN. This stock incentive plan (the "Plan")
is designed to provide an incentive to key employees (including directors and
officers who are key employees) and to consultants and directors who are not
employees of MTR GAMING GROUP, INC., a Delaware corporation (the "Company"),
or any of its Subsidiaries (as defined in Paragraph 17), and to offer an
additional inducement in obtaining the services of such persons. The Plan
provides for the grant of "incentive stock options" ("ISOs") within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), nonqualified stock options which do not qualify as ISOs ("NQSOs"),
and stock of the Company which may be subject to contingencies or
restrictions (collectively, "Awards"). The Company makes no representation
or warranty, express or implied, as to the qualification of any option as an
"incentive stock option" under the Code.
2. STOCK SUBJECT TO THE PLAN. Subject to the provisions of
Paragraph 10, the aggregate number of shares of Common Stock, $.0001 par
value per share, of the Company ("Common Stock") for which Awards may be
granted under the Plan shall not exceed 800,000. Such shares of Common Stock
may, in the discretion of the Board of Directors of the Company (the "Board
of Directors"), consist either in whole or in part of authorized but unissued
shares of Common Stock or shares of Common Stock held in the treasury of the
Company. Subject to the provisions of Paragraph 11, any shares of Common
Stock subject to an option which for any reason expires, is canceled or is
terminated unexercised or which ceases for any reason to be exercisable or a
restricted stock Award which for any reason is forfeited, shall again become
available for the granting of Awards under the Plan. The Company shall at
all times during the term of the Plan reserve and keep available such number
of shares of Common Stock as will be sufficient to satisfy the requirements
of the Plan.
3. ADMINISTRATION OF THE PLAN. The Plan shall be administered by
the Board of Directors or a committee of the Board of Directors consisting of
not less than two directors, each of whom shall be a "non-employee director"
within the meaning of Rule 16b-3 (as defined in Paragraph 17) (collectively,
the "Committee"). Unless otherwise provided in the By-laws of the Company or
by resolution of the Board of Directors, a majority of the members of the
Committee shall constitute a quorum, and the acts of a majority of the
members present at any meeting at which a quorum is present, and any acts
approved in writing by all members without a meeting, shall be the acts of
the Committee. Subject to the express provisions of the Plan, the Committee
shall have the authority, in its sole discretion, to determine: the key
employees, consultants and directors who shall be granted Awards; the
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type of Award to be granted; the times when an Award shall be granted; the
number of shares of Common Stock to be subject to each Award; the term of
each option; the date each option shall become exercisable; whether an option
shall be exercisable in whole or in installments and, if in installments, the
number of shares of Common Stock to be subject to each installment, whether
the installments shall be cumulative, the date each installment shall become
exercisable and the term of each installment; whether to accelerate the date
of exercise of any option or installment thereof; whether shares of Common
Stock may be issued upon the exercise of an option as partly paid and, if so,
the dates when future installments of the exercise price shall become due and
the amounts of such installments; the exercise price of each option; the
price, if any, to be paid for a share Award; the form of payment of the
exercise price of an option; whether to restrict the sale or other
disposition of a stock Award or the shares of Common Stock acquired upon the
exercise of an option and, if so, to determine whether such contingencies
and restrictions have been met and whether and under what conditions to waive
any such contingency or restriction; whether and under what conditions to
subject all or a portion of the grant or exercise of an option, the vesting
of a stock Award or the shares acquired pursuant to the exercise of an option
to the fulfillment of certain contingencies or restrictions as specified in
the contract referred to in Paragraph 9 hereof (the "Contract"), including
without limitation, contingencies or restrictions relating to entering into a
covenant not to compete with the Company, any of its Subsidiaries or a Parent
(as defined in Paragraph 17), to financial objectives for the Company, any of
its Subsidiaries or a Parent, a division of any of the foregoing, a product
line or other category, and/or to the period of continued employment of the
Award holder with the Company, any of its Subsidiaries or a Parent, and to
determine whether such contingencies or restrictions have been met; whether
an Award holder is Disabled (as defined in Paragraph 17); the amount, if any,
necessary to satisfy the obligation of the Company, a Subsidiary or Parent to
withhold taxes or other amounts; the Fair Market Value (as defined in
Paragraph 17) of a share of Common Stock; to construe the respective
Contracts and the Plan; with the consent of the Award holder, to cancel or
modify an Award, PROVIDED, that the modified provision is permitted to be
included in an Award granted under the Plan on the date of the modification,
and FURTHER, PROVIDED, that in the case of a modification (within the meaning
of Section 424(h) of the Code) of an ISO, such Award as modified would be
permitted to be granted on the date of such modification under the terms of
the Plan; to prescribe, amend and rescind rules and regulations relating to
the Plan; to approve any provision which under Rule 16b-3 requires the
approval of the Board of Directors, a committee of non-employee directors or
the stockholders to be exempt (unless otherwise specifically provided
herein); and to make all other determinations necessary or advisable for
administering the Plan. Any controversy or claim arising out of or relating
to the Plan, any Award granted under the Plan or any Contract shall be
determined unilaterally by the Committee in its sole discretion. The
determinations of the Committee on the matters referred to in this Paragraph
3 shall be conclusive and binding on the parties. No member or former member
of the Committee shall be liable for any action, failure to act or
determination made in good faith with respect to the Plan or any Award or
Contract hereunder. Prior to the creation and designation of the Committee
by the Board of Directors, all powers and authority allocated hereby to the
Committee shall be allocated to the Board of Directors and all references to
the Committee shall be deemed to be references to the Board of Directors.
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4. OPTIONS
(a) GRANT. The Committee may from time to time, consistent
with the purposes of the Plan, grant options to such key employees (including
officers and directors who are key employees) of, and consultants to, the
Company or any of its Subsidiaries, and such Outside Directors, as the
Committee may determine, in its sole discretion. Such options granted shall
cover such number of shares of Common Stock as the Committee may determine,
in its sole discretion, as set forth in the applicable Contract; PROVIDED,
HOWEVER, that the maximum number of shares subject to options that may be
granted to any employee during any calendar year under the Plan (the "162(m)
Maximum") shall be 350,000 shares; and FURTHER, PROVIDED, that the aggregate
Fair Market Value (determined at the time the option is granted) of the
shares of Common Stock for which any eligible employee may be granted ISOs
under the Plan or any other plan of the Company, of any of its Subsidiaries
or of a Parent, which are exercisable for the first time by such optionee
during any calendar year shall not exceed $100,000. Such ISO limitation
shall be applied by taking ISOs into account in the order in which they were
granted. Any option granted in excess of such ISO limitation amount shall be
treated as a NQSO to the extent of such excess.
(b) EXERCISE PRICE. The exercise price of the shares of
Common Stock under each option shall be determined by the Committee, in its
sole discretion, as set forth in the applicable Contract; PROVIDED, HOWEVER,
that the exercise price per share of an ISO shall not be less than the Fair
Market Value of a share of Common Stock on the date of grant; and FURTHER,
PROVIDED, that if, at the time an ISO is granted, the optionee owns (or is
deemed to own under Section 424(d) of the Code) stock possessing more than
10% of the total combined voting power of all classes of stock of the
Company, of any of its Subsidiaries or of a Parent, the exercise price per
share of such ISO shall not be less than 110% of the Fair Market Value of a
share of Common Stock on the date of grant.
(c) TERM. The term of each option granted pursuant to the
Plan shall be determined by the Committee, in its sole discretion, and set
forth in the applicable Contract; PROVIDED, HOWEVER, that the term of each
ISO shall not exceed 10 years from the date of grant thereof; and FURTHER,
PROVIDED, that if, at the time an ISO is granted, the optionee owns (or is
deemed to own under Section 424(d) of the Code) stock possessing more than
10% of the total combined voting power of all classes of stock of the
Company, of any of its Subsidiaries or of a Parent, the term of the ISO shall
not exceed five years from the date of grant. Options shall be subject to
earlier termination as hereinafter provided.
(d) EXERCISE. An option (or any part or installment
thereof), to the extent then exercisable, shall be exercised by giving
written notice to the Company at its then principal office stating which
option is being exercised, specifying the number of shares of Common Stock as
to which such option is being exercised and accompanied by payment in full of
the aggregate exercise price therefor (or the amount due upon exercise if the
Contract
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permits installment payments) (a) in cash or by certified check or (b) if the
applicable Contract permits, with previously acquired shares of Common Stock
having an aggregate Fair Market Value on the date of exercise equal to the
aggregate exercise price of all options being exercised, or with any
combination of cash, certified check or shares of Common Stock having such
value. The Company shall not be required to issue any shares of Common Stock
pursuant to any such option until all required payments, including any
required withholding, have been made.
The Committee may, in its sole discretion, permit payment of all or
a portion of the exercise price of an option by delivery by the optionee of a
properly executed notice, together with a copy of his irrevocable
instructions to a broker acceptable to the Committee to deliver promptly to
the Company the amount of sale or loan proceeds sufficient to pay such
exercise price. In connection therewith, the Company may enter into
agreements for coordinated procedures with one or more brokerage firms.
An optionee entitled to receive Common Stock upon the exercise of
an option shall not have the rights of a stockholder with respect to such
shares of Common Stock until the date of issuance of a stock certificate for
such shares or, in the case of uncertificated shares, until an entry is made
on the books of the Company's transfer agent representing such shares;
PROVIDED, HOWEVER, that until such stock certificate is issued or book entry
is made, any optionee using previously acquired shares of Common Stock in
payment of an option exercise price shall continue to have the rights of a
stockholder with respect to such previously acquired shares.
In no case may an option be exercised with respect to a fraction of
a share of Common Stock. In no case may a fraction of a share of Common
Stock be purchased or issued under the Plan.
(e) RELOAD OPTIONS. An optionee who, at a time when he is
eligible to be granted options under the Plan, uses previously acquired
shares of Common Stock to exercise an option granted under the Plan (the
"prior option"), shall, upon such exercise, be automatically granted an
option (the "reload option") to purchase the same number of shares of Common
Stock so used (or if there is not a sufficient number of shares available for
grant under the Plan remaining, such number of shares as are then available).
Such reload options shall be of the same type and have the same terms as the
prior option (except to the extent inconsistent with the terms of the Plan);
PROVIDED, HOWEVER, that the exercise price per share of the reload option
shall be equal to the Fair Market Value of a share of Common Stock on the
date of grant of the reload option, and FURTHER, PROVIDED, that if the prior
option was an ISO and at the time the reload option is granted, the optionee
owns (or is deemed to own under Section 424(d) of the Code) stock possessing
more than 10% of the total combined voting power of all classes of stock of
the Company, of any of its Subsidiaries or of a Parent, the exercise price
per share shall be equal to 110% of the Fair Market Value of a share of
Common Stock on the date of grant and the term of such option shall not
exceed five years.
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5. RESTRICTED STOCK. The Committee may from time to time,
consistent with the purposes of the Plan, grant shares of Common Stock to
such key employees (including officers and directors who are key employees)
of, or consultants to, the Company or any of its Subsidiaries, as the
Committee may determine, in its sole discretion. The grant may cover such
number of shares as the Committee may determine, in its sole discretion, and
require the Award holder to pay such price per share therefor, if any, as the
Committee may determine, in its sole discretion. Such shares may be subject
to such contingencies and restrictions as the Committee may determine, as set
forth in the Contract. Upon the issuance of the stock certificate for a
share Award, or in the case of uncertificated shares, the entry on the books
of the Company's transfer agent representing such shares, notwithstanding any
contingencies or restrictions to which the shares are subject, the Award
holder shall be considered to be the record owner of the shares, and subject
to the contingencies and restrictions set forth in the Award, shall have all
rights of a stockholder of record with respect to such shares, including the
right to vote and to receive distributions. Upon the occurrence of any such
contingency or restriction, the Award holder may be required to forfeit all
or a portion of such shares back to the Company. The shares shall vest in
the Award holder when all of the restrictions and contingencies lapse.
Accordingly, the Committee may require that such shares be held by the
Company, together with a stock power duly endorsed in blank by the Award
holder, until the shares vest in the Award holder.
6. TERMINATION OF RELATIONSHIP. Except as may otherwise be
expressly provided in the applicable Contract, if an Award holder's
relationship with the Company, its Subsidiaries and Parent as an employee or
a consultant has terminated for any reason (other than as a result of his
death or Disability), the Award holder may exercise the options granted to
him as an employee of, or consultant to, the Company or any of its
Subsidiaries, to the extent exercisable on the date of such termination, at
any time within three months after the date of termination, but not
thereafter and in no event after the date the Award would otherwise have
expired; PROVIDED, HOWEVER, that if such relationship is terminated either
(a) for Cause (as defined in Paragraph 17), or (b) without the consent of the
Company, such option shall terminate immediately.
For the purposes of the Plan, an employment relationship shall be
deemed to exist between an individual and the Company, any of its
Subsidiaries or a Parent if, at the time of the determination, the individual
was an employee of such corporation for purposes of Section 422(a) of the
Code. As a result, an individual on military, sick leave or other bona fide
leave of absence shall continue to be considered an employee for purposes of
the Plan during such leave if the period of the leave does not exceed 90
days, or, if longer, so long as the individual's right to reemployment with
the Company, any of its Subsidiaries or a Parent is guaranteed either by
statute or by contract. If the period of leave exceeds 90 days and the
individual's right to reemployment is not guaranteed by statute or by
contract, the employment relationship shall be deemed to have terminated on
the 91st day of such leave.
Except as may otherwise be expressly provided in the applicable
Contract, options granted under the Plan shall not be affected by any change in
the status of the Award holder so long as he continues to be an employee of, or
a consultant to, the Company, or any of
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its Subsidiaries or a Parent (regardless of having changed from one to the
other or having been transferred from one corporation to another).
Except as may otherwise be expressly provided in the applicable
Contract, if an Award holder's relationship with the Company as an Outside
Director ceases for any reason (other than as a result of his death or
Disability) then options granted to such holder as an Outside Director may be
exercised, to the extent exercisable on the date of such termination, at any
time within three months after the date of termination, but not thereafter
and in no event after the date the Award would otherwise have expired;
PROVIDED, HOWEVER, that if such relationship is terminated for Cause, such
Award shall terminate immediately. An Award granted to an Outside Director,
however, shall not be affected by the Award holder becoming an employee of,
or consultant to, the Company, any of its Subsidiaries or a Parent.
Except as may otherwise be expressly provided in the Contract, upon
the termination of the relationship of an Award holder as an employee of, or
consultant to, the Company, and its Subsidiaries and Parent, or as an Outside
Director, for any reason (including his death or Disability), the share Award
shall cease any further vesting and the unvested portion of such Award as of
the date of such termination shall be forfeited to the Company for no
consideration.
Nothing in the Plan or in any Award granted under the Plan shall
confer on any Award holder any right to continue in the employ of, or as a
consultant to, the Company, any of its Subsidiaries or a Parent, or as a
director of the Company, or interfere in any way with any right of the
Company, any of its Subsidiaries or a Parent to terminate the Award holder's
relationship at any time for any reason whatsoever without liability to the
Company, any of its Subsidiaries or a Parent.
7. DEATH OR DISABILITY. Except as may otherwise be expressly
provided in the applicable Contract, if an Award holder dies (a) while he is
an employee of, or consultant to, the Company, any of its Subsidiaries or a
Parent, (b) within three months after the termination of such relationship
(unless such termination was for Cause or without the consent of the Company)
or (c) within one year following the termination of such relationship by
reason of his Disability, the options that were granted to him as an employee
of, or consultant to, the Company or any of its Subsidiaries, may be
exercised, to the extent exercisable on the date of his death, by his Legal
Representative (as defined in Paragraph 17) at any time within one year after
death, but not thereafter and in no event after the date the option would
otherwise have expired.
Except as may otherwise be expressly provided in the applicable
Contract, if an Award holder's relationship as an employee of, or consultant
to, the Company, any of its Subsidiaries or a Parent has terminated by reason
of his Disability, the options that were granted to him as an employee of, or
consultant to the Company or any of its Subsidiaries may be exercised, to the
extent exercisable upon the effective date of such termination, at any time
within one year after such date, but not thereafter and in no event after the
date the option would otherwise have expired.
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Except as may otherwise be expressly provided in the applicable
Contract, if an Award holder's relationship as an Outside Director terminates
as a result of his death or Disability, the options granted to him as an
Outside Director may be exercised, to the extent exercisable on the date of
such termination, at any time within one year after the date of termination,
but not thereafter and in no event after the date the Award would otherwise
have expired. In the case of the death of the Award holder, the Award may be
exercised by his Legal Representative.
8. COMPLIANCE WITH SECURITIES LAWS. It is a condition to the
issuance of any share Award and exercise of any option that either (a) a
Registration Statement under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the shares of Common Stock to be issued
upon such grant or exercise shall be effective and current at the time of
exercise, or (b) there is an exemption from registration under the Securities
Act for the issuance of the shares of Common Stock upon such exercise.
Nothing herein shall be construed as requiring the Company to register shares
subject to any Award under the Securities Act or to keep any Registration
Statement effective or current.
The Committee may require, in its sole discretion, as a condition
to the receipt of an Award or the exercise of any option that the Award
holder execute and deliver to the Company his representations and warranties,
in form, substance and scope satisfactory to the Committee, which the
Committee determines are necessary or convenient to facilitate the perfection
of an exemption from the registration requirements of the Securities Act,
applicable state securities laws or other legal requirement, including,
without limitation, that (a) the shares of Common Stock to be received under
the Award or issued upon the exercise of the option are being acquired by
the Award holder for his own account, for investment only and not with a view
to the resale or distribution thereof, and (b) any subsequent resale or
distribution of shares of Common Stock by such Award holder will be made only
pursuant to (i) a Registration Statement under the Securities Act which is
effective and current with respect to the shares of Common Stock being sold,
or (ii) a specific exemption from the registration requirements of the
Securities Act, but in claiming such exemption, the Award holder shall prior
to any offer of sale or sale of such shares of Common Stock provide the
Company with a favorable written opinion of counsel satisfactory to the
Company, in form, substance and scope satisfactory to the Company, as to the
applicability of such exemption to the proposed sale or distribution.
In addition, if at any time the Committee shall determine, in its
sole discretion, that the listing or qualification of the shares of Common
Stock subject to any Award or option on any securities exchange, Nasdaq or
under any applicable law, or the consent or approval of any governmental
agency or regulatory body, is necessary or desirable as a condition to, or in
connection with, the granting of an Award or the issuing of shares of Common
Stock thereunder, such Award may not be granted and such option may not be
exercised in whole or in part unless such listing, qualification, consent or
approval shall have been effected or obtained free of any conditions not
acceptable to the Committee.
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9. AWARD CONTRACTS. Each Award shall be evidenced by an
appropriate Contract which shall be duly executed by the Company and the
Award holder, and shall contain such terms, provisions and conditions not
inconsistent herewith as may be determined by the Committee. The terms of
each Award and Contract need not be identical.
10. ADJUSTMENTS UPON CHANGES IN COMMON STOCK. Notwithstanding any
other provision of the Plan, in the event of a stock dividend,
recapitalization, merger in which the Company is the surviving corporation,
spin-off, split-up, combination or exchange of shares or the like which
results in a change in the number or kind of shares of Common Stock which is
outstanding immediately prior to such event, the aggregate number and kind of
shares subject to the Plan, the aggregate number and kind of shares subject
to each outstanding Award, the exercise price of each option, any
contingencies and restrictions based on the number or kind of shares, and the
162(m) Maximum shall be appropriately adjusted by the Board of Directors,
whose determination shall be conclusive and binding on all parties. Such
adjustment may provide for the elimination of fractional shares which might
otherwise be subject to Awards without payment therefor.
In the event of (a) the liquidation or dissolution of the Company,
(b) a merger in which the Company is not the surviving corporation or a
consolidation, or (c) any transaction (or series of related transactions) in
which (i) more than 50% of the outstanding Common Stock is transferred or
exchanged for other consideration or (ii) shares of Common Stock in excess of
the number of shares of Common Stock outstanding immediately preceding the
transaction are issued (other than to stockholders of the Company with
respect to their shares of stock in the Company), any outstanding options,
unvested stock shall terminate upon the earliest of any such event, unless
other provision is made therefor in the transaction.
11. AMENDMENTS AND TERMINATION OF THE PLAN. The Plan was adopted
by the Board of Directors on as of January 27, 1998. No ISO may be granted
under the Plan after January 27, 2008. The Board of Directors, without
further approval of the Company's stockholders, may at any time suspend or
terminate the Plan, in whole or in part, or amend it from time to time in
such respects as it may deem advisable, including, without limitation, in
order that ISOs granted hereunder meet the requirements for "incentive stock
options" under the Code, to comply with the provisions of Rule 16b-3, Section
162(m) of the Code, or any change in applicable law, regulations, rulings or
interpretations of any governmental agency or regulatory body; PROVIDED,
HOWEVER, that no amendment shall be effective without the requisite prior or
subsequent stockholder approval which would (a) except as contemplated in
Paragraph 10, increase the maximum number of shares of Common Stock for which
Awards may be granted under the Plan or the 162(m) Maximum, (b) change the
eligibility requirements to receive Awards hereunder, or (c) make any change
for which applicable law, regulation, ruling or interpretation by the
applicable governmental agency or regulatory authority requires stockholder
approval. No termination, suspension or amendment of the Plan shall
adversely affect the rights of any Award holder under an Award without his
prior consent. The power of the Committee to construe and administer any
Awards granted under the Plan prior to the termination or suspension of the
Plan nevertheless shall continue after such termination or during such
suspension.
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12. NON-TRANSFERABILITY. No option granted under the Plan shall
be transferable otherwise than by will or the laws of descent and
distribution, and options may be exercised, during the lifetime of the Award
holder, only by him or his Legal Representatives. Except as may otherwise be
expressly provided in the Contract, a stock Award, to the extent not vested,
shall not be transferable otherwise than by will or the laws of descent and
distribution. Except to the extent provided above, Awards may not be
assigned, transferred, pledged, hypothecated or disposed of in any way
(whether by operation of law or otherwise) and shall not be subject to
execution, attachment or similar process, and any such attempted assignment,
transfer, pledge, hypothecation or disposition shall be null and void AB
INITIO and of no force or effect.
13. WITHHOLDING TAXES. The Company, a Subsidiary or Parent may
withhold (a) cash or (b) with the consent of the Committee, shares of Common
Stock to be issued under a stock Award or upon exercise of an option having
an aggregate Fair Market Value on the relevant date, or a combination of cash
and shares having such value, in an amount equal to the amount which the
Committee determines is necessary to satisfy the obligation of the Company,
any of its Subsidiaries or a Parent to withhold federal, state and local
taxes or other amounts incurred by reason of the grant, vesting, exercise or
disposition of an Award, or the disposition of the underlying shares of
Common Stock. Alternatively, the Company may require the holder to pay to
the Company such amount, in cash, promptly upon demand.
14. LEGENDS; PAYMENT OF EXPENSES. The Company may endorse such
legend or legends upon the certificates for shares of Common Stock issued
under a stock Award or upon exercise of an option under the Plan and may
issue such "stop transfer" instructions to its transfer agent in respect of
such shares as it determines, in its discretion, to be necessary or
appropriate to (a) prevent a violation of, or to perfect an exemption from,
the registration requirements of the Securities Act and any applicable state
securities laws, (b) implement the provisions of the Plan or any agreement
between the Company and the Award holder with respect to such shares of
Common Stock, or (c) permit the Company to determine the occurrence of a
"disqualifying disposition," as described in Section 421(b) of the Code, of
the shares of Common Stock issued or transferred upon the exercise of an ISO
granted under the Plan.
The Company shall pay all issuance taxes with respect to the
issuance of shares of Common Stock under a stock Award or upon the exercise
of an option granted under the Plan, as well as all fees and expenses
incurred by the Company in connection with such issuance.
15. USE OF PROCEEDS. The cash proceeds received upon the exercise
of an option, or grant of a stock Award under the Plan shall be added to the
general funds of the Company and used for such corporate purposes as the
Board of Directors may determine.
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16. SUBSTITUTIONS AND ASSUMPTIONS OF AWARDS OF CERTAIN CONSTITUENT
CORPORATIONS. Anything in this Plan to the contrary notwithstanding, the
Board of Directors may, without further approval by the stockholders,
substitute new Awards for prior options, or restricted stock of a Constituent
Corporation (as defined in Paragraph 17) or assume the prior options or
restricted stock of such Constituent Corporation.
17. DEFINITIONS. For purposes of the Plan, the following terms shall
be defined as set forth below:
(a) "Cause" shall mean (i) in the case of an employee or
consultant, if there is a written employment or consulting agreement between
the Award holder and the Company, any of its Subsidiaries or a Parent which
defines termination of such relationship for cause, cause as defined in such
agreement, and (ii) in all other cases, cause as defined by applicable state
law.
(b) "Constituent Corporation" shall mean any corporation
which engages with the Company, any of its Subsidiaries or a Parent in a
transaction to which Section 424(a) of the Code applies (or would apply if
the option assumed or substituted were an ISO), or any Subsidiary or Parent
of such corporation.
(c) "Disability" shall mean a permanent and total disability
within the meaning of Section 22(e)(3) of the Code.
(d) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
(e) "Fair Market Value" of a share of Common Stock on any day
shall mean (i) if the principal market for the Common Stock is a national
securities exchange, the average of the highest and lowest sales prices per
share of Common Stock on such day as reported by such exchange or on a
composite tape reflecting transactions on such exchange, (ii) if the
principal market for the Common Stock is not a national securities exchange
and the Common Stock is quoted on Nasdaq, and (A) if actual sales price
information is available with respect to the Common Stock, the average of the
highest and lowest sales prices per share of Common Stock on such day on
Nasdaq, or (B) if such information is not available, the average of the
highest bid and lowest asked prices per share of Common Stock on such day on
Nasdaq, or (iii) if the principal market for the Common Stock is not a
national securities exchange and the Common Stock is not quoted on Nasdaq,
the average of the highest bid and lowest asked prices per share of Common
Stock on such day as reported on the OTC Bulletin Board Service or by
National Quotation Bureau, Incorporated or a comparable service; PROVIDED,
HOWEVER, that if clauses (i), (ii) and (iii) of this subparagraph are all
inapplicable, or if no trades have been made or no quotes are available for
such day, the Fair Market Value of a share of Common Stock shall be
determined by the Board of Directors by any method consistent with applicable
regulations adopted by the Treasury Department relating to stock options.
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(f) "Legal Representative" shall mean the executor,
administrator or other person who at the time is entitled by law to exercise
the rights of a deceased or incapacitated optionee with respect to an option
granted under the Plan.
(g) "Nasdaq" shall mean the Nasdaq Stock Market.
(h) "Outside Director" shall mean a person who is a director
of the Company, but on the date of grant is not an employee of, or consultant
to, the Company, any of its Subsidiaries or a Parent.
(i) "Parent" shall have the same definition as "parent
corporation" in Section 424(e) of the Code.
(j) "Rule 16b-3" shall mean Rule 16b-3 promulgated under the
Exchange Act, as the same may be in effect and interpreted from time to time.
(k) "Subsidiary" shall have the same definition as
"subsidiary corporation" in Section 424(f) of the Code.
18. GOVERNING LAW; CONSTRUCTION. The Plan, the Awards and
Contracts hereunder and all related matters shall be governed by, and
construed in accordance with, the laws of the State of Delaware, without
regard to conflict of law provisions that would defer to the substantive laws
of another jurisdiction.
Neither the Plan nor any Contract shall be construed or interpreted
with any presumption against the Company by reason of the Company causing the
Plan or Contract to be drafted. Whenever from the context it appears
appropriate, any term stated in either the singular or plural shall include
the singular and plural, and any term stated in the masculine, feminine or
neuter gender shall include the masculine, feminine and neuter.
19. PARTIAL INVALIDITY. The invalidity, illegality or
unenforceability of any provision in the Plan, any Award or Contract shall
not affect the validity, legality or enforceability of any other provision,
all of which shall be valid, legal and enforceable to the fullest extent
permitted by applicable law.
20. STOCKHOLDER APPROVAL. The Plan shall be subject to approval by a
majority of the votes present in person or by proxy and entitled to vote hereon
at the next duly held meeting of the Company's stockholders at which a quorum is
present. No Award granted hereunder may vest or be exercised prior to such
approval; PROVIDED, HOWEVER, that the date of grant of any Award shall be
determined as if the Plan had not been subject to such approval.
Notwithstanding the foregoing, if the Plan is not approved by a vote of the
stockholders of the Company on or before January 27, 1999, the Plan and any
Awards granted hereunder shall terminate.
-11-
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<PAGE>
Exhibit 99.1
F O R I M M E D I A T E R E L E A S E
COMPANY CONTACT: EDSON R. ARNEAULT, PRESIDENT
(304) 387-2400
MTR GAMING GROUP PURCHASES TWO NEVADA GAMING PROPERTIES
-- CHEYENNE HOTEL & CASINO FOR $5.5 MILLION
TO BE RENAMED "SPEEDWAY HOTEL & CASINO" --
-- RENO RAMADA FOR $8 MILLION
TO BE RENAMED "SPEAKEASY HOTEL & CASINO" --
Chester, West Virginia, May 7, 1998 -- MTR Gaming Group, Inc. (NASDAQ:
MNTG) announced that on May 5, through its newly formed, wholly owned
subsidiaries, Speakeasy Gaming of Las Vegas, Inc. and Speakeasy Gaming of
Reno, Inc., it closed the purchase of two hotel/gaming properties in Nevada:
the Cheyenne Hotel & Casino in North Las Vegas for $5.5 million and the Reno
Ramada in Reno for $8 million, respectively. Both transactions were asset
purchases for cash, and both properties are qualified for unrestricted casino
gaming upon licensing of a casino operator pursuant to "grandfather"
provisions of applicable state and municipal laws. The Company expects to
apply for gaming approval and intends to lease the gaming area to a licensed
casino operator. The Company also plans to pursue franchise agreements for
both properties with Ramada Franchise Systems, Inc.
THE CHEYENNE HOTEL & CASINO, NORTH LAS VEGAS, NEVADA
The Company purchased the Cheyenne Hotel & Casino from Banter, Inc. for
$5.5 million. The Cheyenne is a 131-room hotel consisting of one two-story
building and one three-story building located at 3227 Civic Center Drive in
North Las Vegas at the intersection of Cheyenne Avenue and Interstate 15.
I-15 is a major interstate freeway, which extends north into Utah and south
into the Los Angeles Basin. The Property is approximately five miles from
the Las Vegas Motor Speedway and three miles from Nellis Air Force Base.
The hotel has a bar, restaurant, and swimming pool as well as parking for
approximately 172 cars. The prior owners had operated 25 slot machines at
the hotel's bar and had commenced construction of an 18,000 square foot
addition including a 10,000 square foot casino, which the Company intends to
complete. The Company's plan for the casino calls for 350 slot machines,
three blackjack tables, one roulette wheel, and one craps table. The
Company plans to implement a motor racing theme for the casino in an effort
to accommodate patrons of the nearby Las Vegas Motor Speedway. The Company
estimates that the cost of construction of the casino and renovation of some
of the hotel rooms will be approximately $2 million. The Company expects to
complete construction within the next 120 days and will rename the project
the "Speedway Hotel & Casino".
<PAGE>
THE RENO RAMADA HOTEL, RENO, NEVADA
The Company purchased the Reno Ramada Hotel from Reno Hotel LLC, an
affiliate of the Company's lender, for $8 million. The Reno property has a
total of 262 hotel rooms, 236 of which are located in an eleven story tower and
26 of which are in a separate three-story structure. The property is located at
6th and Lake Streets in Reno and has parking for approximately 238 cars. The
tower also has a restaurant, a deli and two bars. The Reno property has an 8000
square foot casino area and a small convention facility. The property recently
underwent renovations of approximately $4 million. The Company's development
plans for the casino at the Reno property likewise call for 350 slot machines,
three blackjack tables, a roulette wheel, and a craps table. The Reno casino's
theme will be similar to the Speakeasy concept in place at the Company's
Mountaineer Racetrack & Gaming Resort in West Virginia. The Company also plans
to spend approximately $500,000 on renovations of the hotel and expansion of the
capacity of the convention facility and will rename the project the "Speakeasy
Hotel & Casino".
OPERATION OF THE PROPERTIES/GAMING LICENSING
The Company and its newly formed subsidiaries intend to apply as soon as
practicable to the authorities in the State of Nevada for all necessary permits
and licenses required for the Company to operate casinos at the two properties.
The Company is advised, however, that the licensing process may take
approximately one year to complete and that there can be no assurances that the
Company will obtain the necessary approvals. Until the Company obtains these
approvals, it will not be permitted to conduct gaming or participate in any
gaming revenues generated at the properties. In the interim, the Company will
operate the hotels and restaurants and lease the casino area to an independent,
licensed casino operator as permitted by Nevada law.
The Company anticipates that Speakeasy Vegas will immediately hire
approximately twenty-five new employees at the Cheyenne property and that
Speakeasy Reno will hire approximately forty new employees at the Reno
property. The Company has engaged Bruce E. Dewing to oversee the operation of
the two Nevada properties as well as to assist the Company in the licensing
process. Mr. Dewing has more than twenty years experience in upper level
management of hotels and casinos and holds a non-restricted gaming license in
the State of Nevada. Most recently, Mr. Dewing was President and CEO of the
Ormsby House Hotel/Casino, a 200-room hotel with three restaurants and full
service casino with entertainment in Carson City, Nevada. From 1981-1994,
Mr. Dewing served variously as Vice President/Operations, General
Manager/Chief Marketing Officer/Director of the Sands Regency Hotel & Casino
in Reno, Nevada. He was responsible for management of the Sands Regency's
1,000 hotel rooms and supervised 950 employees and twenty-five departments.
FINANCING OF THE ACQUISITIONS
The Company financed the acquisitions through its cash on hand and
additional borrowings from its existing lender, Madeleine LLC. Pursuant to a
Third Amended and Restated Term Loan Agreement entered as of April 30, 1998 by
Mountaineer Park, Inc., Speakeasy Gaming of Las Vegas, Inc., and Speakeasy
2
<PAGE>
Gaming of Reno, Inc. jointly and severally as borrowers, the Company as
guarantor, and Madeleine LLC as lender, the Company increased its borrowings
(previously the principal sum of $21,476,500) by (i) $8 million, representing
the full purchase price of the Reno Ramada Hotel; (ii) $3,765,000 toward the
purchase of the Cheyenne Hotel & Casino; and (iii) $150,000 in lender's fees.
The Company expended approximately $2 million of its cash reserves for the
balance of the purchase price of the Cheyenne property and closing costs and
expenses of the transactions. The loan amendment also provides a
construction line of credit of up to $1.7 million for the Cheyenne property
and increases Mountaineer's line of credit by $5 million (up to $1.5 million
of which may be used for improvements at the Nevada properties). The loans,
as well as any draws against the lines of credit, continue to be for a term
ending July 2, 2001 with monthly payments of interest only at the rate of 13%
per year with all principal becoming due at the end of the term. The loans
likewise remain secured by substantially all of the assets of Mountaineer and
now Speakeasy Vegas and Speakeasy Reno and are unconditionally guaranteed by
the Company. The call premium applicable to prepayment of the loans (5%
until July 2, 1998, 3% between July 3, 1998 and July 2, 1999, 2% from July 3,
1999 until July2, 2000, and 1% from July 3, 2000 until the end of the term),
however, does not apply to the $11.8 million borrowed for the acquisitions or
draws on the $1.7 million Cheyenne construction line of credit.
Commenting on the acquisitions, MTR Gaming Group's president, Ted
Arneault, explained that, "These acquisitions present a number of
opportunities for our Company and are consistent with our long term growth
strategy of identifying entertainment facilities, coupled with gaming, in
niche markets in which we cater to the small to mid-level player.
"Focusing on properties that have not been aggressively marketed and
where the gaming potential has not been fully utilized has allowed us to
acquire these properties at attractive prices and thus enter two additional
gaming markets for a relatively modest investment and without dilution. The
Cheyenne Hotel & Casino is an opportunity to expand gaming in the North Las
Vegas market, which enjoyed a healthy 24% increase in gaming revenues during
February of 1998 versus 1997. The Reno property allows us to replicate our
Speakeasy concept that has been so successful in West Virginia.
"We also view these properties as an opportunity for cross marketing
with Mountaineer, enhanced purchasing power, and enhanced ability to attract
various forms of entertainment to all of our properties.
"We look forward to working with state and local government in Nevada as
well as the residents of the communities we are now entering to build our
infrastructure and management team and to make these properties successful.
These are long-term projects that we believe will ultimately prove beneficial
to our communities, our employees, and our shareholders."
MTR Gaming Group, Inc., a West Virginia based corporation, through
subsidiaries, owns and operates the Mountaineer Racetrack and Gaming Resort
in Chester, West Virginia and has just acquired the Cheyenne Hotel & Casino
in North Las Vegas, Nevada, and the Reno Ramada Hotel in Reno, Nevada as
described above. The Mountaineer complex currently encompasses a
thoroughbred racetrack, including off track betting, 1000 video lottery
terminals, a 101 room hotel,
3
<PAGE>
nine hole executive golf course, fine dining and entertainment, the Speakeasy
Gaming Saloon, Big Al's Deli, the Gatsby Lounge, and the Hollywood Knights
Saloon.
THIS PRESS RELEASE CONTAINS FORWARD-LOOKING STATEMENTS CONCERNING THE COMPANY'S
PLANS FOR CONSTRUCTION OF IMPROVEMENTS AS WELL AS ITS ESTIMATES OF THE TIME AND
EXPENSE INVOLVED IN SUCH CONSTRUCTION AT ITS RECENTLY ACQUIRED HOTEL PROPERTIES;
THE ENTERING OF FRANCHISE AGREEMENTS; LICENSING, OPERATION, AND CONFIGURATION OF
GAMING FACILITIES AT THE NEVADA PROPERTIES; AND THE LONG-TERM PROSPECTS FOR THE
SUCCESSFUL OPERATION OF THE ACQUIRED PROPERTIES. SUCH STATEMENTS ARE BASED ON
THE COMPANY'S CURRENT PLANS AND EXPECTATIONS. ACTUAL RESULTS COULD DIFFER
MATERIALLY BASED UPON A NUMBER OF FACTORS, INCLUDING BUT NOT LIMITED TO WEATHER
CONDITIONS, INABILITY TO OBTAIN GAMING LICENSES IN THE STATE OF NEVADA,
COMPETITION, GENERAL ECONOMIC CONDITIONS AFFECTING THE RESORT BUSINESS,
DEPENDENCE UPON KEY PERSONNEL, AND OTHER FACTORS DESCRIBED IN THE COMPANY'S
PERIODIC REPORTS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
4
